Volume 40 Number 44 October 30, 2015 Pages 7495
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Volume 40 Number 44 October 30, 2015 Pages 7495 - 7 School children's artwork is used to decorate the front cover and blank filler pages of the Texas Register. Teachers throughout the state submit the drawings for students in grades K-12. The drawings dress up the otherwise gray pages of the Texas Register and introduce students to this obscure but important facet of state government. The artwork featured on the front cover is chosen at random. Inside each issue, the artwork is published on what would otherwise be blank pages in the Texas Register. These blank pages are caused by the production process used to print the Texas Register. Texas Register (ISSN 0362-4781, USPS 12-0090) is published weekly (52 times per year) for $259.00 by Matthew Bender & Co., Inc., 3 Lear Jet Lane Suite 102, P O Box 1710, Latham, NY 12110. Periodical postage is paid at Albany, NY, and at additional mailing offices. Postmaster: Send address changes to the Texas Register, 136 Carlin Rd., Conklin, N.Y. 13748-1531. Material in the Texas Register is the property of the State of Texas. However, it may be copied, reproduced, or republished by any person without permission of the Texas Register director, provided no such republication shall bear the legend Texas Register or "Official" without the written permission of the director. The Texas Register is published under the Government Code, Title 10, Chapter 2002. Secretary of State – Carlos H. Cascos Director – Robert Sumners a section of the Office of the Secretary of State P.O. Box 12887 Austin, TX 78711 (512) 463-5561 FAX (512) 463-5569 http://www.sos.state.tx.us register@sos.texas.gov Staff Leti Benavides Dana Blanton Deana Lackey Jill S. Ledbetter Michelle Miner Joy L. Morgan Barbara Strickland Tami Washburn IN THIS ISSUE ATTORNEY GENERAL Opinions.........................................................................................7501 7 TAC §§83.5003 - 83.5005 ..........................................................7531 MOTOR VEHICLE INSTALLMENT SALES PROPOSED RULES 7 TAC §84.608 ...............................................................................7535 COMMISSION ON STATE EMERGENCY COMMUNICATIONS PAWNSHOPS AND CRAFTED PRECIOUS METAL DEALERS 9-1-1 SERVICE--STANDARDS 7 TAC §85.206 ...............................................................................7537 1 TAC §251.16 ...............................................................................7503 7 TAC §85.304 ...............................................................................7538 TEXAS HEALTH AND HUMAN SERVICES COMMISSION 7 TAC §85.607 ...............................................................................7538 MEDICAID HEALTH SERVICES 1 TAC §354.1835 ...........................................................................7507 CONSUMER DEBT MANAGEMENT SERVICES 7 TAC §88.103 ...............................................................................7538 PROPERTY TAX LENDERS 1 TAC §354.1851 ...........................................................................7508 7 TAC §89.307 ...............................................................................7539 1 TAC §354.1863, §354.1868 ........................................................7508 CREDIT UNION DEPARTMENT 1 TAC §354.1901 ...........................................................................7509 CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS 1 TAC §§354.1921, 354.1923, 354.1927 .......................................7509 REIMBURSEMENT RATES 7 TAC §91.101 ...............................................................................7540 1 TAC §§355.8541, 355.8546 - 355.8548, 355.8551 ....................7514 7 TAC §91.301 ...............................................................................7544 1 TAC §355.8545 ...........................................................................7516 TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS FINANCE COMMISSION OF TEXAS CREDIT CARD SURCHARGE APPEAL PROCEDURES 7 TAC §4.105 .................................................................................7517 COMMUNITY AFFAIRS PROGRAMS 10 TAC §5.7 ...................................................................................7546 MULTIFAMILY HOUSING REVENUE BOND RULES RULES OF PROCEDURE FOR CONTESTED CASE HEARINGS, APPEALS, AND RULEMAKINGS 10 TAC §§12.1 - 12.10 ..................................................................7547 7 TAC §9.1 .....................................................................................7519 TEXAS DEPARTMENT OF LICENSING AND REGULATION 7 TAC §9.12 ...................................................................................7519 TEXAS DEPARTMENT OF BANKING TRUST COMPANY REGULATION 7 TAC §17.23 .................................................................................7520 TRUST COMPANY CORPORATE ACTIVITIES 7 TAC §21.24 .................................................................................7521 10 TAC §§12.1 - 12.10 ..................................................................7548 AUCTIONEERS 16 TAC §§67.20, 67.21, 67.25, 67.30, 67.65, 67.70 - 67.72, 67.80 7554 16 TAC §67.70 ...............................................................................7556 TEXAS HIGHER EDUCATION COORDINATING BOARD OFFICE OF CONSUMER CREDIT COMMISSIONER PROGRAM DEVELOPMENT IN PUBLIC TWO-YEAR COLLEGES REGULATED LENDERS AND CREDIT ACCESS BUSINESSES 19 TAC §§9.660 - 9.666 ................................................................7556 7 TAC §83.307 ...............................................................................7524 7 TAC §83.3007 .............................................................................7524 7 TAC §83.1002 .............................................................................7528 7 TAC §§83.3001, 83.3002, 83.3006, 83.3010 ..............................7528 7 TAC §83.3012 .............................................................................7529 7 TAC §83.4002, §83.4003 ............................................................7530 7 TAC §83.4003, §83.4004 ............................................................7531 NATIONAL RESEARCH UNIVERSITIES 19 TAC §15.10 ...............................................................................7557 TEXAS STATE BOARD OF EXAMINERS OF DIETITIANS DIETITIANS 22 TAC §711.6 ...............................................................................7559 22 TAC §§711.7, 711.8, 711.10, 711.12, 711.13............................7559 TABLE OF CONTENTS 40 TexReg 7497 DEPARTMENT OF STATE HEALTH SERVICES 37 TAC §221.3 ...............................................................................7594 37 TAC §221.3 ...............................................................................7594 CHRONIC DISEASES 25 TAC §§61.1 - 61.5, 61.7 - 61.11 ...............................................7562 37 TAC §221.5 ...............................................................................7595 25 TAC §61.11 ...............................................................................7567 37 TAC §221.13 .............................................................................7595 COMPTROLLER OF PUBLIC ACCOUNTS 37 TAC §221.43 .............................................................................7596 ENFORCEMENT TAX ADMINISTRATION 34 TAC §3.344 ...............................................................................7567 37 TAC §223.1 ...............................................................................7596 34 TAC §3.355 ...............................................................................7571 37 TAC §223.3 ...............................................................................7597 34 TAC §3.434 ...............................................................................7573 37 TAC §223.5 ...............................................................................7598 TEXAS COUNTY AND DISTRICT RETIREMENT SYSTEM 37 TAC §223.5 ...............................................................................7598 CALCULATIONS OR TYPES OF BENEFITS 37 TAC §223.7 ...............................................................................7599 37 TAC §223.9 ...............................................................................7599 34 TAC §103.1 ...............................................................................7575 37 TAC §223.11 .............................................................................7600 TEXAS COMMISSION ON LAW ENFORCEMENT 37 TAC §223.14 .............................................................................7600 37 TAC §223.15 .............................................................................7601 ADMINISTRATION 37 TAC §211.1 ...............................................................................7576 37 TAC §223.15 .............................................................................7601 37 TAC §211.5 ...............................................................................7579 37 TAC §223.16 .............................................................................7602 37 TAC §211.7 ...............................................................................7579 37 TAC §223.16 .............................................................................7602 37 TAC §211.13 .............................................................................7580 37 TAC §223.17 .............................................................................7603 37 TAC §211.13 .............................................................................7580 37 TAC §223.18 .............................................................................7604 37 TAC §211.16 .............................................................................7581 37 TAC §223.19 .............................................................................7605 37 TAC §211.25 .............................................................................7582 37 TAC §223.19 .............................................................................7605 37 TAC §211.29 .............................................................................7582 37 TAC §223.20 .............................................................................7606 37 TAC §211.35 .............................................................................7583 37 TAC §223.21 .............................................................................7607 TRAINING AND EDUCATIONAL PROVIDERS SCHOOL MARSHALS 37 TAC §215.9 ...............................................................................7584 37 TAC §227.1 ...............................................................................7607 37 TAC §215.13 .............................................................................7585 37 TAC §227.3 ...............................................................................7608 ENROLLMENT, LICENSING, APPOINTMENT, AND SEPARATION 37 TAC §227.5 ...............................................................................7609 37 TAC §217.1 ...............................................................................7586 37 TAC §227.11 .............................................................................7610 CONTINUING EDUCATION 37 TAC §218.9 ...............................................................................7588 37 TAC §218.11 .............................................................................7589 37 TAC §227.9 ...............................................................................7609 TEXAS FORENSIC SCIENCE COMMISSION DNA, CODIS, FORENSIC ANALYSIS, AND CRIME LABORATORIES PRELICENSING, REACTIVATION, TESTS, AND ENDORSEMENTS 37 TAC §§651.1, 651.3 - 651.11.................................................... 7611 37 TAC §219.1 ...............................................................................7590 37 TAC §§651.101 - 651.105 ........................................................7614 37 TAC §219.11 .............................................................................7591 WITHDRAWN RULES 37 TAC §219.11 .............................................................................7591 TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS 37 TAC §219.13 .............................................................................7592 37 TAC §219.25 .............................................................................7593 PROFICIENCY CERTIFICATES TABLE OF CONTENTS 40 TexReg 7498 37 TAC §651.12 .............................................................................7614 MANUFACTURED HOUSING 10 TAC §80.3 .................................................................................7617 10 TAC §§80.30, 80.32, 80.36 .......................................................7617 7 TAC §§90.101 - 90.105 ..............................................................7639 10 TAC §80.41 ...............................................................................7617 7 TAC §§90.201 - 90.204 ..............................................................7639 10 TAC §80.73 ...............................................................................7617 7 TAC §§90.301 - 90.304 ..............................................................7640 10 TAC §80.90 ...............................................................................7617 7 TAC §§90.401 - 90.404 ..............................................................7642 TEXAS DEPARTMENT OF MOTOR VEHICLES 7 TAC §§90.501 - 90.504 ..............................................................7647 MOTOR VEHICLE DISTRIBUTION 7 TAC §§90.601 - 90.604 ..............................................................7651 43 TAC §215.102 ...........................................................................7618 7 TAC §90.701, §90.703 ................................................................7662 43 TAC §215.133 ...........................................................................7618 7 TAC §90.703 ...............................................................................7662 ADOPTED RULES CREDIT UNION DEPARTMENT TEXAS ETHICS COMMISSION CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS REPORTING POLITICAL CONTRIBUTIONS AND EXPENDITURES 7 TAC §91.401 ...............................................................................7662 1 TAC §20.66 .................................................................................7619 7 TAC §91.802 ...............................................................................7663 COMMISSION ON STATE EMERGENCY COMMUNICATIONS 7 TAC §91.803 ...............................................................................7664 ADMINISTRATION 7 TAC §91.805 ...............................................................................7665 7 TAC §91.901 ...............................................................................7666 1 TAC §252.8 .................................................................................7619 7 TAC §§91.2000 - 91.2006 ..........................................................7666 FINANCE COMMISSION OF TEXAS COMMISSION POLICIES AND ADMINISTRATIVE RULES STATE BANK REGULATION 7 TAC §3.36, §3.37 ........................................................................7620 BANKING DEVELOPMENT DISTRICTS 7 TAC §§6.1 - 6.6 ..........................................................................7621 7 TAC §97.206 ...............................................................................7667 TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS COMMUNITY AFFAIRS PROGRAMS TEXAS DEPARTMENT OF BANKING 10 TAC §5.12 .................................................................................7667 MONEY SERVICES BUSINESSES 10 TAC §§5.201, 5.203, 5.207, 5.210, 5.213, 5.214 ......................7668 7 TAC §33.4 ...................................................................................7622 10 TAC §5.503, §5.529 ..................................................................7668 TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING TEXAS RACING COMMISSION TEXAS RESIDENTIAL MORTGAGE LOAN COMPANIES 16 TAC §311.1 ...............................................................................7669 7 TAC §§80.201, 80.203, 80.204 ...................................................7623 16 TAC §311.104 ...........................................................................7669 MORTGAGE BANKERS AND RESIDENTIAL MORTGAGE LOAN ORIGINATORS 7 TAC §§81.200, 81.201, 81.204 ...................................................7623 OFFICE OF CONSUMER CREDIT COMMISSIONER MOTOR VEHICLE INSTALLMENT SALES 7 TAC §84.102 ...............................................................................7626 7 TAC §§84.801, 84.802, 84.805, 804.807 - 804.809 ...................7627 RETAIL CREDITORS 7 TAC §86.101 ...............................................................................7635 CHAPTER 342, PLAIN LANGUAGE CONTRACT PROVISIONS OTHER LICENSES OFFICIALS AND RULES OF HORSE RACING 16 TAC §313.110 ...........................................................................7669 PARI-MUTUEL WAGERING 16 TAC §321.322 ...........................................................................7669 TEXAS DEPARTMENT OF CRIMINAL JUSTICE GENERAL PROVISIONS 37 TAC §151.25 .............................................................................7670 37 TAC §151.75 .............................................................................7670 PRIVATE SECTOR PRISON INDUSTRIES PROGRAMS 37 TAC §§154.1 - 154.9, 154.11....................................................7670 TABLE OF CONTENTS 40 TexReg 7499 RULE REVIEW Notice of Approval of Coastal Boundary Survey ..........................7722 Adopted Rule Reviews Office of the Governor Texas Department of Banking .......................................................7671 Body-Worn Camera Program - Request for Applications .............7722 Office of Consumer Credit Commissioner ....................................7672 Texas Health and Human Services Commission Credit Union Department...............................................................7672 Notice of Public Hearing on Proposed Medicaid Payment Rates..7726 Texas Department of Criminal Justice ...........................................7672 Public Notice - Advisory Committee Notification.........................7726 Commission on State Emergency Communications ......................7673 Texas Department of Housing and Community Affairs TABLES AND GRAPHICS Notice of Public Hearing and Public Comment Period on the Draft 2016 State of Texas Consolidated Plan: One-Year Action Plan .............7727 .......................................................................................................7675 Panhandle Regional Planning Commission IN ADDITION Capital Area Council of Governments Texas Control Center Services Request for Proposals...................7711 Legal Notice ...................................................................................7727 Texas Parks and Wildlife Department Notice of Hearing and Opportunity for Public Comment..............7727 Comptroller of Public Accounts Notice of Loan Fund Availability and Request for Applications ..7711 Notice of Request for Proposals ....................................................7711 Request for Proposals ....................................................................7712 Office of Consumer Credit Commissioner Notice of Rate Ceilings ..................................................................7712 Credit Union Department Application for a Merger or Consolidation....................................7713 Notice of Final Action Taken.........................................................7713 Texas Commission on Environmental Quality Agreed Orders ................................................................................7713 Enforcement Orders .......................................................................7717 Notice of Hearing...........................................................................7719 Texas Department of Public Safety Notice of the Texas Ranger Public Integrity Unit..........................7728 Public Utility Commission of Texas Notice of Application to Amend a Water Certificate of Convenience and Necessity .................................................................................7728 Notice of Application to Amend a Water Certificate of Convenience and Necessity .................................................................................7728 Notice of Application to Relinquish a Service Provider Certificate of Operating Authority .......................................................................7728 Notice of Intent to Serve Decertified Area ....................................7728 Public Notice of Workshop ............................................................7729 Public Notice of Workshop ............................................................7729 Texas Department of Transportation Notice of Public Hearing ...............................................................7719 Aviation Division - Request for Qualifications for Professional Engineering Services .............................................................................7729 Notice of Receipt of Application and Intent to Obtain a New Municipal Solid Waste Permit Proposed Permit Number 2386 ......................7720 Texas Water Development Board Texas Facilities Commission Request for Qualifications - Water Demand Projection Methodologies .................................................................................................7730 Request for Proposals #303-7-20521.............................................7721 Request for Qualifications - Water Use Data Work Plan ...............7731 Request for Proposals #303-7-20522.............................................7721 General Land Office Notice and Opportunity to Comment on Requests for Consistency Agreement/Concurrence Under the Texas Coastal Management Program ...............................................................................................7721 TABLE OF CONTENTS 40 TexReg 7500 Opinions Re: Discoverability under Brady v. Maryland and the Michael Morton Act of recordings of inmate telephone calls to which the criminal district attorney's office has access without a warrant (RQ-0025-KP) Opinion No. KP-0040 The Honorable Jim Murphy SUMMARY Chair, Committee on Corrections Texas House of Representatives Post Office Box 2910 Austin, Texas 78768-2910 Re: Whether a community college system may expend funds for attorney's fees incurred by a member of its board of trustees in a challenge to the member's qualification to serve as trustee (RQ-0022-KP) SUMMARY While it is unlikely that a court would conclude that the Houston Community College System has a public interest in paying the legal expenses associated with a challenge to a trustee's qualifications for office, the College must determine, in good faith and subject to review for abuse of discretion, whether the reimbursement is primarily for a College purpose and not merely for the trustee's personal interest and that the quo warranto proceeding involved actions of the trustee that were taken in good faith within the scope of his official duties. Opinion No. KP-0041 The Honorable Sharen Wilson Tarrant County Criminal District Attorney 401 West Belknap Fort Worth, Texas 76196 Brady v. Maryland and its progeny do not impose a general duty upon a prosecutor to listen to all recordings of inmate telephone calls held by the county telecommunications provider to search for exculpatory evidence for a defendant if the prosecutor would not do so otherwise. To the extent the investigators and other employees of the prosecutor listen to any recorded inmate telephone call, Brady does impose upon the prosecutor a duty to discover whether the investigators and employees find evidence favorable to a defendant in the recordings and, if so, to disclose that evidence to the defendant. Considering the Texas Supreme Court's definition of "possession, custody, or control" in an analogous context, a court construing the phrase in article 39.14 of the Code of Criminal Procedure would have a basis on which to determine that a contract providing a criminal district attorney's office with unfettered access to recordings of inmate telephone calls gives the criminal district attorney's office possession, custody, or control of the recordings. For further information, please access the website at www.texasattorneygeneral.gov or call the Opinion Committee at (512) 463-2110. TRD-201504468 Amanda Crawford General Counsel Office of the Attorney General Filed: October 20, 2015 ♦ ♦ ATTORNEY GENERAL October 30, 2015 ♦ 40 TexReg 7501 TITLE 1. ADMINISTRATION PART 12. COMMISSION ON STATE EMERGENCY COMMUNICATIONS CHAPTER 251. 9-1-1 SERVICE--STANDARDS 1 TAC §251.16 The Commission on State Emergency Communications (CSEC) proposes new rule §251.16. BACKGROUND AND PURPOSE CSEC proposes new §251.16 (Title 1, Part 12, Chapter 251 of the Texas Administrative Code) relating to direct access to 9-1-1 service from a telephone system including a multi-line telephone system (telephone system). This rule implements Kari's Law (Senate Bill 788, 84th Texas Legislature) which established Texas Health and Safety Code Chapter 771A. Kari's Law requires a business service user that owns or controls a Telephone System that provides outbound dialing capacity to "configure the telephone system or equivalent system to allow a person initiating a 9-1-1 call on the system to directly access 9-1-1 service by dialing the digits 9-1-1 without an additional code, digit, prefix, postfix, or trunk-access code." If compliance is "unduly and unreasonably cost prohibitive," the law allows for 1-year waivers of the direct access requirement upon timely submission of a waiver request affidavit, including confirmation that the business service user agrees to place a corresponding instructional sticker on or immediately adjacent to each noncompliant, outbound capable telephone informing the user on how to access 9-1-1 service. Kari's Law also requires a business service user that provides a residential or business facility, and owns or controls a telephone system, to configure the system to provide notification of a 9-1-1 call to a central location on the site of the facility--if notification can be implemented without improving the system's hardware. Additionally, based on CSEC's interpretation of Kari's Law and its statutory rulemaking authority to implement the law, CSEC is proposing (1) an additional location for notification; and (2) to make clear that the liability protection provided by Health and Safety Code §771.053 extends to a business service user that complies with §251.16. Kari's Law was passed in the aftermath of a tragedy that occurred when a young girl attempted several times without success to contact 9-1-1 to obtain help for her mother. Unbeknownst to the young girl, the telephone handset she was using was associated with a telephone system that required her to first dial "9" in order to make an outside call-including when making a 9-1-1 call. The law avoids imposing an undue financial hardship on a business service user by providing for an annual self-certify- ing waiver if the business service user determines compliance is unduly and unreasonably cost prohibitive. Over the last 18 months untold numbers of businesses and governmental entities throughout the state and country have voluntarily changed their telephone systems to allow direct dialing of 9-1-1. Based on the success of these voluntary efforts, technical or cost issues do not appear to be factors in implementing the necessary changes to existing systems. The responsibility to implement Kari's Law is on a "business service user," as opposed to the user's underlying service provider. The term is defined in the law (Health and Safety Code §771.001(2)) as well as in §251.16. Consistent with related provisions in Health and Safety Code Chapter 771, the rule defines the term to include a recipient of "communications" service (e.g., Voice over Internet Protocol service), and makes clear that the law also applies to a "governmental body" as defined in Texas Government Code §552.003. While the law places responsibility for compliance on a business service user, the business service user may have had little involvement in the programming of its non-compliant telephone system. A business service user, therefore, may require the assistance of its underlying system provider or operator--which may or may not be the user's underlying telecommunications or communications service provider--in order to implement Kari's Law. CSEC and the state's 52 independent Emergency Communication Districts (ECDs; defined in Health and Safety Code §771.001(3)) will assist business service users in complying with the law and §251.16. Defined Terms. CSEC considered but does not define the term "cost prohibitive" because the law allows a business service user to obtain relief by providing a self-certifying waiver request. Accordingly, cost prohibitive is determined by a business service user rather than by CSEC or an ECD. CSEC does not define either the term "facility" or the phrase "the providing of a residential or business facility" which are used in the notification provision of the law. Neither the term nor the phrase can be clearly or exhaustively defined. By way of example, a business service user that leases office space from a third party is arguably excluded from the notification requirements, as is the third party owner or manager of the office facility. Conversely, an owner or manager of an office facility that makes available a telephone system to its tenants is subject to the notification requirements. Notwithstanding the foregoing, Kari's Law promotes the providing of notification of a 9-1-1 call made from within residential or business facilities in order to enhance the efforts of emergency first responders, including by allowing for access to a facility and the providing of specific caller location. On-site Notification and Additional Location. The notification requirement is inapplicable if compliance requires an upgrade to a telephone system's hardware. On its face the statute envisions PROPOSED RULES October 30, 2015 40 TexReg 7503 that over time non-capable systems will be replaced with systems that provide notification as a feature. The notification requirement, therefore, balances the costs of replacing a system with the benefits derived from notification of a 9-1-1 call from within a facility. The law does not, however, require someone be available to receive the notification. In order to promote meaningful notification, §251.16 authorizes notification be provided to an additional location not located at the facility. Such additional location should be staffed 24 hours per day, seven days per week, by personnel that can assist emergency first responders in providing access to a facility and better determine the location of the 9-1-1 call, e.g., campus police or security office. The additional location is in addition to the statutory on-site notification. Waivers. A waiver request that complies with §251.16(d) shall be granted by CSEC or the appropriate ECD. A compliant request is granted with or without notice being sent by CSEC or the appropriate ECD. Liability Protection. Health and Safety Code §771.053 provides a limitation on liability of a service provider involved in providing 9-1-1 service. Liability protection extends to a third party provider or other entity involved in providing 9-1-1 service, including an officer, director, or employee of the provider or entity. A business service user in compliance with §251.16 is deemed to be a third party or other entity involved in providing 9-1-1 service and is afforded the protections in §771.053. FISCAL NOTE Kelli Merriweather, CSEC's executive director, has determined that for each year of the first five fiscal years (FY) that §251.16 is in effect there will be no costs to the state or to local governments as a result of enforcing or administering §251.16. Ms. Merriweather's determination is based partly on costs not being a factor in the successful efforts by a number of state and local entities, and by telephone system providers and operators, and various trade associations to implement changes to allow for direct access to 9-1-1 service from existing telephone systems. Additionally, the direct access requirement can be waived each year upon submission by a state or local government business service user of an affidavit that compliance is "unduly and unreasonably cost prohibitive." Finally, the requirement that some governmental entity business service users must provide on-site notification of a 9-1-1 call is applicable only if providing notification does not require an upgrade in the telephone system's hardware. PUBLIC BENEFIT Ms. Merriweather has determined that for each year of the first five years the new section is in effect, the public benefits anticipated as a result of the rule adoption will be to ensure that all individuals have direct access to 9-1-1 service, including those calling from a telephone system. If direct access is not available from a particular telephone handset, the rule requires a sticker be placed on or adjacent to the handset that instructs the user on how to reach 9-1-1 service. CSEC will make available a form sticker that is compliant with §251.16(d)(7). REGULATORY ANALYSIS OF MAJOR ENVIRONMENTAL RULES CSEC has determined that this proposal is not a "major environmental rule" as defined by Government Code §2001.0225. LOCAL EMPLOYMENT IMPACT STATEMENT 40 TexReg 7504 October 30, 2015 Texas Register CSEC has determined that this proposal does not affect a local economy and therefore has not drafted a local employment impact statement as would otherwise be required under Administrative Procedure Act §2001.022. CSEC makes the foregoing determination based on the foregoing Fiscal Note, and the waiver provision provided in the rule. SMALL AND MICRO-BUSINESS IMPACT ANALYSIS In accordance with Government Code §2006.002(c), Ms. Merriweather has determined that there will be no adverse economic effect on small businesses or micro-businesses. Accordingly, CSEC has not prepared the economic impact statement or regulatory flexibility analysis that would otherwise be required. If such an impact is found for individual small and micro businesses, the rule provides a means to request a waiver of its provisions due to financial hardship. PUBLIC COMMENT Initial and Reply comments on the proposed rule may be submitted in writing to Patrick Tyler, Commission on State Emergency Communications, 333 Guadalupe Street, Suite 2-212, Austin, Texas 78701-3942, by email to patrick.tyler@csec.texas.gov, or by fax to (512) 305-6937. Comments should include in the subject line "Initial (or Reply) Comments to Proposed Rule 251.16." Initial comments will be accepted for 30 days and Reply comments for 45 days following publication of the proposal in the Texas Register. All comments will be published on CSEC's website www.csec.texas.gov. STATEMENT OF AUTHORITY The new rule is proposed pursuant to Texas Health and Safety Code §771A.001(f) and §771.051. No other statute, article, or code is affected by the proposal. §251.16. Direct Access to 9-1-1 Service. (a) Purpose. The purpose of this rule is to facilitate the implementation of Texas Health and Safety Code Chapter 771A ("Kari's Law") requiring telephone systems that provide outbound dialing capacity to be configured to provide direct access to 9-1-1 service and, in instances where no hardware changes are necessary, to provide notification of a 9-1-1 call to a central location on the site of the residential or business facility from which a 9-1-1 call is made using a telephone system. (b) Definitions. For the purposes of this rule: (1) "9-1-1 service" means a communications service that connects users to a public safety answering point through a 9-1-1 system. (2) "Additional location" means an optional location, other than a central location, that receives notification of a 9-1-1 call that should be staffed 24x7 with personnel that can assist emergency first responders in accessing the residential or business facility from which a 9-1-1 call is made and determining the location of the 9-1-1 call, e.g., Campus Police, Security Office. (3) "Business service" means a telecommunications or communications service provided a customer where the use is primarily of a business, professional, institutional, or otherwise occupational nature. (4) "Business service user" means a user of business service that provides telecommunications or communications service, including 9-1-1 service, to end users through a publicly or privately owned or controlled telephone switch. Business service user includes a "governmental body" as defined in §552.003, Government Code, including an institution of higher education. (2) address of all locations within Texas served by a noncomplaint telephone system; (5) "Central location" means a designated location on the site of a residential or business facility from which a 9-1-1 call is made that receives notification of the 9-1-1 call. A central location is not required to have a person available at the location to receive or respond to the notification. (3) a narrative of efforts demonstrating a good faith attempt to reprogram or replace non-compliant telephone systems; (6) "Commission" means the Commission on State Emergency Communications. (7) "Internet Protocol enabled service" or "IP" has the meaning assigned by §51.002, Texas Utilities Code. (8) "Local exchange access line" or "Equivalent local exchange access line" has the meaning assigned in Commission Rule 255.4 (Title 1, Part 12 Tex. Admin Code, §255.4). (9) "Notification" refers to a telephone system feature that can send notice to a central location and optional additional location that a 9-1-1 call has been made. Common notifications include "screen pops" with audible alarms for security desk computers using a client application, text messages for smartphones, and email for administrators. Where feasible, notification should provide the telephone number or extension and location information of the telephone system handset from which the 9-1-1 call is made. (10) "Telephone switch" refers to the function of switching inbound and outbound calls in order to allow multiple end-users to share a defined number of local exchange access lines or equivalent local exchange access line. (11) "Telephone system" refers to a legacy system, or equivalent system using Internet Protocol enabled service, comprised of common control units, interconnected telephone or handsets, control hardware and software, and adjunct systems that allow for advanced features such as call handling and transferring, conference calling, call metering and accounting, private and shared voice message boxes, direct inward/outward dialing. A telephone system, commonly referred to as a "multi-line telephone system" or MLTS, includes network and premises based systems such as Centrex and VoIP, as well as private branch exchange (PBX), Hybrid, and Key Telephone Systems (as classified by the Federal Communications Commission under part 68 of title 47, Code of Federal Regulations) and includes systems used, owned, or leased by governmental agencies and political subdivisions, for-profit businesses, and non-profit entities. (12) Any term not expressly defined in this rule has the meaning assigned in Commission Rule 252.7, Definitions. (c) A business service user that owns or controls a telephone system that provides outbound dialing capacity or access shall configure the telephone system to allow a person initiating a 9-1-1 call on the system to directly access 9-1-1 service by dialing in order the digits 9, 1, and 1 without an additional code, digit, prefix, postfix, or trunk-access code. All non-compliant telephone handsets that provide outbound dialing capacity or access must have immediately adjacent to the telephone the instructional sticker required in subsection (d)(7). (d) A business service user shall be granted a one-year waiver (September 1 - August 31) of the requirements of Kari's Law and this rule upon submission of an affidavit not later than September 1 of each year that provides: (1) name (legal and any D/B/A), address, and contact information of the business service user; (4) a statement that compliance with this rule is unduly and unreasonably cost prohibitive; (5) the manufacturer and model number of each non-compliant telephone system and the estimated costs to reprogram or replace each system; (6) a projected date for compliance with Kari's Law and this rule; and (7) confirmation that the business service agrees to or has placed an instructional sticker on or immediately adjacent to each noncompliant telephone handset instructing the user how to access 9-1-1 service. The instructional sticker must be printed in at least 16-point boldface type, in a contrasting color using a font that is easily readable, and is written in English and Spanish. (e) A business service user's waiver request affidavit may be submitted electronically to www.csec.texas.gov/TexasKariLaw or mailed to the appropriate address provided in the website link. (f) A business service user that provides residential or business facilities and owns or controls a telephone system that provides outbound dialing capacity or access shall configure the telephone system to provide notification when a person within a residential or business facility dials 9-1-1 if the telephone system is able to be configured to provide the notification without an improvement to the system's hardware. The notification requirement is separate from and in addition to the requirement in Texas law that "9-1-1 service" connects a 9-1-1 caller to the public safety answering point designated for the area from which the call is made. (g) A business service user in compliance with this rule is deemed a "third party or other entity involved in the providing of 9-1-1 service" as that term is used to limit liability in §771.053, Texas Health and Safety Code. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 15, 2015. TRD-201504359 Patrick Tyler General Counsel Commission on State Emergency Communications Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 305-6922 ♦ ♦ ♦ PART 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION CHAPTER 354. MEDICAID HEALTH SERVICES SUBCHAPTER F. PHARMACY SERVICES The Texas Health and Human Services Commission (HHSC) proposes amendments to §354.1835, Prescriber Identification PROPOSED RULES October 30, 2015 40 TexReg 7505 Numbers; §354.1851, Substitution of One Drug for Another in a Prescription; §354.1863, Prescription Requirements; §354.1901, Pharmacy Claims; §354.1921, Addition of Drugs to the Texas Drug Code Index; §354.1923, Review and Evaluation; and §354.1927, Retention and Deletion of Drugs. HHSC also proposes new Title 1, Part 15, Chapter 354, Subchapter F, Division 4, §354.1868, Exceptions in Disasters. Background and Justification The amended rules serve two purposes. Proposed amendments allow pharmacists to fill a 30-day refill of medications in certain disaster situations, as allowed by Senate Bill (S.B.) 460, 84th Legislature, Regular Session, 2015. Proposed amendments also replace the estimated acquisition cost (EAC) with the acquisition cost, which includes the National Average Drug Acquisition Cost (NADAC), long term care pharmacy acquisition cost (LTCPAC), and specialty pharmacy acquisition cost (SPAC), for drug ingredient reimbursement. The proposed rule changes related to acquisition cost only affect claims processed through the HHSC Vendor Drug Program (VDP), which includes fee-for-service (FFS) Medicaid and the Kidney Health Care, Children with Special Health Care Needs, and Texas Women's Health programs. Claims processed through managed care are not impacted by the proposed changes to acquisition cost. Concurrently, HHSC is proposing amendments to §§355.8541, 355.8546, 355.8547, 355.8548, and 355.8551; and repealing §355.8545 of this title (relating to Purchased Health Services). The proposed amendments and repeal appear elsewhere in this issue of the Texas Register. HHSC also proposes new §354.1868, Exceptions in Disasters, to clarify that HHSC will reimburse pharmacists for drugs dispensed under the conditions described by S.B. 460. Managed care organizations in Medicaid and the Children's Health Insurance Program (CHIP) must also adhere to proposed §354.1868 of this title, in accordance with §353.905(i) of this title (relating to Managed Care Organization Requirements), and §370.701 of this title (relating to Applicability of Medicaid Managed Care Standards for Outpatient Pharmacy Services to CHIP). Reimbursement for Certain Drugs in Disasters S.B. 460 allows a pharmacist to dispense a 30-day supply refill of a prescription drug in a Governor-declared disaster without prescriber authorization if failure to refill the prescription might result in an interruption of a therapeutic regimen or create patient suffering; the disaster prohibits the pharmacist from being able to contact the practitioner; and the Texas State Board of Pharmacy has notified pharmacists that they may dispense up to a 30-day supply of a dangerous (i.e., prescription) drug. Medicaid Fee-For-Service Drug Reimbursement The 2016-17 General Appropriations Act (H.B. 1, 84th Legislature, Regular Session, 2015, Article II, HHSC, Rider 50) requires HHSC to achieve cost savings through initiatives such as increasing efficiencies in VDP. In a proposed Medicaid Pharmacy Outpatient Rule published by the Centers for Medicare & Medicaid Services (CMS) (CMS2345-P) to amend 42 CFR part 447, subpart I, published on February 2, 2012, CMS proposes that states adopt an acquisition cost, such as NADAC, that more closely reflects pharmacies' overall acquisition costs and market conditions as the basis for state Medicaid pharmacy ingredient cost reimburse- 40 TexReg 7506 October 30, 2015 Texas Register ment. In 2014, HHSC contracted with Myers & Stauffer to conduct studies to identify the acquisition cost being paid by Texas pharmacies to procure drug products, determine how much it costs them to dispense medications per prescription, and evaluate the impact of the potential adoption of the new federal upper limit prices. Based on Myers & Stauffer's reports, HHSC is proposing the adoption of a reimbursement methodology using NADAC for drug ingredient reimbursement. For drugs without a NADAC rate, HHSC proposes the use of wholesale acquisition cost (WAC) minus a percentage for brand and generic drugs. The proposed rule amendments replace references to estimated acquisition cost with acquisition cost, but the adoption of the NADAC methodology is not reflected in the amendments, as the current rule allows for the use of NADAC. The current rule also allows for the use of WAC, as HHSC receives WAC from First Databank. In addition to the adoption of NADAC and WAC minus a percentage for certain drugs, HHSC also proposes to establish two new acquisition costs that are based on NADAC: LTCPAC and SPAC, to reimburse drug claims submitted by long term care pharmacies and specialty drug pharmacies respectively. These changes are reflected in the rule with the addition of LTCPAC and SPAC in the definition of acquisition cost. HHSC will no longer use direct price to chain pharmacy or the maximum allowable cost for multiple source drugs as acquisition costs. Furthermore, CMS suggests that moving from an estimated pricing methodology to one that is actual acquisition cost-based will impact the balance of overall pharmacy reimbursement, thereby requiring states to concurrently reevaluate the dispensing fee. While this change is not reflected in the proposed rule amendments, VDP did reevaluate and will increase the dispensing fee amount on the effective date of the proposed rule, based on Myers & Stauffer's cost of dispensing study. These adjustments will help offset the impact of the proposed ingredient drug pricing changes. Section-by-Section Summary Proposed amended §354.1835 adds a reference to proposed §354.1868 that allows for an exception during a disaster to the requirement that pharmacies must enter the identification number of the prescriber, as listed with the appropriate medical specialty board, on each claim. Proposed amended §354.1851(a) removes outdated language and clarifies that substitution of one drug for another in a prescription must follow all state and federal rules and laws. Proposed amended §354.1851(b) clarifies that pharmacies may dispense interchangeable biological products, as allowed by House Bill 751, 84th Legislature, Regular Session, 2015, and clarifies that HHSC pays pharmacy claims based on the acquisition cost rather than the estimated acquisition cost of the drug when generic equivalents are dispensed. Proposed deleted §354.1851(c) removes the requirement that an authorized drug substitution be completely documented on the prescription, as this requirement now falls under the general requirement in subsection (a) of this section that substitutions must meet all state and federal rules and laws. Proposed amended §354.1863 adds subsection (c) to clarify that prescriptions filled in a disaster, under proposed new §354.1868, are not subject to the prescription requirements in subsection (b) of this section. The amendments to this rule also include nonsubstantive corrections and language changes. Proposed new §354.1868 states that HHSC will reimburse pharmacies for refill medications dispensed during a declared disaster without having prescriber authorization if certain conditions are met, and clarifies that pharmacists must follow state law and Texas State Board of Pharmacy rules pertaining to these situations. Proposed amended §354.1901(a) removes a reference to the Direct Price to Chain Pharmacy (DPCP) price, since this price will no longer be used. Proposed amended §354.1901(b) updates the name of the pharmacy provider procedures manual and adds an exception to the requirement that providers must dispense the quantity prescribed or ordered by the prescriber, since proposed new §354.1868 limits prescriptions dispensed during a declared disaster to 30 days. Proposed amended §354.1901(e) replaces estimated acquisition cost with acquisition cost; clarifies that the acquisition cost may be determined by sources other than HHSC in accordance with 1 TAC §355.8541; and replaces the term "provider's dispensing fee" with "professional dispensing fee." Proposed amended §354.1921(c)(2)(A)-(D) repeals the requirement that drug manufacturers submit to HHSC drug price changes requested in the Price Certification section of the Certification of Information and adds a requirement that drug manufacturers submit these drug price changes only when requested by HHSC, within 10 calendar days of receiving the request. Proposed amended §354.1921(g) removes references to DPCP and adds definitions of long term care facility, long term care pharmacy, long term care pharmacy acquisition cost, specialty pharmacy, and specialty pharmacy acquisition cost. Proposed amended §354.1923(b)(4) removes a reference to WEAC, DPCP, and DEAC being determined based on Reported Manufacturer Pricing and a review of published and non-published prices since VDP is adopting NADAC and WAC as the basis of cost. Proposed amended §354.1927(2)(B) deletes a reference stating that the Commission establishes the cost of a drug in the event a cost for the drug is not reported to the Commission. Fiscal Note Greta Rymal, Deputy Executive Commissioner for Financial Services, has determined that during the first 5-year period the new rule and amended rules are in effect, there could be a fiscal impact to state government to implement the rules as proposed. The rule amendments related to S.B. 460 have the potential to increase costs of state government. The potential impact is dependent on declarations of disasters and on the quantity of additional prescriptions filled under disaster conditions described in the bill. Therefore, HHSC lacks sufficient data to provide an estimate of additional costs. pharmacies to provide the prescriptions described during a declared disaster. Public Benefit and Costs Kay Ghahremani, Associate Commissioner for Medicaid/CHIP, has determined that for each year of the first five years the new rule and amended rules are in effect, the public will benefit from the adoption of the rules. In the event of a declared disaster, pharmacies will be able to dispense certain medications without the required prescription on file and will ensure that individuals in need of medications will receive uninterrupted services. Also, implementation of the amended rules will enhance the accuracy of reimbursements for drug ingredient costs, thereby resulting in a more responsible and effective use of taxpayer dollars. Ms. Rymal has determined there are no anticipated economic costs to persons who are required to comply with the new rule and amended rules. There is no anticipated negative impact on local employment. Regulatory Analysis HHSC has determined that this proposal is not a "major environmental rule" as defined by §2001.0225 of the Texas Government Code. A "major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risk to human health from environmental exposure and that may adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of a state or a sector of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure. Takings Impact Assessment HHSC has determined that this proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under §2007.043 of the Government Code. Public Comment Written comments on the proposal may be submitted to Stacey Johnston, Senior Policy Analyst, Vendor Drug Program, Health and Human Services Commission, P.O. Box 85200, Mail Code 2250, Austin, Texas 78708-5200; by fax to (512) 730-7483; or by e-mail to stacey.johnston@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register. Public Hearing A public hearing is scheduled from 10:00 to11:00 a.m. on November 23, 2015, in the Brown-Heatly Public Hearing Room located at 4900 North Lamar Boulevard, Austin, Texas 78751. Persons requiring further information, special assistance, or accommodations should contact Kristine Dahlmann at (512) 462-6299. DIVISION 2. ADMINISTRATION There is no anticipated impact to the costs and revenues of local governments. 1 TAC §354.1835 Small and Micro-business Impact Analysis The amendment is proposed under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas. HHSC has determined that there will be no adverse effect on small businesses or micro-businesses to comply with the new rule and amended rules, as there is no requirement to alter current business practices as a result of the new rule and amended rules. The changes made by S.B. 460 permit but do not require Statutory Authority PROPOSED RULES October 30, 2015 40 TexReg 7507 The proposed amendment affects Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal. §354.1835. Prescriber Identification Numbers. Unless an exception is needed during a disaster, as described in §354.1868 of this subchapter (relating to Exceptions in Disasters), vendors [Vendors] must enter the identification number of the prescriber, as listed with the appropriate medical specialty board, on each claim. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504445 Karen Ray Chief Counsel Texas Health and Human Services Commission Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 424-6900 ♦ DIVISION 3. ♦ Karen Ray Chief Counsel Texas Health and Human Services Commission Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 424-6900 ♦ DIVISION 4. ♦ ♦ LIMITATIONS 1 TAC §354.1863, §354.1868 Statutory Authority The amendment and new rule are proposed under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas. The proposed rules affect Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal. §354.1863. Prescription Requirements. (a) Payment for pharmaceuticals can be made only when these pharmaceuticals are prescribed by a practitioner licensed to prescribe legend drugs. ♦ MEDICATIONS 1 TAC §354.1851 Statutory Authority The amendment is proposed under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas. The proposed amendment affects Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal. §354.1851. Substitution of One Drug for Another in a Prescription. (a) Substitution of one drug for another in a prescription must follow all state and federal rules and laws. [Substitution is legal only if and when authorized by the the prescribing physician.] (b) When generic equivalents or interchangeable biological products are dispensed, the Health and Human Services Commission pays the claim based on the acquisition cost (AC), in accordance with §355.8541 of this title (relating to Legend and Nonlegend Medications) [the estimated acquisition cost of the drug used is claimed]. [(c) Substitution authorization must be completely documented on the prescription.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, (b) The pharmacist must ensure that the original prescription conforms to the Texas State Board of Pharmacy rules concerning the records to be maintained by a pharmacy. A signed prescription must be maintained in the dispenser's file and available for audit at any reasonable time. Telephone orders, where legal, must be documented in writing. The name of the prescriber and the signature of the dispensing pharmacist must be documented. If a pharmacy maintains prescription records in a data processing system, a hard copy of the prescription must be retained on file unless the daily log includes all the information required in §354.1901 [§351.1901] of this title (relating to Pharmacy Claims). The provider must conform to all regulations issued by the Drug Enforcement Administration and Texas State Board of Pharmacy concerning the recording of prescriptions in a data processing system. (c) Pharmaceuticals dispensed in disasters under §354.1868 of this subchapter (relating to Exceptions in Disasters) are not subject to the requirements in subsection (b) of this section. (d) [(c)] Prescriptions [Effective April 1, 2008, prescriptions] for covered pharmaceuticals submitted to a pharmacy in written form are [will be] eligible for payment only if the prescription is executed on tamper-resistant prescription paper, as required by §1903(i)(23) of the Social Security Act (42 U.S.C. §1936b(i)(23)). (e) [(d)] The dispensing pharmacist must date the prescription and initial the refills. §354.1868. Exceptions in Disasters. (a) In the case of a disaster, a pharmacy is reimbursed for dispensing a refill medication without prescriber authorization if: (1) failure to refill the prescription might result in an interruption of a therapeutic regimen or create patient suffering; (2) the natural or manmade disaster prohibits the pharmacist from being able to contact the prescribing practitioner or original filling pharmacy; 2015. TRD-201504446 (3) the Governor has declared a state of disaster under Chapter 418, Texas Government Code; and 40 TexReg 7508 October 30, 2015 Texas Register (4) the Texas State Board of Pharmacy has notified pharmacies that pharmacists may dispense up to a 30-day supply of a dangerous drug, as defined in Chapter 483 of the Texas Health and Safety Code. (b) Protocols for drugs dispensed in disasters must conform to state law and Texas State Board of Pharmacy rules. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, 2015. DIVISION 6. ♦ ♦ (d) The provider must submit claims as the prescription is dispensed through the on-line system. Providers who supply a large volume of medications to nursing facility recipients may submit these claims through their data transmission company after the point of sale. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. PHARMACY CLAIMS 1 TAC §354.1901 Filed with the Office of the Secretary of State on October 19, Statutory Authority 2015. The amendment is proposed under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas. The proposed amendment affects Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal. §354.1901. (c) If all necessary information is not supplied, a claim will not be processed or paid. (e) Overcharged prescription claims are not denied. The Commission pays the appropriate drug cost. The appropriate drug cost is the [estimated] acquisition cost, as determined by the Commission or other source in accordance with §355.8541 of this title (relating to Legend and Nonlegend Medications), plus the professional [provider's] dispensing fee. The amount claimed and the amount paid are shown on the payment register. TRD-201504447 Karen Ray Chief Counsel Texas Health and Human Services Commission Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 424-6900 ♦ Disasters) [Pharmacy Provider Handbook]. Where the actual quantity dispensed deviates from the prescribed quantity, the provider must bill for the amount actually dispensed. The quantity of drugs must be entered in the metric decimal quantity field. The quantity shown as the metric decimal quantity unit must be calculated after referencing the pricing unit shown in the Texas Drug Code Index. Pharmacy Claims. (a) To receive payment from the Health and Human Services Commission (Commission), the provider must submit a pharmacy claim through the electronic adjudication system. A separate entry is submitted for each prescription or refill. For the original dispensing and each subsequent refill, the provider indicates on the corresponding pharmacy claim submitted to the Commission the usual and customary price, the purchasing method, and the National Drug Code (NDC). [All drug purchases through a central purchasing agreement or from a central purchasing entity must be billed to the Commission as Direct Price to Chain Pharmacy, as required by §355.8541 of this title (relating to Legend and Nonlegend Medications).] Claims received over 90 days after the date of service are rejected. For claims on behalf of an individual who has applied for Medicaid coverage but has not yet been assigned a recipient number on the date of service, the filing period does not commence until the date the individual has been assigned a number. The requirements in §354.1863 of this subchapter (relating to Prescription Requirements) are also waived for retroactive claims. The provider must ensure, however, that a prescription submitted for a prior eligibility period conformed to Texas State Board of Pharmacy and Commission regulations on the date of service, or a claim cannot be submitted. (b) Providers must dispense the quantity prescribed or ordered by the prescriber except as limited by the policies and procedures described in the Commission's pharmacy provider procedure manual, or as allowed by §354.1868 of this subchapter (relating to Exceptions in TRD-201504448 Karen Ray Chief Counsel Texas Health and Human Services Commission Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 424-6900 ♦ ♦ ♦ DIVISION 7. TEXAS DRUG CODE INDEX--ADDITIONS, RETENTIONS, AND DELETIONS 1 TAC §§354.1921, 354.1923, 354.1927 Statutory Authority The amendments are proposed under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas. The proposed amendments affect Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal. §354.1921. Addition of Drugs to the Texas Drug Code Index. (a) A drug company that has a valid rebate agreement under 42 U.S.C. §1396r-8 may apply to the Health and Human Services Commission (Commission) to add a drug to the Texas Drug Code Index (TDCI). The term "drug company" includes any manufacturer, repackager, or private labeler. (b) To apply for the addition of a drug to the TDCI, a drug company must complete each section of the Certification of Informa- PROPOSED RULES October 30, 2015 40 TexReg 7509 tion for the Addition of a Drug Product to the TDCI provided by the Commission. (c) A drug company must also: (1) update the Commission with changes to formulation, product status, or availability; and (2) submit changes to the prices requested in the Price Certification section of the Certification of Information, if requested by the Commission, within 10 calendar days of receiving the request. [as follows:] [(A) send all price updates, except Average Manufacturer Price (AMP) updates, to the Commission by the 10th day of each month.] [(i) If a price change occurs on or before the 10th day of the month, send the price update by the 10th day of the next month (for example, if the price change occurs on August 8, the due date is the 10th day of September).] [(ii) If a price change occurs after the 10th day of the month, send the price update by the 10th day of the second month after the month in which the price change occurs (for example, if the price change occurs on August 11, the due date is the 10th day of October);] [(B) when submitting price updates, include current information for each price on the Certification of Information that changed during the preceding month;] [(C) update Average Manufacturer Price (AMP) prices quarterly; and] [(D) if required by the Commission, update pricing on a more frequent basis as circumstances warrant.] (d) Sources other than drug companies may request the addition of a drug not currently listed in the TDCI. If the request is not from a drug company, the Commission may request that the manufacturer submit a Certification of Information as described in subsection (b) of this section. (e) The drug company and other sources, if applicable, are entitled to receive notification of approved or denied Certifications of Information. If a Certification of Information is denied, the Commission will state the reasons for the denial. (f) Notwithstanding any other state law, pricing information reported by a drug company under this subchapter is confidential and must not be disclosed by the Commission, its agents, contractors, or any other State agency in a format that discloses the identity of a specific manufacturer or labeler, or the prices charged by a specific manufacturer or labeler for a specific drug, except as necessary to permit the Attorney General to enforce state and federal law. (g) Definitions. The following words and terms, when used in this chapter and in Chapter 355 of this title (relating to Reimbursement Rates), have the following meanings unless the context clearly indicates otherwise. (1) Average Manufacturer Price (AMP)--The average manufacturer price as defined in 42 USC §1396r-8(k)(1). (2) Average Wholesale Price (AWP)--The average wholesale price for a drug as published in a price reporting compendium such as First DataBank or Medispan. (3) Customary Prompt Pay Discount--Any discount off the purchase price of a drug routinely offered by the drug company to a wholesaler or distributor for prompt payment of purchased drugs within 40 TexReg 7510 October 30, 2015 Texas Register a specified time frame and consistent with customary business practices for payment. [(4) Direct Price to Chain Pharmacy--The amount paid by a chain pharmacy for a product when purchased directly from a drug company, whether delivered directly to a chain warehouse facility or indirectly through a wholesaler or a distributor. The price should be net of price concessions. In reporting this price point to the Commission, if the price is reported as a range, the weighted average of these prices, based on unit sales, must be included. The following prices should be excluded from this price point:] [(A) prices excluded from the determination of Medicaid Best Price at 42 C.F.R. §447.505; and] [(B) prices to entities participating in the Health Resources and Services Administration (HRSA) 340b discount program.] (4) [(5)] Direct Price to Long Term Care Pharmacy--The amount paid by a pharmacy servicing a long term care facility, including a nursing facility, assisted living facility, and skilled nursing facility. The price should be net of price concessions. In reporting this price point to the Commission, if the price is reported as a range, the weighted average of these prices, based on unit sales, must be included. The following prices should be excluded from this price point: (A) prices excluded from the determination of Medicaid Best Price at 42 C.F.R. §447.505; and (B) prices to entities participating in the Health Resources and Services Administration (HRSA) 340b discount program. (5) [(6)] Direct Price to Pharmacy--The amount paid for a product by a pharmacy when purchased directly from a drug company. This price should be net of Price Concessions. In reporting this price point to the Commission, if the price is reported as a range, the weighted average of these prices, based on unit sales, must be included. The following prices should be excluded from this price point: (A) prices excluded from the determination of Medicaid Best Price at 42 C.F.R. §447.505; (B) prices to entities participating in the Health Resources and Services Administration (HRSA) 340b discount program; and (C) [Direct Prices to a Chain Pharmacy or] Direct Prices to Long Term Care Pharmacy. (6) [(7)] Gross Amount Due--Has the meaning as defined by the National Council for Prescription Drug Programs. (7) Long term care facility--Facility that provides long term care services, such as a nursing home, skilled nursing facility, assisted living facility, group home, hospice facility, or intermediate care facility for individuals with an intellectual disability or related condition (ICF/IID). (8) Long term care pharmacy--A pharmacy for which the total Medicaid claims for prescription drugs to residents of long term care facilities exceeds 50 percent of the pharmacy's total Medicaid claims per year. Long term care pharmacies are typically not open to the public for walk-in business. (9) Long term care pharmacy acquisition cost (LTCPAC)-The acquisition cost determined by the Commission for a drug product purchased by a long term care pharmacy. (10) [(8)] "may apply to the Commission"--The act of applying to have a drug included on the TDCI. This includes completing the Certification of Information for the Addition of a New Drug Product to the Texas Drug Code Index, submitting National Drug Code (NDC) changes, submitting price updates, and submitting additional package sizes for a drug that is already included on the TDCI. (11) [(9)] National Drug Code (NDC)--The 11-digit numerical code established by the U.S. Food and Drug Administration that indicates the labeler, product, and package size. (12) [(10)] Pharmacy--An entity with an approved community pharmacy license or an institutional pharmacy license. (13) [(11)] Price concession--An action by a manufacturer (other than a customary prompt-pay discount as defined in this section) that has the effect of reducing the net cost of a product to a purchaser. The term includes discounts, rebates, billbacks, chargebacks, or other adjustments to pricing or payment terms. Lagged price concessions must be accounted for in the Reported Manufacturer Pricing by operation of a 12-month average estimation methodology as described in 42 C.F.R. §414.804. For new, at launch products, if a manufacturer has forecasted price concessions, the initial Reported Manufacturer Pricing should reflect this internal business information. (14) [(12)] Price to Wholesaler/Distributor--The amount paid by a wholesaler or a distributor. The price should be net of price concessions. In reporting this price point to the Commission, if the price is reported as a range, the weighted average of these prices, based on unit sales, must be included. The following prices should be excluded from this price point: (A) prices excluded from the determination of Medicaid Best Price at 42 C.F.R. §447.505; and (B) prices to entities participating in the Health Resources and Services Administration (HRSA) 340b discount program. (15) [(13)] Reliable Sources--Sources including other state or federal agencies and pricing services, as well as verifiable reports by contracted providers and Vendor Drug Program formulary and field staff. (16) [(14)] Reported Manufacturer Pricing--Pricing information submitted to the Commission by a drug company on a Certification of Information, or in subsequent price updates as described in subsections (b) and (c) of this section. This includes: Average Wholesale Price, Average Manufacturer Price, Price to Wholesaler/Distributor, Direct Price to Pharmacy, [Direct Price to Chain Pharmacy,] and Direct Price to Long Term Care Pharmacy. If a drug company does not have a single price for a price point, it must report a range of prices. If a drug company reports a range of prices, it must also provide the weighted average of these prices based on unit sales. (17) Specialty pharmacy--A pharmacy that meets all of the following criteria: (A) total Medicaid claims for specialty drugs, as described in §354.1853 of this subchapter (relating to Specialty Drugs), exceeds 10 percent of the pharmacy's total Medicaid claims per year; (B) obtains volume-based discounts or rebates on specialty drugs from manufacturers or wholesalers; and (C) delivers at least 80 percent of dispensed prescriptions by shipment through the U.S. Postal Service or other common carrier to customers or healthcare professionals (including physicians and home health providers). (18) Specialty pharmacy acquisition cost (SPAC)--The acquisition cost determined by the Commission for a drug product purchased by a specialty pharmacy. [(15) Warehouse Purchases--Purchases through a central purchasing agreement or from a central purchasing entity. Warehouse purchases will be reimbursed at Direct Price to Chain Pharmacy.] (19) [(16)] Weighted AMP (Average Manufacturer Price)-The Weighted AMP (Average Manufacturer Price) as contemplated in 42 U.S.C. §1396r-8(b)(3) and (e), and as reported by the Centers for Medicare & Medicaid Services. (20) [(17)] Wholesaler Cost--The net cost of a product to a wholesaler; equivalent to Price to Wholesaler/Distributor and cost to wholesaler. §354.1923. Review and Evaluation. (a) The Health and Human Services Commission (Commission) reviews Certifications of Information to determine the need for a drug to be added to the Texas Drug Code Index and to determine the need for restrictions, when appropriate. In determining need, the Commission considers the following: (1) expansion of the prescriber's armamentarium by a new drug entity or an additional multiple source drug; (2) the predominant use of the drug in an outpatient setting; (3) the cost of the drug to pharmacies compared to: (A) relevant costs as published in price reporting com- pendia; (B) the drug company's prices for the drug in other packaging sizes; (C) the Average Manufacturer Price (AMP) as defined by 42 U.S.C. 1396r-8(k), as amended; and (D) other generically equivalent drug products; and (4) whether the drug is part of a category that is subject to inclusion in a preferred drug list (PDL) under §354.1924 of this division (relating to Preferred Drug List). If a drug is subject to inclusion in the PDL, the manufacturer or labeler's provision of supplemental rebates will be considered when determining whether the product is subject to prior authorization. (b) The Commission may return a Certification of Information for any of the following reasons: (1) discovery of false, erroneous, or incomplete information or documentation in the Certification of Information; (2) failure of the drug company to provide the Commission with documentation of the: (A) approved New Drug Application or Abbreviated New Drug Application, if applicable; or (B) Food and Drug Administration (FDA) approval for marketing; (3) failure of the drug company to provide the Commission with the National Drug Code, as defined by and filed with the FDA, for the drug product as shown on the drug product container sold to the pharmacy; or (4) failure of the drug company to provide the Commission with current prices for the pricing points on the Certification of Information. [The Wholesale Estimated Acquisition Cost, Direct Price to Chain Pharmacy, and Direct Estimated Acquisition Cost are determined based on Reported Manufacturer Pricing and a review of published and non-published prices.] (c) The Commission may deny a request if it determines that the drug is included in one or more of the following classes: PROPOSED RULES October 30, 2015 40 TexReg 7511 (1) amphetamines, when used for weight loss, and obesity control drugs; (2) appliances; (3) cosmetics; (4) DESI-ineffective products; (4) Effective upon notification, the Commission deletes discontinued or permanently recalled drugs. This provision applies to: (5) diagnostic aids; (6) durable medical equipment (rental or purchase); (7) elastic stockings; (8) experimental drugs; (9) fertility drugs; (10) first aid supplies; (11) immunizing agents; (12) irrigating sets; (13) IV sets; (14) medical devices; (15) medical supplies; (16) oxygen; (3) The Commission may delete a legend drug if the same drug becomes available as an over-the-counter drug. (A) drugs permanently recalled by the manufacturer; (B) drugs permanently recalled by the FDA; and (C) drugs no longer manufactured. (5) The Commission deletes drugs for which federal matching funds are no longer available. (6) The Commission may delete a drug if: (A) there is no federal rebate for the drug; (B) the drug no longer meets the definition of a covered, outpatient drug; (C) the drug has been designated to an excludable class of drugs; or (D) the classification of the drug changes to a class listed in §354.1923(c) of this division (relating to Review and Evaluation). (17) products unsuitable for use outside of physician offices or health care facilities; The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. (18) shampoos, unless medicated for parasite control; Filed with the Office of the Secretary of State on October 19, (19) skin lotions and creams (nonlegend cosmetic types); 2015. (20) soaps and soap substitutes; (21) supports and suspensories; TRD-201504449 Karen Ray Chief Counsel Texas Health and Human Services Commission Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 424-6900 (22) syringes and needles; (23) unit-dose or convenience packaging; (24) vitamin and antianemia combinations; (25) medical foods; and/or (26) nutritional supplements. §354.1927. Retention and Deletion of Drugs. The Health and Human Services Commission (Commission) reviews the Texas Drug Code Index to evaluate the need for retaining or deleting drugs according to the following criteria. (1) If the drug company fails to remove from pharmacies any drug recalled by the Food and Drug Administration (FDA) or fails to meet other federal requirements, the Commission has the right to request that the U.S. Department of Health and Human Services (HHS) allow deletion of the drug. If the drug company repeatedly fails to meet FDA or other federal requirements, the Commission may request permission to delete all drugs manufactured by the company. (2) of a drug if: The Commission may request that HHS allow deletion (A) the drug company or companies' actions with respect to a drug violate state or federal law; or (B) the drug company fails to provide to the Commission the information required under §354.1921(c) of this division (relating to Addition of Drugs to the Texas Drug Code Index). [If the Commission retains a drug for which the cost was not reported, the Commission establishes the cost.] 40 TexReg 7512 October 30, 2015 Texas Register ♦ ♦ ♦ CHAPTER 355. REIMBURSEMENT RATES SUBCHAPTER J. PURCHASED HEALTH SERVICES DIVISION 28. PHARMACY SERVICES: REIMBURSEMENT The Texas Health and Human Services Commission (HHSC) proposes to amend §355.8541, Legend and Nonlegend Medications; §355.8546, Brand-Name Drugs; §355.8547, Reimbursement for Compound Prescriptions; §355.8548, 340B Covered Entities; and §355.8551, Dispensing Fee, to replace the estimated acquisition cost (EAC) with the acquisition cost, which includes the National Average Drug Acquisition Cost (NADAC), long term care pharmacy acquisition cost (LTCPAC), and specialty pharmacy acquisition cost (SPAC), for drug ingredient reimbursement. HHSC also proposes to repeal §355.8545, Texas Maximum Allowable Cost, to delete the Texas Maximum Allowable Cost drug pricing methodology. These proposed rule changes only affect claims processed through the HHSC Vendor Drug Program (VDP), which includes fee-for-service (FFS) Medicaid and the Kidney Health Care, Children with Special Health Care Needs, and Texas Women's Health programs. Concurrently, HHSC is proposing amendments to §§354.1851, 354.1901, 354.1921, 354.1923, and 354.1927 of this title (relating to Pharmacy Services). The proposed amendments appear elsewhere in this issue of the Texas Register. Background and Justification The 2016-17 General Appropriations Act (House Bill 1, 84th Legislature, Regular Session, 2015, Article II, HHSC, Rider 50) requires HHSC to achieve cost savings through initiatives such as increasing efficiencies in VDP. In a proposed Medicaid Pharmacy Outpatient Rule published by the Centers for Medicare & Medicaid Services (CMS) (CMS2345-P) to amend 42 CFR part 447, subpart I, published on February 2, 2012, CMS proposes to replace estimated acquisition cost with actual acquisition cost as the basis for state Medicaid pharmacy ingredient cost reimbursement. In 2014, HHSC contracted with Myers & Stauffer to conduct studies to identify the acquisition cost being paid by Texas pharmacies to procure drug products, determine how much it costs them to dispense medications per prescription, and evaluate the impact of the potential adoption of the new federal upper limit prices. Myers & Stauffer recommended the adoption of a reimbursement methodology using the National Average Drug Acquisition Cost (NADAC) for drug ingredient reimbursement. For drugs without a NADAC rate, the use of wholesale acquisition cost (WAC) minus a percentage for brand and generic drugs was recommended. Based on Myers & Stauffer's reports, HHSC also proposes to establish two new acquisition costs that are based on NADAC, long term care pharmacy acquisition cost and specialty pharmacy acquisition cost, to reimburse drug claims submitted by long term care pharmacies and specialty drug pharmacies. In addition, CMS suggests that moving from an estimated pricing methodology to one that is actual acquisition cost-based will impact the balance of overall pharmacy reimbursement, thereby requiring states to concurrently reevaluate the dispensing fee. VDP did reevaluate and will increase the dispensing fee amount on the effective date of the proposed rule, based on Myers & Stauffer's cost of dispensing study. These adjustments will help offset the impact of the proposed ingredient drug pricing changes and are included in the proposed rule's fiscal impact. The proposed rule amendments incorporate these recommendations, in addition to making updates to outdated language and repealing language that is no longer applicable to the program. Section-by-Section Summary Proposed amended §355.8541(a) adds nonlegend drugs because reimbursement for nonlegend drugs will be identical to reimbursement for legend drugs. Proposed amended §355.8541(a)(1), (b), (b)(1), and (b)(2) replaces HHSC's best estimate of acquisition cost (EAC) with acquisition cost (AC). Proposed amended §355.8541(a)(1) also reflects the proposed change to §355.8551, which renames "dispensing fee" to "professional dispensing fee." Proposed deleted §355.8541(b)(1)(C) removes direct price to chain pharmacy (DPCP) from the definition of AC, as the DPCP methodology will no longer be used. Proposed deleted §355.8541(b)(1)(D) removes maximum allowable cost (MAC) for multiple source drugs from the definition of AC, as the MAC methodology for multiple source drugs will no longer be used. Proposed new §355.8541(b)(1)(C) adds long term care pharmacy acquisition cost (LTCPAC) to the definition of AC. Proposed new §355.8541(b)(1)(D) adds specialty pharmacy acquisition cost (SPAC) to the definition of AC. Proposed deleted §355.8541(b)(3) removes the requirement that all drug purchases through a central purchasing agreement or from a central purchasing entity must be billed to HHSC as DPCP. The rule is renumbered. Proposed amended §355.8541(b)(3) adds LTCPAC and SPAC to the list of acquisition costs and clarifies that WEAC, LTCPAC, and SPAC may be established by entities other than HHSC. Proposed deleted §355.8541(b)(5) removes the requirement that WEAC may not exceed the Wholesaler Cost plus an amount representing wholesaler operating costs and profits, as NADAC includes wholesaler operating costs and profits. The rule is renumbered. Proposed deleted §355.8541(b)(7) removes the reference to DPCP because this methodology will no longer be used. Proposed deleted §355.8541(c) removes a subsection related to nonlegend drugs, because §355.8541(a) and (b) now apply to nonlegend drugs. The rule is re-lettered. Proposed repealed §355.8545 is deleted because Texas Maximum Allowable Cost (MAC) will no longer be used. Proposed amended §355.8546(a) removes the reference to maximum allowable cost, as this will no longer be used; clarifies that physicians who want to dispense a brand name for a prescription for a multisource drug must write the phrase "brand necessary" on the prescription; and clarifies that a pharmacy provider must enter "1" in the field rather than "6" for "Dispense as Written." Proposed new §355.8546(c) includes existing language that is in proposed repealed §355.8545 and clarifies that a pharmacy provider that dispenses a brand name drug that is subject to a NADAC generic reimbursement limit and bills HHSC for the service must accept Medicaid reimbursement as payment in full. Proposed amended §355.8547 replaces the estimate of acquisition cost with acquisition cost, makes a non-substantive change to replace "the department" with HHSC, and renames "dispensing fee" to "professional dispensing fee." Proposed amended §355.8548(c) is amended to remove a reference to Texas MAC and adds the term "professional" to dispensing fee to align the term with the proposed amendments in §355.8541. Proposed amended §355.8551 adds "professional" to the rule title and corresponding sections within the rule and removes the reference to MAC. The rule is renumbered to reflect these amendments. Proposed amended §355.8551(a) adds a definition for "acquisition cost," deletes a definition for "estimated acquisition cost," adds a reference to 42 C.F.R. §447.502 in the definition for "professional dispensing fee," and clarifies that the definition of "professional dispensing fee" includes the pharmacist's professional services. Proposed amended §355.8551 (b) eliminates unnecessary verbiage from the rule and adds the term "professional" to dispensing fee. PROPOSED RULES October 30, 2015 40 TexReg 7513 Proposed deleted §355.8551(c) removes the language that allows HHSC to make inflation adjustments, as this practice was not required by law and has not been undertaken. The rule is re-lettered. HHSC has determined that this proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under §2007.043 of the Government Code. Proposed amended §355.8551 (e) adds the term "professional" to dispensing fee to align the term with the proposed amendments in §355.8541. Public Comment Fiscal Note Greta Rymal, Deputy Executive Commissioner for Financial Services, has determined that during the first 5-year period the amended and repealed rules are in effect, there will be a net reduction of costs to state government. The anticipated cost reduction results from decreased costs for drug acquisition, net of a small increase to dispensing fees implemented concurrently, as discussed in the Background and Justification section of the preamble. The expected savings are ($676,327) General Revenue (GR) (($1,577,623) All Funds (AF)) for state fiscal year (SFY) 2016, ($263,261) GR (($608,133) AF) for SFY 2017, ($234,269) GR (($540,663) AF) for SFY 2018, ($266,497) GR (($615,040) AF) for SFY 2019, and ($304,914) GR (($703,701) AF) for SFY 2020. The costs and revenues of local governments will not be affected. Small Business and Micro-business Impact Analysis Ms. Rymal has also determined that there may be an effect on small businesses or micro businesses to comply with the amended rules. There are an estimated 1,231 pharmacies operating that qualify as small businesses or micro-businesses. HHSC expects the individual impact to these small businesses and micro-businesses to be small; totaling around $41.39 per year. There are no alternative methods of achieving the purpose of the proposed rule that are consistent with the health, safety, environmental, and economic welfare of the state. Public Benefit and Costs Kay Ghahremani, Associate Commissioner for Medicaid/CHIP, has determined that for each year of the first five years the amended rules are in effect, the public will benefit from the adoption of the rules. HHSC anticipates that enforcement of the amended rules as proposed will enhance the accuracy of reimbursements for drug ingredient costs thereby resulting in a more responsible and effective use of taxpayer dollars. Ms. Rymal has determined there are no anticipated economic costs to persons who are required to comply with the amended rules. There is no anticipated negative impact on local employment. Written comments on the proposal may be submitted to Stacey Johnston, Senior Policy Analyst, Vendor Drug Program, Health and Human Services Commission, P.O. Box 85200, Mail Code 2250, Austin, Texas 78708-5200; by fax to (512) 730-7483; or by e-mail to Stacey.johnston@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register. Public Hearing A public hearing is scheduled from 8:45 to 9:45 a.m. on November 23, 2015, in the Brown-Heatly Public Hearing Room located at 4900 North Lamar Boulevard, Austin, TX 78751. Persons requiring further information, special assistance, or accommodations should contact Kristine Dahlmann at (512) 462-6299. 1 TAC §§355.8541, 355.8546 - 355.8548, 355.8551 Statutory Authority The amendments are proposed under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code §32.021 (and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas). The proposed amendments affect Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal. §355.8541. Legend and Nonlegend Medications. (a) Legend and nonlegend drug reimbursement. A pharmaceutical provider is reimbursed for legend and nonlegend drugs based on the lesser of the: (1) acquisition cost (AC) plus the Health and Human Services Commission's (HHSC's) [best estimate of acquisition cost (EAC) plus HHSC's] currently established professional dispensing fee per prescription; usual and customary price charged the general public; (3) Gross Amount Due, if provided. (b) Acquisition cost (AC). The AC is an [Estimated acquisition cost (EAC). The EAC is HHSC's best] estimate of prices generally and currently paid in the market. (1) Regulatory Analysis HHSC has determined that this proposal is not a "major environmental rule" as defined by §2001.0225 of the Texas Government Code. A "major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risk to human health from environmental exposure and that may adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of a state or a sector of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure. October 30, 2015 The AC [EAC] is defined as the: (A) Texas Register wholesale estimated acquisition cost (WEAC); (B) direct estimated acquisition cost (DEAC), according to the pharmacist's usual purchasing source and the pharmacist's usual purchasing quantity; (C) long term care pharmacy acquisition cost (LTC- (D) specialty pharmacy acquisition cost (SPAC). [(C) direct price to chain pharmacy (DPCP); or] PAC); or [(D) source drugs.] Takings Impact Assessment 40 TexReg 7514 (2) or maximum allowable cost (MAC) for multiple (2) The AC [EAC] is verifiable by invoice audit conducted by HHSC to include necessary supporting documentation that will verify the final cost to the provider. [(3) All drug purchases through a central purchasing agreement or from a central purchasing entity must be billed to HHSC as DPCP.] (3) [(4)] The WEAC, LTCPAC, and SPAC are [is] established [by HHSC] using market or government sources, which include, but are not limited to: (A) Reported Manufacturer Pricing; (B) First Databank; (C) Redbook; (D) Weighted AMP, as published by the Centers for Medicare & Medicaid Services (CMS); (E) National Average Drug (NADAC), as published by the CMS; or (F) Acquisition Cost face of the prescription. This procedure enables payment for the drug at the more expensive brand name [estimated] acquisition cost. To indicate this certification (override) on the pharmacy claim form, the pharmacy provider must enter "1" ["6"] in the field for "Dispense as Written." For telephone orders involving physician overrides, a written prescription must be obtained from the prescribing physician within 30 days from the time the order was placed. (b) A physician override for a prescription is valid only for the life of the prescription. The life of the prescription is defined as the original dispensing and any authorized refills, not to exceed eleven refills or a twelve-month supply. The physician override cannot be forwarded or transferred to any other prescription for the same drug. (c) A pharmacy provider that dispenses a brand drug that is subject to a generic reimbursement and bills HHSC for the service must accept Medicaid reimbursement as payment in full. No additional dispensing fee or product cost amounts may be billed to the Medicaid recipient. §355.8547. Reimbursement for Compound Prescriptions. Gold Standard. [(5) The WEAC may not exceed the Wholesaler Cost, as supplied by a drug company, plus an amount representing wholesaler operating costs and profits. Wholesaler operating conditions may be determined from information supplied to HHSC by drug companies, wholesalers, or other reliable sources. Exceptions to general pricing determinations may be made on certain drugs and/or drug categories based on information from these same sources.] Reimbursement for compounded prescriptions is based on [estimated] acquisition cost of the ingredients used, verifiable by invoice audit, plus HHSC's [the department's] currently established professional dispensing fee per prescription or the usual and customary price charged to the general public, whichever is lower. Only drugs listed in the latest revision of the Texas Drug Code Index are considered for reimbursement. There is no provision for a compounding fee over and above the professional dispensing fee. (4) [(6)] The DEAC is established by HHSC using direct price information supplied by a drug company. Providers are reimbursed only at the DEAC on all drug products that are available from select manufacturers/distributors who actively seek and encourage direct purchasing. §355.8548. 340B Covered Entities. [(7) The DPCP is established by HHSC using price information supplied by a drug company.] (b) Definitions. For purposes of this section, the following terms are defined as follows: [(c) Nonlegend drugs.] [(1) Reimbursement for nonlegend drugs is based on the lesser of the:] [(A) usual and customary price charged to the general public;] [(B) EAC, plus 50 percent of the EAC; or] [(C) Gross Amount Due, if provided.] [(2) No dispensing fee is added to the price of nonlegend drugs paid under this subsection, except as described in paragraph (3) of this subsection.] (a) Scope. This section applies to each manufacturer of outpatient drugs that has executed an agreement with the Secretary of the United States Department of Health and Human Services under Section 340B of the Public Health Service Act (42 U.S.C. §256b). (1) 340B covered entity--A health-care organization enrolled in the 340B Program. (2) 340B covered outpatient drug--A drug eligible for purchase through the 340B Program, as defined in 42 C.F.R. §10.20 and §10.21. (3) 340B price--The maximum price that the United States Health Resources and Services Administration will allow a drug manufacturer to charge a 340B covered entity for a 340B covered outpatient drug purchased through the 340B program. The 340B price is also known as the "ceiling price." [(3) If 50 percent of the EAC exceeds the standard dispensing fee calculation, the nonlegend drug is reimbursed under subsection (a) of this section.] (4) 340B program--A drug-pricing program established under Section 340B of the Public Health Service Act (42 U.S.C. §256b) under which a manufacturer of covered outpatient drugs agrees that it will not charge a 340B covered entity more than the 340B price for a 340B covered outpatient drug. (c) [(d)] Public hearing. Notice of a public hearing to receive comments on proposed changes to general pricing determinations derived under this section will be published in the Texas Register. (5) HHSC--The Texas Health and Human Services Commission or its designee. (d) [(e)] Definitions. The terms used in this section have the meanings as defined for the same terms in §354.1921(g) of this title (relating to Addition of Drugs to the Texas Drug Code Index). §355.8546. Brand-Name Drugs. (a) Physicians[,] who want [to dispense] a brand name drug dispensed on a prescription for a multisource drug must [with a maximum allowable cost,] handwrite the phrase "Brand necessary" on the (c) Reimbursement methodology. HHSC reimburses a 340B covered entity for a 340B covered outpatient drug purchased through the 340B program and dispensed to a patient of a 340B covered entity based on [the lower of] HHSC's estimate of the 340B price [or the maximum allowable cost in accordance with §355.8545 of this division (relating to Texas Maximum Allowable Cost)] plus a professional dispensing fee assigned by HHSC in accordance with §355.8551 of this division (relating to Dispensing Fee). HHSC establishes the estimate PROPOSED RULES October 30, 2015 40 TexReg 7515 (1) Reported manufacturer pricing; (2) Weekly data from national drug pricing publishers; and as to the general public; and publicly displaying the availability of prescription delivery services at no charge. The delivery incentive is to be paid on all Medicaid prescriptions filled for legend drugs. This delivery incentive is not to be paid for over-the-counter drugs that are prescribed as a benefit of this program. (3) Quarterly data from the Centers for Medicare and Medicaid Services. (d) [(e)] Preferred generic drugs are subject to the Preferred Drug List requirements. §355.8551. Professional Dispensing Fee. (a) The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise. (e) [(f)] The total professional dispensing fee will not exceed $200 per prescription. of the 340B price using market or government sources, which include, but are not limited to: (1) Acquisition Cost--As defined in §355.8541 of this division (relating to Legend and Nonlegend Medications). (2) [(1)] Delivery Incentive--An incentive for offering no-charge prescription delivery to all Medicaid recipients, in accordance with subsection (d) of this section. (3) [(2)] Professional Dispensing Fee--The portion of the reimbursement paid to a pharmacy under §355.8541 of this division [(relating to Legend and Nonlegend Medications)], in accordance with 42 C.F.R. §50.504 and 42 C.F.R. §447.502, to provide a reasonable payment for the cost of dispensing a prescription drug, including the pharmacist's professional services, and which may include incentive amounts for providers that qualify under this section. [(3) Estimated Acquisition Cost--As defined in §355.8541 of this division and §355.8545 of this division (relating to Texas Maximum Allowable Cost).] (4) Fixed Component--A component that provides the base reimbursement to a pharmacy for the cost of dispensing a prescription; it includes reimbursement for professional services costs and overhead costs. (5) Preferred Generic Incentive--An incentive to fill a Medicaid prescription with a premium preferred generic drug for which a drug manufacturer has agreed to pay a supplemental rebate. (6) Variable Component--A component that is expressed as a percentage of the [estimated] acquisition cost, and provides an incentive to a pharmacy to stock and dispense higher-cost drugs by covering additional expenses incurred when providing those drugs. (b) The Texas Health and Human Services Commission (HHSC) reimburses contracted Medicaid pharmacy providers according to the following dispensing fee formula: Professional Dispensing Fee = ((([Estimated] Acquisition Cost + Fixed Component) divided by (1 - the percentage used to calculate the Variable Component)) - [Estimated] Acquisition Cost) + Delivery Incentive + Preferred Generic Incentive. [(c) An inflation adjustment may be made, subject to the availability of appropriated funds, on the first day of the biennium. The projected rate of inflation is based upon a forecast of the Personal Consumption Expenditures (PCE) chain-type price index as the general cost inflation index. HHSC uses the lowest feasible PCE forecast consistent with the forecasts of nationally recognized sources available to HHSC at the time proposed reimbursement is prepared for public dissemination and comment.] (c) [(d)] A delivery incentive is paid to approved providers who certify in a form prescribed by HHSC that the delivery services meet minimum conditions for payment of the incentive. These conditions include: making deliveries to individuals rather than just to institutions, such as nursing homes; offering no-charge prescription delivery to all Medicaid recipients requesting delivery in the same manner 40 TexReg 7516 October 30, 2015 Texas Register (f) [(g)] Notwithstanding other provisions of this section, HHSC may adjust the dispensing fee to address budgetary constraints in accordance with the provisions of §355.201 of this division (relating to Establishment and Adjustment of Reimbursement Rates by the Health and Human Services Commission). The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504443 Karen Ray Chief Counsel Texas Health and Human Services Commission Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 424-6900 ♦ ♦ ♦ 1 TAC §355.8545 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Health and Human Services Commission or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) Statutory Authority The repeal is proposed under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; and Texas Human Resources Code §32.021 (and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas). The proposed repeal affect Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal. §355.8545. Texas Maximum Allowable Cost. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504444 Karen Ray Chief Counsel Texas Health and Human Services Commission Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 424-6900 ♦ ♦ ♦ TITLE 7. BANKING AND SECURITIES PART 1. FINANCE COMMISSION OF TEXAS CHAPTER 4. CREDIT CARD SURCHARGE APPEAL PROCEDURES SUBCHAPTER A. CONTESTED CASE PROCEDURE FOR VIOLATIONS ON OR BEFORE AUGUST 31, 2013 7 TAC §4.105 The Finance Commission of Texas (commission) proposes amendments to Title 7 of the Texas Administrative Code, §4.105, concerning the rules applicable to a contested case hearing on a credit card surcharge violation occurring on or before August 31, 2013. In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meeting where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. See, 7 TAC §9.1. The Office of Consumer Credit Commissioner (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC §155.1(a). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years that the amendments to §4.105 are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to laurie.hobbs@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. The amendments are proposed under Texas Government Code, §2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter 14, 339, and Title 4. §4.105. Contested Case on Credit Card Surcharge. (a) (No change.) Concurrent with these proposed rule amendments, the commission is proposing amendments to §9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in §9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." (b) A contested case under this chapter is subject to Texas Government Code, Chapter 2001, and the rules of procedure applicable under §9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)]. To the extent of any conflict between this chapter and Chapter 9, this chapter prevails. Title 7, Part 1 (relating to the Finance Commission of Texas), contains one reference to the Chapter 9 rules of procedure concerning credit card surcharge violations regulated by the OCCC under Chapter 4. Section 4.105(b) identifies the rules of procedure applicable to a contested case hearing regarding a credit card surcharge violation occurring on or before August 31, 2013. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to §9.1(a) of Title 7 (relating to Application, Construction, and Definitions). 2015. (c) (No change.) The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, TRD-201504390 Leslie L. Pettijohn Consumer Credit Commissioner Finance Commission of Texas Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 PROPOSED RULES ♦ ♦ October 30, 2015 ♦ 40 TexReg 7517 CHAPTER 9. RULES OF PROCEDURE FOR CONTESTED CASE HEARINGS, APPEALS, AND RULEMAKINGS The Finance Commission of Texas (commission) proposes amendments to 7 TAC Chapter 9, concerning Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings. Specifically, the amendments are proposed in §9.1, concerning Definitions and Interpretation; Severability; and in §9.12, concerning Default in a contested case subject to the rules under Chapter 9, Subchapter B. In general, the purpose of the proposed amendments is to update and clarify certain contested case procedural rules applicable to the finance agencies (Texas Department of Banking, Texas Department of Savings and Mortgage Lending, and Office of Consumer Credit Commissioner). Regarding §9.1, the purpose of the proposed amendments is to clarify the rules applicable to different forums in which contested cases may be heard for individuals and entities regulated by the finance agencies. Regarding §9.12, the purpose of the proposed amendments is to clarify that the finance agencies may informally dispose of contested cases by default, as authorized by Section 2001.056 of the Texas Government Code. The finance agencies circulated drafts of the proposed amendments to interested stakeholders and held a stakeholders meeting where the background of the amendments was provided. The following background information relates to the proposed amendments in §9.1, regarding contested case forums. Some of the finance agencies have contracted with a licensed attorney to serve as an administrative law judge and conduct contested case hearings. This administrative law judge used by the Texas Department of Savings and Mortgage Lending (SML) and by the Office of Consumer Credit Commissioner (OCCC) elected to not renew the contract for the 2016 fiscal year. In order to provide an appropriate, timely, and transparent forum to persons subject to SML and OCCC regulation, these two finance agencies entered into contracts with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. In contrast, the Texas Department of Banking has contracted with another administrative law judge for this fiscal year. At present, contested cases for the Texas Department of Banking will continue to be governed by the rules contained in 7 TAC Chapter 9. With regard to the SML and the OCCC, the law requires that SOAH's rules of procedure control a contested case conducted by SOAH. In order to clarify the application of procedural rules in various forums, the proposed amendments have been prepared for persons regulated by the SML and the OCCC whose cases may be heard by SOAH. Additionally, should any of the finance agencies have the need to utilize a different contested case forum in the future, the proposed amendments will provide the flexibility for contested cases to be heard by either a contracted administrative law judge or by SOAH. The proposed amendments to §9.1 add new subsection (a), which states that the rules provided in Chapter 9 govern contested case hearings conducted by an administrative law judge employed or contracted by one of the finance agencies. The 40 TexReg 7518 October 30, 2015 Texas Register amendments to §9.1 further explain that contested case hearings conducted by SOAH are governed by SOAH's procedural rules. The proposed amendments also revise the title of the rule to provide a more appropriate description of the amended content of the rule. The new title of "Application, Construction, and Definitions" is proposed to replace the current title of §9.1, "Definitions and Interpretation; Severability." In addition, the existing subsections have been relettered accordingly. The following background information relates to the proposed amendments in §9.12, concerning default in a contested case subject to the rules under Chapter 9, Subchapter B. A contested case is a formal proceeding to determine the legal rights, duties, or privileges of licensees and applicants after an opportunity for an adjudicative hearing. The proceeding is governed by formal rules of procedure, which allow an agency to dispose of a case by default. The finance agencies expend considerable resources preparing for and conducting contested case hearings where the respondent fails to appear at the hearing, or withdraws its request shortly before the hearing date. These costs are ultimately passed on to licensees and applicants in the form of higher license and renewal fees. During the last session, the Texas Legislature expressed further support for disposing of cases by default according to the individual agency's rules. Therefore, the proposed amendments to §9.12 further the Legislature's directive to conserve state resources where a party does not intend to proceed with a hearing. The proposed amendments to §9.12 clarify the finance agencies' authority to informally dispose of a contested case by default. The amendments add a single sentence to the end of the existing rule. The additional sentence states that a finance agency may, as an alternative to conducting a hearing when a party fails to appear, informally dispose of the matter as permitted by Section 2001.056 of the Texas Government Code, without the necessity of a hearing. This amendment is consistent with Section 2001.056(4) of the Texas Government Code, as well as the Finance Commission's existing default procedures found within the current language of §9.12 (deeming the defaulting party to have waived the right to contest the evidence, cross-examine the witnesses, and present an affirmative case or defense), and the default procedures of the State Office of Administrative Hearings found at 1 Texas Administrative Code §155.501. Charles Cooper, Banking Commissioner, as Executive Director of the Finance Commission, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years the amendments are in effect, Commissioner Cooper has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. To be considered, comments on the proposed amendments must be submitted no later than 5:00 p.m. on November 29, 2015. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov. SUBCHAPTER A. GENERAL 7 TAC §9.1 The amendments are proposed under Texas Government Code, §2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are also proposed under specific rulemaking authority in the substantive statutes administered by the agencies. Texas Finance Code, §11.301 and §31.003(a)(5) authorize the finance commission to adopt rules necessary or reasonable to facilitate the fair hearing and adjudication of matters before the banking commissioner and the finance commission. Texas Finance Code, §151.102(a)(1) authorizes the finance commission to adopt rules necessary to implement and clarify Chapter 151. Texas Finance Code, §154.051(b) authorizes the department of banking to adopt rules concerning matters incidental to the enforcement and orderly administration of Chapter 154. Texas Finance Code, §11.302 authorizes the finance commission to adopt rules applicable to state savings associations or to savings banks. Texas Finance Code, §96.002(a)(2) authorize the savings and mortgage lending commissioner and the finance commission to adopt procedural rules for deciding applications filed with the savings and mortgage lending commissioner or the department of savings and mortgage lending. Texas Finance Code, §11.304 authorizes the finance commission to adopt rules necessary for supervising the consumer credit commissioner and for ensuring compliance with Texas Finance Code, Chapter 14 and Title 4. Texas Finance Code, §371.006 authorizes the consumer credit commissioner to adopt rules necessary for the enforcement of Texas Finance Code, Chapter 371. Texas Finance Code, §11.306 authorizes the commission to adopt residential mortgage loan origination rules as provided by Chapter 156. Texas Finance Code, §180.004 authorizes the commission to adopt rules to enforce Chapter 180. Texas Finance Code, §393.622 authorizes the commission to adopt rules to enforce Chapter 393. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 154, 156, 157, 180, 339, 393, 394, and Title 4, and Texas Occupations Code, Chapter 1956. §9.1. Application, Construction, and Definitions [Definitions and Interpretation; Severability]. (a) This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code. (b) [(a)] The same rules of construction that apply to interpretation of Texas statutes and codes, the definitions in Government Code, §2001.003, and the definitions in subsection (c) [(b)] of this section govern the interpretation of this chapter. If any section of this chapter is found to conflict with an applicable and controlling provision of other state or federal law, the section involved shall be void to the extent of the conflict without affecting the validity of the rest of this chapter. (c) [(b)] The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: (1) Administrative law judge--The hearings officer employed by or contracted by an agency to conduct administrative hearings for the finance commission, the department of banking, the department of savings and mortgage lending, and the office of consumer credit commissioner. (2) Agency--The finance commission, the department of banking, the department of savings and mortgage lending, or the office of consumer credit commissioner. (3) Agency head(s)--Finance commission members, the banking commissioner, the savings and mortgage lending commissioner, or the consumer credit commissioner, or a designee if authorized by law. (4) Applicant--A party seeking a license, registration, charter, or permit, or to amend its authority under an existing license, registration, charter or permit, or other action from an agency. (5) Protestant--A party opposing an application for a license, registration, charter, permit, or other action filed with an agency who has paid any filing fees required by an applicable law. (6) Respondent--A permittee, licensee, registrant, charter holder, or other party against whom a disciplinary proceeding is directed by an agency. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504385 Charles Cooper Executive Director Finance Commission of Texas Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ SUBCHAPTER B. CONTESTED CASE HEARINGS 7 TAC §9.12 The amendments are proposed under Texas Government Code, §2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are also proposed under specific rulemaking authority in the substantive statutes administered by the agencies. Texas Finance Code, §11.301 and §31.003(a)(5) authorize the finance commission to adopt rules necessary or reasonable to facilitate the fair hearing and adjudication of matters before the banking commissioner and the finance commission. Texas Finance Code, §151.102(a)(1) authorizes the finance commission to adopt rules necessary to implement and clarify Chapter 151. Texas Finance Code, §154.051(b) authorizes the department of banking to adopt rules concerning matters incidental to the enforcement and orderly administration of Chapter 154. PROPOSED RULES October 30, 2015 40 TexReg 7519 Texas Finance Code, §11.302 authorizes the finance commission to adopt rules applicable to state savings associations or to savings banks. Texas Finance Code, §96.002(a)(2) authorize the savings and mortgage lending commissioner and the finance commission to adopt procedural rules for deciding applications filed with the savings and mortgage lending commissioner or the department of savings and mortgage lending. Texas Finance Code, §11.304 authorizes the finance commission to adopt rules necessary for supervising the consumer credit commissioner and for ensuring compliance with Texas Finance Code, Chapter 14 and Title 4. Texas Finance Code, §371.006 authorizes the consumer credit commissioner to adopt rules necessary for the enforcement of Texas Finance Code, Chapter 371. Texas Finance Code, §11.306 authorizes the commission to adopt residential mortgage loan origination rules as provided by Chapter 156. Texas Finance Code, §180.004 authorizes the commission to adopt rules to enforce Chapter 180. Texas Finance Code, §393.622 authorizes the commission to adopt rules to enforce Chapter 393. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 154, 156, 157, 180, 339, 393, 394, and Title 4, and Texas Occupations Code, Chapter 1956. §9.12. Default. If, after served with notice in compliance with §9.11 of this title (relating to Notice and Initiation of Proceedings), a party fails to attend a hearing, the administrative law judge may proceed in that party's absence and, where appropriate, may issue a proposal for decision against that party. The proposal for decision shall be served upon the defaulting party and the party will be afforded the opportunity to contest the law as stated in the proposal for decision, but shall be deemed to have waived the right to contest the evidence, cross-examine the witnesses, and present an affirmative case or defense. In the alternative, an agency may informally dispose of the matter as permitted by §2001.056 of the Texas Government Code, without the necessity of a hearing. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504388 Charles Cooper Executive Director Finance Commission of Texas Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ PART 2. TEXAS DEPARTMENT OF BANKING CHAPTER 17. TRUST COMPANY REGULATION SUBCHAPTER B. EXAMINATION AND CALL REPORTS Finance Code §181.107(c) and §182.013(a) were amended effective September 1, 2015 by Sections 3 and 7 of S.B. 875 (Acts 2015, 84th Leg., R.S., Ch. 250, §3 and §7), which make confidential the statement of condition and income (call report) of an exempt trust company, and require the trust company's annual certification that it is maintaining the conditions and limitations of its exemption to be submitted with the company's call report. The statutory amendments further make clear that these provisions apply to all exempt trust companies, whether exempt under Finance Code §182.011 or §182.019. Proposed amendments to §17.23(b)(2) will revise the due date for an exempt trust company to file its call report from January 31 to April 30 of each year, and to simultaneously file its annual certification of exempt status required by Finance Code §182.013(a). Section 17.23(f) is proposed to be amended to incorporate the changes in law regarding confidentiality of call reports. Finally, conforming changes are proposed in §17.23(g)(2). Robert L. Bacon, Deputy Commissioner, Texas Department of Banking, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule. Mr. Bacon also has determined that, for each year of the first five-year period the section as proposed will be in effect, the public benefit anticipated as a result of enforcing this section is the enhanced ability of an exempt trust company to consult with accounting professionals before filing its annual reports and certifications. For each year of the first five years that the rule will be in effect, there will be no economic costs to persons required to comply with the rule as proposed, no adverse economic effect on small businesses or micro-businesses, and no difference in the cost of compliance for small businesses as compared to large businesses. To be considered, comments on the proposed amended section must be submitted no later than 5:00 p.m. on November 30, 2015. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov. The amendments are proposed pursuant to Finance Code §181.003, which authorizes the commission to adopt rules to implement and clarify applicable law, and pursuant to Finance Code §181.107(b)(1), which empowers the commission to adopt rules requiring trust companies to file their statements of condition and income with the banking commissioner at specified intervals. Finance Code §181.107 and §182.013 are affected by the proposed amendments. §17.23. Call Reports. (a) (No change.) (b) Reporting requirements of trust companies. (1) (No change.) (2) Exempt [Family] trust companies. Each trust company that is exempt pursuant to Finance Code, §182.011 or §182.019 [and 7 TAC §17.23 40 TexReg 7520 The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes amendments to §17.23, regarding trust company call reports. October 30, 2015 Texas Register §182.012, and §21.24 of this title (relating to Exemptions for Trust Companies Administering Family Trusts),] shall file an annual call report with the banking commissioner no later than April 30 [January 31] of each year relating to the preceding calendar year, accompanied by its annual certification, required by Finance Code, §182.013(a), that the trust company is maintaining the conditions and limitations of its exemption. (3) (No change.) (c) - (e) (No change.) (f) Confidentiality. Call reports filed under subsection (b)(2) of this section are confidential as provided by [Pursuant to] Finance Code, §181.107(c)(2). Call [§181.107(b) and (c) and 181.301, call] reports filed under subsection (b)(1) [(b) of this section] are public information except for those portions designated as confidential by the banking commissioner [to the extent that such reports are considered public records], and may be published or otherwise disclosed to the public. Special call reports filed pursuant to subsection (c) of this section and non-public portions of call reports filed pursuant to subsection (b) of this section are confidential, subject only to such disclosure as may be permitted by Finance Code, §§181.301, et seq. or by §3.111 of this title (relating to Confidential Information). (g) Reports containing significant errors and penalties for failure to file or for filing a report with false or misleading information. (1) (No change.) (2) Exempt [Family] trust companies. Failure of a trust company that is exempt pursuant to Finance Code, §182.011 or §182.019 [and §182.012, and §21.24 of this title] to make, file, or submit a timely call report or a special call report as required by this section is grounds for revocation of its exempt status. (3) (No change.) The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, TRD-201504371 Catherine Reyer General Counsel Texas Department of Banking Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 475-1301 ♦ Section 21.24 specifies the information that must be contained in an application for exemption as a family trust company, and further specifies the specific provisions of the Trust Company Act (Finance Code, Title 3, Subtitle F), from which a trust company may request an exemption, subject to conditions or limitations imposed by the banking commissioner. Proposed amendments to Subsection (a) will clarify the definition of "family member" by eliminating ambiguities in Finance Code, §182.011(a - 1)(2), and define the term "key employee" as required by Finance Code, §182.011(a - 1)(1)(C). As proposed, §21.24(c) would be amended to delete existing paragraph (1) and renumber the subsequent paragraphs accordingly. An exempt family trust company is no longer required to request confidential treatment of its call report because Finance Code, §181.107(c), was amended effective September 1, 2015, to make such call reports confidential by law. Proposed new §21.24(f) would establish one year as a reasonable transition period for terminating services to a former key employee or to a formerly revocable trust that is no longer an eligible family client. The banking commissioner is proposed to be empowered to grant an extension of up to one year based on a finding that additional time is needed for the trust company to appropriately discharge its fiduciary duty to affected beneficiaries, notwithstanding its demonstrated good faith efforts to terminate the ineligible relationship. Proposed new §21.24(g) would extend the revised statutory exemption scheme to a family trust company that was granted exempt status prior to September 1, 2015. However, the control person named in its certificate of formation would be deemed to be the shared common ancestor for purposes of determining family client eligibility under Finance Code, §182.011, unless the trust company amends its certificate of formation to name a new shared common ancestor. 2015. ♦ 84th Leg., R.S., Ch. 250, §5 - §6), to materially revise the requirements for exemption as a family trust company. In general, prior to September 1, 2015, a trust company could obtain an exemption from certain otherwise applicable requirements if it restricted its client services to individuals related within the fourth degree of affinity or consanguinity to an individual who controls the trust company, and to certain of their related interests. Effective September 1, 2015, the exemption is available to a trust company that serves only individuals related within the seventh degree to a shared common ancestor and their related interests, provided the trust company is wholly owned by family members, see Finance Code §182.011(a). Finally, the proposed amendments to §21.24 that are not discussed in this preamble are nonsubstantive and proposed solely to conform the text to new law and the proposed, substantive amendments to §21.24. ♦ CHAPTER 21. TRUST COMPANY CORPORATE ACTIVITIES SUBCHAPTER B. TRUST COMPANY CHARTERING AND POWERS Robert L. Bacon, Deputy Commissioner, Texas Department of Banking, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule. 7 TAC §21.24 The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes amendments to §21.24, regarding exemptions for family trust companies. Finance Code §182.011 and §182.012 were amended effective September 1, 2015, by Sections 5 and 6 of S.B. 875 (Acts 2015, Mr. Bacon also has determined that, for each year of the first five-year period the section as proposed will be in effect, the public benefit anticipated as a result of enforcing this section is the clarification of highly complex and recently amended statutory standards to aid the industry in compliance. PROPOSED RULES October 30, 2015 40 TexReg 7521 For each year of the first five years that the rule will be in effect, there will be no economic costs to persons required to comply with the rule as proposed, no adverse economic effect on small businesses or micro-businesses, and no difference in the cost of compliance for small businesses as compared to large businesses. To be considered, comments on the proposed new section must be submitted no later than 5:00 p.m. on November 30, 2015. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov. The amendments are proposed pursuant to Finance Code §181.003, which grants the commission authority to adopt rules to implement and clarify applicable law, and Finance Code §182.011(e)(2) - (4), which grants the commission authority to adopt rules (1) specifying the provisions of Finance Code, Title 3, Subtitle F that are subject to an exemption request, (2) establishing procedures and requirements for obtaining, maintaining, or revoking an exemption, and (3) defining or further defining terms used in Finance Code §182.011. Finance Code §182.011 and §182.012 are affected by the proposed amendments. §21.24. Exemptions for Family Trust Companies [Administering Family Trusts]. (a) Definitions. Definitions in Finance Code, §182.011(a 1), are incorporated herein by reference except for the term "family member." As used in this section and in Finance Code, Title 3, Subtitle F (the Trust Company Act), the following words and terms shall have the following meanings, unless the context clearly indicates otherwise: [Compliance required. Pursuant to Finance Code, §182.011 and §182.012, a trust company, which does not transact business with the public, may request in writing that it be exempted from specified provisions of the Trust Company Act. The banking commissioner may grant the request in whole or in part if the trust company does not transact business with the public. A trust company does not transact business with the public if it acts as a corporate fiduciary for accounts in which all beneficiaries are related within the fourth degree of affinity or consanguinity to the person who controls the trust company. A trust company administering family trusts which request exemption from specified provisions of the Trust Company Act, must comply with this section.] (1) "Family" means individuals who are related within the seventh degree of affinity or consanguinity to a shared common ancestor. (2) "Family member" means each individual included in the definition of "family," provided that a foster child is considered the child of the foster parent and a person for whom a guardian was appointed before the person's 18th birthday is considered the child of the guardian. The term "family member" also includes the shared common ancestor. (3) "Key employee" means the president of the trust company, any of its officers in charge of a principal business unit, division or function (such as administration or finance), an officer who performs a policymaking function for the trust company, or another person who performs similar policymaking functions for the trust company. (b) Application for exemption. (1) Pursuant to Finance Code, §182.011 and §182.012, a trust company may request in writing that it be exempted from specified provisions of the Trust Company Act, if it has only family clients, 40 TexReg 7522 October 30, 2015 Texas Register transacts business solely on behalf of family clients and their related interests, is wholly owned, directly or indirectly, legally or beneficially, by one or more family members, and does not hold itself out to the general public as a corporate fiduciary for hire. [A trust company administering family trusts which seeks exemption from specified provisions of the Trust Company Act, shall file an application, together with the appropriate filing fee required by §21.2 of this title (relating to Filing and Investigation Fees), with the banking commissioner. ] (2) The application must: (A) be accompanied by the appropriate filing fee required by §21.2 of this title (relating to Filing and Investigation Fees); (B) specify the specific exemptions requested and the reasons or justification for requesting the exemptions; and[. The application must also] (C) include a copy of the trust company's certificate of formation containing, or a proposed amendment to the certificate of formation that would cause it to [which must] contain, the following statement in its purposes clause: "The sole purpose for which the trust company is organized is to act as a corporate fiduciary for accounts in which all beneficiaries are related within the seventh [fourth] degree of affinity or consanguinity to _____________ (name of common ancestor), and their related interests to the extent permitted by the Texas Finance Code or applicable rules and regulations [person who controls the trust company)]." [(2) A person who has beneficial ownership of sufficient outstanding shares of a class of voting securities to constitute control of a state trust company may be designated as the control person for purposes of Finance Code, §182.011(a) and this section. Such identification of a beneficial shareholder as the controlling person is permissive and does not affect determinations of control made pursuant to Finance Code, §183.001.] (c) Exemption. Subject to conditions or limitations being imposed by the banking commissioner, a family trust company [administering family trusts] may request exemption from the following provisions of the Trust Company Act: [(1) the requirement of Finance Code, §181.107(c), providing that the report of assets portion of a statement of condition and income is a public record.] (1) [(2)] the requirement of Finance Code, §183.103(a), that five is the minimum number of directors, managers, or managing participants that can be specified in the certificate of formation, provided that the certificate of formation must specify the number of directors, managers, or managing participants, consistent with paragraph (2) [(3)] of this subsection; (2) [(3)] the requirement of Finance Code, §183.103(a), that the number of directors, managers, or managing participants of a trust company cannot be less than five or more than 25, the majority of whom must be residents of this state, provided that the board of a trust company seeking exemption under this section must consist of not fewer than three or more than 25 directors, managers, or managing participants, at least one of whom must be a resident of this state; (3) [(4)] the restrictions of Finance Code, §183.109(a) (c), regarding transactions with management and affiliates; (4) [(5)] the limitations of Finance Code, §184.002, on investment in trust company facilities; (5) [(6)] the limitations of Finance Code, §184.101, on securities investments, provided that the exemption request must address each limitation and the reasons for exemption separately; (6) [(7)] the restrictions of Finance Code, §184.102, regarding transactions in state trust company shares or participation shares; PART 5. OFFICE OF CONSUMER CREDIT COMMISSIONER (7) [(8)] the limitations of Finance Code, §184.003, on other real estate investments; and CHAPTER 83. REGULATED LENDERS AND CREDIT ACCESS BUSINESSES (8) [(9)] the limitations of Finance Code, §§184.201 184.203, regarding lending limit and lease financing transaction restrictions, provided that no loans may be made from a trust company's minimum restricted capital amount. (d) Notice to applicant. The banking commissioner shall issue a written notice as required by §21.4 of this title (relating to Required Information and Abandoned Filings) informing the applicant either that all filing fees have been paid and the application is complete and accepted for filing, or that the application is deficient and specific additional information is required. (e) Notice to clients [beneficiary]. A family trust company [administering family trusts] which has been granted an exemption under subsection (c) of this section must provide each family client [beneficiary of the family trust] with a copy of the exemption granted by the banking commissioner. The trust company must maintain an acknowledged receipt of such notice in its files. (f) Transition period for certain former family clients. Pursuant to Finance Code, §182.011(a - 1)(1)(C) and (I), a family trust company may continue providing services to a former key employee or a formerly revocable trust that is no longer an eligible family client for a period of one year after the date of the disqualifying event. The banking commissioner may grant an extension of up to one year in response to a written request if the commissioner determines that: (1) the trust company has acted diligently and in good faith in its efforts to terminate the disqualified relationship in a manner consistent with its fiduciary duties; and (2) additional time is needed to avoid harm to the affected beneficiaries and appropriately discharge the trust company's fiduciary duties with respect to the disqualified relationship. (g) Effect on existing family trust company. A family trust company with exemptions granted prior to September 1, 2015, under Finance Code, §182.011 and §182.012, is not required to take any action to preserve its exemption as a result of changes in law made by Acts 2015, 84th Leg., R.S., Ch. 250, §5. However, unless and until any such family trust company amends its certificate of formation to name a new shared common ancestor, the control person named in its certificate of formation is considered to be the shared common ancestor for purposes of determining eligibility of family members under Finance Code, §182.011, and this section. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504372 Catherine Reyer General Counsel Texas Department of Banking Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 475-1301 ♦ ♦ ♦ The Finance Commission of Texas (commission) proposes amendments to the following sections of Title 7 of the Texas Administrative Code: §83.307, concerning the rules applicable to a regulated lender license application denial hearing; and §83.3007, concerning the rules applicable to a credit access business license application denial hearing. In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meeting where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. See, 7 TAC §9.1. The Office of Consumer Credit Commissioner (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC §155.1(a). Concurrent with these proposed rule amendments, the commission is proposing amendments to §9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in §9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." Title 7, Part 5 (relating to the OCCC), contains eight references to the Chapter 9 rules of procedure. Chapter 83 contains two of these eight references. The proposed amendments replace these references with references to the rules of procedure made applicable by the amendment to §9.1(a) of Title 7, described earlier. Accordingly, the proposed amendments will clarify that Chapter 9 rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and SOAH rules of procedure apply to a hearing conducted by SOAH. Section 83.307(d) identifies the rules of procedure applicable to a regulated lender license application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to §9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Section 83.3007(d) identifies the rules of procedure applicable to a credit access business license application denial hearing. The PROPOSED RULES October 30, 2015 40 TexReg 7523 proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to §9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years that the amendments to §83.307 and §83.3007 are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to laurie.hobbs@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. SUBCHAPTER A. RULES FOR REGULATED LENDERS DIVISION 3. APPLICATION PROCEDURES 7 TAC §83.307 The amendments are proposed under Texas Government Code, §2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; Texas Finance Code, §11.306, which authorizes the commission to adopt residential mortgage loan origination rules as provided by Chapter 156; Texas Finance Code, §180.004, which authorizes the commission to adopt rules to enforce Chapter 180; and Texas Finance Code, §393.622, which authorizes the commission to adopt rules to enforce Chapter 393. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 156, 180, 393, and Title 4. §83.307. Processing of Application. (a) - (c) (No change.) (d) Hearing. Whenever an application is denied, the affected applicant has 30 calendar days from the date the application was denied to request in writing a hearing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, and the rules of procedure applicable under §9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for 40 TexReg 7524 October 30, 2015 Texas Register Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision. (e) - (f) (No change.) The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504415 Leslie L. Pettijohn Commissioner Office of the Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ SUBCHAPTER B. RULES FOR CREDIT ACCESS BUSINESSES DIVISION 3. APPLICATION PROCEDURES 7 TAC §83.3007 The amendments are proposed under Texas Government Code, §2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; Texas Finance Code, §11.306, which authorizes the commission to adopt residential mortgage loan origination rules as provided by Chapter 156; Texas Finance Code, §180.004, which authorizes the commission to adopt rules to enforce Chapter 180; and Texas Finance Code, §393.622, which authorizes the commission to adopt rules to enforce Chapter 393. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 156, 180, 393, and Title 4. §83.3007. Processing of Application. (a) - (c) (No change.) (d) Hearing. Whenever an application is denied, the affected applicant has 30 calendar days from the date the application was denied to request in writing a hearing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, and the rules of procedure applicable under §9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision. (e) - (f) (No change.) The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504416 Leslie L. Pettijohn Commissioner Office of the Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ SUBCHAPTER B. RULES FOR CREDIT ACCESS BUSINESSES The Finance Commission of Texas (commission) proposes amendments to §§83.1002, 83.3001, 83.3002, 83.3006, 83.3010, and 83.4002 and proposes new §§83.4003 (repeal and replace), 83.5003, 83.5004, and 83.5005 in 7 TAC Chapter 83, Subchapter B, concerning Rules for Credit Access Businesses. In addition, the commission proposes the repeal of §83.3012, §83.4003 (repeal and replace), and §83.4004. In general, the purpose of the proposal regarding these rules for credit access businesses is to implement changes resulting from the commission's review of Chapter 83, Subchapter B under Texas Government Code, §2001.039. The proposed amendments include clarifying changes regarding definitions, license applications, and fees. Proposed new sections outline examination authority and recordkeeping requirements, including a list of documents that credit access businesses are required to maintain, and relate to separation between credit access businesses and third-party lenders. Section 83.4003 is being proposed for repeal and being replaced with a reorganized rule regarding the review of criminal history. The content of current §83.4004 has been incorporated into proposed new §83.4003. Section 83.3012 concerning provisional licenses is being proposed for repeal, as this rule is no longer necessary. This is the first of two anticipated rule actions for credit access businesses. The agency anticipates that the second action, to be published in a later issue of the Texas Register, will include rule amendments on the following issues: (1) consumer disclosures, (2) reporting requirements, and (3) license transfers. The notice of intention to review 7 TAC Chapter 83, Subchapter B was published in the September 11, 2015, issue of the Texas Register (40 TexReg 6165). The commission received no comments in response to that notice. The agency circulated an early draft of proposed changes to interested stakeholders and received some informal precomments. Certain concepts recommended by the precommenters have been incorporated into this proposal, and the agency appreciates the thoughtful input provided by stakeholders. The individual purposes of the proposed amendments, new rules, and repeals are outlined in the paragraphs to follow. Section 83.1002 provides general definitions to be used throughout the chapter. The proposed amendments to this section contain definitions for the terms "multiple payment auto title loan," "multiple payment payday loan," "single payment auto title loan," and "single payment payday loan." The agency intends to apply these definitions for purposes of the require- ments for recordkeeping (proposed §83.5004), data reporting (current §83.5001), and disclosures (current §§83.6001 through 83.6008). Two precommenters expressed concern about these definitions. One precommenter recommended "deferred presentment transaction" instead of "payday loan," due to the limited uses of the phrase "payday loan" in Texas Finance Code, Chapter 393. However, the agency believes that the term "payday loan" is appropriate, because it is widely used by the industry, and Texas Finance Code, §393.221(2) specifies that the term "[d]eferred presentment transaction . . . is also referred to as a payday loan." The other precommenter recommended the terms "installment pay day loans" and "installment auto title loan" instead of terms beginning with "multiple payment," because the precommenter believed that this more closely corresponds to how the products are marketed. However, the agency has consistently used the phrases "multiple payment" and "multi-payment" in the rule for consumer disclosures at §83.6007 and the accompanying figures. A proposed amendment to §83.3001(2)(A) amends the definition of "principal party" for sole proprietorships. The amendment removes the statement that proprietors include spouses with a community property interest. In addition, an amendment to §83.3002(1)(A)(iv)(I) removes the requirement to disclose community property interests and documentation regarding separate property status, and replaces it with a requirement to disclose the names of the spouses of principal parties if requested. The agency currently spends considerable time requesting information from license applicants to determine the status of spouses' property interests, and explaining these concepts to applicants. These amendments will help streamline the licensing process. Proposed amendments to §83.3006 clarify the circumstances in which a licensee must notify the OCCC of changes to information in the original license application. The amendments specify that the requirement to provide updated information within 10 days applies before a license application is approved. Proposed new §83.3006(b) provides that a licensee must notify the OCCC within 30 days if the information relates to the names of principal parties or third-party lenders, criminal history, regulatory actions, or court judgments. Proposed new §83.3006(c) specifies that each applicant or licensee is responsible for ensuring that all contact information on file with the OCCC is current and correct, and that it is a best practice for licensees to regularly review contact information. A proposed amendment to §83.3010(c) provides that a license applicant must pay a fee to a party designated by the Texas Department of Public Safety (DPS) for processing fingerprints, replacing a statement that the fee will be paid to the OCCC. This amendment conforms the rule to the method by which applicants currently provide fingerprint information through DPS's Fingerprint Applicant Services of Texas (FAST) program. A proposed amendment to §83.3010(g)(1)(B) contains a technical correction for the method of calculating the volume-based portion of the annual assessment fee. Currently, the rule provides that the volume-based fee will not exceed "$0.03 per each $1,000 advanced . . . in accordance with the most recent quarterly report filing required by Texas Finance Code, §393.627." However, the total dollar amount of extensions of consumer credit is not part of the information the OCCC currently requests on the quarterly report. Rather, this information is requested on the annual report. For this reason, the proposed amendment specifies that the fee will be based on the most recent annual PROPOSED RULES October 30, 2015 40 TexReg 7525 report under §83.5001. This amendment is intended to provide technical clarification. Section 83.3012 is proposed for repeal because it is no longer necessary. The agency issued provisional licenses during 2012 (the first year in which credit access businesses were licensed), but no longer issues provisional licenses. Proposed amendments to §83.4002 clarify the agency's procedure for providing delinquency notices to licensees that have failed to pay an annual assessment fee. The amendments specify that notice of delinquency is considered to be given when the OCCC sends the notice by mail to the address on file with the OCCC as a master file address, or by e-mail to the address on file with the OCCC (if the licensee has provided an e-mail address). The amendments replace current language stating that notice is given upon mailing in a properly addressed envelope. Proposed new §83.4003 specifies the criminal history information collected by the OCCC, outlines factors the OCCC will consider when reviewing criminal history information, and describes grounds for denial, suspension, and revocation of a credit access business license. This section replaces the current §83.4003 and §83.4004, which are proposed for repeal. Subsection (a) describes the OCCC's collection of criminal history record information from law enforcement agencies. Subsection (b) identifies the criminal history information that the applicant must disclose. Subsection (c) describes the OCCC's denial, suspension, and revocation based on crimes that are directly related to the licensed occupation of a credit access business. Subsection (c)(1) lists the types of crimes that the OCCC considers to directly relate to the duties and responsibilities of being a credit access business, including the reasons the crimes relate to the occupation, as provided by Texas Occupations Code, §53.025(a). Subsection (c)(2) contains the factors the OCCC will consider in determining whether a criminal offense directly relates to the duties and responsibilities of a licensee, as provided by Texas Occupations Code, §53.022. Subsection (c)(3) provides the mitigating factors the OCCC will consider to determine whether a conviction renders an applicant or licensee unfit, as provided by Texas Occupations Code, §53.023. Subsection (d) describes the OCCC's authority to deny a license application if it does not find that the financial responsibility, experience, character, and general fitness of the applicant are sufficient to command the confidence of the public and warrant the belief that the business will be operated lawfully and fairly, as provided by Texas Finance Code, §393.607(a). Subsection (e) explains that the OCCC will revoke a license on the licensee's imprisonment following a felony conviction, felony community supervision revocation, revocation of parole, or revocation of mandatory supervision, as provided by Texas Occupations Code, §53.021(b). Subsection (f) identifies other grounds for denial, suspension, or revocation, including convictions for specific offenses described by statutory provisions cited in the rule. Proposed new §83.5003 describes the OCCC's examination authority for credit access businesses. This section implements Texas Finance Code, §393.622(a)(3), which allows the commission to "adopt rules with respect to periodic examination" of credit access businesses by the agency, as well as Texas Finance Code, §393.622(b), which authorizes the commission to "adopt rules . . . to allow the commissioner to review, as part of a periodic examination, any relevant contracts between the credit access business and the third-party lender organizations with which the credit access business contracts to provide services." Subsection (a) provides that the OCCC may periodically exam- 40 TexReg 7526 October 30, 2015 Texas Register ine each place of business of a licensee. Subsection (b) requires licensees to allow the OCCC to access their offices and make copies of records. Subsection (c) provides that the OCCC's examination authority includes the authority to examine third-party lender agreements. Subsections (d) and (e) allow the OCCC to take witness and records statements during an examination, and specifies the requirements of these statements. Unlike the other chapters of the Texas Finance Code that provide examination authority to the OCCC, Chapter 393 does not include express authority to take oaths. For this reason, under subsections (d) and (e), the OCCC may obtain unsworn witness and records, rather than sworn affidavits. Both statements would require an acknowledgment that the statements could be used in an enforcement action in which the licensee is a party. Proposed new §83.5004 describes the recordkeeping requirements for credit access businesses. Paragraph (1) requires a transaction register showing the name of each consumer, the transaction number, and the type of transaction. Paragraph (2) outlines the information that must be included in the record of an individual consumer's account. Paragraph (2)(A) identifies the records that must be kept for every transaction, including required disclosures and any agreements with the consumer. Paragraph (2)(B) identifies additional records for transactions that the licensee services or collects, including account histories, documentation of repossessed collateral, litigation records, and records of criminal charges. Paragraph (2)(C) specifies the time period for maintaining the information in the individual consumer's file, which generally must be kept for four years from the date of the transaction, or two years from the date of the final entry made on the consumer's account, whichever is later. This provision is intended to ensure that the licensee keeps transaction records at least until the time specified in applicable statutes of limitations, including the four-year limitations period in Texas Finance Code, §393.505. Paragraph (4) requires a licensee to maintain the required in-store fee schedule and notices. Paragraph (5) requires a licensee to maintain online disclosures and copies of web pages used to access online disclosures. Paragraph (6) requires a licensee to maintain advertisements. Paragraph (7) requires a licensee to maintain credit applications and adverse action records for the time period specified in Regulation B, 12 C.F.R. §1002.12(b). Paragraph (8) requires a licensee to maintain an index of transfers, assignments, and sales. Paragraph (9) requires a licensee to maintain an index of litigation, criminal charges, and repossessions. Paragraph (10) requires a licensee to maintain records of its registration and surety bond as a credit services organization. Paragraph (11) requires a licensee to maintain an official correspondence file for communications with the OCCC. Paragraph (12) requires a licensee to maintain general business records showing its compliance with applicable laws. One precommenter requested a delayed implementation period for the recordkeeping requirements in §83.5004. As of the effective date of the rules, a licensee will be required to maintain any records described by §83.5004 that are in the licensee's possession. However, the agency is willing to consider a delayed implementation date for generating new records (such as the transaction register or the index of litigation, criminal charges, and repossessions) in order to comply with the rule. The agency invites comments about the amount of time that would be required in order to generate any new records not currently maintained. Proposed new §83.5005 describes the requirements for separation between credit access businesses and third-party lenders. Subsection (a) describes the general separation requirement for credit access businesses and third-party lenders. Subsection (b) explains that the relationship must be consistent with special agency. Subsection (c) prohibits the credit access business from sharing its fee with the third-party lender. This rule helps ensure that credit access businesses comply with Texas Finance Code, §393.001(3), which provides that a credit services organization's services include obtaining for a consumer or assisting a consumer in obtaining an extension of consumer credit "by others." Because a credit access business is a type of credit services organization, this means that a credit access business must be a separate entity from any third-party lender that provides an extension of credit to a consumer. The credit access business and third-party lender must operate independently. The agency is aware of two published court decisions analyzing the separation between credit services organizations and lenders under Texas law. First, in Lovick v. Ritemoney Ltd., 378 F.3d 433 (5th Cir. 2004), the Fifth Circuit analyzed whether the relationship between a credit services organization and a lender was consistent with special agency for purposes of Chapter 393 and Texas usury laws. The court determined that the relationship was consistent with special agency, based primarily on four facts: (1) the credit services organization was not the same entity as the lender, (2) the credit services organization did not select underwriting criteria for making loans (instead, the credit services organization applied criteria selected by the lender), (3) the credit services organization's fee was not passed on to the lender, and (4) the credit services organization's fee did not directly benefit the lender. Lovick, 378 F.3d at 440-44. According to the court, the fact that the credit services organization and lender shared an exclusive relationship was not sufficient to create a general-agency or joint-participant relationship that would lead to a violation of Texas usury law. Id. at 439-40. Second, in In re Grayson, 488 B.R. 579, 589 (S.D. Tex. Bankr. 2012), a Texas bankruptcy court rejected a debtor's allegation that a credit services organization and lender were not truly independent and operated as a combined entity. Although the lender developed the software to prepare agreements between the credit services organization and lender, the court found that the facts did not support the debtor's allegation. Two precommenters discussed the requirements for separation between credit access businesses and third-party lenders. One precommenter noted that some credit access businesses perform an initial credit evaluation to determine whether they will provide services for the consumer, before applying the lender's separate underwriting criteria to determine whether the loan will be made. In response to this precomment, proposed subsection (b) specifies that a licensee "may not select the underwriting criteria used in determining whether the lender will make a loan to the consumer." Another precommenter suggested that the requirement that the credit access business be a "separate legal entity" from the third-party lender was insufficient, stating that this would provide credit access businesses with a loophole to get around the separation requirement. In response to this precomment, subsection (a) specifies that a credit access business "must operate independently from any third-party lender." The agency believes that with this language, the rule includes the necessary requirements to ensure that a credit access business assists in obtaining extensions of credit "by others," consistent with the case law discussed above. Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the rule changes are in effect there will be no fiscal implications for state or local government as a result of administering the rules. Commissioner Pettijohn also has determined that for each year of the first five years the rule changes are in effect, the public benefit anticipated as a result of the changes will be increased protection of consumers, clear and consistent regulations for credit access businesses, and enhanced compliance with the law. Additional economic costs may be incurred by a person required to comply with this proposal. The agency anticipates that any costs resulting from the proposal would involve fulfilling certain requirements in the proposed recordkeeping rule, §83.5004. The three main types of potential costs the agency anticipates licensees may encounter in complying with the proposal are: 1) labor costs, 2) costs involved to maintain records for longer periods than they are currently maintained, 3) costs involved to generate new records not currently kept, and 4) programming costs for licensees that utilize electronic recordkeeping systems. For licensees that utilize manual or electronic recordkeeping systems, the anticipated costs may include expenses related to employee training to review and implement the new recordkeeping requirements. These costs would vary widely among licensees depending on the number of employees who must be trained, as well as the labor costs associated with supervisors or other personnel assigned to create or maintain a licensee's records. For licensees that utilize manual or electronic recordkeeping systems, the anticipated costs would include expenses required to generate new records not currently kept. In particular, the proposed provisions that may result in the generation of new records are: 1) §83.5004(1) (transaction register), 2) §83.5004(2)(B)(i)(IX) and (X) (individual payment entries and refunds for each consumer's transaction file), 3) §83.5004(8) (index of transfers, assignments, and sales), 4) §83.5004(9) (index of litigation, criminal charges, and repossessions). The amount of potential costs would vary considerably and be impossible to predict, as much will depend on how licensees currently maintain certain records, and the ability of licensees to produce certain records not retained with their current recordkeeping systems. However, based on the agency's experience with other licensees that maintain similar registers and indexes, such records should be easily produced from existing records (e.g., software program query or report). Some licensees who use or lease specialized computer software programs for their business may experience some additional costs. These costs are impossible to predict, as much will depend on the particular licensee's current software system and the amount of programming changes required to comply with the proposal. Some training may be necessary to teach employees how to use existing or updated software to produce the records contemplated by the rule. The amount of software training necessary for each licensee is impossible to predict due to several variable factors, such as number of employees, amount of previous training conducted, and current knowledge of employees. In relation to software programming, it is the agency's experience that today's credit access business transactions involve highly automated software systems. The agency expects that many licensees will select computer programs that will result in any marginal costs increases being relatively low. First, licensees should already be maintaining a majority of the required records outlined in proposed new §83.5004 in order to comply with mandated quarterly and annual reporting require- PROPOSED RULES October 30, 2015 40 TexReg 7527 ments. In order to provide accurate reports, licensees must maintain detailed transaction records, including the type of transaction and all charges imposed in connection with the transaction. Second, most of these records should be maintained in order to demonstrate compliance with the law during examinations and investigations. Third, retention of the records outlined in proposed §83.5004 is a prudent business practice, and complying with these requirements helps ensure that licensees can properly address inquiries from the OCCC, federal regulators, and consumers. proposed under Texas Finance Code, §393.622(a)(3), which authorizes the commission to adopt rules regarding periodic examinations of credit access businesses by the OCCC, and under Texas Finance Code, §393.622(b), which authorizes the commission to adopt rules regarding the review of third-party lender agreements. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter 393. §83.1002. Definitions. The agency has attempted to lessen any potential costs by providing flexibility in the recordkeeping rules, which allow paper, electronic, or optically imaged systems. As noted earlier, this proposal incorporates the ability to access several items, or produce the information in the form of a report or list, which if generated from an electronic system, does not have to be maintained as a separate file or record. The agency has also allowed for certain records to be maintained at a centralized location, thus reducing the costs of keeping records at multiple locations, and providing examination access to these records at a particular location upon request. Additionally, the agency is considering a delaying implementation date for the generation of new records, which will help minimize potential costs. Words and terms used in this chapter that are defined in Texas Finance Code, Chapter 393 have the same meanings as defined in Chapter 393. The following words and terms, when used in this chapter, will have the following meanings, unless the context clearly indicates otherwise. Overall, the agency anticipates that any costs involved to comply with the proposal will be minimal for most licensees. However, due to several factors resulting in varying, uncertain, and unpredictable costs, the agency would like to invite comment from licensees on any costs involved to comply with the proposal, as well as any alternatives to lessen those costs while achieving the purpose of the proposal. (7) Single payment auto title loan--An auto title loan for which the entire principal balance, interest, and all fees required under the terms of the transaction, including fees required to be paid to a credit access business, are due in a single payment. Aside from the previously outlined costs, there will be no other effects on individuals required to comply with the rule changes as proposed. The agency is not aware of any adverse economic effect on small or micro-businesses resulting from this proposal. But in order to obtain more complete information concerning the economic effect of these rule changes, the agency invites comments from interested stakeholders and the public on any economic impacts on small businesses, as well as any alternative methods of achieving the purpose of the proposal while minimizing adverse impacts on small businesses. Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by e-mail to laurie.hobbs@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. DIVISION 1. GENERAL PROVISIONS 7 TAC §83.1002 These rule changes are proposed under Texas Finance Code, §393.622(a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. In addition, proposed new §83.5003 and §83.5004 are 40 TexReg 7528 October 30, 2015 Texas Register (1) - (3) (No change.) (4) Multiple payment auto title loan--An auto title loan that is not a single payment auto title loan. (5) Multiple payment payday loan--A payday loan that is not a single payment payday loan. (6) [(4)] OCCC--The Office of Consumer Credit Commissioner of the State of Texas. (8) Single payment payday loan--A payday loan for which the entire principal balance, interest, and all fees required under the terms of the transaction, including fees required to be paid to a credit access business, are due in a single payment. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504408 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ DIVISION 3. ♦ ♦ APPLICATION PROCEDURES 7 TAC §§83.3001, 83.3002, 83.3006, 83.3010 These rule changes are proposed under Texas Finance Code, §393.622(a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. In addition, proposed new §83.5003 and §83.5004 are proposed under Texas Finance Code, §393.622(a)(3), which authorizes the commission to adopt rules regarding periodic examinations of credit access businesses by the OCCC, and under Texas Finance Code, §393.622(b), which authorizes the commission to adopt rules regarding the review of third-party lender agreements. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter 393. §83.3001. Definitions. Words and terms used in this chapter that are defined in Texas Finance Code, Chapter 393, have the same meanings as defined in Chapter 393. The following words and terms, when used in this chapter, will have the following meanings, unless the context clearly indicates otherwise. (1) (No change.) (2) Principal party--An adult individual with a substantial relationship to the applicant by ownership of more than 10% of the applicant, or having control of the proposed credit access business of the applicant. The following individuals are principal parties: (A) a proprietor holding a 100% ownership interest [proprietors, including spouses with community property interest]; (B) - (H) (No change.) §83.3002. Filing of New Application. An application for issuance of a new credit access business license must be submitted in a format prescribed by the commissioner at the date of filing and in accordance with the commissioner's instructions. The commissioner may accept the use of prescribed alternative formats to facilitate multistate uniformity of applications or in order to accept approved electronic submissions. Appropriate fees must be filed with the application and the application must include the following: (1) Required application information. All questions must be answered. (A) Application for license. (i) - (iii) (iv) (No change.) Owners and principal parties. (I) Proprietorships. The applicant must disclose the name of the individual holding a 100% ownership interest in the business and the name of any individual [who owns and who is] responsible for operating the business. If requested, the applicant must also disclose the names of the spouses of these individuals. [All community property interests must also be disclosed. If the business interest is owned by a married individual as separate property, documentation establishing or confirming separate property status must be provided.] (II) - (VI) (B) - (E) (2) - (3) (No change.) (No change.) §83.3006. Updating Application and Contact Information [Reportable Actions After Application]. (a) Applicant's updates to license application information. Before a license application is approved, an applicant must report to the OCCC any [Any action, fact, or] information that would require a materially different answer than that given in the original license application and that relates to the qualifications for license[, must be reported] within 10 calendar days after the person has knowledge of the [action, fact, or] information. (b) Licensee's updates to license application information. A licensee must report to the OCCC any information that would require a different answer than that given in the original license application within 30 calendar days after the licensee has knowledge of the information, if the information relates to any of the following: the names of principal parties; (2) the names of third-party lender organizations; criminal history; (4) actions by regulatory agencies; or (5) court judgments. (c) Contact information. Each applicant or licensee is responsible for ensuring that all contact information on file with the OCCC is current and correct, including all mailing addresses, all phone numbers, and all e-mail addresses. It is a best practice for licensees to regularly review contact information on file with the OCCC to ensure that it is current and correct. §83.3010. Fees. (a) - (b) (No change.) (c) Fingerprint processing. An applicant must pay a fee to a party designated by the Texas Department of Public Safety for processing fingerprints. The Texas Department of Public Safety and the designated party determine the amount of the fee and whether it is refundable. [A nonrefundable fee as prescribed by the commissioner will be charged to recover the costs of investigating each principal party's fingerprint record.] (d) - (f) (No change.) (g) Annual renewal and assessment fees. (1) An annual assessment fee is required for each license consisting of: (A) (No change.) (B) a volume fee based upon the volume of business that consists of an amount not to exceed $0.03 per each $1,000 advanced for license holders whose operations occur within Texas Finance Code, Chapter 393 in accordance with the most recent annual report required by §83.5001 of this title (relating to Data Reporting Requirements) [quarterly report filing required by Texas Finance Code, §393.627]. (2) - (4) (No change.) The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. (No change.) (1) (3) TRD-201504410 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ 7 TAC §83.3012 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Office of Consumer Credit Commissioner or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) This repeal is proposed under Texas Finance Code, §393.622(a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. PROPOSED RULES October 30, 2015 40 TexReg 7529 The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter 393. §83.3012. Provisional License. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504413 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ with the OCCC. Failure to provide any information required as part of the application or requested by the OCCC reflects negatively on the belief that the business will be operated lawfully and fairly. The OCCC may request additional criminal history information from the applicant, including the following: (1) information about arrests, charges, indictments, and convictions of the applicant and its principal parties; (2) reliable documents or testimony necessary to make a determination under subsection (c), including letters of recommendation from prosecution, law enforcement, and correctional authorities; (3) proof that the applicant has maintained a record of steady employment, has supported the applicant's dependents, and has otherwise maintained a record of good conduct; and (4) proof that all outstanding court costs, supervision fees, fines, and restitution as may have been ordered have been paid. 7 TAC §83.4002, §83.4003 (c) Crimes directly related to licensed occupation. The OCCC may deny a license application, or suspend or revoke a license, if the applicant or licensee has been convicted of an offense that directly relates to the duties and responsibilities of a credit access business, as provided by Texas Occupations Code, §53.021(a)(1). These rule changes are proposed under Texas Finance Code, §393.622(a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. In addition, proposed new §83.5003 and §83.5004 are proposed under Texas Finance Code, §393.622(a)(3), which authorizes the commission to adopt rules regarding periodic examinations of credit access businesses by the OCCC, and under Texas Finance Code, §393.622(b), which authorizes the commission to adopt rules regarding the review of third-party lender agreements. (1) Providing credit access business services involves or may involve making representations to consumers regarding the terms of the contract, receiving money from consumers, remitting money to third parties, maintaining accounts, repossessing property without a breach of the peace, maintaining goods that have been repossessed, and collecting due amounts in a legal manner. Consequently, crimes involving the misrepresentation of costs or benefits of a product or service, the improper handling of money or property entrusted to the person, failure to file a governmental report or filing a false report, or the use or threat of force against another person are directly related to the duties and responsibilities of a licensee and may be grounds for denial, suspension, or revocation. DIVISION 4. LICENSE The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter 393. §83.4002. Notice of Delinquency in Payment of Annual Assessment Fee. For purposes of Texas Finance Code, §393.613, notice of delinquency in the payment of an annual assessment fee is given when the OCCC sends the delinquency notice: [upon the mailing of the delinquency notice, enclosed in a postpaid, properly addressed envelope, in a post office or official depository under the care and custody of the United States Postal Service.] (1) by mail to the address on file with the OCCC as a master file address; or (2) by e-mail to the address on file with the OCCC, if the licensee has provided an e-mail address. §83.4003. Denial, Suspension, or Revocation Based on Criminal History. (a) Criminal history record information. After an applicant submits a complete license application, including all required fingerprints, and pays the fees required by §83.3010 of this title (relating to Fees), the OCCC will investigate the applicant and its principal parties. The OCCC will obtain criminal history record information from the Texas Department of Public Safety and the Federal Bureau of Investigation based on the applicant's fingerprint submission. The OCCC will continue to receive information on new criminal activity reported after the fingerprints have been initially processed. (b) Disclosure of criminal history. The applicant must disclose all criminal history information required to file a complete application 40 TexReg 7530 October 30, 2015 Texas Register (2) In determining whether a criminal offense directly relates to the duties and responsibilities of holding a license, the OCCC will consider the following factors, as specified in Texas Occupations Code, §53.022: (A) the nature and seriousness of the crime; (B) the relationship of the crime to the purposes for requiring a license to engage in the occupation; (C) the extent to which a license might offer an opportunity to engage in further criminal activity of the same type as that in which the person previously had been involved; and (D) the relationship of the crime to the ability, capacity, or fitness required to perform the duties and discharge the responsibilities of a licensee. (3) In determining whether a conviction for a crime renders an applicant or a licensee unfit to be a licensee, the OCCC will consider the following factors, as specified in Texas Occupations Code, §53.023: (A) the extent and nature of the person's past criminal activity; (B) the age of the person when the crime was committed; (C) the amount of time that has elapsed since the person's last criminal activity; (D) the conduct and work activity of the person before and after the criminal activity; (E) evidence of the person's rehabilitation or rehabilitative effort while incarcerated or after release, or following the criminal activity if no time was served; and (F) evidence of the person's current circumstances relating to fitness to hold a license, which may include letters of recommendation from one or more of the following: (i) prosecution, law enforcement, and correctional officers who prosecuted, arrested, or had custodial responsibility for the person; (ii) the sheriff or chief of police in the community where the person resides; and (iii) other persons in contact with the convicted per- The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504411 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ son. (d) Crimes related to character and fitness. The OCCC may deny a license application if the OCCC does not find that the financial responsibility, experience, character, and general fitness of the applicant are sufficient to command the confidence of the public and warrant the belief that the business will be operated lawfully and fairly, as provided by Texas Finance Code, §393.607(a). In conducting its review of character and fitness, the OCCC will consider the criminal history of the applicant and its principal parties. If the applicant or a principal party has been convicted of an offense described by subsections (c)(1) or (f)(2) of this section, this reflects negatively on an applicant's character and fitness. The OCCC may deny a license application based on other criminal history of the applicant or its principal parties if, when the application is considered as a whole, the agency does not find that the financial responsibility, experience, character, and general fitness of the applicant are sufficient to command the confidence of the public and warrant the belief that the business will be operated lawfully and fairly. The OCCC will, however, consider the factors identified in subsection (c)(2) - (3) of this section in its review of character and fitness. (e) Revocation on imprisonment. A license will be revoked on the licensee's imprisonment following a felony conviction, felony community supervision revocation, revocation of parole, or revocation of mandatory supervision, as provided by Texas Occupations Code, §53.021(b). (f) Other grounds for denial, suspension, or revocation. The OCCC may deny a license application, or suspend or revoke a license, based on any other ground authorized by statute, including the following: (1) a conviction for an offense that does not directly relate to the duties and responsibilities of the occupation and that was committed less than five years before the date of application, as provided by Texas Occupations Code, §53.021(a)(2); (2) a conviction for an offense listed in Texas Code of Criminal Procedure, art. 42.12, §3g, or art. 62.001(6), as provided by Texas Occupations Code, §53.021(a)(3) - (4); (3) errors or incomplete information in the license applica- tion; (4) a fact or condition that would have been grounds for denying the license application, and that either did not exist at the time of the application or the OCCC was unaware of at the time of application, as provided by Texas Finance Code, §393.614(a)(3); and (5) any other information warranting the belief that the business will not be operated lawfully and fairly, as provided by Texas Finance Code, §393.607(a) and §393.614(a). ♦ ♦ 7 TAC §83.4003, §83.4004 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Office of Consumer Credit Commissioner or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The repeals are proposed under Texas Finance Code, §393.622(a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter 393. §83.4003. Effect of Criminal History Information on Applicants and Licensees. §83.4004. Crimes Directly Related to Fitness for License; Mitigating Factors. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504414 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ DIVISION 5. OPERATIONAL REQUIREMENTS 7 TAC §§83.5003 - 83.5005 These rule changes are proposed under Texas Finance Code, §393.622(a), which authorizes the Finance Commission to adopt rules to necessary to enforce and administer Chapter 393, Subchapter G. Ensuring compliance with Chapter 393 is necessary to the enforcement and administration of Chapter 393, Subchapter G. In addition, proposed new §83.5003 and §83.5004 are proposed under Texas Finance Code, §393.622(a)(3), which authorizes the commission to adopt rules regarding periodic examinations of credit access businesses by the OCCC, and under PROPOSED RULES October 30, 2015 40 TexReg 7531 Texas Finance Code, §393.622(b), which authorizes the commission to adopt rules regarding the review of third-party lender agreements. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter 393. §83.5003. Examinations. (a) Examination authority. The OCCC may periodically examine each place of business of a licensee and investigate the licensee's transactions and records, including books, accounts, papers, and correspondence, to the extent the transactions and records pertain to business regulated under Texas Finance Code, Chapter 393. (b) Access to records. A licensee must allow the OCCC to examine the licensee's place of business and make a copy of an item that may be investigated under subsection (a) of this section. (c) Third-party lender agreements. The OCCC's examination authority includes the authority to review all agreements between a licensee and any third-party lender with which the licensee contracts to provide services under Texas Finance Code, Chapter 393. (d) Witness statements. In connection with an examination, the OCCC may obtain witness statements that pertain to business regulated under Texas Finance Code, Chapter 393. A witness statement must be signed and dated, and must include an acknowledgment that the statement may be introduced in an enforcement action in which the licensee is a party. (e) Records statements. In connection with an examination, the OCCC may obtain statements regarding records maintained by the licensee that pertain to business regulated under Texas Finance Code, Chapter 393. A records statement must be signed and dated by a witness, and must include acknowledgments of the following: (1) a statement of the witness's position and duties at the licensee; (2) a statement that the witness is familiar with the manner in which records are created and maintained by virtue of duties and responsibilities; (3) the number of pages of attached records; (4) a statement that the records are original records or exact duplicates of the original records; generally accepted accounting principles. If federal law requirements for record retention are different from the provisions contained in this section, the federal law requirements prevail only to the extent of the conflict with the provisions of this section. (1) Transaction register. A licensee must maintain a transaction register, or be able to produce this information within a reasonable amount of time. Each record in the register must contain the transaction number, the date of the transaction, the last name of the consumer, the total fees payable to the licensee, the total of payments, and the type of transaction (single payment payday loan, single payment auto title loan, multiple payment payday loan, or multiple payment auto title loan). Each record in the transaction register must be retained for four years from the date of the transaction, or two years from the date of the final entry made on the consumer's account, whichever is later. (2) Consumer's transaction file. A licensee must maintain a paper or electronic transaction file for each individual transaction under Texas Finance Code, Chapter 393, or be able to produce this information within a reasonable amount of time. The transaction file must contain documents that show the licensee's compliance with applicable state and federal law, including Texas Finance Code, Chapter 393. If a substantially equivalent electronic record for any of the following documents exists, a paper copy of the record does not have to be included in the transaction file if the electronic record can be accessed upon request. (A) The transaction file must include the following documentation for each transaction under Texas Finance Code, Chapter 393: (i) any agreement between the consumer and the licensee, including the contract described by Texas Finance Code, §393.201, with all provisions required by that section, as well as the notice of cancellation described by Texas Finance Code, §393.202; (ii) any agreement between the consumer and the lender, including the promissory note; (iii) documentation referencing which agreements between the licensee and a third-party lender apply to the transaction, including any guarantee or letter of credit issued by the licensee; (iv) all legally required disclosures provided in connection with the transaction, including: (5) a statement that the records were made at or near the time of each act, event, condition, opinion, or diagnosis set forth; (I) the consumer disclosure required by Texas Finance Code, §393.223, and §83.6007 of this title (relating to Consumer Disclosures); (6) a statement the records were made by, or from information transmitted by, persons with knowledge of the matters set forth; (II) the credit services organization disclosure required by Texas Finance Code, §393.105; (7) a statement that the records were kept in the course of regularly conducted business activity; (III) any disclosures provided under the Truth in Lending Act, 15 U.S.C. §§1601-1667f, and Regulation Z, 12 C.F.R. Part 1026; (8) a statement that it is the regular practice of the business activity to make the records; and (9) an acknowledgment that the statement and the accompanying records may be introduced in an enforcement action in which the licensee is a party. §83.5004. Files and Records Required. A licensee must maintain records for each transaction under Texas Finance Code, Chapter 393, and make those records available to the OCCC for examination. The records required by this section may be maintained by using a paper or manual recordkeeping system, electronic recordkeeping system, optically imaged recordkeeping system, or a combination of these types of systems, unless otherwise specified. All records must be prepared and maintained in accordance with 40 TexReg 7532 October 30, 2015 Texas Register (IV) any privacy notice provided under the Gramm-Leach-Bliley Act, 15 U.S.C. §§6801-6809, and Regulation P, 12 C.F.R. Part 1016; (V) any notice to cosigner provided under the Federal Trade Commission's Credit Practices Rule, 16 C.F.R. §444.3; (v) the consumer's credit application and any other written or recorded information used in evaluating the application; (vi) any document signed by a co-borrower, co-signor, or other guarantor in connection with the transaction; (vii) any documentation of whether the consumer is a covered borrower under the Department of Defense's Military Lending Act Rule, 32 C.F.R. Part 232, including the identification of covered borrower described by 32 C.F.R. §232.5; (viii) complete documentation of any ancillary products (including insurance or an automobile club) offered to the consumer or purchased by the consumer in connection with the transaction; (ix) complete documentation of all payments made by or to the licensee during the transaction and all payments made by or to the third-party lender at the inception of the transaction (including the amount of each payment, the source of each payment, and the recipient of each payment); (x) any other documentation created or obtained by the licensee in connection with the transaction. (B) The transaction file must include the following documentation if the licensee services or collects a loan in connection with a transaction under Texas Finance Code, Chapter 393, or if the licensee otherwise obtains this documentation in the course of business: (i) Consumer's account record. The licensee must maintain an account record containing at least the following information: (XII) corrective entries to the consumer's account record, if justified, including the reason and supporting documentation for each corrective entry. (ii) Payday loan records. For a payday loan, the transaction file must include documentation relating to the personal check or authorization to debit a deposit account accepted in connection with the loan. (iii) Auto title loan records. For an auto title loan, the transaction file must include all documentation relating to the attachment and perfection of a security interest in the motor vehicle, including any of the following documentation obtained by the licensee: (I) the security agreement; (II) if obtained by the licensee or the third-party lender, the original certificate of title to the vehicle, a certified copy of the negotiable certificate of title, or a copy of the front and back of either the original or certified copy of the title; (III) if executed by the licensee or the third-party lender, an application for certificate of title (Texas Department of Motor Vehicles Form 130-U for Texas vehicles); (I) loan number or another unique number identifying the transaction; (IV) if obtained by the licensee or the third-party lender, a title application receipt (Texas Department of Motor Vehicles Form VTR-500-RTS for Texas vehicles), or a similar document evidencing the filing of the application for certificate of title and payment of required fees and taxes. (II) loan schedule and terms itemized to show the number of installments and the due date and amount of each installment, including installments payable to the licensee; (iv) Repossession records. The transaction file must include complete documentation of any repossession initiated by the licensee, including: (III) name, address, and telephone number of (IV) names and addresses of co-borrowers, if consumer; any; (V) (VI) (VII) (I) any condition report indicating the condition of the collateral, if prepared by the licensee, the licensee's agent, or any independent contractor hired to perform the repossession; (II) any invoices or receipts for any reasonable and authorized out-of-pocket expenses that are assessed to the consumer and incurred in connection with the repossession or sequestration of the vehicle including cost of storing, reconditioning, and reselling the vehicle; principal balance; total interest charges; all fees paid to the licensee; (VIII) amount of official fees for recording, amending, or continuing a notice of security interest that are collected at the time the loan is made; (IX) individual payment entries for all payments described by subparagraph (A)(ix) of this paragraph, and any other payments made by the consumer during the transaction, itemized to show the date payment was received (dual postings are acceptable if date of posting is other than date of receipt), actual amounts received for application to due amounts, and actual amounts paid for default, deferment, or other authorized charges; (X) any refunds of unearned charges that are required in the event a loan is prepaid in full, including records of final entries, and entries to substantiate that refunds due were paid to consumers, with refund amounts itemized to show interest charges refunded; (XI) collection contact history, including a written or electronic record of each contact made by a licensee with the consumer or any other person and each contact made by the consumer with the licensee, in connection with amounts due, with each record including the date, method of contact, contacted party, person initiating the contact, and a summary of the contact; (III) for a vehicle disposed of in a public or private sale as permitted by the Texas Business and Commerce Code, §9.610, the following documents: (-a-) one of the following notices: (-1-) a copy of the notification of disposition as sent to the consumer and other obligors as required by Texas Business and Commerce Code, §9.614; or (-2-) a copy of the waiver of the notice of intended disposition prescribed by subitem (-1-) of this item, as applicable, signed by the consumer and other obligors after default; (-b-) copies of evidence of the type or manner of private sale that was conducted. These records must show that the manner of the disposition was commercially reasonable, such as circumstances surrounding a dealer-only auction, internet sale, or other type of private disposition; (-c-) copies of evidence of the type or manner of public sale that was conducted. These records must show that the manner of the disposition was commercially reasonable, such as documentation of the date, place, manner of sale of the vehicle, and amounts received for disposition of the vehicle; (-d-) the bill of sale showing the name and address of the purchaser of the repossessed collateral and the purchase price of the vehicle; PROPOSED RULES October 30, 2015 40 TexReg 7533 (-e-) for a disposition or sale of collateral creating a surplus balance, a copy of the check representing the payment of the surplus balance paid to the consumer or other person entitled to the surplus; (-f-) for a disposition or sale of collateral resulting in a surplus or deficiency, a copy of the explanation of calculation of surplus or deficiency as required by Texas Business and Commerce Code, §9.616, if requested by the consumer; (-g-) a copy of the waiver of the deficiency letter if the licensee elects to waive the deficiency balance in lieu of sending the explanation of calculation of surplus or deficiency form, if applicable; Code, §393.105, which must be kept for two years from the date on which it is provided to the consumer, as provided by Texas Finance Code, §393.106. (IV) for a vehicle disposed of using the strict foreclosure method permitted by the Texas Business and Commerce Code, §9.620 and §9.621, the following documents: (-a-) one of the two following notices: (3) Agreements between licensee and third-party lender. A licensee must maintain all documentation of its current agreements with third-party lenders, including copies of the agreement, any guarantees or letters of credit, and underwriting guidelines issued by the lender. The documentation must show the licensee's compliance with §83.5005 of this title (relating to Separation Between Credit Access Business and Third-Party Lender). The licensee may maintain this documentation at a centralized location other than the licensed location or branch office if the agreements apply to multiple locations. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it. If an agreement terminates, documentation of the agreement must be maintained until the latest of: (-1-) a copy of the proposal to accept collateral in full satisfaction of the obligation; or (A) four years from the date of the last consumer transaction subject to the agreement; (-2-) for a transaction where 60% or more of the principal balance has been paid, a copy of the debtor or obligor's waiver of compulsory disposition of collateral signed by the consumer and other obligors after default; (-b-) for a transaction where the consumer rejects the offer under item (-a-)(-1-) or (-2-) of this subclause, a copy of the consumer's signed objection to retention of the collateral; (-c-) copies of the records reflecting the total satisfaction of the obligation. (B) two years from the date of the final entry made on the consumer's account in the last consumer transaction subject to the agreement; (v) Litigation records. The transaction file must include complete documentation of any litigation filed by a licensee against a consumer, or by a consumer against the licensee, including all pleadings, the terms of settlement (if a settlement was entered), documentation of any mediation or arbitration, the final judgment (if the court entered a final judgment), and records of all payments received after judgment, properly identified and applied. If the licensee maintains the complete documentation of litigation at a centralized location other than the licensed location or branch office, then the licensee's transaction file may include a written summary of the status of the litigation, rather than complete documentation of the litigation. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it. (4) In-store fee schedule and notices. The in-store fee schedule and notices required by Texas Finance Code, §393.222(a), and §83.6003(a) of this title must be available for inspection by the OCCC in a conspicuous location visible to the general public. If a licensee amends the in-store fee schedule or notices, it must maintain documentation of the previous versions of the schedule or notices for one year from the date of amendment or until the next examination by OCCC staff, whichever is later. The licensee may maintain the documentation of previous in-store fee schedules and notices at a centralized location other than the licensed location or branch office. In this case, the documentation must be maintained for one year from the date of amendment or until the OCCC's next examination of the centralized location, whichever is later. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it. (vi) Criminal charge records. The transaction file must include complete documentation of any criminal charge or complaint filed by a licensee against a consumer, showing the licensee's compliance with Texas Finance Code, §393.201(c)(3). This must include any written evidence of criminal conduct, a written summary of any oral statement submitted to law enforcement, any police report, and any court records obtained by the licensee. (vii) Claim records for insurance or ancillary products. The transaction file must include complete documentation of any claims or disbursement of money related to insurance or another ancillary product provided in connection with the transaction. (viii) Transfer records. The transaction file must include transfer, assignment, or sale records for any loan transferred, assigned, or sold to or from another person. (C) The transaction file and its contents must be retained for four years from the date of the transaction, or two years from the date of the final entry made on the consumer's account, whichever is later. However, this retention period does not apply to the credit services organization disclosure required by Texas Finance 40 TexReg 7534 October 30, 2015 Texas Register (C) one year from the date of termination of the agree- ment; or (D) the OCCC's next examination of the licensee (if the documentation is maintained at a centralized location, this refers to the next examination of the centralized location). (5) Website and online disclosures. If a licensee maintains a website, it must make the website available to the OCCC for inspection. The website must include a fee schedule to show the licensee's compliance with §83.6003(b) of this title, and applicable consumer disclosures to show the licensee's compliance with §83.6007(f) of this title. If a licensee amends the website's fee schedule, consumer disclosures, or method of accessing the fee schedule or consumer disclosures, the licensee must maintain documentation of the previous version of the website to show compliance with §83.6003(b) of this title and §83.6007(f) of this title. This must include the home page, any pages used in accessing the fee schedule and disclosures, and copies of the previously used fee schedule and disclosures. The licensee must maintain this documentation for one year from the date of amendment or until the next examination by OCCC staff, whichever is later. This paragraph does not require a licensee to maintain previously used pages of the website that were not the home page or pages used in accessing the fee schedule and consumer disclosures. The licensee may maintain the documentation of previous versions of the website at a centralized location other than the licensed location or branch office. In this case, the documentation must be maintained for one year from the date of amendment or until the OCCC's next examination of the centralized location, whichever is later. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it. (6) Advertisements. A licensee must maintain advertising and solicitation records, including examples of all written and electronic communications soliciting transactions (including advertisements at the place of business, scripts of radio and television broadcasts, and reproductions of billboards and signs not at the licensed place of business) for one year from the date of use or until the next examination by OCCC staff, whichever is later. If any language other than English is used in any advertising material, a true and correct translation must be maintained along with the advertising material. The licensee may maintain the documentation of advertising at a centralized location other than the licensed location or branch office. In this case, the documentation must be maintained for one year from the date of amendment or until the OCCC's next examination of the centralized location, whichever is later. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it. (7) Adverse action records. Each licensee must maintain adverse action records for all applications relating to Texas Finance Code, Chapter 393 transactions. Adverse action records must be maintained according to the record retention requirements in Regulation B, 12 C.F.R. §1002.12(b). The current retention period is 25 months for consumer credit. These records include the loan application, any written or recorded information used in evaluating the application, the adverse action notice (if required), the notice of incompleteness (if applicable), and counteroffer notice (if applicable). (8) Index of transfers, assignments, and sales. The licensee must maintain (or be able to produce within a reasonable period of time) an index of all loans transferred, assigned, or sold to or from another person, including a third-party lender, or to a different location of the licensee. Each record in the index must be retained for four years from the date of the transaction, or two years from the date of the final entry made on the consumer's account, whichever is later. (For transfers from the licensee, the date of transfer is the date of the final entry.) (9) Index of litigation, criminal charges, and repossessions. A licensee must maintain (or be able to produce within a reasonable period of time) an index of each litigation action and criminal charge filed by or against the licensee, as well as each repossession initiated by the licensee. The index must show the consumer's name, account number, and date of action. Each record in the index must be retained for a period of four years from the date of the transaction, or two years from the date of the final entry made on the consumer's account, whichever is later. (10) Registration and surety bond records. A licensee must maintain documentation of its registration as a credit services organization with the Texas Secretary of State, including its registration statement and registration certificate, to show its compliance with Texas Finance Code, §393.101. A licensee must maintain complete documentation of any surety bond obtained by the licensee under Texas Finance Code, §393.401, and any surety bond required by the OCCC under Texas Finance Code, §393.605. If a registration or surety bond terminates, the licensee must maintain the documentation for one year after the date of termination or until the next examination by OCCC staff, whichever is later. (11) Official correspondence file. A licensee must maintain an official correspondence file, including all communications from the OCCC, copies of correspondence and reports addressed to the OCCC (including quarterly and annual reports), examination reports issued by the OCCC, and notices of relocation described by §83.3008 of this title (relating to Relocation of Licensed Office). (12) General business records. A licensee must maintain any other business records showing its compliance with applicable law, including accounting records showing that the licensee maintains net assets required by Texas Finance Code, §393.611, records used to compile quarterly and annual reports, records of disbursement of funds between the licensee and third-party lenders, receipts, bank statements, and any master insurance policies. §83.5005. Separation Between Credit Access Business and ThirdParty Lender. (a) Generally. A licensee assists consumers in obtaining extensions of credit by others, as provided by Texas Finance Code, §393.001(3). A licensee must operate independently from any third-party lender that makes a loan in connection with a transaction under Texas Finance Code, Chapter 393. A licensee must be a separate legal entity from any third-party lender. (b) Special agency. The relationship between the licensee and a third-party lender must be limited to special agency. A licensee may not engage in a general agency or joint-venture relationship with a third-party lender. A licensee may not select the underwriting criteria used in determining whether the lender will make a loan to the consumer, but a licensee may apply underwriting criteria selected by the third-party lender. (c) Fee sharing. No portion of a fee charged by the licensee may be passed on to the third-party lender. A fee charged by a licensee may not directly benefit a third-party lender. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504412 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ CHAPTER 84. MOTOR VEHICLE INSTALLMENT SALES SUBCHAPTER F. LICENSING 7 TAC §84.608 The Finance Commission of Texas (commission) proposes amendments to Title 7 of the Texas Administrative Code, §84.608, concerning the rules applicable to a motor vehicle installment sales license application denial hearing. In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meet- PROPOSED RULES October 30, 2015 40 TexReg 7535 ing where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. See, 7 TAC §9.1. The Office of Consumer Credit Commissioner (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC §155.1(a). Concurrent with these proposed rule amendments, the commission is proposing amendments to §9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in §9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." Title 7, Part 5 (relating to the OCCC), contains eight references to the Chapter 9 rules of procedure. Chapter 84 contains one of these references. The proposed amendments replace this reference with a reference to the rules of procedure made applicable by the amendment to §9.1(a) of Title 7, described earlier. Accordingly, the proposed amendments will clarify that Chapter 9 rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and SOAH rules of procedure apply to a hearing conducted by SOAH. Section 84.608(d) identifies the rules of procedure applicable to a motor vehicle installment sales license application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to §9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years that the amendments to §84.608 are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to lau- 40 TexReg 7536 October 30, 2015 Texas Register rie.hobbs@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. The amendments are proposed under Texas Government Code, §2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; Texas Finance Code; and Texas Finance Code, §348.513, which authorizes the commission to adopt rules to enforce Chapter 348. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 348, and Title 4. §84.608. Processing of Application. (a) - (c) (No change.) (d) Hearing. Whenever an application is denied, the affected applicant has 30 calendar days from the date the application was denied to request in writing a hearing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, and the rules of procedure applicable under §9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision. (e) - (f) (No change.) The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504417 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ CHAPTER 85. PAWNSHOPS AND CRAFTED PRECIOUS METAL DEALERS SUBCHAPTER A RULES OF OPERATION FOR PAWNSHOPS The Finance Commission of Texas (commission) proposes amendments to the following sections of Title 7 of the Texas Administrative Code: §85.206, concerning the rules applicable to a pawnshop employee license application denial hearing; §85.304, concerning the rules applicable to a pawnshop license application denial hearing; and §85.607, concerning the rules applicable to a pawnshop license revocation, suspension, and surrender hearing. effect, there will be no fiscal implications for state or local government as a result of administering the amendments. In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. For each year of the first five years that the amendments to §§85.206, 85.304, and 85.607 are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meeting where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. See, 7 TAC §9.1. The Office of Consumer Credit Commissioner (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC §155.1(a). Concurrent with these proposed rule amendments, the commission is proposing amendments to §9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in §9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." Title 7, Part 5 (relating to the OCCC), contains eight references to the Chapter 9 rules of procedure. Chapter 85 contains three of these references. The proposed amendments replace these references with references to the rules of procedure made applicable by the amendment to §9.1(a) of Title 7, described earlier. Accordingly, the proposed amendments will clarify that Chapter 9 rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and SOAH rules of procedure apply to a hearing conducted by SOAH. Section 85.206(g) identifies the rules of procedure applicable to a pawnshop employee license application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to §9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Section 85.304(e) identifies the rules of procedure applicable to a pawnshop license application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to §9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Section 85.607 identifies the rules of procedure applicable to a pawnshop license revocation, suspension, and surrender hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to §9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to laurie.hobbs@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. DIVISION 2. PAWNSHOP LICENSE 7 TAC §85.206 The amendments are proposed under Texas Government Code, §2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; and Texas Finance Code, §371.006, which authorizes the commission to adopt rules to enforce Chapter 371. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 371, and Title 4. §85.206. Processing of Application. (a) - (f) (No change.) (g) Hearing. When an application is denied, the applicant has 30 days from the date of the denial to request a hearing in writing to contest the denial. Also, upon a proper and timely protest pursuant to subsection (e) of this section, a hearing will be set. This hearing will be conducted within 60 days of the date of the appeal or protest unless the parties agree to an extension of time or the administrative law judge grants an extension of time pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001 and the rules of procedure applicable under §9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision either approving or denying the license. (h) (No change.) The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. PROPOSED RULES October 30, 2015 40 TexReg 7537 Filed with the Office of the Secretary of State on October 16, 7 TAC §85.607 2015. The amendments are proposed under Texas Government Code, §2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; and Texas Finance Code, §371.006, which authorizes the commission to adopt rules to enforce Chapter 371 regarding pawnshops. TRD-201504418 Leslie L. Pettijohn Commissioner Office of the Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ DIVISION 3. LICENSE ♦ ♦ PAWNSHOP EMPLOYEE The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 371, and Title 4. 7 TAC §85.304 §85.607. Hearings. The amendments are proposed under Texas Government Code, §2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; and Texas Finance Code, §371.006, which authorizes the commission to adopt rules to enforce Chapter 371 regarding pawnshops. Hearings held under this subchapter will be held in accordance with the rules of procedure applicable under §9.1(a) of this title (relating to Application, Construction, and Definitions) [Administrative Hearing Process and Rules of Procedure in the Finance Commission Agencies, Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings (Chapter 9 of this title)], the Administrative Procedure Act, the Texas Rules of Civil Procedure, and the Texas Rules of Evidence. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 371, and Title 4. (e) Hearing. When an application is denied, the applicant has 30 days from the date of the denial to request a hearing in writing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001 and the rules of procedure applicable under §9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title]. When a hearing is requested following an initial license application denial, the hearing will be held within 60 days after a request for a hearing is made unless the parties agree to an extension of time. The commissioner will make a final decision approving or denying the license application after receipt of the proposal for decision from the administrative law judge. (f) (No change.) The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504419 Leslie L. Pettijohn Commissioner Office of the Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ DIVISION 6. LICENSE REVOCATION, SUSPENSION, AND SURRENDER 40 TexReg 7538 Filed with the Office of the Secretary of State on October 16, 2015. §85.304. Processing of Application. (a) - (d) (No change.) ♦ The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. October 30, 2015 Texas Register TRD-201504420 Leslie L. Pettijohn Commissioner Office of the Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ CHAPTER 88. CONSUMER DEBT MANAGEMENT SERVICES SUBCHAPTER A. REGISTRATION PROCEDURES 7 TAC §88.103 The Finance Commission of Texas (commission) proposes amendments to Title 7 of the Texas Administrative Code, §88.103, concerning the rules applicable to a consumer debt management services registration application denial hearing. In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meeting where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. See, 7 TAC §9.1. The Office of Consumer Credit Commissioner (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC §155.1(a). Concurrent with these proposed rule amendments, the commission is proposing amendments to §9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in §9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." Title 7, Part 5 (relating to the OCCC), contains eight references to the Chapter 9 rules of procedure. Chapter 88 contains one of these references. The proposed amendments replace this reference with a reference to the rules of procedure made applicable by the amendment to §9.1(a) of Title 7, described earlier. Accordingly, the proposed amendments will clarify that Chapter 9 rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and SOAH rules of procedure apply to a hearing conducted by SOAH. Section 88.103(d) identifies the rules of procedure applicable to a consumer debt management services registration application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to §9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. The amendments are proposed under Texas Government Code, §2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter 14 and Title 4. §88.103. Processing of Application. (a) - (c) (No change.) (d) Hearing. Whenever an application is denied, the applicant has 30 days from the date the application was denied to request in writing a hearing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, and the rules of procedure applicable under §9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision. (e) - (f) (No change.) The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504421 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ For each year of the first five years that the amendments to §88.103 are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. CHAPTER 89. PROPERTY TAX LENDERS SUBCHAPTER C. APPLICATION PROCEDURES There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. The Finance Commission of Texas (commission) proposes amendments to Title 7 of the Texas Administrative Code, §89.307, concerning the rules applicable to a property tax lender license application denial hearing. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to laurie.hobbs@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. 7 TAC §89.307 In general, the purpose of these amendments is to clarify which rules of procedure are applicable to a contested case hearing for persons regulated by the Office of Consumer Credit Commissioner. The agency circulated an early draft of the proposed amendments to interested stakeholders and held a stakeholders meeting where the following background of the amendments was provided. The commission has previously adopted rules of procedure applicable to a contested case hearing conducted by an administrative law judge employed by or contracted by a finance agency. PROPOSED RULES October 30, 2015 40 TexReg 7539 See, 7 TAC §9.1. The Office of Consumer Credit Commissioner (OCCC) has recently contracted with the State Office of Administrative Hearings (SOAH) to conduct contested case hearings. SOAH applies its own procedural rules to all matters referred to SOAH, unless otherwise required by statute or rule. 1 TAC §155.1(a). Concurrent with these proposed rule amendments, the commission is proposing amendments to §9.1(a) of Title 7 (relating to Definitions and Interpretation; Severability; proposed new title: "Application, Construction, and Definitions") to clarify which rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and which rules apply to a hearing conducted by SOAH. The amended subsection (a) in §9.1 is proposed to read: "This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code." Title 7, Part 5 (relating to the OCCC), contains eight references to the Chapter 9 rules of procedure. Chapter 89 contains one of these references. The proposed amendments replace this reference with a reference to the rules of procedure made applicable by the amendment to §9.1(a) of Title 7, described earlier. Accordingly, the proposed amendments will clarify that Chapter 9 rules of procedure apply to a contested case hearing conducted by an administrative law judge contracted by a finance agency, and SOAH rules of procedure apply to a hearing conducted by SOAH. Section 89.307(d) identifies the rules of procedure applicable to a property tax lender license application denial hearing. The proposed amendment replaces the reference in this subsection to Chapter 9 with a reference to §9.1(a) of Title 7 (relating to Application, Construction, and Definitions). Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the amendments are in effect, there will be no fiscal implications for state or local government as a result of administering the amendments. For each year of the first five years that the amendments to §89.307 are in effect, Commissioner Pettijohn has also determined that the public benefit anticipated as a result of the proposed amendments will be that the commission's rules will conform to current practice of administrative agencies, will be more easily understood by persons required to comply with the rules, and will be more easily enforced. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to laurie.hobbs@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission. 40 TexReg 7540 October 30, 2015 Texas Register The amendments are proposed under Texas Government Code, §2001.004(1), which requires all administrative agencies to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are further proposed under the authority of Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Chapter 14 and Title 4 of the Texas Finance Code; and Texas Finance Code, §351.007, which authorizes the commission to adopt rules to ensure compliance with Chapter 351. The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 351, and Title 4. §89.307. Processing of Application. (a) - (c) (No change.) (d) Hearing. Whenever an application is denied, the affected applicant has 30 calendar days from the date the application was denied to request in writing a hearing to contest the denial. This hearing will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, and the rules of procedure applicable under §9.1(a) of this title (relating to Application, Construction, and Definitions) [Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)], before an administrative law judge who will recommend a decision to the commissioner. The commissioner will then issue a final decision after review of the recommended decision. (e) - (f) (No change.) The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504422 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ PART 6. CREDIT UNION DEPARTMENT CHAPTER 91. CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS SUBCHAPTER A. GENERAL RULES 7 TAC §91.101 The Credit Union Commission (the Commission) proposes amendments to §91.101 concerning Definitions and Interpretations. The amendments revise and update certain characteristics used to determine if a unifying factor among a group of persons satisfies the requirements and qualifies for inclusion in a credit union's field of membership. The absence of a characteristic is determinative. The modification will help ensure credit union compliance with membership requirements. Additionally, the proposal clarifies that only a credit union owned, deposit-taking ATM is included in the definition of "office." The amendments proposed will result in more objective applications of the standards, less difficulty for credit unions, and more efficient use of agency recourses. (7) Catastrophic act--any natural or man-made disaster such as a flood, tornado, earthquake, major fire or other disaster resulting in physical destruction or damage. The amendments are proposed as a result of the Department's general rule review. (8) Community of interest--a unifying factor among persons that by virtue of its existence, facilitates the successful organization of a new credit union or promotes economic viability of an existing credit union. The types of community of interest currently recognized are: Shari Shivers, General Counsel, has determined that for the first five-year period the proposed amendments are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the amended rule. Ms. Shivers has also determined that for each year of the first five years the proposed amendments are in effect, the public benefits anticipated as a result of enforcing the rule will be greater clarity and ease of use of the rule. There will be no effect on small or micro businesses as a result of adopting the amended rule. There is no economic cost anticipated to the credit union system or to individuals for complying with the amended rule if adopted. Written comments on the proposal must be submitted within 30 days after its publication in the Texas Register to Shari Shivers, General Counsel, Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699. The amendments are proposed under Texas Finance Code, §15.402, which authorizes the Commission to adopt reasonable rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the Texas Finance Code. The specific section affected by the proposed amended rule is Texas Finance Code, §15.402. §91.101. (A) Associational--based on commonality of interest related to membership in a recognized organization or a portion of such a group. The organization must satisfy each of the following criteria: (i) The organization's primary purpose must be other than providing eligibility for credit union services. For purposes of this subparagraph, the practice of a credit union enrolling an individual in an association without that person's knowledge or consent is presumed to be the equivalent of providing eligibility for credit union services; (ii) The organization's membership must be primarily composed of natural persons; (iii) The organization's organizational documents clearly define membership eligibility and it may not be based primarily on a client or customer relationship; and (iv) The organization observes the formalities of corporate separateness from the credit union. (v) With respect to an associational group within a credit union's field of membership, a credit union may admit to membership: Definitions and Interpretations. (I) Employees of the enterprise; (a) Words and terms used in this chapter that are defined in Finance Code §121.002, have the same meanings as defined in the Finance Code. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise. (II) Directors, employees, volunteers, and retirees of the enterprise or its subsidiaries or affiliates; (1) Act--the Texas Credit Union Act (Texas Finance Code, Subtitle D). (IV) Family members (as determined by the credit union) of any of the above-described natural persons; (2) Allowance for loan and lease losses (ALLL)--a general valuation allowance that has been established through charges against earnings to absorb losses on loans and lease financing receivables. An ALLL excludes the regular reserve and special reserves. (3) Applicant--an individual or credit union that has submitted an application to the commissioner. (4) Application--a written request filed by an applicant with the department seeking approval to engage in various credit union activities, transactions, and operations or to obtain other relief for which the commission is authorized by the act to issue a final decision or order subject to judicial review. (5) Appraisal--a written statement independently and impartially prepared by a qualified appraiser setting forth an opinion as to the market value of a specifically described asset as of a specific date, supported by the presentation and analysis of relevant market information. (6) Automated teller machine (ATM)--an automated, unstaffed credit union facility owned by or operated exclusively for the credit union at which deposits are received, cash dispensed, or money lent. (III) Natural persons under contract to work for the enterprise, or its subsidiaries or affiliates; (V) The enterprise and its subsidiaries and affili- (VI) Other persons approved by the commis- ates; and sioner. (B) Occupational--based on an commonality of interest related to employment by, work for, an enterprise, or employment within a specific trade, industry or profession (TIP) with a close nexus and narrow attributes. A geographic limitation is not a requirement for an occupational community of interest; however, for purposes of describing the field of membership, the geographic areas being served may be included. With respect to an occupational group within a credit union's field of membership, a credit union may admit to membership: (i) Employees of the enterprise; (ii) Directors, employees, volunteers, and retirees of the enterprise or its subsidiaries or affiliates; (iii) Natural persons under contract to work for the enterprise, or its subsidiaries or affiliates; (iv) Family members (as determined by the credit union) of any of the above-described natural persons; (v) The enterprise and its subsidiaries and affiliates; and PROPOSED RULES October 30, 2015 40 TexReg 7541 (vi) Other persons approved by the commissioner. [(A) Occupational--based on an employment relationship that may be established by:] [(i) employment (or a long term contractual relationship equivalent to employment) by a single employer, affiliated employers or employers under common ownership with at least a 10% ownership interest;] [(ii) employment or attendance at a school; or] [(iii) employment in the same trade, industry or profession (TIP) with a close nexus and narrow commonality of interest, which is geographically limited.] [(B) Associational--based on groups consisting primarily of natural persons whose members participate in activities developing common loyalties, mutual benefits, or mutual interests. In determining whether a group has an associational community of interest, the commissioner shall consider the totality of the circumstances, which include:] [(i) whether the members pay dues,] [(ii) whether the members participate in furtherance of the goals of the association,] [(iii) whether the members have voting rights,] [(iv) whether there is a membership list,] [(v) whether the association sponsors activities,] [(vi) what the association's membership eligibility requirements are, and] [(vii) the frequency of meetings. Associations formed primarily to qualify for credit union membership and associations based on client or customer relationships, do not have a sufficient associational community of interest.] (C) Geographic--based on a clearly defined and specific geographic boundary. Geographic boundaries may include a city, county (single, multiple, or portions of a county) or their political equivalent, school districts, or a clearly identifiable neighborhood. The Department recognizes four types of affinity on which a geographic community of interest can be based--persons who live in, worship in, attend school in, or work in the geographic area. Businesses and other legal entities with the geographic boundaries may also qualify for membership. The geographic community of interest requirement is met if the area to be served is in a recognized single political jurisdiction, e.g., a city, county, or their political equivalent, or any contiguous portion thereof. Some examples of insufficiently defined or unacceptable geographic communities of interest are: [area where persons have common interests and/or interact. More than one credit union may share the same geographic community of interest area where persons have common interests and/or interact. More than one credit union may share the same geographic community of interest. There are currently four types of affinity on which a geographic community of interest can be based: persons, who] (i) Persons who live or work within, and business located within, a ten-mile radius of a credit union office; (ii) Persons who live or work in the greater Houston area; or (iii) Persons who live or work in the State of Texas; [(i) live in,] October 30, 2015 attend school in, or] [(iv) work in that community. The geographic community of interest requirements are met if the area to be served is in a recognized single political jurisdiction, e.g., a city or a county, or a portion thereof.] (D) Other--The commissioner may authorize other types of community of interest, if the commissioner determines that either a credit union or foreign credit union has sufficiently demonstrated that a proposed factor creates an identifiable affinity among the persons within the proposed group. Such a factor shall be well-defined, have a geographic definition, and may not circumvent any limitation or restriction imposed on one of the other enumerated types. (9) Construction or development loan--a financing arrangement for acquiring property or rights to property, including land or structures, with the intent of converting the property into income-producing property such as residential housing for rental or sale; commercial use; industrial use; or similar use. Construction or development loan includes a financing arrangement for the major renovation or development of property already owned by the borrower that will convert the property to income-producing property or convert the use of income-producing property to a different or expanded use from its former use. Construction or development loan does not include loans to finance maintenance, repairs, or improvements to an existing income-producing property that do not change its use. (10) Day--whenever periods of time are specified in this title in days, calendar days are intended. When the day, or the last day fixed by statute or under this title for taking any action falls on Saturday, Sunday, or a state holiday, the action may be taken on the next succeeding day which is not a Saturday, Sunday, or a state holiday. (11) Department newsletter--the monthly publication that serves as an official notice of all applications, and by which procedures to protest applications are described. (12) Field of membership (FOM)--refers to the totality of persons a credit union may accept as members. The FOM may consist of one group, several groups with a related community of interest, or several unrelated groups with each having its own community of interest. (13) Finance Code or Texas Finance Code--the codification of the Texas statutes governing financial institutions, financial businesses, and related financial services, including the regulations and supervision of credit unions. (14) Imminent danger of insolvency--a circumstance or condition in which a credit union is unable or lacks the means to meet its current obligations as they come due in the regular and ordinary course of business, even if the value of its assets exceeds its liabilities; or the credit union has a positive net worth ratio equal to two percent or less of its assets. (15) Improved residential property--real property consisting of a residential dwelling having one to four dwelling units, at least one of which is occupied by the owner of the property. This term shall also include a one to four unit dwelling occupied in whole or in part by the owner on a seasonal basis. (16) Indirect financing--a program in which a credit union makes the credit decision in a transaction where the credit is extended by the vendor and assigned to the credit union or a loan transaction that generally involves substantial participation in and origination of the transaction by a vendor. (17) Loan-to-value ratio--the aggregate amount of all sums borrowed including outstanding balances plus any unfunded commit- [(ii) worship in,] 40 TexReg 7542 [(iii) Texas Register ment or line of credit from all sources on an item of collateral divided by the market value of the collateral used to secure the loan. (18) Loan and extension of credit--a direct or indirect advance of funds to a member, or on that member's behalf, that is conditioned upon the repayment of the funds by the member or the application of collateral. The terminology also includes the purchase of a member's loan or other obligation, a lease financing transaction, a credit sale, a line of credit or loan commitment under which the credit union is contractually obligated to advance funds to or on behalf of a member, an advance of funds to honor a check or share draft drawn on the credit union by a member, or any other indebtedness not classified as an investment security. (19) Manufactured home--a HUD-code manufactured home as defined by the Texas Manufactured Housing Standards Act. The terminology may also include a mobile home, house trailer, or similar recreational vehicle if the unit will be used as the member's residence and the loan is secured by a first lien on the unit, and the unit meets the requirements for the home mortgage interest deduction under the Internal Revenue Code (26 U.S.C. Section 163(a), (h)(2)(D)). (20) Market Value--the most probable price which an asset should bring in a competitive and open market under an arm's-length sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of ownership from seller to buyer where: (A) Buyer and seller are typically motivated; (B) Both parties are well informed or well advised, and acting in their own best interests; (C) A reasonable time is allowed for exposure in the open market; (D) Payment is made in cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (E) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (21) Metropolitan Statistical Area (MSA)--a geographic area as defined by the director of the U. S. Office of Management and Budget. (22) Mobile office--a branch office that does not have a single, permanent site, including a vehicle that travels to various public locations to enable members to conduct their credit union business. (23) Office--includes any service facility or place of business established by a credit union at which deposits are received, checks or share drafts paid, or money lent. This definition includes a credit union owned branch, a mobile branch, an office operated on a regularly scheduled weekly basis, a credit union owned deposit-taking ATM, or a credit union owned electronic facility that meets, at a minimum, these requirements; however, it does not include the credit union's Internet website. This definition also includes a shared branch or a shared branch network if either: (A) the credit union has an ownership interest in the service facility either directly or through a CUSO or similar organization; or (B) the service facility is local to the credit union and the credit union is an authorized participant in the service center. (24) Overlap--the situation which exists when a group of persons is eligible for membership in two or more state, foreign, or federal credit unions doing business in this state. Notwithstanding this provision, no overlap exists if eligibility for credit union membership results solely from a family relationship. (25) Pecuniary interest--the opportunity, directly or indirectly, to make money on or share in any profit or benefit derived from a transaction. (26) Person--an individual, partnership, corporation, association, government, governmental subdivision or agency, business trust, estate, trust, or any other public or private entity. (27) Principal office--the home office of a credit union. (28) Protestant--a credit union that opposes or objects to the relief requested by an applicant. (29) Real estate or real property-an identified parcel or tract of land. The term includes improvements, easements, rights of way, undivided or future interest and similar rights in a tract of land, but does not include mineral rights, timber rights, growing crops, water rights and similar interests severable from the land when the transaction does not involve the associated parcel or tract of land. (30) Remote service facility--an automated, unstaffed credit union facility owned or operated by, or operated for, the credit union, such as an automated teller machine, cash dispensing machine, point-of-sale terminal, or other remote electronic facility, at which deposits are received, cash dispensed, or money lent. (31) Reserves--allocations of retained earnings including regular and special reserves, except for any allowances for loan, lease or investment losses. (32) Resident of this state--a person physically located in, living in or employed in the state of Texas. (33) Respondent--a credit union or other person against whom a disciplinary proceeding is directed by the department. (34) Shared service center--a facility which is connected electronically with two or more credit unions so as to permit the facility, through personnel at the facility and the electronic connection, to provide a credit union member at the facility the same credit union services that the credit union member could lawfully obtain at the principal office of the member's credit union. (35) Secured credit--a loan made or extension of credit given upon an assignment of an interest in collateral pursuant to applicable state laws so as to make the enforcement or promise more certain than the mere personal obligation of the debtor or promisor. Any assignment may include an interest in personal property or real property or a combination thereof. (36) TAC--an acronym for the Texas Administrative Code, a compilation of all state agency rules in Texas. (37) Title or 7 TAC--Title 7, Part VI of the Texas Administrative Code [(TAC)], Banking and Securities, which contains all of the department's rules. (38) Underserved area--a geographic area, which could be described as one or more contiguous metropolitan statistical areas (MSA) or one or more contiguous political subdivisions, including counties, cities, and towns, that satisfy any one of the following criteria: (A) A majority of the residents earn less than 80 percent of the average for all wage earners as established by the U. S. Bureau of Labor Statistics; PROPOSED RULES October 30, 2015 40 TexReg 7543 (B) The annual household income for a majority of the residents falls at or below 80 percent of the median household income for the State of Texas, or the nation, whichever is higher; or The amendments proposed allow more flexibility to credit unions for determining a community of interest and will result in reduced regulatory burden for credit unions. (C) The commission makes a determination that the lack of available or adequate financial services has adversely effected economic development within the specified area. Shari Shivers, General Counsel, has determined that for the first five-year period the proposed amendments are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the amended rule. (39) Uninsured membership share--funds paid into a credit union by a member that constitute uninsured capital under conditions established by the credit union and agreed to by the member including possible reduction under §122.105 of the act, risk of loss through operations, or other forfeiture. Such funds shall be considered an interest in the capital of the credit union upon liquidation, merger, or conversion. (40) Unsecured credit--a loan or extension of credit based solely upon the general credit financial standing of the borrower. The term shall include loans or other extensions of credit supported by the signature of a co-maker, guarantor, or endorser. (b) The same rules of construction that apply to interpretation of Texas statutes and codes, the definitions in the Act and in Government Code §2001.003, and the definitions in subsection (a) of this section govern the interpretation of this title. If any section of this title is found to conflict with an applicable and controlling provision of other state or federal law, the section involved shall be void to the extent of the conflict without affecting the validity of the rest of this title. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504432 Harold E. Feeney Commissioner Credit Union Department Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 837-9236 ♦ ♦ SUBCHAPTER C. ♦ The Credit Union Commission (the Commission) proposes amendments to §91.301, concerning Field of Membership. The proposed amendments to §91.301 make changes to reflect that a credit union's field of membership may include a mosaic of communities of interest. More specifically, the amendments expand the local service area requirement to a newly delineated market area with certain limitations. The amendments eliminate many existing restrictions imposed\ by the Commissioner. The amendments also add a direct marketing restriction. Additionally, the amendments delete the restrictions for underserved communities by granting the Department a more permissive waiver provision and makes amendments necessary to include the provisions of Subchapter K, related to Credit Union Development Districts. The amendments change and streamline the notice requirements. Finally, the rule places certain affirmative obligations on a credit union who presents an application to expand their field of membership. The amendments are proposed as a result of the Department's general rule review. October 30, 2015 Written comments on the proposal must be submitted within 30 days after its publication in the Texas Register to Shari Shivers, General Counsel, Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699. The amendments are proposed under Texas Finance Code, §15.402, which authorizes the Commission to adopt reasonable rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the Texas Finance Code and under Texas Finance Code §122.051, concerning membership. The specific section affected by the proposed amended rule is Texas Finance Code, §122.051. §91.301. Field of Membership. (a) General. Membership in a credit union shall be limited to one or more groups, each of which (the Group) has its own community of interest and is within the credit union's market [local service] area. [In this section, local service area shall mean an area that is within reasonable proximity of a credit union's office, and allows members to be realistically served from that office.] For purposes of field of membership, the Group as a whole will be considered to be within the credit union's market [local service] area when: (1) A majority of the persons in the Group live, work, or gather regularly within the market [local service] area; (2) The Group's corporate headquarters is located within the market [local service] area; or MEMBERS 7 TAC §91.301 40 TexReg 7544 Ms. Shivers has also determined that for each year of the first five years the proposed amendments are in effect, the public benefits anticipated as a result of enforcing the rule will be greater clarity and ease of use of the rule. There will be no effect on small or micro businesses as a result of adopting the amended rule. There is no economic cost anticipated to the credit union system or to individuals for complying with the amended rule if adopted. Texas Register (3) The persons in the Group are "paid from" or "supervised from" an office or facility located within the market [local service] area. The commissioner may impose a geographical limitation on any Group if the commissioner reasonably determines that the applicant credit union does not have the facilities and staffing to serve a larger group or there are other operational or management concerns. (b) Delineation of market area. A credit union shall delineate its market area in the bylaws. A credit union whose field of membership does not include any geographic communities of interest, may delineate its membership bylaw provisions as its market area. (1) Market area. The market area for a credit union shall consist generally of one or more MSA's or metropolitan divisions or one or more contiguous political subdivisions, such as counties, cities, or towns in which the credit union has its principal place of business, offices, and deposit-taking ATMs. (2) Limitations on market area. Each credit union's market area(s): (A) Must consist only of whole metropolitan areas or political subdivisions; (B) Must be of reasonable geographic size, taking into account the credit union's size, financial condition, and location of its offices and deposit-taking ATMs; and feasibility, complies with the requirements of this rule, and no protestant reasonably establishes a basis for denying the request, it shall be approved.] (C) May not reflect illegal discrimination. [(3) If a finding is made that overlap protection is warranted, the commissioner shall reject the application or require the applicant to limit or eliminate the overlap by adding exclusionary language to the text of the amendment, e.g., "excluding persons eligible for primary membership in any occupation or association based credit union that has an office within a specified proximity of the applicant credit union at the time membership is sought." Exclusionary clauses are rarely appropriate for inclusion on a geographic community of interest.] [(b) Other persons eligible for membership. A number of persons by virtue of their close relationship to a Group may be included in the field of membership at the option of the applicant credit union. These include:] [(1) members of the family or household of a member of the Group;] [(2) volunteers performing services for or on behalf of the Group;] [(3) organizations owned or controlled by a member or members of the Group, and any employees and members of those organizations;] [(4) spouses of persons who died while in the Group;] [(5) employees of the credit union;] [(6) subsidiaries of the credit union and their employees; and businesses and other organizations whose employees or members are within the Group.] (c) Multiple-groups. (1) The commissioner may approve a credit union's original articles of incorporation and bylaws or a request for approval of an amendment to a credit union's bylaws to serve one or more communities of interest or a combination of types of communities of interest. (2) In addition to general requirements, special requirements pertaining to multiple-Group applications may be required before the commissioner will grant such a certificate or approve such an amendment. (A) Each Group to be included in the proposed field of membership of the credit union must have its own community of interest. (B) Each associational or occupational Group must individually request inclusion in the proposed credit union's field of membership. (d) Direct marketing restriction. A credit union with a geographic community of interest may not direct marketing targeted primarily at the persons in an occupational or associational Group unless: (1) the Group was included in the bylaws of the credit union prior to October 31, 2015. An occupational or associational Group is "included" in the bylaws of a credit union if the underlying enterprise or organization, as applicable, is specifically named in the credit unions bylaws. (2) a management official of the underlying enterprise or organization has provided the credit union with a written statement, signed by the official, that the Group desires service by the credit union. [(d) Overlap protection.] [(1) The commissioner will only consider the financial effect of an overlap proposed by an application to expand a credit union's field of membership or when a charter application proposes an overlap for a Group of 3,000 members or more.] [(2) The commissioner will weigh the information in support of the application and any information provided by a protesting or affected credit union. If the applicant has the financial capacity to serve the financial needs of the proposed members, demonstrates economic [(4) Generally, if the overlapped credit union does not submit a notice of protest form, and the department determines that there is no safety and soundness problem, an overlap will be permitted. If, however, a notice of protest is filed, the commissioner will consider the following in performing an overlap analysis:] [(A) whether the overlap is incidental in nature, ie., the group(s) in question is so small as to have no material effect on the overlapped credit union;] [(B) whether there is limited participation by members of the group(s) in the overlapped credit union after the expiration of a reasonable period of time;] [(C) whether the overlapped credit union provides requested service;] [(D) the financial effect on the overlapped credit union;] [(E) the desires of the group(s); and] [(F) the best interests of the affected group(s) and the credit union members involved.] [(5) Where a sponsor organization expands its operations internally, by acquisition or otherwise, the credit union may serve these new entrants to its field of membership if they are part of the community of interest described in the credit union's bylaws. Where acquisitions are made which add a new subsidiary or affiliate, the group cannot be served until the entity is included in the field of membership through the application process.] [(6) Credit unions affected by the organizational restructuring or merger of a group within its field of membership must apply for a modification of their fields of membership to reflect the group to be served.] (e) Underserved communities. (1) The Department may waive any provision of this section as the commissioner deems appropriate to facilitate credit union service to low and moderate income persons. (2) A credit union may extend membership to persons and organizations in an underserved community where such area has been designated a credit union development district in accordance with Subchapter K (related to Credit Union Development Districts). [(1) All credit unions may include underserved areas in their fields of membership, without regard to location. More than one credit union can serve the same underserved area.] [(2) Once an underserved area has been added to a credit union's field of membership, the credit union must establish and maintain an office or facility in the community. For the purposes of this subsection, service facility is defined as a place where shares are accepted for members' accounts, loan applications are accepted and loan proceeds are disbursed. This definition includes a credit union owned PROPOSED RULES October 30, 2015 40 TexReg 7545 branch, a shared branch, a mobile branch, and an office operated on a regularly scheduled weekly basis, or a credit union owned electronic facility that meets, at a minimum, these requirements. This definition does not include an ATM or a credit union's Internet website.] [(3) A credit union desiring to add an underserved area must document that the community meets the definition. In addition, the credit union must develop a business plan specifying how it will serve the community. The business plan, at a minimum, must identify the credit and depository needs of the community and detail how the credit union plans to serve those needs. The credit union will be expected to regularly review the business plan to determine if the community is being adequately served. The commissioner may require periodic service status reports from a credit union pertaining to the underserved area to ensure that of the area are being met, as well as requiring such reports before allowing a credit union to add an additional underserved area.] (f) Parity with Federal Credit Unions. Credit unions will be allowed to have, at a minimum, at least as much flexibility as federal credit unions have in field of membership regulation. If a credit union proposes a type of Group that the National Credit Union Administration has previously determined meets the Federal requirements, the commissioner shall approve the application unless the commissioner finds that the credit union has not demonstrated sufficient managerial and financial capacity to safely and soundly serve such expanded membership. (g) Application to expand field of membership. (1) In order to request the approval of the commissioner to add a Group to its field of membership [bylaws], a credit union must submit a written application to the Department. The applicant credit union shall have the burden to show to the Department such facts and data that support the requirements and considerations in this rule. In reviewing such application, the commissioner shall consider: the credit union to expand its field of membership to include another geographic community of interests or change its market area. (2) A credit union has a continuing and affirmative obligation to help meet the financial needs of a geographic community of interest. This obligation, however, does not require a credit union to make loans or to provide services that are inconsistent with safe and sound operations. (i) Applicability of this section. (1) This section also applies to the conversion of a foreign or federal credit union to a credit union chartered and operating under Texas Finance Code, Title 3, Subtitle D. (2) This section does not apply to mergers where the continuing credit union is organized and operating under Texas Finance Code, Title 3, Subtitle D. The continuing credit union may amend its bylaws to add the field of membership of the merging credit union. (3) This section does not restrict Groups added to a credit union's bylaws prior to October 31, 2015. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504433 Harold E. Feeney Commissioner Credit Union Department Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 837-9236 ♦ ♦ ♦ (A) [(1)] Whether the Group has adequate unifying characteristics or a mutual interest such that the safety and soundness of the credit union is maintained; TITLE 10. COMMUNITY DEVELOPMENT (B) [(2)] The ability of credit unions to maintain parity and to compete fairly with their counterparts; PART 1. TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS (C) [(3)] Service by the credit union that is responsive to the convenience and needs of prospective members; (D) [(4)] Protection for the interest of current and future members of the credit union; and (E) [(5)] The encouragement of economic progress in this State by allowing opportunity to expand services and facilities. (2) Notice published in accordance with Section 91.104 (relating to Public Notice and Comment on Certain Applications) is deemed sufficient notification to all credit unions that the applicant credit union has submitted a request to expand its field of membership and comments on the proposed expansion are being accepted. (h) Plan to Serve Geographic Community of Interest. (1) A credit union must develop a business plan specifying how it will serve a proposed geographic community of interest. The business plan, at a minimum, must identify the credit and depository needs of the geographic area and detail how the credit union plans to serve those needs. The board of directors should periodically evaluate the credit union's record of helping to meet the credit needs of a geographic area(s) included in its field of membership. The commissioner may require a service status report from a credit union before allowing 40 TexReg 7546 October 30, 2015 Texas Register CHAPTER 5. COMMUNITY AFFAIRS PROGRAMS SUBCHAPTER A. GENERAL PROVISIONS 10 TAC §5.7 The Texas Department of Housing and Community Affairs (the "Department") proposes amendments to 10 TAC Chapter 5, §5.7, Fidelity Bond Requirements. The purpose of the amendments to 10 TAC §5.7 is to remove reference to Office of Management and Budget ("OMB") Circular A-110 "Administrative Requirements for Grants to Non-Profits," which has been replaced by requirements now included in 2 Code of Federal Regulations ("CFR") Part 200 and addressed elsewhere in this Subchapter, and to update Subrecipient requirements for fidelity bond documentation. The proposed amendments make changes to harmonize the section with 10 TAC §5.2 and 10 TAC Chapter 2, Subchapter B, and reduce the reporting burden for Subrecipients. FISCAL NOTE. Timothy K. Irvine, Executive Director, has determined that, for each year of the first five years the amendments are in effect, enforcing or administering the amendments does not have any foreseeable implications related to costs or revenues of the state or local governments. after. A copy of the actual policy shall remain on file with the Subrecipient and shall be subject to monitoring by the Department. PUBLIC BENEFIT/COST NOTE. Mr. Irvine also has determined that, for each year of the first five years the amendments are in effect, the public benefit anticipated as a result of the amendments will be clarity of program requirements and programmatic adherence to federal guidelines. There will not be any economic cost to any individuals required to comply with the amendments. (5) Subrecipients are responsible for filing claims against the fidelity bond when a covered loss is discovered. The Department may take any one or more of the actions described in Chapter 2, Subchapter B of this Part, titled "Enforcement Regarding Community Affairs Contract Subrecipients." [subparagraphs (A) - (D) of this paragraph for noncompliance.] ADVERSE IMPACT ON SMALL OR MICRO-BUSINESSES. The Department has determined that there will be no economic effect on small or micro-businesses. [(A) Deny Subrecipient's requests for advances and place the Subrecipient on a Modified Cost Reimbursement plan until written assurance of compliance is received by the Department.] REQUEST FOR PUBLIC COMMENT. The public comment period will be held October 23, 2015, to November 23, 2015, to receive input on the amendments. Written comments may be submitted to the Texas Department of Housing and Community Affairs, Attention: Annette Cornier, Rule Comments, P.O. Box 13941, Austin, Texas 78711-3941, by email to the following address: cadrulecomments@tdhca.state.tx.us, or by fax to (512) 475-3935. ALL COMMENTS MUST BE RECEIVED BY 5:00 P.M. NOVEMBER 23, 2015. [(B) Withhold Subrecipient payments (either reimbursement or advance) until written assurance of compliance is received by the Department.] STATUTORY AUTHORITY. The amendments are proposed pursuant to Texas Government Code §2306.053, which authorizes the Department to adopt rules, and Chapter 2306, Subchapter E, which authorizes the Department to administer its Community Affairs programs. The proposed amendments affect no other code, article, or statute. §5.7. Fidelity Bond Requirements. The Department is required to assure that fiscal control and accounting procedures for federally funded entities will be established to assure the proper disbursal and accounting for the federal funds paid to the state [(A-110 "Administrative Requirements for Grants to Non-Profits")]. In compliance with that assurance the Department requires program Subrecipients to maintain adequate fidelity bond coverage. A fidelity bond is a bond indemnifying the Subrecipient against losses resulting from the fraud or lack of integrity, honesty or fidelity of one or more of its employees, officers, or other persons holding a position of trust. (1) In administering Contracts, Subrecipients shall observe their regular requirements and practices with respect to bonding and insurance. In addition, the Department may impose bonding and insurance requirements by contract. (2) If a Subrecipient is a non-governmental organization, the Department requires an adequate fidelity bond. If the amount of the fidelity bond is not prescribed in the contract, the fidelity bond must be for a minimum of $10,000 or an amount equal to the contract if less than $10,000. The bond must be obtained from a company holding a certificate of authority to issue such bonds in the State of Texas. (3) The fidelity bond coverage must include all persons authorized to sign or counter-sign checks or to disburse sizable amounts of cash. Persons who handle only petty cash (amounts of less than $250) need not be bonded, nor is it necessary to bond officials who are authorized to sign payment vouchers, but are not authorized to sign or counter-sign checks or to disburse cash. (4) [The Department must receive written assurance from the Subrecipient that the required fidelity bond has been established.] The Subrecipient must receive an assurance letter [must be received] from the bonding company or agency stating the type of bond, the amount and period of coverage, the positions covered, and the annual cost of the bond. Compliance must be continuously maintained there- [(C) Suspend performance of the contract until written assurance of compliance is received by the Department.] [(D) Contract termination.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504426 Timothy K. Irvine Executive Director Texas Department of Housing and Community Affairs Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 475-0471 ♦ ♦ ♦ CHAPTER 12. MULTIFAMILY HOUSING REVENUE BOND RULES 10 TAC §§12.1 - 12.10 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Department of Housing and Community Affairs or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Department of Housing and Community Affairs (the "Department") proposes the repeal of 10 TAC Chapter 12, §§12.1 - 12.10, concerning the 2015 Multifamily Housing Revenue Bond Rules. The purpose of the repeal is to allow for the proposal and adoption of new sections. The proposed new Chapter 12, concerning the 2016 Multifamily Housing Revenue Bond Rules, is published concurrently with this proposed repeal in this issue of the Texas Register. FISCAL NOTE. Timothy K. Irvine, Executive Director, has determined that, for each year of the first five years the repeal will be in effect, enforcing or administering the repeal does not have any foreseeable implications related to costs or revenues of the state or local governments. PUBLIC BENEFIT/COST NOTE. Mr. Irvine also has determined that, for each year of the first five years the repeal is in effect, the public benefit anticipated as a result of the repeal will be the adoption of new rules for multifamily housing revenue bonds; PROPOSED RULES October 30, 2015 40 TexReg 7547 providing updates and greater clarity, and enhancing the state's ability to provide decent, safe and sanitary housing administered by the Department. There will not be any economic cost to any individuals required to comply with the repeal. ADVERSE IMPACT ON SMALL OR MICRO-BUSINESSES. The Department has determined that there will be no economic effect on small or micro-businesses. REQUEST FOR PUBLIC COMMENT. The public comment period will be held October 30, 2015, to November 30, 2015, to receive input on the repeal. Written comments may be submitted to the Texas Department of Housing and Community Affairs, Shannon Roth, Rule Comments, P.O. Box 13941, Austin, Texas 78711-3941 or by fax to (512) 475-1895. ALL COMMENTS MUST BE RECEIVED BY 5:00 P.M. November 30, 2015. STATUTORY AUTHORITY. The repeal is proposed pursuant to Texas Government Code, §2306.053, which authorizes the Department to adopt rules. The proposed repeal affects no other code, article, or statute. §12.1. General. §12.2. Definitions. §12.3. Bond Rating and Investment Letter. §12.4. Pre-Application Process and Evaluation. §12.5. Pre-Application Threshold Requirements. §12.6. Pre-Application Scoring Criteria. §12.7. Full Application Process. §12.8. Refunding Application Process. §12.9. Regulatory and Land Use Restrictions. §12.10. Fees. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504450 Tom Gouris Deputy Executive Director Texas Department of Housing and Community Affairs Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 475-3800 ♦ ♦ ♦ 10 TAC §§12.1 - 12.10 The Texas Department of Housing and Community Affairs (the "Department") proposes new 10 TAC Chapter 12, §§12.1 12.10, concerning the 2016 Multifamily Housing Revenue Bond Rules. The purpose of the proposed new rules is to implement changes that will improve the 2016 Private Activity Bond Program. The Multifamily Housing Revenue Bond Rules outline the threshold and scoring related requirements associated with private activity bond funding from the Department. The proposed repeal of existing Chapter 12 is published concurrently with this rulemaking. FISCAL NOTE. Timothy K. Irvine, Executive Director, has determined that, for each year of the first five years the new sections will be in effect, enforcing or administering the new sections 40 TexReg 7548 October 30, 2015 Texas Register does not have any foreseeable implications related to costs or revenues of the state or local governments. PUBLIC BENEFIT/COST NOTE. Mr. Irvine also has determined that, for each year of the first five years the new sections will be in effect, the public benefit anticipated as a result of the new sections will be the adoption of new rules for multifamily housing revenue bonds; providing updates and greater clarity and thereby enhancing the state's ability to provide decent, safe and sanitary housing administered by the Department. The average cost of filing an application is between $40,000 and $50,000, which may vary depending on the specific type of application, location of the development site, and other non-state of Texas funding sources utilized. The proposed rules do not, on average, result in an increased cost of filing an application as compared to the existing program rules. ADVERSE IMPACT ON SMALL OR MICRO-BUSINESSES. The Department has determined that there will be no new or additional economic effect on small or micro-businesses. The average cost of filing an application is between $40,000 and $50,000, which may vary depending on the specific type of application, location of the development site, and other non-state of Texas funding sources utilized. The proposed rules do not, on average, result in an increased cost of filing an application as compared to the existing program rules. REQUEST FOR PUBLIC COMMENT. The public comment period will be held October 30, 2015, to November 30, 2015, to receive input on the new sections. Written comments may be submitted to the Texas Department of Housing and Community Affairs, Shannon Roth, Rule Comments, P.O. Box 13941, Austin, Texas 78711-3941 or by fax to (512) 475-1895. ALL COMMENTS MUST BE RECEIVED BY 5:00 P.M. November 30, 2015. STATUTORY AUTHORITY. The new sections are proposed pursuant to Texas Government Code, §2306.053, which authorizes the Department to adopt rules. The proposed new sections affect no other code, article, or statute. §12.1. General. (a) Authority. The rules in this chapter apply to the issuance of multifamily housing revenue bonds ("Bonds") by the Texas Department of Housing and Community Affairs ("Department"). The Department is authorized to issue Bonds pursuant to Texas Government Code, Chapter 2306. Notwithstanding anything in this chapter to the contrary, Bonds which are issued to finance the Development of multifamily rental housing are subject to the requirements of the laws of the State of Texas, including but not limited to Texas Government Code, Chapters 1372 and 2306, and federal law pursuant to the requirements of Internal Revenue Code ("Code"), §142. (b) General. The purpose of this chapter is to state the Department's requirements for issuing Bonds, the procedures for applying for Bonds and the regulatory and land use restrictions imposed upon Bond financed Developments. The provisions contained in this chapter are separate from the rules relating to the Department's administration of the Housing Tax Credit program. Applicants seeking a Housing Tax Credit Allocation should consult Chapter 11 of this title (relating to the Housing Tax Credit Program Qualified Allocation Plan) and Chapter 10 of this title (relating to Uniform Multifamily Rules) for the current program year. In general, the Applicant will be required to satisfy the requirements of the Qualified Allocation Plan ("QAP") and Uniform Multifamily Rules in effect at the time the Certificate of Reservation is issued by the Texas Bond Review Board. If the applicable QAP or Uniform Multifamily Rules contradict rules set forth in this chapter, the applicable QAP or Uniform Multifamily Rules will take precedence over the rules in this chapter. The Department encourages participation in the Bond program by working directly with Applicants, lenders, Bond Trustees, legal counsels, local and state officials and the general public to conduct business in an open, transparent and straightforward manner. (c) Costs of Issuance. The Applicant shall be responsible for payment of all costs related to the preparation and submission of the pre-application and Application, including but not limited to, costs associated with the publication and posting of required public notices and all costs and expenses associated with the issuance of the Bonds, regardless of whether the Application is ultimately approved or whether Bonds are ultimately issued. At any stage during the process, the Applicant is solely responsible for determining whether to proceed with the Application and the Department disclaims any and all responsibility and liability in this regard. (d) Taxable Bonds. The Department may issue taxable Bonds and the requirements associated with such Bonds, including occupancy requirements, shall be determined by the Department on a case by case basis. (e) Waivers. Requests for waivers of program rules must be made in accordance with §10.207 of this title (relating to Waiver of Rules for Applications). §12.2. Definitions. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise. Any capitalized terms not specifically mentioned in this section shall have the meaning as defined in Texas Government Code, Chapter 2306, §§141, 142, and 145 of the Internal Revenue Code, and Chapter 10 of this title (relating to Uniform Multifamily Rules). (1) Institutional Buyer--Shall have the meaning prescribed under 17 CFR §230.501(a), but excluding any natural person or any director or executive officer of the Department (17 CFR §230.501(a)(4) - (6)), or as defined by 17 CFR §230.144(A), promulgated under the Securities Act of 1935, as amended. (2) Persons with Special Needs--Shall have the meaning prescribed under Texas Government Code, §2306.511. (3) Bond Trustee--A financial institution, usually a trust company or the trust department in a commercial bank, that holds collateral for the benefit of the holders of municipal securities. The Bond Trustee's obligations and responsibilities are set forth in the Indenture. §12.3. Bond Rating and Investment Letter. (a) Bond Ratings. All publicly offered Bonds issued by the Department to finance Developments shall have a debt rating the equivalent of at least an "A" rating assigned to long-term obligations by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or Moody's Investors Service, Inc. If such rating is based upon credit enhancement provided by an institution other than the Applicant or Development Owner, the form and substance of such credit enhancement shall be subject to approval by the Board, evidenced by a resolution authorizing the issuance of the credit enhanced Bonds. (b) Investment Letters. Bonds rated less than "A," or Bonds which are unrated must be placed with one or more Institutional Buyers and must be accompanied by an investor letter acceptable to the Department. Subsequent purchasers of such Bonds shall also be qualified as Institutional Buyers and shall execute and deliver to the Department an investor letter in a form satisfactory to the Department. Bonds rated less than "A" and Bonds which are unrated shall be issued in physical form, in minimum denominations of one hundred thousand dollars ($100,000), and shall carry a legend requiring any purchasers of the Bonds to sign and deliver to the Department an investor letter in a form acceptable to the Department. §12.4. Pre-Application Process and Evaluation. (a) Pre-Inducement Questionnaire. Prior to the filing of a preapplication, the Applicant shall submit the Pre-Inducement Questionnaire, in the form prescribed by the Department, so the Department can get a preliminary understanding of the proposed Development plan before a pre-application and corresponding fees are submitted. Information requested by the Department in the questionnaire includes, but is not limited to, the financing structure, borrower and key principals, previous housing tax credit or private activity bond experience, related party or identity of interest relationships and contemplated scope of work (if proposing Rehabilitation). After reviewing the pre-inducement questionnaire, Department staff will follow-up with the Applicant to discuss the next steps in the process and may schedule a pre-inducement conference call or meeting. Prior to the submission of a pre-application, it is important that the Department and Applicant communicate regarding the Department's objectives and policies in the development of affordable housing throughout the State using Bond financing. The acceptance of the questionnaire by the Department does not constitute a pre-application or Application and does not bind the Department to any formal action regarding an inducement resolution. (b) Undesirable Neighborhood Characteristics. If the Development Site has any of the characteristics described in §10.101(a)(4)(B) of this title (relating to Site and Development Requirements and Restrictions), the Applicant must disclose the presence of such characteristics to the Department. Disclosure may be done at time of pre-application and handled in connection with the inducement or it can be addressed at the time of Application submission. The Application may be subject to termination should staff conclude that the Development Site has any characteristics found in §10.101(a)(4)(B) of this title (relating to Site and Development Requirments and Restrictions) and the Applicant failed to disclose. (c) Pre-Application Process. An Applicant who intends to pursue Bond financing from the Department shall submit a pre-application by the corresponding pre-application submission deadline, as set forth by the Department. The required pre-application fee as described in §12.10 of this chapter (relating to Fees) must be submitted with the pre-application in order for the pre-application to be accepted by the Department. Department review at the time of the pre-application is limited and not all issues of eligibility and documentation submission requirements pursuant to Chapter 10 of this title (relating to Uniform Multifamily Rules) are reviewed. The Department is not responsible for notifying an Applicant of potential areas of ineligibility or other deficiencies at the time of pre-application. If the Development meets the criteria as described in §12.5 of this chapter (relating to Pre-Application Threshold Requirements), the pre-application will be scored and ranked according to the selection criteria as described in §12.6 of this chapter (relating to Pre-Application Scoring Criteria). (d) Scoring and Ranking. The Department will rank the preapplication according to score within each priority defined by Texas Government Code, §1372.0321. All Priority 1 pre-applications will be ranked above all Priority 2 pre-applications which will be ranked above all Priority 3 pre-applications. This priority ranking will be used throughout the calendar year. The selection criteria, as further described in §12.6 of this chapter, reflect a structure which gives priority consideration to specific criteria as outlined in Texas Government Code, §2306.359. In the event two or more pre-applications receive the same score, the Department will use the tie breaker factors as outlined PROPOSED RULES October 30, 2015 40 TexReg 7549 in §11.7 of this title (relating to Tie Breaker Factors) in the order they are presented to determine which pre-application will receive preference in consideration of a Certificate of Reservation. submission of a pre-application and the submission of an Application, Applicants are required to notify the newly elected (or appointed) official. (e) Inducement Resolution. After the pre-applications have been scored and ranked, the pre-application and proposed financing structure will be presented to the Department's Board for consideration of an inducement resolution declaring the Department's initial intent to issue Bonds with respect to the Development. Approval of the inducement resolution does not guarantee final Board approval of the Bond Application. Department staff may recommend that the Board not approve an inducement resolution for a pre-application. Each Development is unique, and therefore, making the final determination to issue Bonds is often dependent on the issues presented at the time the full Application is considered by the Board. §12.6. Pre-Application Scoring Criteria. This section identifies the scoring criteria used in evaluating and ranking pre-applications. The criteria identified below include those items required under Texas Government Code, §2306.359 and other criteria considered important by the Department. Any scoring items that require supplemental information to substantiate points must be submitted in the pre-application, as further outlined in the Multifamily Bond Pre-Application Procedures Manual. Applicants proposing multiple sites will be required to submit a separate pre-application for each Development Site. Each Development Site will be scored on its own merits and the final score will be determined based on an average of all of the individual scores. §12.5. Pre-Application Threshold Requirements. The threshold requirements of a pre-application include the criteria listed in paragraphs (1) - (9) of this section. As the Department reviews the pre-application the assumptions as reflected in Chapter 10, Subchapter D of this title (relating to Underwriting and Loan Policy) will be utilized even if not reflected by the Applicant in the pre-application. (1) Submission of the multifamily bond pre-application in the form prescribed by the Department; (2) Completed Bond Review Board Residential Rental Attachment for the current program year; (3) Site Control, evidenced by the documentation required under §10.204(10) of this title (relating to Required Documentation for Application Submission). The Site Control must be valid through the date of the Board meeting at which the inducement resolution is considered and must meet the requirements of §10.204(10) of this title at the time of Application; (4) Boundary survey or plat clearly identifying the location and boundaries of the subject Property; (5) Local area map that shows the location of the Development Site and the location of at least six (6) community assets within a one mile radius (two miles if in a Rural Area). Only one community asset of each type will count towards the number of assets required. The mandatory community assets and specific requirements are identified in §10.101(a)(2) of this title (relating to Site and Development Requirements and Restrictions); (6) Organization Chart showing the structure of the Development Owner and of any Developer or Guarantor, providing the names and ownership percentages of all Persons having an ownership interest in the Development Owner or the Developer or Guarantor, as applicable. (7) Distribution List Form, as provided in the pre-application, to include the anticipated financing participants; (8) Evidence of Entity Registration or Reservation with the Texas Office of the Secretary of State; (9) A certification, as provided in the pre-application, that the Applicant met the requirements and deadlines for public notifications as identified in §10.203 of this title (relating to Public Notifications (§2306.6705(9)). Notifications must not be older than three (3) months prior to the date of Application submission. Re-notification will be required by Applicants who have submitted a change from pre-application to Application that reflects a total Unit increase of greater than 10 percent or a 5 percent increase in density (calculated as units per acre) as a result of a change in the size of the Development Site. In addition, should a change in elected official occur between the 40 TexReg 7550 October 30, 2015 Texas Register (1) Income and Rent Levels of the Tenants. Pre-applications may qualify for up to (10 points) for this item. (A) Priority 1 designation includes one of clauses (i) (iii) of this subparagraph. (10 points) (i) Set aside 50 percent of Units rent capped at 50 percent AMGI and the remaining 50 percent of units rents capped at 60 percent AMGI; or (ii) Set aside 15 percent of units rent capped at 30 percent AMGI and the remaining 85 percent of units rent capped at 60 percent AMGI; or (iii) Set aside 100 percent of units rent capped at 60 percent AMGI for Developments located in a census tract with a median income that is higher than the median income of the county, MSA or PMSA in which the census tract is located. (B) Priority 2 designation requires the set aside of at least 80 percent of the Units capped at 60 percent AMGI. (7 points) (C) Priority 3 designation. Includes any qualified residential rental development. Market rate units can be included under this priority. (5 points) (2) Cost of Development per Square Foot. (1 point) For this item, costs shall be defined as either the Building Cost or the Hard Costs as represented in the Development Cost Schedule, as originally provided in the pre-application. This calculation does not include indirect construction costs. Pre-applications that do not exceed $95 per square foot of Net Rentable Area will receive one (1) point. Rehabilitation will automatically receive (1 point). (3) Unit Sizes. (5 points) The Development must meet the minimum requirements identified in this subparagraph to qualify for points. Points for this item will be automatically granted for Applications involving Rehabilitation (excluding Reconstruction) provided they are requested in the Private Activity Bond Pre-Application Scoring Form. (A) five-hundred-fifty (550) square feet for an Effi- ciency Unit; (B) six-hundred-fifty (650) square feet for a one Bedroom Unit; (C) eight-hundred-fifty (850) square feet for a two Bedroom Unit; (D) one-thousand-fifty (1,050) square feet for a three Bedroom Unit; and (E) one-thousand, two-hundred-fifty (1,250) square feet for a four Bedroom Unit. (4) Extended Affordability. (2 points) A pre-application may qualify for points under this item for Development Owners that are willing to extend the Affordability Period for a Development to a total of thirty-five (35) years. (5) Unit and Development Features. A minimum of (7 points) must be selected, as certified in the pre-application, for providing specific amenity and quality features in every Unit at no extra charge to the tenant. The amenities and corresponding point structure is provided in §10.101(b)(6)(B) of this title (relating to Site and Development Requirements and Restrictions). The amenities selected at pre-application may change at Application so long as the overall point structure remains the same. The points selected at pre-application and/or Application and corresponding list of amenities will be required to be identified in the LURA and the points selected must be maintained throughout the Extended Use Period. Applications involving scattered site Developments must have a specific amenity located within each Unit to count for points. Rehabilitation Developments will start with a base score of (3 points). (6) Common Amenities. All Developments must provide at least the minimum threshold of points for common amenities based on the total number of Units in the Development as provided in subparagraphs (A) - (F) of this paragraph. The common amenities include those listed in §10.101(b)(5) of this title and must meet the requirements as stated therein. The Owner may change, from time to time, the amenities offered; however, the overall points as selected at Application must remain the same. For Developments with 41 Units or more, at least two (2) of the required threshold points must come from the Green Building Features as identified in §10.101(b)(5)(C)(xxxi) of this title. (9) Development Support/Opposition. (Maximum +24 to -24 points) Each letter will receive a maximum of +3 to -3 and must be received ten (10) business days prior to the date of the Board meeting at which the pre-application will be considered. Letters must clearly state support or opposition to the specific Development. State Representatives or Senators as well as local elected officials to be considered are those in office at the time the pre-application is submitted and represent the district containing the proposed Development Site. Letters of support from State or local elected officials that do not represent the district containing the proposed Development Site will not qualify for points under this exhibit. Neutral letters, letters that do not specifically refer to the Development or do not explicitly state support will receive (zero (0) points). A letter that does not directly express support but expresses it indirectly by inference (i.e., a letter that says "the local jurisdiction supports the Development and I support the local jurisdiction") will be treated as a neutral letter. (A) State Senator and State Representative of the districts whose boundaries include the proposed Development Site; (B) Mayor of the municipality (if the Development is within a municipality or its extraterritorial jurisdiction); (C) All elected members of the Governing Body of the municipality (if the Development is within a municipality or its extraterritorial jurisdiction); (D) Presiding officer of the Governing Body of the county in which the Development Site is located; (E) All elected members of the Governing Body of the county in which the Development Site is located; Developments with 16 to 40 Units must qualify for (F) Superintendent of the school district in which the Development Site is located; and (B) Developments with 41 to 76 Units must qualify for (G) Presiding officer of the board of trustees of the school district in which the Development Site is located. (A) (4 points); (7 points); (C) Developments with 77 to 99 Units must qualify for (10 points); (D) for (14 points); Developments with 100 to 149 Units must qualify (E) Developments with 150 to 199 Units must qualify for (18 points); or (F) for (22 points). Developments with 200 or more Units must qualify (7) Tenant Supportive Services. (8 points) By electing points, the Applicant certifies that the Development will provide supportive services, which are listed in §10.101(b)(7) of this title, appropriate for the proposed tenants and that there will be adequate space for the intended services. The provision and complete list of supportive services will be included in the LURA and must be maintained throughout the Extended Use Period. The Owner may change, from time to time, the services offered; however, the overall points as selected at Application must remain the same. The services provided should be those that will directly benefit the Target Population of the Development and accessible to all. No fees may be charged to the tenants for any of the services. Services must be provided on-site or transportation to those off-site services identified on the list must be provided. The same service may not be used for more than one scoring item. All services must be provided by a person on the premises. (8) Underserved Area. An Application may qualify to receive up to (2 points) if the Development Site is located in an Underserved Area as further described in §11.9(c)(6)(A)-(G) of this title. (10) Preservation Initiative. (10 points) Preservation Developments, including rehabilitation proposals on properties which are nearing expiration of an existing affordability requirement within the next two (2) years or for which there has been a rent restriction requirement in the past ten (10) years may qualify for points under this item. Evidence must be submitted in the pre-application. (11) Declared Disaster Areas. (7 points) If at the time the complete pre-application is submitted or at any time within the twoyear period preceding the date of submission, the proposed Development Site is located in an area declared to be a disaster area under Texas Government Code, §418.014. §12.7. Full Application Process. (a) Application Submission. Once the inducement resolution has been approved by the Board, an Applicant who elects to proceed with submitting a full Application to the Department must submit the complete tax credit Application pursuant to §10.201 of this title (relating to Procedural Requirements for Application Submission). (b) Eligibility Criteria. The Department will evaluate the Application for eligibility and threshold at the time of full Application pursuant to Chapter 10 of this title (relating to Uniform Multifamily Rules). If there are changes to the Application at any point prior to closing that have an adverse affect on the score and ranking order and that would have resulted in the pre-application being placed below another pre-application in the ranking, the Department will terminate the Application and withdraw the Certificate of Reservation from the Bond Review Board (with the exception of changes to deferred developer's fees and support or opposition points). The Development and the Applicant must satisfy the requirements set forth in Chapter 10 of this PROPOSED RULES October 30, 2015 40 TexReg 7551 title (relating to Uniform Multifamily Rules) and Chapter 11 of this title (relating to Housing Tax Credit Program Qualified Allocation Plan) in addition to Texas Government Code, Chapter 1372, the applicable requirements of Texas Government Code, Chapter 2306, and the Code. The Applicant will also be required to select a Bond Trustee from the Department's approved list as published on its website. (c) Bond Documents. Once the Application has been submitted and the Applicant has deposited funds to pay costs, the Department's bond counsel shall draft Bond documents. (d) Public Hearings. For every Bond issuance, the Department will hold a public hearing in order to receive comments from the public pertaining to the Development and the issuance of the Bonds. The Applicant or member of the Development Team must be present at the public hearing and will be responsible for conducting a brief presentation on the proposed Development and providing handouts at the hearing that should contain at a minimum, a description of the Development, maximum rents and income restrictions. If the proposed Development is Rehabilitation then the presentation should include the proposed scope of work that is planned for the Development. All handouts must be submitted to the Department for review at least two (2) days prior to the public hearing. Publication of all notices required for the public hearing shall be at the sole expense of the Applicant, as well as any facility rental fees or required deposits. (e) Approval of the Bonds. Subject to the timely receipt and approval of commitments for financing, an acceptable evaluation for eligibility, the satisfactory negotiation of Bond documents, and the completion of a public hearing, the Board, upon presentation by Department staff, will consider the approval of the final Bond resolution relating to the issuance, final Bond documents and in the instance of privately placed Bonds, the pricing, terms and interest rate of the Bonds. The process for appeals and grounds for appeals may be found under §1.7 of this title (relating to Staff Appeals Process) and §1.8 of this title (relating to Board Appeals Process). To the extent applicable to each specific Bond issuance, the Department's conduit multifamily Bond transactions will be processed in accordance with 34 TAC Part 9, Chapter 181, Subchapter A (relating to Bond Review Board Rules) and Texas Government Code, Chapter 1372. (f) Local Permits. Prior to closing on the Bond financing, all necessary approvals, including building permits from local municipalities, counties, or other jurisdictions with authority over the Development Site must have been obtained or evidence that the permits are obtainable subject only to payment of certain fees must be submitted to the Department. §12.8. Refunding Application Process. (a) Application Submission. Owners who wish to refund or modify tax-exempt bonds that were previously issued by the Department must submit to the Department a summary of the proposed refunding plan or modifications. To the extent such modifications constitute a re-issuance under state law the Applicant shall then be required to submit a refunding Application in the form prescribed by the Department pursuant to the Bond Refunding Application Procedures Manual. (b) Bond Documents. Once the Department has received the refunding Application and the Applicant has deposited funds to pay costs, the Department's bond counsel will draft the required Bond documents. (c) Public Hearings. Depending on the proposed modifications to existing Bond covenants a public hearing may be required. Such hearing must take place prior to obtaining Board approval and must meet the requirements pursuant to §12.7(d) of this chapter (relating to Full Application Process) regarding the presence of a member of 40 TexReg 7552 October 30, 2015 Texas Register the Development Team and providing a summary of proposed Development changes. (d) Rule Applicability. Refunding Applications must meet the requirements pursuant to Chapter 10 of this title (relating to Uniform Multifamily Rules) and Chapter 11 of this title (relating to Housing Tax Credit Program Qualified Allocation Plan) with the exception of criteria stated therein specific to the Competitive Housing Tax Credit Program. At the time of the original award the Application would have been subject to eligibility and threshold requirements under the QAP in effect the year the Application was awarded. Therefore, it is anticipated the Refunding Application would not be subject to the site and development requirements and restrictions pursuant to §10.101 of this title (relating to Site and Development Requirements and Restrictions). The circumstances surrounding a refunding Application are unique to each Development; therefore, upon evaluation of the refunding Application, the Department is authorized to utilize its discretion in the applicability of the Department's rules as it deems appropriate. §12.9. Regulatory and Land Use Restrictions. (a) Filing and Term of Regulatory Agreement. A Bond Regulatory and Land Use Restriction Agreement will be filed in the property records of the county in which the Development is located for each Development financed from the proceeds of Bonds issued by the Department. The term of the Regulatory Agreement will be based on the criteria as described in paragraphs (1) - (3) of this subsection, as applicable: (1) the longer of thirty (30) years, from the date the Development Owner takes legal possession of the Development; (2) the end of the remaining term of the existing federal government assistance pursuant to Texas Government Code, §2306.185; or (3) (b) the period required by the Code. Federal Set Aside Requirements. (1) Developments which are financed from the proceeds of Private Activity Bonds must be restricted under one of the two minimum set-asides as described in subparagraphs (A) and (B) of this paragraph: (A) at least 20 percent of the Units within the Development shall be occupied or held vacant and available for occupancy at all times by persons or families whose income does not exceed 50 percent of the area median income; or (B) at least 40 percent of the Units within the Development shall be occupied or held vacant and available for occupancy at all times by persons or families whose income does not exceed 60 percent of the area median income. (2) The Development Owner must designate at the time of Application which of the two set-asides will apply to the Development and must also designate the selected priority for the Development in accordance with Texas Government Code, §1372.0321. Units intended to satisfy set-aside requirements must be distributed evenly throughout the Development, and must include a reasonably proportionate amount of each type of Unit available in the Development. (3) No tenant qualifying under either of the set-asides shall be denied continued occupancy of a Unit in the Development because, after commencement of such occupancy, such tenant's income increases to exceed the qualifying limit; provided, however, that should a tenant's income, as of the most recent determination thereof, exceed 140 percent of the applicable income limit and such tenant constitutes a portion of the set-aside requirement of this section, then such tenant shall only continue to qualify for so long as no Unit of comparable or smaller size is rented to a tenant that does not qualify as a Low-Income Tenant. §12.10. Fees. PART 4. TEXAS DEPARTMENT OF LICENSING AND REGULATION CHAPTER 67. AUCTIONEERS (a) Pre-Application Fees. The Applicant is required to submit, at the time of pre-application, the following fees: $1,000 (payable to TDHCA), $2,500 (payable to the Department's bond counsel) and $5,000 (payable to the Texas Bond Review Board (BRB) pursuant to Texas Government Code, §1372.006(a)). These fees cover the costs of pre-application review by the Department, its bond counsel and filing fees to the BRB. The Texas Department of Licensing and Regulation (Department) proposes amendments to existing rules at 16 Texas Administrative Code (TAC) Chapter 67, §§67.20, 67.25, 67.30, 67.65 and 67.80; proposes new rules §§67.21, 67.70, 67.71 and 67.72; and proposes the repeal of current §67.70, regarding the Auctioneer program. (b) Application Fees. At the time of Application the Applicant is required to submit a tax credit application fee of $30/unit and $10,000 for the bond application fee (for multiple site Applications the application fee shall be $10,000 or $30/unit, whichever is greater). Such fees cover the costs associated with Application review and the Department's expenses in connection with providing financing for a Development. For Developments proposed to be structured as part of a portfolio such application fees may be reduced on a case by case basis at the discretion of the Executive Director. House Bill 2481 (H.B. 2481), 84th Legislature, Regular Session (2015), made substantive changes to Chapter 1802, Occupations Code in the regulation of auctioneers. The bill authorized the Texas Commission of Licensing and Regulation (Commission) to establish an associate auctioneer license; exempted certain auctions of property through the internet from Chapter 1802; and added several exemptions for auctioneers to conduct auctions of certain motor vehicles. The proposed amendments, new rules and repeal are necessary to implement the changes made by H.B. 2481 and make editorial and technical corrections. (c) Closing Fees. The closing fee for Bonds, other than refunding Bonds is equal to 50 basis points (0.005) of the issued principal amount of the Bonds. The Applicant will also be required to pay at closing of the Bonds the first two years of the administration fee equal to 20 basis points (0.002) of the issued principal amount of the Bonds and a Bond compliance fee equal to $25/unit (such compliance fee shall be applied to the third year following closing). (d) Application and Issuance Fees for Refunding Applications. For refunding Applications the application fee will be $10,000 unless the refunding is not required to have a public hearing, in which case the fee will be $5,000. The closing fee for refunding Bonds is equal to 25 basis points (0.0025) of the issued principal amount of the refunding Bonds. If applicable, administration and compliance fees due at closing may be prorated based on the current billing period of such fees. If additional volume cap is being requested other fees may be required as further described in the Bond Refunding Applications Procedures Manual. The proposed amendments to §67.20 make editorial corrections and add an alternative path to obtaining an auctioneer license, via experience gained through licensure as an associate auctioneer. Proposed new §67.21 establishes the requirements for an associate auctioneer. The proposed amendments to §67.25 add "associate auctioneer" to the continuing education requirements and make an editorial change. The proposed amendments to §67.30 provide clarity for exemptions regarding internet based auctions. Proposed amendment to the title of §67.65 removes "Education" from the name of the advisory board to bring about consistency in the names of the Department's boards. (e) Administration Fee. The annual administration fee is equal to 10 basis points (0.001) of the outstanding bond amount on its date of calculation and is paid as long as the Bonds are outstanding. The proposed repeal and replacement of current §67.70 will reorganize the current standards and add certain standards of practice for auctioneers into a more logical format, by separating the duties relating to advertising, auctioneering and recordkeeping. (f) Bond Compliance Fee. The Bond compliance monitoring fee is equal to $25/Unit. The proposed new §67.71 creates duties and responsibilities for the sponsoring auctioneer. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Proposed new §67.72 creates duties and responsibilities for associate auctioneers. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504451 Tom Gouris Deputy Executive Director Texas Department of Housing and Community Affairs Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 475-3800 ♦ ♦ ♦ TITLE 16. ECONOMIC REGULATION The proposed amendments to §67.80 create an application fee and renewal fee for the associate auctioneer license. William H. Kuntz, Jr., Executive Director, has determined that for the first five-year period the proposed amendments, new rules, and repeal are in effect there will be no direct cost to state or local government as a result of enforcing or administering the proposed rules. There is no estimated loss in revenue to the state as a result of enforcing or administering the proposed amendments, new rules or repeal. The anticipated increase in revenue to the state would be $5,000 annually, which is comprised of the annual license application fee and annual renewal fee for the associate which is $25 multiplied by the anticipated population of associates which was 200 at the time the program was abolished by H.B. 3038 on June 14, 2013. PROPOSED RULES October 30, 2015 40 TexReg 7553 Mr. Kuntz also has determined that for each year of the first five-year period the proposed amendments, new rules and repeal are in effect, the public benefit will be auctioneers who have had experience in the various aspects of the auction business through the associate program and will also benefit from employment opportunities in this occupation. There will be no anticipated economic effect on small and micro-businesses who are required to comply with the rules as proposed. An auctioneer is not required to hire an associate auctioneer. Since the agency has determined that the proposed amendments and new rules will have no adverse economic effect on small or micro-businesses, preparation of an Economic Impact Statement and a Regulatory Flexibility Analysis, under Texas Government Code §2006.002, is not required. Comments on the proposal may be submitted by mail to Pauline Easley, Legal Assistant, General Counsel's Office, Texas Department of Licensing and Regulation, P.O. Box 12157, Austin, Texas 78711; or by facsimile to (512) 475-3032; or electronically to erule.comments@tdlr.texas.gov. The deadline for comments is 30 days after publication in the Texas Register. 16 TAC §§67.20, 67.21, 67.25, 67.30, 67.65, 67.70 - 67.72, 67.80 The amendments and new rules are proposed under Texas Occupations Code, Chapters 51 and 1802, which authorize the Commission, the Department's governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by the Department. The statutory provisions affected by the proposal are those set forth in Texas Occupations Code, Chapters 51 and 1802. No other statutes, articles, or codes are affected by the proposal. §67.20. License Requirements--Auctioneer. (a) (No change.) (b) To obtain a license as an auctioneer an applicant must: be at least 18 years of age; (2) be a citizen of the United States or a legal alien; and (3) either: §67.25. Continuing Education. (a) (No change.) (b) To renew a license as an auctioneer or associate auctioneer, a licensee must complete six hours of continuing education in courses approved by the department, including two hours of instruction in laws and rules that regulate the conduct of auctioneers and associate auctioneers. (c) - (d) (No change.) (e) A licensee must [shall] retain a copy of the certificate of completion for a course for one year after the date of completion. In conducting any inspection or investigation of the licensee, the department may examine the licensee's records to determine compliance with this subsection. (f) To be approved under Chapter 59 of this title, a provider's course must be dedicated to instruction in one or more of the following topics: (1) - (2) (No change.) (3) other laws and rules that regulate the conduct of auctioneers and associate auctioneers; (4) - (5) (No change.) (g) (No change.) §67.30. Exemptions. (a) Any auction of property conducted by live bid call, regardless of whether the property may be bid upon through the internet, is subject to this chapter and Texas Occupations Code, Chapter 1802 and is not exempt under §1802.002(14). [A person is not engaged in the business of selling property at auction for purposes of Texas Occupations Code, §1802.002(4), if the person acquired the property at issue for reasons other than resale at auction.] (c) This chapter does not apply to a person providing an online platform to facilitate an auction. §67.65. Auctioneer [Education] Advisory Board. (A) [(3)] pass a written or oral examination provided by the department; or (B) provide proof of employment and licensure as an associate auctioneer for at least two (2) years, and of having participated in at least ten (10) auctions, as described in §67.72(c). (4) hold a high school diploma or a high school equivalency certificate; (5) not have been convicted of a felony during the [within] five (5) years preceding [of] the application date; and (6) show proof of successful completion of at least eighty (80) [80] hours of classroom instruction at an auction school with a curriculum approved by the department. §67.21. License Requirements--Associate Auctioneers. An applicant for licensure as an associate must: submit a completed application along with required fees; 40 TexReg 7554 (3) either be a citizen of the United States or a legal alien. (b) (No change.) (1) (1) (2) be employed under the direct supervision of an auctioneer licensed under this chapter; and October 30, 2015 Texas Register (a) - (d) (No change.) §67.70. Auctioneer Standards of Practice. (a) Advertising (1) All advertisements designed to solicit auction business, including the advertisement of an auction, shall include the auctioneer's name as it appears on the license and the license number. (2) If an auctioneer advertises an auction as "absolute" or "without reserve", no lots included may have a minimum bid. Advertising may include the wording "many lots are without reserve"; however, the auction may not be titled, headed or called an "absolute" or "without reserve" auction unless all lots meet the criteria. (3) An auctioneer who intends to charge a buyer's premium at an auction must state this condition and the amount of the buyer's premium in all advertising for the auction. (4) An auctioneer may not make a false or misleading statement in an advertisement. (b) Recordkeeping (1) An auctioneer must furnish to the department the name, including assumed names, addresses, website, or social media pages, and telephone numbers of all auction companies that he owns or operates. (2) An auctioneer must report any change of address to the department in writing within thirty (30) days of the change. (3) Each licensed auctioneer shall keep records relative to all auctions for a minimum of two (2) years from the date of the sale. (4) The records for each auction must state the name(s) and address of the owners of the property auctioned, the date of the sale, the name of the auctioneer and clerk of the sale, the gross proceeds, the location and account number of the auctioneer's trust or escrow account, an itemized list of all expenses charged to the consignor or seller, a list of all purchasers at the auction and a description and selling price for each item sold. (5) The auctioneer shall keep, as part of the records for each auction, all documents relating to the auction, These documents shall include, but are not limited to, settlement sheets, written contracts, copies of advertising and clerk sheets. (6) These documents include records and documents on- (7) Each licensed auctioneer must: line. (A) Maintain a separate trust or escrow account in a federally insured bank or savings and loan association, in which shall be deposited all funds belonging to others which come into the auctioneer's possession and control. (B) Deposit all proceeds from an auction into the trust or escrow account within seventy two (72) hours of the auction unless the owner or consignor of the property auctioned is paid immediately after the sale or the written contract stipulates other terms, such as sight drafts. (C) Pay any public monies, including, but not limited to state sales tax, received into the State Treasury at the times and as per the regulations prescribed by law; and (2) A licensee may not allow any person who is not either a Texas licensed auctioneer or associate auctioneer who is directly supervised by a licensed auctioneer, to call bids at a sale. (3) A licensee may not knowingly use or permit the use of false bidders at any auction. (4) All licensed auctioneers shall notify consumers and service recipients of the department's name, mailing address, telephone number and website "www.tdlr.texas.gov" for purposes of directing complaints to the department. The notification shall be included on any auction listing contract and on at least one of the following: (A) A sign prominently displayed at the place of the auction or on any auction website; (B) Bills of sale or receipt to be given to buyers; or (C) Bidder cards. §67.71. Requirements--Sponsoring Auctioneer. (a) There must be a legitimate employee-employer relationship between an associate auctioneer and the sponsoring auctioneer or between the associate and an auction company operated by a licensed auctioneer that employs the sponsoring auctioneer. (b) A sponsoring auctioneer must be on the premises and directly supervising an associate auctioneer when the associate is bid calling. (c) A sponsoring auctioneer is responsible for supervision of an associate auctioneer as the associate performs the items listed in §67.72(c). (d) An auctioneer who terminates his sponsorship of an associate auctioneer must: (1) within thirty (30) days notify the department in writing; and (2) provide signed documentation to the associate auctioneer showing: (A) the beginning and ending date of sponsorship; (B) date and location of up to ten (10) auctions bid called by the associate; (D) Pay all amounts due the seller or consignor within fifteen (15) banking days of the auction unless otherwise required by statute or a written contract between license holder and seller. formed. (E) A licensed auctioneer shall cooperate with the department in the performance of an investigation. This includes, but is not limited to responding to requests from the department, including producing requested documents or other information, within thirty (30) days of request. §67.72. Requirements--Associate Auctioneers. (a) An associate auctioneer shall provide auction services only when under the supervision of the licensed Texas auctioneer whose name is on file with the department as the associate's sponsoring auctioneer. (F) The failure of a licensed auctioneer to timely pay a consignor may subject the licensed auctioneer to a claim under the Auctioneer Education and Recovery Fund. (b) When bid calling, an associate auctioneer must be under the direct on-premises supervision of the sponsoring auctioneer. (c) At auction (1) Before beginning an auction, a licensee must ensure the announcement of, give notice, display notice or disclose: (C) items listed in §67.72(c), that the associate has per- (c) In order to be eligible for licensure as an auctioneer without taking the examination, an associate auctioneer must participate in all aspects of the auction business involving the laws of this state, in at least ten (10) auctions including but not limited to: (1) appraising; (2) inventorying; (B) the terms and conditions of the sale including whether a buyer's premium will be assessed; and (3) advertising; (4) property make ready; (C) if the owner, consignor, or agent thereof has reserved the right to bid. (5) site selection and preparation; (A) that the auctioneer conducting the sale is licensed by the department; (6) lotting; PROPOSED RULES October 30, 2015 40 TexReg 7555 ♦ ♦ registration; (8) clerking; 16 TAC §67.70 (9) cashiering; (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Department of Licensing and Regulation or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) (10) bid-calling; (11) ring working; (12) property check out; (13) security; (14) accounting; and (15) managing an escrow account. The repeal is proposed under Texas Occupations Code, Chapters and 1802, which authorize the Commission, the Department's governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by the Department. (d) An associate auctioneer must report any change of address to the department within thirty (30) days. (e) When a sponsoring auctioneer terminates the sponsorship of an associate auctioneer, the associate may not provide auction services until an agreement with a new sponsoring auctioneer, whose name and signature are on file with the department, has been made. §67.80. Fees. (a) (No change.) $25. (c) [(b)] The annual application fee to renew an auctioneer license is $50. (d) The annual fee to renew an associate auctioneer license is $25. (e) [(c)] Late renewal fees for licenses issued under this chapter are provided under §60.83 of this title (relating to Late Renewal Fees). [(d)] Inactive License Status--Auctioneer (1) The fee to place a license on 'inactive' status--no charge. (2) The fee to renew a license on 'inactive' status--renewal fee as stated in subsection (c) or (d). (3) The fee to change from 'inactive' status to 'active status' is $25. (g) [(e)] Revised/Duplicate License/Certificate/Permit/Registration--$25. (h) [(f)] A $250 curriculum review fee will be assessed to all schools submitting their curriculum for review and approval by the department. (i) [(g)] The initial recovery fund fee is $50. (j) [(h)] All fees are non-refundable. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504430 William H. Kuntz, Jr. Executive Director Texas Department of Licensing and Regulation Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 463-8179 40 TexReg 7556 The statutory provisions affected by the proposal are those set forth in Texas Occupations Code, Chapters 51 and 1802. No other statutes, articles, or codes are affected by the proposal. §67.70. Requirements--Auctioneer. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, (b) The application fee for an associate auctioneer license is (f) ♦ (7) October 30, 2015 Texas Register 2015. TRD-201504429 William H. Kuntz, Jr. Executive Director Texas Department of Licensing and Regulation Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 463-8179 ♦ ♦ ♦ TITLE 19. EDUCATION PART 1. TEXAS HIGHER EDUCATION COORDINATING BOARD CHAPTER 9. PROGRAM DEVELOPMENT IN PUBLIC TWO-YEAR COLLEGES SUBCHAPTER M. BLOCK SCHEDULING 19 TAC §§9.660 - 9.666 The Texas Higher Education Coordinating Board (Coordinating Board) proposes new §§9.660 - 9.666 regarding Rules Applying to Program Development in Public Two-Year Colleges concerning Block Scheduling. The intent of these new sections is to establish the Board's oversight for public junior colleges regarding block scheduling of certain associate degree and certificate programs. House Bill 1583, 84th Texas Legislature, Regular Session requires public junior colleges to adopt at least five associate degree or certificate programs from the allied health, nursing, or career and technology education fields as block scheduled programs. In addition, Senate Bill 215, 83rd Texas Legislature, Regular Session, called for the Board to engage institutions of higher education in a negotiated rulemaking process as described in Subchapter 2008, Government Code in the development of such rules. The new Block Scheduling rules proposed for this chapter were reviewed and approved by the Negotiated Rulemaking Committee on Block Scheduling on October 13, 2015. Dr. Rex C. Peebles, Assistant Commissioner for Academic Quality and Workforce, has determined that for the first five years there will be no fiscal implications for state or local governments as a result of these proposed new rules. Dr. Peebles has also determined that for the first five years the new rules are in effect, the program will encourage more students to complete associate degree or certificate programs in a timelier manner and with fewer semester credit hours that do not apply to the program of study. There are no anticipated economic costs to persons who are required to comply with the section as proposed. There is no impact on local employment. Comments on the proposed new rules may be submitted by mail to Rex C. Peebles, Assistant Commissioner, Texas Higher Education Coordinating Board, P.O. Box 12788, Austin, Texas 78711 or via email at AQWcomments@thecb.state.tx.us. Comments will be accepted for 30 days following publication of the proposal in the Texas Register. The new rules are proposed under the Texas Education Code, Chapter 130, §130.0095, which provides the Coordinating Board with the authority to adopt rules to administer the section. The new rules affect the implementation of Texas Education Code, Chapter 130. §9.660. Purpose. The purpose of this subchapter is to establish the coordinating board's oversight for public junior colleges regarding block scheduling of certain associate degree or certificate programs. §9.661. Authority. Authority for this subchapter is provided by Texas Education Code, §130.0095, which provides the board with the authority to administer block schedule programs. §9.662. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. (1) Block Scheduling--Co-registration in a group of courses equal to a full-time load related to a specific program of study or major to facilitate schedule predictability from semester to semester and encourage timely degree completion. (2) Board or Coordinating Board--The Texas Higher Education Coordinating Board. (3) Full-time load--The number of semester credit hours a student is required to complete per semester to complete the program in the amount of time the degree or certificate represents. As examples, a Level I certificate should be completed in one year or less; a Level II certificate should be completed in less than two years; and an associate degree should be completed in two years. (4) Block Scheduled Program--A Coordinating Board approved associate of applied science degree or credit-bearing certificate program in the fields of allied health, nursing, or career education and technology utilizing block scheduling. (5) Public Junior College--Has the meaning as defined in Texas Education Code, §61.003(2). §9.663. Block Scheduled Program. A block scheduled program established at a public junior college under this section must allow a student to enroll in courses equal to that of a full-time load for the program of study and shall be offered each semester in scheduled blocks, such as a morning, full-day, afternoon, evening, or weekend block to provide scheduling predictability from semester to semester for students enrolled in the program. Clinical, practicum and other externships may deviate from the block schedule. §9.664. Adoption of Block Scheduled Programs. Each public junior college shall establish a block scheduled program curriculum from among the allied health, nursing, and career education and technology associate degree or certificate programs offered by the public junior college in at least five of those programs not previously offered as a block scheduled curriculum. §9.665. Block Enrollment. Each public junior college shall publish in advance of each semester the available curricula for each associate degree or certificate program identified as a block scheduled program offered by the college for that semester. Students may enroll in an entire block scheduled program curriculum offered under the program in a semester, rather than enrolling in individual courses leading toward the degree or certificate. §9.666. Demonstration of Hardship. If a public junior college does not offer the minimum number of block scheduled programs as described by this subchapter, the institution must provide detailed written documentation to the coordinating board describing the reason why offering the required number of programs creates a hardship for the institution and how students would be impacted by offering additional block scheduled programs. Factors creating an institutional hardship may include, but are not limited to, programmatic accreditation requirements; statutory requirements; number of students enrolled in the program; availability of faculty; or availability of classroom, laboratory, or other types of instructional/experiential spaces. The Coordinating Board will review the documentation provided and make a determination to approve or deny a request to not offer the minimum number of block scheduled programs as defined by this subchapter. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504441 Bill Franz General Counsel Texas Higher Education Coordinating Board Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 427-6114 ♦ ♦ ♦ CHAPTER 15. NATIONAL RESEARCH UNIVERSITIES SUBCHAPTER A. GENERAL PROVISIONS 19 TAC §15.10 The Texas Higher Education Coordinating Board (Coordinating Board) proposes amendments to §15.10, pertaining to the Texas Research Incentive Program (TRIP). The proposed amendment to this section explicitly allows matches for donations restricted to undergraduate research and disallows matches for donations restricted to undergraduate financial aid grants. Dr. Julie Eklund, Interim Assistant Commissioner, Strategic Planning and Funding, Texas Higher Education Coordinating Board (THECB), has determined that for each year of the first PROPOSED RULES October 30, 2015 40 TexReg 7557 five years the section is in effect, there will not be a fiscal impact to the state. Dr. Eklund has determined that there will be no impact on the public. There is no effect on small businesses. There are no anticipated economic costs to persons who are required to comply with the section as proposed. There is no impact on local employment. Comments on the proposed amendments may be submitted to Mr. David Young, Senior Director, Special Projects, Strategic Planning and Funding, 1200 East Anderson Lane, Austin, TX 78752, david.young@thecb.state.tx.us. Comments will be accepted for 30 days following publication of the proposal in the Texas Register. The amendments are proposed under the Texas Education Code, §62.123. Section 62.124 provides the coordinating board with the authority to adopt rules relating to the Texas Research Incentive Program (TRIP). The amendments affect Texas Education Code, §62.123, Matching Grants. §15.10. Texas Research Incentive Program (TRIP). (a) - (b) (No change.) (c) Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. (1) - (2) (No change.) (No change.) (6) Ineligible Funds-A gift for undergraduate scholarships or undergraduate financial aid grants, bundled gifts, or any portion in excess of $10 million of gifts or endowments received from a single source in a state fiscal year or gifts that are bundled by a [an] university [universities]-associated entity. (7) - (8) (No change.) (9) University-Affiliated Entity-An entity whose sole purpose is to support the mission or programs of the university. (d) - (h) ♦ ♦ ♦ TITLE 22. EXAMINING BOARDS PART 31. TEXAS STATE BOARD OF EXAMINERS OF DIETITIANS CHAPTER 711. DIETITIANS SUBCHAPTER A. LICENSED DIETITIANS The Texas State Board of Examiners of Dietitians (board) proposes the repeal of §711.6 and amendments to §§711.7, 711.8, 711.10, 711.12 and 711.13, concerning the licensing and regulation of dietitians. BACKGROUND AND PURPOSE The proposed amendments remove obsolete requirements regarding preplanned professional experience programs for applicants; remove references to §711.6 concerning preplanned professional experience programs throughout the chapter; remove examination requirements that are not under the board's jurisdiction; and add the ability for licensees to show their highest academic degrees on their license certificates. SECTION-BY-SECTION SUMMARY (3) Eligible Funds-Gifts or endowments certified on or after September 1, 2009, to an eligible public institution from private sources in a state fiscal year for the purpose of enhancing research activities at the institution, including a gift or endowment for endowed chairs, professorships, research facilities, research equipment, program costs, [or] graduate research stipends or fellowships, or undergraduate research. These include [Including] gifts that are bundled from a private source. All gifts, cash and non-cash, must have been originally donated for research purposes. (4) - (5) Bill Franz General Counsel Texas Higher Education Coordinating Board Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 427-6114 (No change.) The repeal of §711.6 deletes language concerning applicants for the preplanned professional experience program, which no longer exists. The amendment to §711.7 deletes the requirement for applying to take the examination for licensure. The national examination is administered by the Commission on Dietetic Registration and is not administered by the board. The amendment to §711.8 deletes the reference to §711.6, which is proposed for repeal. The amendment to §711.10 deletes the reference to §711.6 which is proposed for repeal. The amendment to §711.12 adds new text that allows the licensee to add their highest academic degree to their license certificate. The amendment to §711.13 deletes the reference to §711.6 which is proposed for repeal. FISCAL NOTE The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Bobbe Alexander, Executive Secretary, has determined that for each year of the first five years the sections are in effect, there will be no fiscal implications to state or local governments as a result of enforcing or administering the sections as proposed. Filed with the Office of the Secretary of State on October 19, SMALL AND MICRO-BUSINESS IMPACT ANALYSIS 2015. Ms. Alexander has also determined that there will be no adverse economic impact on small businesses or micro-businesses. This was determined by finding that small businesses and micro-businesses will not be required to alter their business practices to comply with the sections as proposed. TRD-201504442 40 TexReg 7558 October 30, 2015 Texas Register ECONOMIC COSTS TO PERSONS AND IMPACT ON LOCAL EMPLOYMENT There are no anticipated economic costs to persons who are required to comply with the sections as proposed. There is no anticipated negative impact on local employment. Janet S. Hall, R.D., L.D. Chair Texas State Board of Examiners of Dietitians Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 776-6972 ♦ PUBLIC BENEFIT Ms. Alexander has also determined that for each year of the first five years the sections are in effect, the public will benefit from adoption of the sections. The public will benefit by having updated rules, which will promote public health, safety, and welfare. REGULATORY ANALYSIS The board has determined that this proposal is not a "major environmental rule" as defined by Government Code, §2001.0225. "Major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risk to human health from environmental exposure and that may adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment or the public health and safety of a state or a sector of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure. TAKINGS IMPACT ASSESSMENT The board has determined that the proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, do not constitute a taking under Government Code, §2007.043. PUBLIC COMMENT Comments on the proposal may be submitted to Bobbe Alexander, Executive Secretary, State Board of Examiners of Dietitians, Department of State Health Services, Mail Code 1982, and P.O. Box 149347, Austin, Texas 78714-9347 or by email to dietitian@dshs.state.tx.us. When emailing comments to the board, please indicate "Comments on Proposed Rules" in the email subject line. Comments will be accepted for 30 days following publication of the proposal in the Texas Register. 22 TAC §711.6 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas State Board of Examiners of Dietitians or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) STATUTORY AUTHORITY The repeal is authorized by Occupations Code, §55.004, which requires licensing agencies to adopt rules for issuance of a license to spouses of active members of the U.S. armed forces; and Occupations Code, §701.152, which authorizes the board to adopt rules consistent with Chapter 701. ♦ ♦ 22 TAC §§711.7, 711.8, 711.10, 711.12, 711.13 STATUTORY AUTHORITY The proposed amendments are authorized by Occupations Code, §55.004, which requires licensing agencies to adopt rules for issuance of a license to spouses of active members of the U.S. armed forces; and Occupations Code, §701.152, which authorizes the board to adopt rules consistent with Chapter 701. §711.7. Examination for Dietitian Licensure. (a) - (b) (No change.) [(c) Applications for examination.] [(1) The board shall notify an applicant whose application has been approved. The board or its designee shall forward an examination registration form to each approved applicant.] [(2) An applicant who wishes to take a scheduled examination must complete the registration form and return it with the appropriate fee to the board or its designee by the established deadline.] [(3) Any applicant who fails to apply for and take the licensure examination within a period of three years after an examination approval notice is mailed to the applicant may have such approval withdrawn.] [(d) Locations. Examinations administered by the commission or its designee will be held in locations to be announced by the commission.] [(e) Grading. Examinations administered by the commission shall be graded by the commission or its designee.] [(f) Results.] [(1) If the examination is graded or reviewed by a national or state testing service, the board shall notify each examinee of the examination results within 14 days of the date the board receives the results from the testing service.] [(2) If examination results will be delayed for more than 90 days after the examination, the board shall notify each applicant of the reason for the delay before the 90th day.] [(3) No matter what numerical or other scoring system the national or state testing service may use in arriving at examination results, the official notice of results to applicants shall be stated in terms of "pass" or "fail."] [(g) Failures.] §711.6. Preplanned Professional Experience Requirements for Licensure. [(1) An applicant who fails the examination prescribed by the board may take a subsequent examination after paying the examination fee.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. [(2) If requested in writing, the board shall furnish an applicant who fails an examination an analysis of performance.] Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504363 [(3) An applicant who fails the licensing examination three times shall have his/her application denied unless the applicant furnished the board an official transcript from an accredited college or university indicating completed course work taken for credit with a passing grade in the area(s) of weakness determined by analysis of the PROPOSED RULES October 30, 2015 40 TexReg 7559 previous examination(s). Before the applicant will be scheduled for another examination, the applicant shall submit an official transcript showing course work completed in the area of weakness after the date of the last examination taken by the applicant.] [(4) An applicant who completes course work as described in paragraph (3) of this subsection must file an updated application for examination with the application fee.] §711.8. Application Procedures. (a) - (b) (No change.) (c) Required application materials. (1) (No change.) (2) The internship [or preplanned professional experience program] documentation form shall contain: (A) - (D) (No change.) (E) the type of setting, the type of clients served, and the type of work performed; and (F) program.[; and] the credentials of the director or coordinator of each [(G) the signed statement(s) of endorsements from the person(s) who can formally attest to the applicant's successful completion of experience as set out in §711.6(a)(1) and (2) of this title (relating to Preplanned Professional Experience Requirements for Licensure).] (3) - (6) (No change.) §711.10. Provisional Licensed Dietitians. (a) - (b) (No change.) (c) Upgrading a provisional license. The purpose of this subsection is to set out the procedure to upgrade from PLD to a licensed dietitian. [(1) The PLD who has completed a board approved experience program in accordance with §711.6 of this title (relating to Preplanned Professional Experience Requirements for Licensure) shall submit to the board a letter from the sponsor indicating the date the PLD completed the program.] (1) [(2)] A PLD who becomes registered by the commission shall submit proof of current registration status with a written request to upgrade and submit the required fee for upgrade to a licensed dietitian. (2) [(3)] The requirements of sponsorship as defined in subsection (a)(4)(F) of this section, shall continue until the PLD becomes a licensed dietitian. (d) - (e) (No change.) §711.12. Licensing. (a) - (b) (No change.) (c) The highest academic degree in Dietetics or Nutrition may appear on the license certificate. (d) [(c)] Licensing of Military Service Members, Military Veterans, and Military Spouses. (1) This section sets out licensing procedures for military service members, military veterans, and military spouses required under Occupations Code, Chapter 55 (relating to Licensing of Military Service Members, Military Veterans, and Military Spouses). For purposes of this section: (A) "Military service member" means a person who is currently serving in the armed forces of the United States, in a reserve 40 TexReg 7560 October 30, 2015 Texas Register component of the armed forces of the United States, including the National Guard, or in the state military service of any state. (B) "Military spouse" means a person who is married to a military service member who is currently on active duty. (C) "Military veteran" means a person who has served in the army, navy, air force, marine corps, or coast guard of the United States, or in an auxiliary service of one of those branches of the armed forces. (2) An applicant shall provide documentation of the applicant's status as a military service member, military veteran, or military spouse. Acceptable documentation includes, but is not limited to, copies of official documents such as military service orders, marriage licenses, and military discharge records. The application of a person who fails to provide documentation of his or her status shall not be processed under the requirements of this section. (3) Upon request, an applicant shall provide acceptable proof of current licensure issued by another jurisdiction. Upon request, the applicant shall provide proof that the licensing requirements of that jurisdiction are substantially equivalent to the licensing requirements of this state. (4) The board's authority to require an applicant to undergo a criminal history background check, and the timeframes associated with that process, are not affected by the requirements of this section. (5) For an application for a license submitted by a verified military service member or military veteran, the applicant shall receive credit towards any licensing or internship requirements, except an examination requirement, for verified military service, training, or education that is relevant to the occupation, unless he or she holds a restricted license issued by another jurisdiction or if he or she has an unacceptable criminal history as described by the Act and this chapter. (6) An applicant who is a military spouse who holds a current license issued by another jurisdiction that has substantially equivalent licensing requirements shall complete and submit an application form and fee. The board shall issue a license to a qualified applicant who holds such a license as soon as practicable and the renewal of the license shall be in accordance with paragraph (9) of this subsection. (7) In accordance with Occupations Code, §55.004(c), the executive director may waive any prerequisite to obtaining a license after reviewing the applicant's credentials and determining that the applicant holds a license issued by another jurisdiction that has licensing requirements substantially equivalent to those of this state. (8) A military spouse who within the five years preceding the application date held the license in this state that expired while the applicant lived in another state for at least six months is qualified for licensure based on the previously held license, if there are no unresolved complaints against the applicant and if there is no other bar to licensure, such as criminal background or non-compliance with a board order. (9) If the board issues an initial license to an applicant who is a military spouse in accordance with paragraph (6) of this subsection, the board shall assess whether the applicant has met all licensing requirements of this state by virtue of the current license issued by another jurisdiction. The board shall provide this assessment in writing to the applicant at the time the license is issued. If the applicant has not met all licensing requirements of this state, the applicant must provide proof of completion at the time of the first application for license renewal. A license shall not be renewed, shall be allowed to expire, and shall become ineffective if the applicant does not provide proof of completion at the time of the first application for licensure renewal. §711.13. Temporary License. (a) - (c) SECTION-BY-SECTION SUMMARY (No change.) (d) Status change. The board shall issue a license to the holder of a temporary license after: (1) (No change.) (2) the board verifies that the temporary licensee has met the academic requirements set out in 711.5 of this title (relating to Academic Requirements for Licensure) [and the experience requirements in §711.6 of this title (relating to Preplanned Professional Experience Requirements for Licensure), if applicable]. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504364 Janet S. Hall, R.D., L.D. Chair Texas State Board of Examiners of Dietitians Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 776-6972 ♦ ♦ Proposed amendments to §61.1 update existing language for accuracy and clarity by adding the term "authorized entities" and replacing the acronym "KHC" with the word "program." Proposed amendments to §61.2 revise existing definitions, remove unnecessary definitions, and add new definitions. New terms used in this subchapter include authorized entity; enrolled provider; incomplete claim; resubmitted claim; and veterans programs. Proposed amendments to §61.3 update the program requirement to align with eligibility requirements of the Social Security Administration and replace the acronym "KHC" with the word "program." Proposed amendments to §61.4 add language which stipulates that applications must be submitted by an authorized entity. The notary requirement was removed to streamline the application process. Proposed amendments to §61.5 replace the term "drug products" with "supplies" to accurately reflect program benefits; add language that better describes benefit limitations; and replace the acronym "KHC" with the word "program." ♦ TITLE 25. HEALTH SERVICES PART 1. DEPARTMENT OF STATE HEALTH SERVICES CHAPTER 61. CHRONIC DISEASES SUBCHAPTER A. KIDNEY HEALTH CARE The Executive Commissioner of the Health and Human Services Commission, on behalf of the Department of State Health Services (department), proposes the amendments to §§61.1 - 61.5 and §§61.7 - 61.10, new §61.11 and repeal of §61.11, concerning the Kidney Health Care (KHC) Program (program). BACKGROUND AND PURPOSE The KHC Program serves Texas residents with an end-stage renal disease (ESRD) diagnosis, who are not Medicaid eligible, and have a gross income of less than $60,000 annually. The program provides Medicare Part D premium payment, deductible and coinsurance benefits; limited drug benefits; travel reimbursement for ESRD related travel up to 13 round trips monthly; and allowable dialysis and access surgery benefits. The KHC rules implement Texas Health and Safety Code, Chapter 42, Kidney Health Care, and set guidelines necessary for the administration of the program. The proposed amendments to §§61.1 - 61.5 and 61.7 - 61.10, repeal of §61.11, and new §61.11 are necessary to strengthen and clarify understanding of the program, and improve flow, accuracy, and clarity of the rules. Government Code, §2001.039, requires that each state agency review and consider for re-adoption each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedure Act). Sections 61.1 - 61.5 and 61.7 61.11 have been reviewed, and the department has determined that reasons for adopting the sections continue to exist because rules on this subject are needed to administer the program effectively. Section 61.6 was moved into new 1 TAC §392.605, concerning Kidney Health Care Provider Requirements and Effective Dates, to comply with the consolidation of contract and procurement rules under the Health and Human Services Commission. Section 392.605 defines some words and terms used in Subchapter G (relating to Contracting with Providers for Certain DSHS Programs) and establishes certain requirements for providers to qualify as providers for the program. This section also establishes effective dates for all enrolled provider agreements and pharmacy agreements. Proposed amendments to §61.7 add language that specifies who may file claims; remove reference to the Automated System for Kidney Information Tracking to allow for an updated software application; and replace the acronym "KHC" with the word "program." Amendments in this section also add new language that the program will not pay claims for medical benefits until the provider has entered into a fully executed provider agreement. Proposed amendments to §61.8 clarify existing language by explaining that claims that do not meet the filing deadlines will be denied; and replacing the term "approved" provider with "enrolled" provider for consistency throughout the subchapter. Proposed amendments to §61.9 clarify existing language related to client and provider rights and responsibilities; add new language to outline responsibilities for authorized entities; and replace the acronym "KHC" with the word "program." Proposed amendments to §61.10 clarify existing language by specifying that clients must reapply for benefits when program eligibility is terminated, and by replacing the acronym "KHC" with the word "program." Proposed new §61.11 clarifies the rights of appeal for applicants, clients, and providers by outlining the circumstances for which an administrative review may be requested. FISCAL NOTE Sam Cooper, LMSW-IPR, Director, Specialized Health Services Section, has determined that for each year of the first five years that the sections will be in effect, there will be no fiscal implica- PROPOSED RULES October 30, 2015 40 TexReg 7561 tions to state or local governments as a result of enforcing and administering the sections as proposed. SMALL AND MICRO-BUSINESSES IMPACT ANALYSIS Mr. Cooper has also determined that there will be no adverse effect on small businesses or micro-businesses required to comply with the sections as proposed because small businesses and micro-businesses will not be required to alter their business practices in order to comply with the sections. ECONOMIC COSTS TO PERSONS AND IMPACT ON LOCAL EMPLOYMENT There are no anticipated economic costs to persons who are required to comply with the sections as proposed. There is no anticipated negative impact on local employment. PUBLIC BENEFIT Mr. Cooper has determined that for each year of the first five years the sections are in effect, the public will benefit from adoption of the sections. The anticipated benefits include improved consistency and interpretation of the rules for clients and providers, as well as efficiencies in program operations and functions regarding eligibility, enrollment, and administrative reviews. REGULATORY ANALYSIS The department has determined that this proposal is not a "major environmental rule" as defined by Government Code, §2001.0225. "Major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risk to human health from environmental exposure and that may adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment or the public health and safety of a state or a sector of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure. The amendments and new section are authorized by Health and Safety Code, §42.003(c), which authorizes the Executive Commissioner of the Health and Human Services Commission to adopt rules necessary to carry out Chapter 42 and to provide adequate kidney care and treatment for citizens of this state; and by Government Code, §531.0055(e), and the Health and Safety Code, §1001.075, which authorize the Executive Commissioner of the Health and Human Services Commission to adopt rules and policies necessary for the operation and provision of health and human services by the department and for the administration of Health and Safety Code, Chapter 1001. The amendments and new section affect Government Code, Chapter 531; and Health and Safety Code, Chapters 42 and 1001. Review of the sections implements Government Code, §2001.039. §61.1. General. (a) (No change.) (b) Confidentiality of Information. (1) All information submitted, as required by this subchapter, may be verified at the discretion of the Department of State Health Services (department) with or without notice to applicants, clients, authorized entities, or providers of program [KHC] benefits or services. This information is confidential to the extent authorized by law. (2) (No change.) (c) Forms. The program provides approved forms to applicants, clients, authorized entities, and providers. §61.2. Definitions. The following words and terms when used in this subchapter [shall] have the following meanings, unless the context clearly indicates otherwise. (1) (No change.) (2) Action--A suspension, modification, denial, or termination of program [KHC] eligibility, benefits, or participation. TAKINGS IMPACT ASSESSMENT The department has determined that the proposed amendments, repeal and new rule do not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, do not constitute a taking under Government Code, §2007.043. PUBLIC COMMENT Comments on the proposal may be submitted by mail to Laura Ethridge, Purchased Health Services Unit, Mail Code 1938, Department of State Health Services, P.O. Box 149347, Austin, Texas 78714-9347; by telephone at (512) 776-3664; or by email to laura.ethridge@dshs.state.tx.us. Comments will be accepted for 30 days following publication of the proposal in the Texas Register. (3) - (4) (No change.) (5) Applicant--A person [An individual] who has submitted an application for program [KHC] benefits and has not received a final determination of eligibility. (6) Authorized entity--Any individual or organization approved by the program to submit applications for benefits or travel verification reports on behalf of an applicant or client. (7) [(6)] Claim--A request for payment or reimbursement of services. (8) [(7)] Client--A person who has applied for program services and who meets all program [KHC] eligibility requirements and is determined to be eligible for program services. LEGAL CERTIFICATION (9) [(8)] CMS--The Centers for Medicare and Medicaid The Department of State Health Services General Counsel, Lisa Hernandez, certifies that the proposed rules have been reviewed by legal counsel and found to be within the state agencies' authority to adopt. 25 TAC §§61.1 - 61.5, 61.7 - 61.11 October 30, 2015 (10) [(9)] Co-insurance--A cost-sharing arrangement in which a covered person is responsible for paying a specified percentage of the charge for a covered service or product. (11) [(10)] Commissioner--The commissioner of the Department of State Health Services. STATUTORY AUTHORITY 40 TexReg 7562 Services. Texas Register (12) [(11)] Co-pay/Co-payment--A cost-sharing arrangement in which a covered person is responsible for paying a specified or fixed charge for a covered service or product. (13) [(12)] CRNA--Certified registered nurse anesthetist. (14) [(13)] Date of service (DOS)--The date a service is rendered. (15) [(14)] Denial--An action by the program that disallows program eligibility, benefits, or provider enrollment [administrative review requests]. (16) [(15)] Department--The Department of State Health Services. (17) [(16)] Effective date--The [initial] date a program client or enrolled provider is approved to receive program benefits or reimbursements [of eligibility for a KHC client or provider]. (18) [(17)] End-Stage Renal Disease (ESRD)--The final stage of renal failure [impairment] that requires dialysis or [and/or] kidney transplant to reduce uremic symptoms and [and/or] prevent the death of the patient. (19) Enrolled provider--Any individual or entity who has completed all the requirements located in the Texas Health and Human Services Commission rule at 1 TAC §392.605, Kidney Health Care Provider Requirements and Effective Dates, and is deemed enrolled by the program to furnish covered services to program clients including: (A) outpatient dialysis facilities; (B) out-of-state outpatient dialysis facilities; (C) hospitals and ambulatory surgical centers (ASCs) located in Texas and operating in compliance with applicable law; (D) out-of-state hospitals and ASCs; (E) military or Veterans Administration hospitals located in Texas which have a renal unit; (F) pharmacies approved as Texas Medicaid providers and licensed to operate within the United States and its territories, including mail order pharmacies; (G) physicians and certified registered nurse anesthetists (CRNAs) licensed in Texas; (H) out-of-state physicians and CRNAs; and (I) Medicare Prescription Drug Plan (PDP) providers. (20) [(18)] Explanation of benefits (EOB) [EOB]--A form, in paper or electronic format, which provides an explanation of benefits. It is used to explain a payment or denial of a claim. (21) [(19)] Fair hearing--The informal hearing process the department follows under §§1.51 - 1.55 of this title (relating to Fair Hearing Procedures). (22) [(20)] Filing deadline--The last date that a claim may be received by the program and still be considered eligible for benefit. (23) [(21)] Final decision--A decision that is made by a decision maker after conducting a fair hearing under §§1.51 - 1.55 of this title. (24) Incomplete claim--A claim that is submitted to the program without the required information to enable determination of program liability or payment. [(22) Interim approval--The status given by the program to an outpatient dialysis facility, free-standing or hospital-based, which has applied for participation as a KHC provider but has not executed an agreement with the program.] (25) [(23)] KHC--Kidney Health Care. (26) [(24)] KHC formulary--A list of general therapeutic categories of drugs, over-the-counter products, and limited diabetic supplies that are covered for reimbursement by the program. (27) [(25)] Low Income Subsidy (LIS)--The subsidy provided under the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003 for Medicare Part D plan premiums and related costs, at varying levels, for some low-income Medicare beneficiaries. (28) [(26)] Medical benefit--Any medical treatment or procedure approved by the program as a covered service. (29) [(27)] Medicare Advantage Plan--A Medicare health plan that is similar to a health maintenance organization, participating provider organization, or other Medicare health plan, and includes medical, drug coverage and other benefits. (30) [(28)] Medicare Part A--Hospital insurance for people age 65 or older, or under age 65 with certain disabilities, that helps cover inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. (31) [(29)] Medicare Part B--Health insurance for people age 65 or older, or under age 65 with certain disabilities, and any age with ESRD, that helps cover medically necessary services, such as doctors' services and outpatient care, and some preventive services. (32) [(30)] Medicare Part D--Established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), it provides members with prescription drug coverage, expanded health plan options, improved health care access for rural Americans, and preventive care services. (33) [(31)] Medicare Part D out-of-pocket expenses--Include premiums, deductibles, co-payments, or [and] co-insurance amounts. (34) [(32)] Medicare Part D Premium--The amount paid monthly under a Medicare Part D contract to insure coverage. (35) [(33)] Medicare Prescription Drug Plan (PDP)--A stand-alone drug plan offered by insurers and other private companies to individuals eligible for Medicare Part D. (36) [(34)] Medigap plan--A Medicare supplement insurance policy sold by private insurance companies to fill "gaps" in Medicare coverage. (37) [(35)] Modification--A change made to a client or provider account [client's record] that can affect [affects a] program benefits, [benefit or] eligibility, or enrollment [status]. (38) [(36)] Program--Kidney Health Care [Program]. (39) [(37)] Provider--Any individual or entity who furnishes benefits or [approved by the program to furnish covered] services to program [KHC] clients. [including:] [(A) outpatient dialysis facilities;] [(B) out-of-state outpatient dialysis facilities;] [(C) hospitals and ambulatory surgical centers (ASCs) located in Texas and operating in compliance with applicable law;] [(D) PROPOSED RULES out-of-state hospitals and ASCs;] October 30, 2015 40 TexReg 7563 [(E) military or Veterans Administration hospitals located in Texas which have a renal unit approved by the Joint Commission on Accreditation of Healthcare Organizations or the American Osteopathic Association]; [(F) pharmacies approved as Texas Medicaid providers and licensed to operate within the United States and its territories, including mail order pharmacies;] [(G) physicians and certified registered nurse anesthetists (CRNAs) licensed in Texas;] [(H) out-of-state physicians and CRNAs; and] [(I) Medicare Prescription Drug Plan (PDP) and Medicare Advantage Plan (MA-PD) providers.] (40) [(38)] Qualified Individual (QI) Program--A Medicaid program for beneficiaries who need help in paying for Medicare Part B premiums. The beneficiary must be entitled to [have] Medicare Part A, have [and] limited income and resources as calculated using federal and state guidelines, and not be otherwise eligible for Medicaid. For those who qualify, the Medicaid program pays full Medicare Part B premiums only. (1) A client must meet the following requirements within the first 3 months of program [KHC] eligibility: (A) - (D) (No change.) (2) A client must meet the following requirements to continue benefit eligibility: (A) continue premium payments to [on] health insurance plans under Medicare, individual or group health insurance plans, and prepaid medical plans, where enrollment was effective prior to program [KHC] eligibility; (B) re-apply for LIS as required by the Social Security Administration [annually]; (C) - (D) (E) (No change.) notify the program within 30 days of changes in the following: (i) - (ii) (No change.) (iii) coverage under Medicaid, Medicare, individual or group insurance, Veterans programs, or any other health benefits coverage; [insurance coverage; and] (41) [(39)] Qualified Medicare Beneficiary (QMB) Program--A Medicaid program for beneficiaries who need help in paying for Medicare services. The beneficiary must be entitled to [have] Medicare Part A, have [and] limited income and resources as calculated using federal and state guidelines. For those who qualify, the Medicaid program pays Medicare Part A premiums, Part B premiums, and Medicare deductibles and coinsurance amounts for Medicare services. §61.4. Applications. Persons meeting the eligibility requirements set forth in §61.3(a) - (c) of this title (relating to Client Eligibility Requirements) must submit an [make a complete] application packet for benefits. (42) [(40)] Reimbursement--Payment of a claim for covered benefits or services [allowable services or transportation]. (1) A complete application packet must be submitted by an authorized entity and include all of the following: (43) [(41)] Reimbursement rate--The program [KHC] payment rate for covered benefits or services [allowable products, services, and transportation determined annually for the following fiscal year]. (A) a completed, signed and dated program application [complete and notarized Application for Benefits, with the applicant's, or the applicant's representative's, original signature or "mark;"]; (44) Resubmitted claim--A claim that is submitted to the program more than once to correct errors. (B) a copy of the completed, signed and dated Centers for Medicare and Medicaid Services (CMS) End-Stage Renal Disease Medical Evidence Report or, with program approval, the Kidney Health Care Physician Assessment Form; (45) [(42)] Specified Low Income Medicare Beneficiary (SLMB) Program--A Medicaid program that pays for Medicare Part B premiums for individuals who have Medicare Part A, a low monthly income, and limited resources as calculated using federal and state guidelines. (46) [(43)] Suspension--An action by the program, [Eligibility for benefits] which holds client benefits or reimbursement to enrolled providers [is held without final action] pending satisfaction of a program request or requirement. (47) [(44)] Termination--A final action by the program, which ends client or enrolled provider participation in the [KHC] program. (48) Veterans programs--Health care programs authorized and administered by the United States Department of Veterans Affairs and the United States Department of Defense. (iv) location of treatment; and[.] (v) income. (C) documentation of Texas residency as required by §61.3 of this title; (D) a copy of the applicant's social security card issued by the Social Security Administration (SSA), or an allowable substitute, as follows: (i) (No change.) (ii) a copy of a valid Medicare card, if the Medicare account is established in the applicant's own social security number and the social security number is printed on the Medicare card; and[.] (E) applicant's financial data. The applicant or the person(s) legally obligated to support the applicant must verify income by providing one of the following: §61.3. Client Eligibility Requirements. (i) a copy of the first page of the federal individual income tax return for the most recent tax year, if self-employed; or (a) A person must [shall] meet all of the following requirements to be eligible for program [KHC] benefits: (ii) a statement of estimated or declared income for the current tax year, and supporting documentation[, if requested]. (1) - (5) (b) - (c) (No change.) (2) (No change.) (No change.) (3) [Eligibility date for KHC benefits.] The program [KHC] eligibility date is the date the program receives a complete application packet; if approved, the client receives an effective date. (d) Maintenance of Benefits Eligibility. 40 TexReg 7564 October 30, 2015 Texas Register (4) If program [KHC] benefits are terminated, the eligibility date for any subsequent benefit period is the date the program receives a subsequent complete application packet for program [KHC] benefits. (5) §61.5. (No change.) Benefits and Limitations. (a) Benefits. (1) Outpatient drugs and supplies [drug products] listed on the current KHC formulary. (2) - (4) (No change.) (5) Medicare Part B immunosuppressive drug co-insurance amounts. To qualify for this benefit, clients must: (A) be eligible for program [KHC] drug benefits; (B) - (F) (No change.) (6) Limited Medicare Part D out-of-pocket expenses. To qualify for this benefit, clients must: (A) (6) Transportation reimbursement is available from the first day of the month following the program [KHC eligibility] effective date for in-center dialysis clients or from the program [KHC] effective date for transplant and home peritoneal dialysis clients. (7) Clients eligible for coverage under Medicaid, Medicare, individual or group insurance, Veterans programs, or any other health benefits coverage [hospital and medical benefits from Medicare, or other government programs] which cover the treatment of ESRD are not eligible to receive program [KHC] medical benefits. (8) [(9) Clients eligible for hospital and medical benefits from private/group health insurance which covers the treatment of ESRD are not eligible for KHC medical benefits.] (9) [(10)] The program is the payor of last resort. All third parties must be billed prior to the program. The Commissioner may waive this requirement in individually considered cases where its enforcement will deny services to a class of ESRD patients because of conflicting state or federal laws or regulations, under the Texas Health and Safety Code, §42.009. be eligible for program [KHC] drug benefits; (B) - (E) (b) Limitations. (1) Only enrolled [out-of-state] providers [approved by the program] may be reimbursed for [provide] covered services and [KHC] allowable drugs. (2) Covered services are limited to a maximum allowable amount [per client] based upon: (No change.) (C) an agreement between the department and the enrolled [client's] provider; (D) - (F) (10) [(11)] If budgetary limitations exist, the department may: (No change.) (7) Benefits are payable beyond the Medicare three-month qualifying period for eligible clients who have applied for and have been denied Medicare coverage based on ESRD. Clients must submit a copy of the official Social Security Administration Medicare denial notification (based on chronic renal disease) to the department. (A) - (B) (No change.) (No change.) (A) restrict or categorize covered services. Categories will be prioritized based upon medical necessity, other third party eligibility and projected third party payments for the different treatment modalities, caseloads, and demands for services. Caseloads and demands for services may be based on current or [and/or] projected data. In the event covered services must be reduced, they will be reduced in a manner that takes into consideration medical necessity and other third party coverage. The department may change covered services by adding or deleting specific services, entire categories or by making changes proportionally across a category or categories, or by a combination of these methods; or (B) establish a waiting list of eligible applicants. Information will be collected from each applicant who is placed on a waiting list to facilitate contacting the applicant when benefits become available and to allow efficient enrollment of the applicant for benefits. §61.7. Claims Submission and Payment Rates. (a) (3) Clients eligible for drug coverage under Medicaid, Medicare Advantage Plan, individual or group insurance, Veterans programs, or any other health benefits coverage [an individual or group health insurance plan] are not eligible to receive program [KHC] drug benefits. A client that has exhausted drug coverage under Medicaid, Medicare Advantage Plan, individual or group insurance, Veterans programs, or any other health benefits coverage [an individual or group health insurance plan] may be eligible to receive drug benefits from the program. (4) Access surgery benefits are payable only if the services are performed on or after the date Texas residency is established and not more than 180 days prior to the client's program [KHC eligibility] effective date. (5) Program [KHC] medical benefits are payable during the Medicare three-month qualifying period. Benefits are payable for services received on or after the client's program [KHC eligibility] effective date. The three-month qualifying period is calculated from the first day of the month the client begins chronic maintenance dialysis. When a client becomes eligible for Medicare during the three-month period, program [KHC] medical benefits are not payable from the date of Medicare eligibility. (No change.) (b) Medical benefit claims must be submitted to the program by the provider who rendered the service(s) to the program [KHC] client or by the provider's designee. (c) Transportation benefit claims must be submitted to the program by the client or an authorized entity [the provider performing outpatient dialysis services]. Claims must be submitted electronically through the current automated [Automated System for Kidney Information Tracking (ASKIT), or any other designated] claims payment system, except when the program allows or requires paper submissions. (d) Payments are made using the rates in effect on the date the service is rendered[, and not prospectively]. (e) Claims for medical benefits will not be considered for payment by the program until the program has a fully executed agreement with the provider. (f) [(e)] Incomplete or incorrect claims will not be considered for payment. [Claims which are not received by the program within the deadlines established in §61.8 of this title (relating to Claim Filing Deadlines) will be denied payment.] §61.8. Claim Filing Deadlines. PROPOSED RULES October 30, 2015 40 TexReg 7565 (a) The program must receive all claims [for transportation reimbursement, hospital, out-patient dialysis, and access surgery services,] within the claim filing deadlines established in this section. (1) - (2) (No change.) (b) In addition to the requirements in subsection (a) of this section, the program must receive claims for out-patient dialysis and access surgery services within 60 days from the date on the agreement approval letter for newly enrolled [approved] providers, but no later than 180 days from the date of service. (c) - (e) (No change.) (f) Claims which are not received by the program within the filing deadlines will be denied payment. §61.9. Rights and Responsibilities. (a) An [The] applicant and client [shall] have the right to: (1) (No change.) (2) choose providers subject to program [KHC] limita- (2) not discriminate against applicants or clients. §61.10. Modifications, Suspensions, Denials, and Terminations. (a) (No change.) (b) A provider's participation may be modified, suspended or denied for failing to comply with the provider responsibilities listed in 1 TAC §392.605 [§61.6(a) of this title] (relating to Kidney Health Care Provider Requirements and Effective Dates) and §61.9(d) of this title. (c) A client's eligibility may be terminated for any of the following reasons: (1) (No change.) (2) failing to continue to meet the income requirements for program eligibility or to provide income data as requested by the department to determine continued program [KHC] eligibility; (3) - (12) (No change.) (d) (No change.) tions; (3) be notified of the program's decisions relating to modifications, suspensions, denials, or terminations; and (4) appeal the program's decisions and receive a response within the deadline as described in §61.11 of this title (relating to Rights of Appeal).[; and] (e) A client [An applicant] must reapply for [KHC] benefits when eligibility for program [KHC] benefits is terminated. (f) - (g) (No change.) (h) An enrolled [A] provider's participation may be terminated or suspended for any of the following reasons: (1) - (4) (No change.) [(5) assurance that all information concerning his or her status as an applicant or client shall be confidential in the manner and to the extent authorized by law.] (5) filing false or fraudulent information or claims for program [KHC] benefits; (b) A provider has [Providers shall have] the right to: (7) failure to maintain the participation criteria contained in 1 TAC §392.605 [§61.6(a) of this title]. (1) (No change.) (6) (No change.) (2) appeal the program's decisions and receive a response within the deadline as described in §61.11 of this title. (i) Enrolled providers [Providers] may appeal a termination or suspension under §61.11 of this title. [(2) assurance that all information concerning the provider's program status shall be confidential in the manner and to the extent authorized by law.] §61.11. Rights of Appeal. (a) Administrative review. (c) A client has [The applicant and client shall have] the responsibility to: (1) provide accurate medical information to providers and notify providers of program [KHC] eligibility prior to delivery of services; (2) abide by program [KHC] rules and policies; and (3) (No change.) (d) An enrolled provider has [The provider shall have] the responsibility to: [(1) enroll as a KHC provider and submit a completed application to the program, including all documents requested;] (1) [(2)] abide by [the] program rules and policies; (2) [(3)] not discriminate against applicants or clients based on source of payment; and (3) [(4)] notify the program of any lawsuit(s) contemplated or filed concerning the cause of the medical condition for which the program has made payment. (e) An authorized entity has the responsibility to: (1) abide by program rules and policies; and 40 TexReg 7566 October 30, 2015 Texas Register (1) If the program denies eligibility to an applicant, the program will give the applicant written notice of the denial and the applicant's right to request an administrative review of the denial within 30 days of the date of the notification. (2) If the program proposes to modify, suspend, or terminate a client's eligibility for covered benefits, the program will give the client written notice of the proposed action and the client's right to request an administrative review of the proposed action within 30 days of the date of notification. (3) If the program denies a prior-authorization or authorization request for program services, the program will give the client and provider written notice of the denial and the right of the client or provider to request an administrative review of the denial within 30 days of the date of notification. (4) If the program denies a client's or enrolled provider's claim for benefits or services, according to §61.7 of this title (relating to Claims Submission and Payment Rates) and §61.8 of this title (relating to Claim Filing Deadlines), the program will give the client or enrolled provider written notice of the denial. The client or enrolled provider has the right to request an administrative review of the denial within 30 days of the date of notification. (5) If the program denies or proposes to modify, suspend, or terminate a provider's participation in the program, the program will give the provider written notice of the proposed action and the provider's right to request an administrative review of the proposed action within 30 days of the date of notification. (6) The department establishes the program's reimbursement rates. Clients and providers may not request an administrative review of reimbursement amounts for claims that are paid in accordance with the reimbursement rates as described in §61.5 of this title (relating to Benefits and Limitations). (7) A client or provider may not request administrative review of the program's decision to restrict or categorize program services or reduce provider reimbursement amounts that are authorized by §61.5(b)(10) of this title. (8) If the program receives a written request for administrative review within 30 days of the date of the notification, the program will conduct an administrative review of the circumstances surrounding the proposed action. Within 30 days following receipt of a request for administrative review, the program will send the applicant, client, or provider written notice of: (A) the program decision, including the supporting reasons for the decision; or (B) the need for extended time to research the circumstances, including an expected date for response to the request. (9) If the program does not receive a written request for administrative review within 30 days of the date of the notification, the applicant, client, or provider is presumed to have waived the administrative review as well as access to a fair hearing, and the program's action is final. (b) Fair hearing. (1) If the applicant, client, or provider is dissatisfied with the program's decision and supporting reasons following the administrative review, the applicant, client, or provider may request a fair hearing in writing, addressed to the program, within 20 days of receipt of the administrative review decision notice. (2) If the program receives a written request for fair hearing within 20 days of receipt of the administrative review decision notice, a fair hearing will be conducted in accordance with §§1.51 - 1.55 of this title (relating to Fair Hearing Procedures). (A) The program may not terminate a client or enrolled provider's eligibility until a final decision is rendered under the department's fair hearings process. (B) The program may withhold claims payment pending final decision under the department's fair hearings process. (C) The program must release any withheld payments and reinstate participation if the final determination is in favor of the client or provider. (D) The program must not enter into, extend, or renew an agreement with a provider until a final decision is rendered under the department's fair hearings process. (3) If the applicant, client, or provider fails to request a fair hearing within the 20-day period, the applicant, client, or provider is presumed to have waived the request for a fair hearing, and the program may take final action. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504374 Lisa Hernandez General Counsel Department of State Health Services Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 776-6972 ♦ ♦ ♦ 25 TAC §61.11 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Department of State Health Services or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) STATUTORY AUTHORITY The repeal is authorized by Health and Safety Code, §42.003(c), which authorizes the Executive Commissioner of the Health and Human Services Commission to adopt rules necessary to carry out Chapter 42 and to provide adequate kidney care and treatment for citizens of this state; and by Government Code, §531.0055(e), and the Health and Safety Code, §1001.075, which authorize the Executive Commissioner of the Health and Human Services Commission to adopt rules and policies necessary for the operation and provision of health and human services by the department and for the administration of Health and Safety Code, Chapter 1001. Review of the sections implements Government Code, §2001.039. The repeal affects Government Code, Chapter 531; and Health and Safety Code, Chapters 42 and 1001. §61.11. Rights of Appeal. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504375 Lisa Hernandez General Counsel Department of State Health Services Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 776-6972 ♦ ♦ ♦ TITLE 34. PUBLIC FINANCE PART 1. COMPTROLLER OF PUBLIC ACCOUNTS CHAPTER 3. TAX ADMINISTRATION SUBCHAPTER O. STATE AND LOCAL SALES AND USE TAXES 34 TAC §3.344 The Comptroller of Public Accounts proposes an amendment to §3.344, concerning telecommunications services. This PROPOSED RULES October 30, 2015 40 TexReg 7567 section is amended to implement Senate Bill 140, 84th Legislature, 2015, which amended Tax Code, §151.316, subject to §151.1551, to exempt telecommunications services exclusively provided or used for the navigation of specified machinery and equipment exclusively used on a farm or ranch effective September 1, 2015. Subsection (c) is amended to more accurately describe the content in the subsequent paragraphs includes nontaxable and exempt items. Paragraph (2) is amended to correct the name of §3.313. Subsection (c)(7) is added to enumerate the exemption for telecommunications services exclusively provided or used for navigating machinery and equipment exclusively used on a farm or ranch. The purchaser must be an agricultural registrant and provide the seller with an agricultural exemption certificate. Tom Currah, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government. Mr. Currah also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be by conforming the rule to current state statutes. This rule is proposed under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule. Comments on the proposal may be submitted to Teresa G. Bostick, Director, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711-3528. Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register. This amendment is proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2. This amendment implements Tax Code, §151.1551 (Registration Number Required for Timber and Certain Agricultural Items) and §151.316 (Agricultural Items). §3.344. Telecommunications Services. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Basic local exchange telephone service--The provision by a telephone company of each access line and each dial tone to a fixed location for sending and receiving telecommunications in the telephone company's local exchange network. Services are considered basic irrespective of whether the customer has access to a private or party line, or whether the customer has limited or unlimited access. The term does not include international, interstate, or intrastate long-distance telecommunications services or mobile telecommunications services. (2) Internet--Collectively the myriad of computer and telecommunications facilities, including equipment and operating software, that comprise the interconnected worldwide network of networks that employ the Transmission Control Protocol/Internet Protocol, or any predecessor or successor protocols to the protocol, to communicate information of all kinds by wire or radio. (3) Internet access service--A service that enables users to access content, information, electronic mail, or other services offered 40 TexReg 7568 October 30, 2015 Texas Register over the Internet and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers. The term does not include telecommunications services. See §3.366 of this title (relating to Internet Access Services). (4) Interstate long-distance telecommunication service--A telecommunication service that originates in one state, crosses state lines, and terminates in another state. (5) Intrastate long-distance telecommunications service--A telecommunication service that originates and terminates within one state, but crosses the boundaries on subdivisions or jurisdictions within the state. (6) Mobile telecommunications service--The provision of a commercial mobile radio service, as defined in 47 C.F.R. 20.3 of the Federal Communications Commission's (FCC) regulations in effect on June 1, 1999, under the Mobile Telecommunications Sourcing Act (4 U.S.C. §§116 - 126). The term includes cellular telecommunications services, personal communications services (PCS), specialized mobile radio services, wireless voice over Internet protocol services, and paging services. The term does not include telephone prepaid calling cards or air-ground radio telephone services as defined in 47 C.F.R. 22.99 of FCC regulations in effect on June 1, 1999. (7) Pay telephone coin sent--Telecommunications service paid for by the insertion of coins into a coin-operated telephone. (8) Place of primary use--The physical street address that is representative of where a customer primarily uses a mobile telecommunications service. That location must be either the customer's residential street address or the customer's primary business street address that is within the licensed service area of the service provider. The individual or entity that contracts with the service provider is the customer. If the individual or entity that contracts with the service provider is not the end user, then the physical street address where the end user primarily uses the service determines the customer's place of primary use. For example, a business owner who is located in Austin, Texas establishes mobile telecommunication service accounts for employees who are located in other cities. One employee does business from his home in Dallas, Texas. Two other employees work at an office that is located in Houston, Texas. Another employee works at an office that is located in New Orleans, Louisiana. The home street address of the employee in Dallas is the place of primary use for that cellular phone account. The place of primary use for the two Houston employees is the street address of the Houston office. The place of primary use for the employee in Louisiana is the street address of the New Orleans office. (9) Prepaid telecommunications service--A wireless or wire telecommunications service for which the provider requires a customer to prepay the full amount prior to provision of the service. The term does not include the sale or use of a telephone prepaid calling card as defined in paragraph (15) of this subsection. A card, pin number, access code or similar device that allows a user to access only a specific network, or that is intended for use with a specific user account or device (e.g., to add more minutes to an existing account), is a prepaid telecommunications service and is taxed as the sale of a telecommunications service. Local sales tax is collected as explained in subsection (h) of this section. (10) Private communication service--A telecommunication service that entitles the customer to exclusive or priority use of a communications channel or group of channels between or among termination points, regardless of the manner in which such channel or channels are connected, and includes switching capacity, extension lines, stations, and any other associated services that are provided in connection with the use of such channel or channels. (A) As it relates to private communication service, the term "communications channel" means a physical or virtual path of communications over which signals are transmitted between or among customer channel termination points. (B) As it relates to private communication service, the term "customer channel termination point" means the location where the customer either inputs or receives the communications. (11) Seller--Any person who sells telecommunications services including a hotel, motel, owner or lessor of an office, residential building or development that contracts and pays for telecommunications services for resale to guests or tenants. (12) Taxable service--A telecommunications service or other taxable service listed in Tax Code, §151.0101. (13) Telecommunications services--The electronic or electrical transmission, conveyance, routing, or reception of sounds, signals, data, or information utilizing wires, cable, radio waves, microwaves, satellites, fiber optics, Voice over Internet Protocol (VoIP), or any other method now in existence or that may be devised, including but not limited to long-distance telephone service. The term includes mobile telecommunications services and prepaid telecommunications services. The term does not include: (A) the storage of data or other information for subsequent retrieval or the processing, or reception and processing, of data or information intended to change its form or content; (B) the sale or use of a telephone prepaid calling card; (C) Internet access service; or (D) pay telephone coin sent. (14) Telephone company--A person who owns or operates a telephone line or telephone in this state and charges for its use. (15) Telephone prepaid calling card--A card or other item, including an access code, that represents the right to access telecommunications services, other than prepaid telecommunications services as defined in paragraph (9) of this subsection, through multiple devices, regardless of the network providing direct service to the device used, for which payment is made in incremental amounts and before the call or transmission is initiated. For example, a calling card that allows a user to access a long distance telecommunications network for the purpose of making international calls through a pay phone is a telephone prepaid calling card. The sale of a telephone prepaid calling card is taxed as the sale of tangible personal property. (16) Voice over Internet Protocol (VoIP)--A telecommunication service where a phone call is transmitted over a data network. The term "Internet Protocol" is a catchall phrase for the protocols and technologies of encoding a voice call that allow the voice call to be slotted in between data on a data network, including the Internet, a company's Intranet, or any other type of data network. (b) Taxable telecommunications services. The total amount charged for a taxable telecommunications service is subject to sales tax. Sales tax is due on a charge for the following: (1) basic local exchange telephone services; (2) enhanced services such as metro service, extended area service, multiline hunting, and PBX trunk; (3) auxiliary services such as call waiting and call forward- (4) intrastate long-distance telecommunications services; ing; (5) interstate long-distance telecommunications services that are both originated from, and billed to, a telephone number or billing or service address within Texas such that if a call originates in Texas and is billed to a Texas service address, the charge is taxable even if the invoice, statement, or other demand for payment is sent to an address in another state; (6) mobile telecommunications services for which the place of primary use is located in Texas; (7) telegraph services that are both originated from, and billed to, a person within Texas; (8) a telecommunications service paid for by the insertion of tokens, credit or debit card into a coin-operated telephone located in Texas; (9) subject to subsection (e) of this section, the lease, rental, or other charges for telecommunication equipment including separately stated installation charges. Separately stated charges for labor to install wiring will not be taxable if the wiring is installed in new structures or residences in such manner as to become a part of the realty. Separately stated charges for labor to install wiring in existing nonresidential real property are taxable. See §3.291 and §3.357 of this title (relating to Contractors; Nonresidential Real Property Repair, Remodeling, and Restoration; Real Property Maintenance) for additional information. If charges for the installation of wiring and charges for the equipment are not separated, the total charge will be treated as a sale and installation of tangible personal property. Equipment sold by a telecommunications service provider is subject to sales or use tax and is not taxed as part of the telecommunications service if the service provider separately invoices the sale of the equipment. The sale of equipment is not separately invoiced if it is identified on the same bill, receipt or invoice as the sale of the telecommunications service, even if it is identified as a separate line item on the same bill, receipt, or invoice; (10) installation of telecommunications services, including service connection fees; (11) private communication services. Taxable receipts include the channel termination charge imposed at each channel termination point within this state, the total channel mileage charges imposed between channel termination points or relay points within this state, and an apportionment of the interoffice channel mileage charge that crosses the state border. An apportionment on the basis of the ratio of the miles between the last channel termination point in Texas and the state border to the total miles between that channel termination point and the next channel termination point in the route will be accepted. If there is a single charge for a private communication service in which the customer has channel termination points both inside and outside of Texas, the apportionment can also be determined by dividing the number of customer channel termination points in Texas by the total number of customer channel termination points to establish the percentage of the charge subject to state sales tax for Texas. Other apportionment methods may be used by the seller if first approved in writing by the comptroller; (12) charges that are passed through to a purchaser for federal, state, or local taxes or fees that are imposed on the seller of the telecommunications service rather than on the purchaser. Such charges are a cost or expense of the seller and are included in the total price subject to sales tax; and (13) prepaid wireless telecommunications services as defined by subsection (a)(9) of this section when the purchase is made in person at a Texas business or is made by telephone or the Internet and the purchaser's primary business address or residential address is in Texas. PROPOSED RULES October 30, 2015 40 TexReg 7569 (c) Nontaxable or exempt charges [services]. Sales tax is not due on charges for: (1) interstate long-distance telecommunications services that are not both originated from, and billed to, a telephone number or billing or service address within Texas. Records must clearly distinguish between taxable and exempt long-distance services; (2) broadcasts by commercial radio or television stations licensed or regulated by the FCC. See §3.313 of this title (relating to Cable Television Service and Bundle Cable Service) for the tax status of cable television services; (3) telecommunications services purchased for resale; (4) telegraph services that are not both originated from and billed to a person within Texas; (5) mobile telecommunications services for which the place of primary use is located outside of Texas; [and] (6) charges for federal, state, or local taxes or fees that are imposed on the purchaser rather than on the seller of the telecommunications service. For example, no sales tax is due on a separately stated charge for federal excise tax or for 9-1-1 Emergency Service Fee and 9-1-1 Equalization Surcharge because these taxes or fees are imposed on the purchaser and are not a cost of doing business of the seller; and[.] (7) telecommunications services exclusively provided or used for the navigation of machinery and equipment exclusively used or employed on a farm or ranch in the building or maintaining of roads or water facilities or in the production of: (A) food for human consumption; (B) grass; (C) feed for animal life; or (D) other agricultural products to be sold in the regular course of business. (E) The purchaser must be an agricultural registrant and provide the seller with an agricultural exemption certificate. (F) This paragraph is effective September 1, 2015, and applies to telecommunication services provided after this date. (d) Billing and records requirements. If any nontaxable charges are combined with and not separately stated from taxable telecommunications service charges on the purchaser's bill or invoice from a provider of telecommunications services, the combined charge is subject to tax unless the service provider can identify the portion of the charges that are nontaxable through the provider's books and records kept in the regular course of business. If the nontaxable charges cannot reasonably be identified, the charges from the sale of both nontaxable services and taxable telecommunications services are attributable to taxable telecommunications services. The provider of telecommunications services has the burden of proving nontaxable charges. (e) Resale of tangible personal property. See §3.285 of this title (relating to Resale Certificate; Sales for Resale). (1) Transfer of tangible personal property to the care, custody and control of the purchaser. A telecommunications service provider may claim a resale exemption on the purchase of tangible personal property that is transferred by the telecommunications service provider to the care, custody, and control of the purchaser. A telecommunications service provider must collect sales tax on charges for such items. 40 TexReg 7570 October 30, 2015 Texas Register (2) Wireless voice communication devices. A person may claim a resale exemption on the purchase of a cell phone or other wireless voice communication device as an integral part of a taxable service, regardless of whether there is a separate charge for the wireless voice communication device or whether the purchaser is the provider of the taxable telecommunications service, if payment for the service is a condition for receiving the wireless voice communication device. For example, if a person signs a contract for the purchase of telecommunications services at the location of a retailer and the retailer sells the person a cell phone as a condition of entering the contract for the telecommunications services that will be provided by someone other than the retailer, the retailer can purchase the cell phone tax free with a properly completed resale certificate. (f) Resale of a telecommunications service. See §3.285 of this title. (1) Sales tax is not due on the charge by one telephone company to another for providing access to a local exchange network. The telecommunications service provider must collect sales tax from the final purchaser on the total charge for the taxable service including the charge for access. (2) A telecommunications service may be purchased tax free for resale if resold by the purchaser as an integral part of a taxable service. The purchaser must give the service provider a properly completed resale certificate to purchase the telecommunications service tax free for resale. A telecommunications service is an integral part of a taxable service if the telecommunications service is essential to the performance of the taxable service and without which the taxable service could not be rendered. For example, an Internet access service provider (ISP) may give a resale certificate when purchasing the dedicated dial-up line services to be used by the ISP's customers. However, the ISP must pay sales tax when purchasing its own personal or business use of telecommunications services such as charges for its office phone lines, mobile telecommunications services for its traveling salespersons, or for a customer service call-center. (3) A mobile telecommunications service provider may purchase roaming services from another mobile telecommunications service provider tax free for resale to its customers that are using the roaming services. For example, an out-of-state mobile telecommunications service provider purchases roaming services in Texas for resale to its out-of-state customers (i.e., persons who have a place of primary use outside Texas). To be exempt from sales tax, the out-of-state mobile telecommunications service provider must give the seller of the roaming services a resale certificate showing either a Texas sales tax permit number or the sales tax permit number or registration number issued by its home state. Effective for billing periods that begin on or after August 1, 2002, these out-of-state customers do not owe Texas sales tax on roaming charges incurred while visiting or traveling through Texas. (g) Taxable purchases. Subject to the provisions of subsections (e) and (f) of this section, a telecommunications service provider owes sales or use tax on all tangible personal property and services that are used to provide the service. See §3.346 of this title (relating to Use Tax), §3.281 of this title (relating to Records Required; Information Required), and §3.282 of this title (relating to Auditing Taxpayer Records). (h) Local tax. (1) Subject to the provisions of paragraph (2) of this subsection, jurisdictions that impose local sales and use taxes may repeal the local sales tax exemption on telecommunications services. See Publication 96-339 (Jurisdictions That Impose Local Sales Tax on Telecommunications Services) for a list of jurisdictions that impose local taxes on telecommunications services. (2) Taxable interstate long-distance telecommunications are only subject to state sales tax. Local taxing jurisdictions may not repeal the local sales tax exemption on interstate long-distance telecommunications services. (3) A seller of taxable telecommunications services, with the exception of mobile telecommunications services as explained in paragraph (4) of this subsection and prepaid wireless telecommunications services as explained in paragraph (6) of this subsection, must collect local sales taxes based on the location from which the telecommunications service originates. If the point of origin cannot be determined, the telecommunications service provider must collect local taxes based on the address to which the telecommunications service is billed. (4) A seller of mobile telecommunications services must collect local sales taxes based on the place of primary use as defined in subsection (a)(8) of this section and per Tax Code, §151.061. The location from which a mobile telecommunications service originates does not determine whether the service is exempt or is subject to state or local sales tax. (5) A seller of telephone prepaid calling cards is not selling a telecommunications service and must collect state and local sales or use tax on the sale of the cards in the same manner as sales of other tangible personal property. (6) A seller of prepaid wireless telecommunications services as defined in subsection (a)(9) of this section must collect local tax based on the business address of the seller when the sale occurs in Texas in person. However, if the sale occurs over the telephone or Internet, tax is due if the primary business address of the purchaser or residential address of the purchaser is in Texas. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Subsection (c)(4) is added to state that services performed on behalf of an insured by a public insurance adjuster on or after October 1, 2015, are not taxable insurance services. This subsection also provides that the date the services are performed, and not the date billed or paid, determines the taxability of the services. Subsection (i) is amended to correct a typographical error. Subsection (k) is amended to refer to §3.334 Local Sales and Use Taxes and to delete references to previous rules which were repealed with the adoption of §3.334. Tom Currah, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government. Mr. Currah also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be by conforming the rule to current state law. This rule is proposed under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule. Comments on the proposal may be submitted to Teresa G. Bostick, Director, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711-3528. Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register. The amendment is proposed under Tax Code 111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of provisions of Tax Code, Title 2, and taxes, fees, or other charges or refunds which the comptroller administers under other law. The amendment implements amendments to Tax Code, §151.0039 (Insurance Service). Filed with the Office of the Secretary of State on October 19, §3.355. Insurance Services. 2015. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. TRD-201504423 Lita Gonzalez General Counsel Comptroller of Public Accounts Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 475-0387 ♦ ♦ (1) Insurance loss or damage appraisal--Any activity performed for purposes of valuing damages, or estimating the quantity, value, or extent of loss of property. Appraisal activities performed prior to damage or loss, such as the appraisal of jewelry for scheduling on a homeowners insurance policy, are not considered loss or damage appraisal. ♦ 34 TAC §3.355 The Comptroller of Public Accounts proposes amendments to §3.355, concerning insurance services. This section is amended to implement House Bill 1841, 84th Legislature, 2015, which amended Tax Code, §151.0039(b)(2) to exclude services performed by a public insurance adjuster from the scope of taxable insurance services. House Bill 1841 is effective October 1, 2015. The section is also amended to make clerical edits and to update rule references. Subsection (a)(8) is added to define a public insurance adjuster as set out in, and by reference to, Insurance Code, §4102.001(3). Subsequent paragraphs are renumbered accordingly. (2) Insurance inspection--Any activity performed to evaluate risks to property, to survey or value property in connection with the furnishing of insurance coverage, or any other similar activity. (3) Insurance investigation--Any activity performed to evaluate an individual's eligibility or qualifications for insurance coverage, or for the payment of benefits, or any other similar activity. For example, the assembly or evaluation of information for the purpose of determining whether to issue a life insurance policy to a specific individual would be considered an insurance investigation. (4) Insurance or annuity actuarial analysis or research--Any activity performed in connection with the calculation of rates for a policy of insurance or annuity rates, reserves, refunds, dividends, insurance benefits, or other similar activities. PROPOSED RULES October 30, 2015 40 TexReg 7571 (5) Insurance claims adjustment or claims processing--Any activities to supervise, handle, investigate, pay, settle, or adjust claims or losses. (6) Insurance loss prevention service--Any activities performed in an effort to identify, analyze, evaluate, control, anticipate and/or eliminate the occurrence of accidents, losses, or damage. Examples include: survey recommendations, training programs, consultations, analysis of accident causes, and industrial hygiene and health services. (7) Insurance carrier--Every type of insurer engaged in the business of insurance that is licensed or operates under or is required to be licensed or to operate under the provisions of the Insurance Code. (8) Public insurance adjuster--A person, as set out in Insurance Code, §4102.001(3), who: (A) for direct, indirect, or any other compensation: (i) acts on behalf of an insured in negotiating for or effecting the settlement of a claim or claims for loss or damage under any policy of insurance covering real or personal property; or (ii) on behalf of any other public insurance adjuster, investigates, settles, or adjusts or advises or assists an insured with a claim or claims for loss of damage under any policy of insurance covering real or personal property; or (B) advertises, solicits business, or holds himself or herself out to the public as an adjuster of claims for loss or damage under any policy of insurance covering real or personal property. (9) [(8)] Self-insured plan--A plan whereby an employer maintains funds for providing employee benefits rather than transferring risk by purchasing insurance from an insurance carrier. This plan is not considered a policy of insurance for sales tax purposes. (10) [(9)] Third-party administrator--A person hired by an employer to administer the provisions of the employer's self-insured plan. (b) Taxable services. Insurance services defined in subsection (a) of this section performed on behalf of an insurance carrier, its insured, its policyholders, or others pertaining to a policy or policies of insurance for monetary fees, dues, or other consideration are taxable. These services performed pursuant to a self-insured plan or for a third-party administrator handling distribution of funds under a self-insured plan are not taxable. (c) Nontaxable services. The following services are not taxable as insurance services: (1) insurance coverage for which a premium is paid or sales commissions are paid to insurance agents. Insurance services provided by an insurance agent without charge to the customer are not taxable. If a customer pays a separate amount for these services over and above the amount paid as a commission for a policy, this separate charge is taxable; (2) medical services provided by any medical provider, including physicians, medical staff at the physician's direction, hospitals, clinics, chiropractors, and other practitioners of the healing arts; (3) services related to automobile warranties or service contracts for which the State Board of Insurance allows an exclusion to third-party administrators; and[.] (4) services performed on behalf of an insured by a public insurance adjuster on or after October 1, 2015. Insurance services performed by a public insurance adjuster before October 1, 2015, are subject to tax regardless of the date billed, invoiced, or paid. 40 TexReg 7572 October 30, 2015 Texas Register (d) Doing business. Insurance services will be subject to taxation in Texas if the individual, entity, or property which is the object of the service is in Texas and the company for which the services are performed is either an insurance carrier as that term is defined in subsection (a)(7) of this section, or if not an insurance carrier, is doing business in Texas. (e) Fees and premiums. Insurance premiums and any other form of compensation subject to gross administrative or service fees taxes under the Insurance Code are subject to tax hereunder if paid in connection with the performance of an insurance service. Insurance premiums subject to gross premiums taxes under the Insurance Code are not subject to sales tax. (f) Not insurance related. Where an insurance service is performed as a part of a nontaxable service and the primary purpose for purchasing the nontaxable service is not insurance related, no part of the fee or charge is taxable. For example, the charge for an appraisal required by a lender as a condition of extending credit is not taxable as an insurance service because the primary purpose in obtaining the service is financing the loan. The fact that the appraisal may also be used as the basis for establishing minimum property insurance required by the lender as a condition of financing does not render the service taxable as an insurance service. (g) Responsibilities of persons providing insurance services. Persons providing insurance services must obtain a tax permit and collect tax on the entire sales price of their services. The presumption is that all services are taxable unless the service provider obtains an exemption certificate from a customer claiming an exemption. For example, a third-party administrator may issue an exemption certificate for charges for claim adjustment activities done pursuant to a self-insured plan. (h) Resale certificates. (1) Providers of insurance service may issue a resale certificate in lieu of tax to suppliers of tangible personal property only if care, custody, and control of the property will be transferred to the service provider's client. For example, an insurance service provider purchases magnetic tape to transfer the results of actuarial research to service provider's client. The tape is transferred to the client and the client owns and uses the tape to review the results of the actuarial research. The insurance service provider may purchase the tape tax free by issuing a resale certificate. Tax is due on the total amount charged the customer, including amounts for the tape and for the services. (2) A resale certificate may be issued for a service if the buyer intends to transfer the service as an integral part of taxable services. A service will be considered an integral part of a taxable service if the service purchased is essential to the performance of the taxable service and without which the taxable service could not be rendered. (3) A resale certificate may be issued for a taxable service if the buyer intends to incorporate the service into tangible personal property which will be resold. If the entire service is not incorporated into the tangible personal property, it will be presumed the service is subject to tax and the service will only be exempt to the extent the buyer can establish the portion of the service actually incorporated into the tangible personal property. If the buyer does not intend to incorporate the entire service into the tangible personal property, no resale certificate may be issued, but credit may be claimed at the time of sale of the tangible personal property to the extent the service was actually incorporated into the tangible personal property. (i) Unrelated services. (1) A service will be considered as unrelated if: (A) it is not an insurance service, nor a service taxed under other provisions of [the] Tax Code, Chapter 151; means the place from which the trade or business is directed or managed. (B) it is of a type which is commonly provided on a stand-alone basis; and (k) Local tax. [Local sales and use taxes (city, county, transit authority, and special purpose district) apply to services in the same way as they apply to tangible personal property. Generally, service providers must collect local sales taxes if their place of business is within a local taxing jurisdiction, even if the service is actually provided at a location outside that jurisdiction. However, MTA and CTD sales taxes do not apply to services provided outside the boundaries of the transit area. If the place of business is outside such a jurisdiction but the service is provided to a customer within a local taxing jurisdiction, local use taxes apply and the service provider is responsible for collecting them.] For information on the collection and reporting responsibilities of providers and purchasers of taxable services, see §3.334 of this title (relating to Local Sales and Use Taxes) [§3.374 of this title (relating to Imposition of the Sales Tax; Collection by Retailer; Bracket System Formula; Determining City Tax); §3.375 of this title (relating to Administration of Use Tax; Collection by Retailer); §3.424 of this title (relating to Imposition of Sales Tax); and §3.425 of this title (relating to Administration of Use Tax; Imposition and Collection)]. (C) the performance of the unrelated service is distinct and identifiable. Examples of an unrelated service which may be excluded from the tax base include activities as third-party administrators, appraisals for reasons other than loss or damage, or doctor's fees. (2) Where nontaxable unrelated services and taxable services are sold or purchased for a single charge and the portion relating to taxable services represents more than 5.0% of the total charge, the total charge is presumed to be taxable. The presumption may be overcome by the insurance service provider at the time the transaction occurs by separately stating to the customer a reasonable charge for the taxable services. However, if the charge for the taxable portion of the services is not separately stated at the time of the transaction, the service provider or the purchaser may later establish for the comptroller, through documentary evidence, the percentage of the total charge that relates to nontaxable unrelated services. The insurance service provider's books must support the apportionment between exempt and nonexempt activities based on the cost of providing the service or on a comparison to the normal charge for each service if provided alone. If the charge for exempt services is unreasonable when the overall transaction is reviewed considering the cost of providing the service or a comparable charge made in the industry for each service, the comptroller will adjust the charges and assess additional tax, penalty, and interest on the taxable services. (3) Charges for services or expenses directly related to and incurred while providing the taxable service are taxable and may not be separated for the purpose of excluding these charges from the tax base. Examples would be charges for meals, telephone calls, hotel rooms, or airplane tickets. (j) Service benefit location--multistate customer. (1) To the extent an insurance service is used to support a separate, identifiable segment of a customer's business (other than general administration or operation of the business) the service is presumed to be used at the location where that part of the business is conducted. (2) If that part of the business is conducted at locations both within and outside the state, the service is not taxable to the extent it is used outside Texas. A multistate customer may use any reasonable method for allocation which is supported by business records. (3) A multistate customer purchasing insurance services, such as actuarial services, for the benefit of both in-state and out-of-state locations is responsible for issuing to the insurance services provider an exemption certificate asserting a multistate benefit, and for reporting and paying the tax on that portion of the insurance services charge which will benefit the Texas location. A provider of insurance services that accepts such a certificate in good faith is relieved of responsibility for collecting and remitting tax on transactions to which the certificate relates. (4) The customer's books must support the assignment of the service to an identifiable segment of the business, the determination of the location or locations of the use of the service, and the allocation of the taxable charge to Texas. (5) To the extent the use of the service cannot be assigned to an identifiable segment of a customer's business, the service is presumed to be used to support the administration or operation of the customer's business generally. The service is presumed to be used at the customer's principal place of business. The principal place of business (l) Use tax. If a provider of an insurance service is not doing business in Texas or in a specific local taxing jurisdiction and is not required to collect Texas state or local tax, it is the Texas customer's responsibility to report and pay the use tax directly to this office. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 15, 2015. TRD-201504360 Lita Gonzalez General Counsel Comptroller of Public Accounts Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 475-0387 ♦ SUBCHAPTER S. ♦ ♦ MOTOR FUEL TAX 34 TAC §3.434 The Comptroller of Public Accounts proposes amendments to §3.434, concerning liquefied gas tax decal. The amendments are proposed to implement the provisions of House Bill 1905, 84th Legislature, 2015 which repealed the tax on liquefied gas effective September 1, 2015. The section is amended by adding new subsection (a) indicating that the rule applies to periods prior to September 1, 2015. All subsequent subsections are relettered accordingly and corresponding cross-references in those subsections are also relettered. The subsection cross-reference in the attached graphic is relettered. Tom Currah, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government. Mr. Currah also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as PROPOSED RULES October 30, 2015 40 TexReg 7573 a result of enforcing the rule will be by conforming the rule to current state statutes. This rule is proposed under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule. Comments on the proposal may be submitted to Teresa G. Bostick, Director, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711-3528. Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register. The amendments are proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2. The amendments implement the repeal of Tax Code, Chapter 162, Subchapter D (Motor Fuel Taxes). §3.434. Liquefied Gas Tax Decal. (a) This section applies to periods prior to September 1, 2015. Effective September 1, 2015, the tax on liquefied gas is repealed. (b) [(a)] Use of decal. Except as provided in subsections (c) [(b)], (d) [(c)], and (g) [(f)] of this section, a person who operates a motor vehicle that is required to be licensed in Texas for use on the public highways of Texas and that is powered by ethane, propane, butane, or a mixture of those gases, including a motor vehicle equipped to use liquefied gas interchangeably with another motor fuel, must: (1) obtain from the comptroller a liquefied gas decal; and (2) prepay the liquefied gas tax to the comptroller on an annual basis. (c) [(b)] Motor Vehicle Dealer. A motor vehicle dealer registered under Transportation Code, Chapter 503, must pay the liquefied gas tax to a licensed liquefied gas dealer when the fuel is delivered into the fuel supply tanks of each motor vehicle that display a motor vehicle dealer decal and that is held for resale. (d) [(c)] Interstate trucker. An interstate trucker registered under a multistate tax agreement (International Fuel Tax Agreement), must pay the liquefied gas tax to a licensed liquefied gas dealer when the fuel is delivered into the fuel supply tanks of motor vehicles that have two axles and a registered gross weight in excess of 26,000 pounds; have three or more axles, or are used in combination and the registered gross weight of the combination exceeds 26,000 pounds, and that display current multistate tax agreement (International Fuel Tax Agreement) decals. (e) [(d)] Vehicle registered in another state. A liquefied gas tax decal cannot be issued to a motor vehicle registered in a state other than Texas. Owners of such vehicles must pay tax to a licensed liquefied gas dealer on fuel delivered into the fuel supply tanks. (f) [(e)] Application. Each person purchasing liquefied gas for use in a liquefied gas powered motor vehicle must submit an annual application to the comptroller for each vehicle. (1) Initial application. An applicant initially applying for a liquefied gas tax decal for a Class A - F motor vehicle must purchase a decal based on an estimate of miles that will be driven during the next one-year period. (2) Renewal. The applicant must produce an ending odometer reading on the renewal application. In the absence of an 40 TexReg 7574 October 30, 2015 Texas Register ending odometer reading, the previous year's mileage will be presumed to be at least 15,000 miles. Applications for the upcoming year should be submitted during the month of expiration of the current decal. (A) The liquefied gas tax does not apply to miles traveled outside the state. A record of miles traveled by the motor vehicle outside Texas must be maintained and submitted with the renewal each year. The record must include the date(s) of travel, beginning and ending odometer readings and destination. (B) Special use vehicles. Vehicles required to be licensed for highway use but whose main purpose, design, and use is off the highway may renew a liquefied gas decal for a rate less than the mileage indicated on the odometer if a record or log indicating the miles traveled on the highway by the vehicle is maintained and attached to the renewal application. (g) [(f)] Exceptions. (1) School district transportation and county exceptions. The liquefied gas tax does not apply to liquefied gas sold to public school districts and counties in this state, or to commercial transportation companies providing transportation services to public school districts in this state. These transportation companies must obtain letters of exception from the comptroller, as discussed in §3.448 of this title (relating to Transportation Services for Texas Public School Districts). (2) Decal not required. A public school district, a commercial transportation company providing transportation services to a public school district and holding a valid letter of exception from the comptroller, or a county in this state operating a motor vehicle powered by liquefied gas is not required to prepay the liquefied gas tax and obtain a decal for the motor vehicle. (h) [(g)] Rate schedule. (1) The following rate schedule (based on mileage driven the previous year) applies. Figure: 34 TAC §3.434(h)(1) [Figure: 34 TAC §3.434(g)(1)] (2) Transit company. A special use liquefied gas tax decal and tax is required for the following type of vehicles: Class T: Transit carrier vehicles operated by a transit company, $444. The Class T special use liquefied gas decal may be displayed by compressed natural gas and liquefied natural gas transit carrier vehicles that qualify under Tax Code, §162.312. (i) [(h)] Display of decal. The decal shall be affixed to the inside, lower right corner of the windshield (passenger side) of the vehicle. An expired or invalid liquefied gas tax decal shall be removed before installing a new decal or transferring ownership of the motor vehicle. (j) [(i)] Refunds; transfer of decal. If a motor vehicle bearing a liquefied gas tax decal is sold, transferred, destroyed, or the liquefied gas carburetor system (regulator or fuel supply tank) is removed from the motor vehicle the owner is entitled to a refund of the unused portion of the advanced taxes paid for the decal year. The owner must submit to the comptroller the liquefied gas tax decal with an affidavit identifying the motor vehicle and circumstances for requesting a refund. The comptroller shall refund that portion of the tax payment that corresponds to the number of complete months remaining in the decal year. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504424 Lita Gonzalez General Counsel Comptroller of Public Accounts Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 475-0387 ♦ ♦ Subsection (c) is proposed to be removed as it is duplicative of existing law. ♦ PART 5. TEXAS COUNTY AND DISTRICT RETIREMENT SYSTEM CHAPTER 103. OF BENEFITS standard benefit. Mortality assumptions for these calculations are blended 50% male and 50% female for retirees, and blended 30% male and 70% female for beneficiaries. Subsection (b)(3) provides that the annuity purchase rates are based on the respective retiree's and beneficiary's attained ages in years and months. Subsection (b)(4) provides that service credit, has the meaning as denied in §841.001(16) of the Texas Government Code. CALCULATIONS OR TYPES 34 TAC §103.1 The Texas County and District Retirement System ("TCDRS") proposes an amendment to §103.1 concerning actuarial tables used to calculate annuity purchase rates. Annuity purchase rates convert member savings into lifetime monthly benefits. The proposed amendment is based on the recommendation of the actuary, Milliman Inc., after consideration of the results of a longevity study that was conducted for the system. The amendment would update the annuity purchase rates to reflect improving longevity. This proposed update would keep retirement costs in line with life expectancy, keep employers from experiencing cost creep due to improving life expectancy, and strengthen the retirement system for the future. Application of these new rates will not impact retirees or any member benefits earned before January 1, 2018. To ensure that benefits already earned are not affected and to minimize impact on members, any benefits earned on or before January 1, 2018, would use the current annuity purchase rates to calculate benefits. The current annuity purchase rates also apply to future interest on those pre-2018 benefits. The updated annuity purchase rates would only apply to benefits earned after January 1, 2018, and annuity purchase rates would be based on the member's and beneficiaries' attained ages in years and months. Subsection (a) of the proposed amendment provides that service and disability retirement benefits in which the first benefit payment is payable before January 1, 2018 will be calculated under the existing annuity purchase rates. Subsection (a)(2) provides that the annuity purchase rate would be based on the respective retiree's and beneficiary's attained age in years. Subsection (b) applies to benefits payable after January 1, 2018. Subsection (b)(1) provides the benefit that is associated with service credit that accrued before January 1, 2018 would be calculated using the current annuity purchase rates. Subsection (b)(2) provides that the portion of the benefit that is associated with service credit that accrues on or after January 1, 2018 would be calculated using the new annuity purchase rates that are determined on a generational mortality basis using the RP-2000 Combined Mortality Table projected to 2014 using Scale AA and for projections after 2014 using 110% of MP-2014 Ultimate Projection Scale, with a 32.79% reserve refund assumption for the Ann McGeehan, General Counsel of TCDRS, has determined that for the first five-year period the rule is in effect there will be no fiscal implications for state government, and only potential immaterial fiscal implications for local governments participating in TCDRS as a result of enforcing or administering the rule. In the first five-year period, it is expected that participating counties and districts will experience decreases or increases in their employer contribution rates due to the combined effects of economic and other demographic factors. However, this proposed amendment reduces the risk of employer cost increases due to improving longevity. Ms. McGeehan has also determined that for each year of the first five years the rule is in effect the public benefit anticipated as a result of administering the rule will be to keep retirement costs in line with life expectancy, to prevent employers from experiencing cost creep due to improving life expectancy, and to strengthen the retirement system. There will be no costs to small businesses. Individuals who might be affected by the amendment are TCDRS members whose retirement is based wholly or partly on service credit accrued on or after January 1, 2018. The portion of the retirement benefit associated with service credit that accrues on or after January 1, 2018 will continue to be the actuarial equivalent of the retirement benefit that would have been calculated using existing annuity purchase rates. The monthly payment amount will be less but will be expected to continue over a longer period of time due to longer life expectancies. Comments on the proposed amendment may be submitted to Ann McGeehan, General Counsel, TCDRS, P.O. Box 2034, Austin, Texas 78768-2034, faxed to (512) 328-8887, or submitted electronically to legaldept@tcdrs.org. The amendment is proposed under the Government Code, §841.001(1) and §845.110, which authorizes the TCDRS board of trustees to adopt rates and tables, including a mortality basis to be used in determining actuarial equivalents. The Government Code, §841.001(1) is affected by this proposed rule. §103.1. Actuarial Tables. (a) Service retirement benefits and disability retirement benefits for [on service retirements, on] which the first benefit payment is payable before January 1, 2018, [on or after October 1, 1985,] shall be calculated under the following rules: (1) The annuity purchase rate is calculated on the basis of the UP-1984 table with an age setback of five years for retirees [retired members] and an age setback of 10 years for beneficiaries [of retired members], with a 30% reserve refund assumption for the standard benefit. (2) Annuity purchase rates are based on the respective retiree's and beneficiary's attained ages in years. PROPOSED RULES October 30, 2015 40 TexReg 7575 (b) For benefits payable on or after January 1, 2018, service retirement benefits and disability retirement benefits shall be calculated under the following rules: [Disability retirement benefits on disability retirements, on which the first benefit is payable on or after January 1, 1992, shall be calculated with a 30% reserve refund assumption for the standard benefit, and on the basis of the UP-1984 table with an age setback of five years for disabled annuitants and an age setback of 10 years for beneficiaries of disabled annuitants.] encompasses not only pre-employment investigation, but preenrollment investigations. Subsection (a)(16) is a new definition for a contract jailer. New subsection (a)(19) removes redundant information. New subsection (a)(32) is a new definition for an honorably retired peace officer for clarification in response to legislation. Subsection (a)(17) - (31) and (33) - (68) are amended for renumbering. Subsection (b) is amended to reflect the effective date of the changes. (1) The annuity purchase rate for the portion of the benefit that is associated with service credit that accrued before January 1, 2018, and all future interest earned and employer matching attributable to this portion shall be calculated based on the assumptions described in Subsection (a)(1) of this section. These amendments are necessary to make background investigation a broader definition which encompasses not only pre-employment investigation, but pre-enrollment investigations, provide a definition for a contract jailer, to remove redundant information, and to define honorably retired peace officer for clarification in response to legislation. (2) The annuity purchase rate for the portion of the benefit that is associated with service credit that accrues on or after January 1, 2018, and is not included in amounts described in Subsection (b)(1) above shall be calculated on a generational mortality basis using the RP-2000 Combined Mortality Table projected to 2014 using Scale AA and for projections after 2014 using 110% of MP-2014 Ultimate Projection Scale, with a 32.79% reserve refund assumption for the standard benefit. Mortality assumptions for these calculations are blended 50% male and 50% female for retirees, and blended 30% male and 70% female for beneficiaries. (3) The annuity purchase rates are based on the respective retiree's and beneficiary's attained age in years and months regardless of when the service credit was accrued. (4) For the purpose of this rule, service credit means the monetary credits allowed a member for service for a participating employer as defined in Section 841.001(16) of the Texas Government Code. [(c) The actuarial tables may be changed by the board on recommendations of the actuary to more nearly conform to the actual experience of the system with affected categories.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by removing redundant information and defining contract jailer and honorably retired peace officer. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed section. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority. The rule amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority. No other code, article, or statute is affected by this proposal. §211.1. Definitions. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504373 Ann McGeehan General Counsel Texas County and District Retirement System Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 637-3247 ♦ ♦ ♦ TITLE 37. PUBLIC SAFETY AND CORRECTIONS PART 7. TEXAS COMMISSION ON LAW ENFORCEMENT CHAPTER 211. ADMINISTRATION 37 TAC §211.1 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §211.1, concerning Definitions. Subsection (a)(8) is amended to make this a broader definition which 40 TexReg 7576 October 30, 2015 Texas Register (a) The following words and terms, when used in this part, shall have the following meanings, unless the context clearly indicates otherwise. (1) Academic alternative program--A program for college credit offered by a training provider recognized by the Southern Association of Colleges and Schools and the Texas Higher Education Coordinating Board, authorized by the commission to conduct preparatory law enforcement training as part of a degree plan program, and consisting of commission-approved curricula. (2) Academic provider--A school, accredited by the Southern Association of Colleges and Schools and the Texas Higher Education Coordinating Board, which has been approved by the commission to provide basic licensing courses. (3) Accredited college or university--An institution of higher education that is accredited or authorized by the Southern Association of Colleges and Schools, the Middle States Association of Colleges and Schools, the New England Association of Schools and Colleges, the North Central Association of Colleges and Schools, the Northwest Commission on Colleges and Universities, the Western Association of Schools and Colleges, or an international college or university evaluated and accepted by a United States accredited college or university. (4) Active--A license issued by the commission that meets the current requirements of licensure and training as determined by the commission. (5) Administrative Law Judge (ALJ)--An administrative law judge appointed by the chief administrative law judge of the State Office of Administrative Hearings. (6) Agency--A law enforcement unit or other entity, whether public or private, authorized by Texas law to appoint a person licensed or certified by the commission. (7) Appointed--Elected or commissioned by an agency as a peace officer, reserve or otherwise selected or assigned to a position governed by the Texas Occupations Code, Chapter 1701, without regard to pay or employment status. (8) Background investigation--An [A pre-employment background] investigation into an applicant's personal history that meets or exceeds the commission-developed questionnaire or personal [/]history statement. (9) Basic licensing course--Any current commission developed course that is required before an individual may be licensed by the commission. (10) Certified copy--A true and correct copy of a document or record certified by the custodian of records of the submitting entity. (11) Chief administrator--The head or designee of a law enforcement agency. (19) [(18)] Community [Court-ordered community] supervision--Any court-ordered community supervision or probation resulting from a deferred adjudication or conviction by a court of competent jurisdiction. However, this does not include supervision resulting from a pretrial diversion. (20) [(19)] Diploma mill--An entity that offers for a fee with little or no coursework, degrees, diplomas, or certificates that may be used to represent to the general public that the individual has successfully completed a program of secondary education or training. (21) [(20)] Distance education--Study, at a distance, with an educational provider that conducts organized, formal learning opportunities for students. The instruction is offered wholly or primarily by distance study, through virtually any media. It may include the use of: videotapes, DVD, audio recordings, telephone and email communications, and Web-based delivery systems. (22) [(21)] Duty ammunition--Ammunition required or permitted by the agency to be carried on duty. (23) [(22)] Executive director--The executive director of the commission or any individual authorized to act on behalf of the executive director. (24) [(23)] Experience--Includes each month, or part thereof, served as a peace officer, reserve, jailer, telecommunicator, or federal officer. Credit may, at the discretion of the executive director, be awarded for relevant experience from an out-of-state agency. Commission--The Texas Commission on Law En- (25) [(24)] Family Violence--In this chapter, has the meaning assigned by Chapter 71, Texas Family Code. (13) Commissioned--Has been given the legal power to act as a peace officer or reserve, whether elected, employed, or appointed. (26) [(25)] Field training program--A program intended to facilitate a transition from the academic setting to the performance of the general duties of the appointing agency. (12) forcement. (14) Commissioners--The nine commission members appointed by the governor. (15) Contract jail--A correctional facility, operated by a county, municipality or private vendor, operating under a contract with a county or municipality, to house inmates convicted of offenses committed against the laws of another state of the United States, as provided by Texas Government Code, §511.0092. (16) Contract Jailer--A person licensed as a Jailer in a Contract Jail or employed by an agency outside of a County Jail whose employing agency provides services inside of a County Jail which would require the person to have a Jailer License. (17) [(16)] Contractual training provider--A law enforcement agency or academy, a law enforcement association, alternative delivery trainer, distance education, academic alternative, or proprietary training provider that conducts specific education and training under a contract with the commission. (18) [(17)] Convicted--Has been adjudged guilty of or has had a judgment of guilt entered in a criminal case that has not been set aside on appeal, regardless of whether: (A) the sentence is subsequently probated and the person is discharged from probation; (B) the charging instrument is dismissed and the person is released from all penalties and disabilities resulting from the offense; or (C) the person is pardoned, unless the pardon is expressly granted for subsequent proof of innocence. (27) [(26)] Firearms--Any handgun, shotgun, precision rifle, patrol rifle, or fully automatic weapon that is carried by the individual officer in an official capacity. (28) [(27)] Firearms proficiency--Successful completion of the annual firearms proficiency requirements. (29) [(28)] Fit for duty review--A formal specialized examination of an individual, appointed to a position governed by the Texas Occupations Code, Chapter 1701, without regard to pay or employment status, to determine if the appointee is able to safely and/or effectively perform essential job functions. The basis for these examinations should be based on objective evidence and a reasonable basis that the cause may be attributable to a medical and/or psychological condition or impairment. Objective evidence may include direct observation, credible third party reports; or other reliable evidence. The review should come after other options have been deemed inappropriate in light of the facts of the case. The selected Texas licensed medical doctor or psychologist, who is familiar with the duties of the appointee, conducting an examination should be consulted to ensure that a review is indicated. This review may include psychological and/or medical fitness examinations. (30) [(29)] High School Diploma--An earned high school diploma from a United States high school, an accredited secondary school equivalent to that of United States high school, or a passing score on the general education development test indicating a high school graduation level. Documentation from diploma mills is not acceptable. (31) [(30)] Home School Diploma--An earned diploma from a student who predominately receives instruction in a general elementary or secondary education program that is provided by the PROPOSED RULES October 30, 2015 40 TexReg 7577 parent, or a person in parental authority, in or through the child's home. (Texas Education Code §29.916) (48) [(46)] Placed on probation--Has received an adjudicated or deferred adjudication probation for a criminal offense. (32) Honorably Retired Peace Officer--An unappointed person with a Texas Peace Officer license who has a cumulative total of 15 years of full-time service as a Peace Officer. An Honorably Retired Peace Officer does not carry any Peace Officer authority. (49) [(47)] POST--State or federal agency with jurisdiction similar to that of the commission, such as a peace officer standards and training agency. (33) [(31)] Individual--A human being who has been born and is or was alive. (50) [(48)] Precision rifle--Any rifle with a frame mounted optical sighting device greater than 5 power that is carried by the individual officer in an official capacity. (34) [(32)] Jailer--A person employed or appointed as a jailer under the provisions of the Local Government Code, §85.005, or Texas Government Code §511.0092. (51) [(49)] Proprietary training contractor--An approved training contractor who has a proprietary interest in the intellectual property delivered. (35) [(33)] Killed in the line of duty--A death that is the directly attributed result of a personal injury sustained in the line of duty. (52) [(50)] Public security officer--A person employed or appointed as an armed security officer identified under the provisions of the Texas Occupations Code, §1701.001. (36) [(34)] Law--Including, but not limited to, the constitution or a statute of this state, or the United States; a written opinion of a court of record; a municipal ordinance; an order of a county commissioners' court; or a rule authorized by and lawfully adopted under a statute. (53) [(51)] Reactivate--To make a license issued by the commission active after a license becomes inactive. A license becomes inactive at the end of the most recent unit or cycle in which the licensee is not appointed and has failed to complete legislatively required training. (37) [(35)] Law enforcement academy--A school operated by a governmental entity which may provide basic licensing courses and continuing education under contract with the commission. (54) [(52)] Reinstate--To make a license issued by the commission active after disciplinary action or failure to obtain required continuing education. (38) [(36)] Law enforcement automobile for training--A vehicle equipped to meet the requirements of an authorized emergency vehicle as identified by Texas Transportation Code §546.003 and §547.702. (55) [(53)] Reserve--A person appointed as a reserve law enforcement officer under the provisions of the Texas Occupations Code, §1701.001. (39) [(37)] Lesson plan--A plan of action consisting of a sequence of logically linked topics that together make positive learning experiences. Elements of a lesson plan include: measurable goals and objectives, content, a description of instructional methods, tests and activities, assessments and evaluations, and technologies utilized. (40) [(38)] License--A license required by law or a state agency rule that must be obtained by an individual to engage in a particular business. (41) [(39)] Licensee--An individual holding a license issued by the commission. (42) [(40)] Line of duty--Any lawful and reasonable action, which an officer identified in Texas Government Code, Chapter 3105 is required or authorized by rule, condition of employment, or law to perform. The term includes an action by the individual at a social, ceremonial, athletic, or other function to which the individual is assigned by the individual's employer. (43) [(41)] Moral character--The propensity on the part of a person to serve the public of the state in a fair, honest, and open manner. (44) [(42)] Officer--A peace officer or reserve identified under the provisions of the Texas Occupations Code, §1701.001. (45) [(43)] Patrol rifle--Any magazine-fed repeating rifle with iron/open sights or with a frame mounted optical enhancing sighting device, 5 power or less, that is carried by the individual officer in an official capacity. (46) [(44)] Peace officer--A person elected, employed, or appointed as a peace officer under the provisions of the Texas Occupations Code, §1701.001. (47) [(45)] Personal Identification Number (PID)--A unique computer-generated number assigned to individuals for identification in the commission's electronic database. 40 TexReg 7578 October 30, 2015 Texas Register (56) [(54)] School marshal--A person employed and appointed by the board of trustees of a school district or the governing body of an open-enrollment charter school under Texas Code of Criminal Procedure, Article 2.127 and in accordance with and having the rights provided by Texas Education Code, §37.0811. (57) [(55)] Self-assessment--Completion of the commission created process, which gathers information about a training or education program. (58) [(56)] Separation--An explanation of the circumstances under which the person resigned, retired, or was terminated, reported on the form currently prescribed by the commission, in accordance with Texas Occupations Code, §1701.452. (59) [(57)] SOAH--The State Office of Administrative Hearings. (60) [(58)] Successful completion--A minimum of: (A) 70 percent or better; or (B) C or better; or (C) pass, if offered as pass/fail. (61) [(59)] TCLEDDS--Texas Commission on Law Enforcement Data Distribution System. (62) [(60)] Telecommunicator--A person employed as a telecommunicator under the provisions of the Texas Occupations Code, §1701.001. (63) [(61)] Training coordinator--An individual, appointed by a commission-recognized training provider, who meets the requirements of §215.9 of this title. (64) [(62)] Training cycle--A 48-month period as established by the commission. Each training cycle is composed of two contiguous 24-month units. (65) [(63)] Training hours--Classroom or distance education hours reported in one-hour increments. forcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. (66) [(64)] Training program--An organized collection of various resources recognized by the commission for providing preparatory or continuing training. This program includes, but is not limited to, learning goals and objectives, academic activities and exercises, lesson plans, exams, skills training, skill assessments, instructional and learning tools, and training requirements. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.159, Active and Inactive Peace Officers. (67) [(65)] Training provider--A governmental body, law enforcement association, alternative delivery trainer, or proprietary entity credentialed by or authorized under a training provider contract with the commission to provide preparatory or continuing training for licensees or potential licensees. (68) [(66)] Verification (verified)--The confirmation of the correctness, truth, or authenticity of a document, report, or information by sworn affidavit, oath, or deposition. (b) The effective date of this section is February 1, 2016. [February 1, 2014.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 12, The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority and §1701.159, Active and Inactive Peace Officers. No other code, article, or statute is affected by this proposal. §211.5. Licensee Lists. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 12, 2015. TRD-201504278 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ 2015. TRD-201504277 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ ♦ 37 TAC §211.7 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §211.7, concerning Meeting Dates and Procedures. Subsection (a) removes the commission meeting requirements which gives the presiding officer flexibility to call meetings as needed. Subsections (b) and (c) are amended for relettering. New subsection (c) reflects the effective date. Subsection (d) has been relettered as new subsection (c). ♦ 37 TAC §211.5 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of §211.5, concerning Licensee Lists. The repealed section removes redundant information that is already stated in statute. This repeal is necessary to remove redundant information that is already stated in statute. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by removing redundant information. This amendment is necessary to give the presiding officer more flexibility in scheduling meetings. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by adding flexibility in the scheduling of meetings. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.058, Meetings. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law En- The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority and §1701.058, Meetings. PROPOSED RULES October 30, 2015 40 TexReg 7579 No other code, article, or statute is affected by this proposal. §211.7. Meeting Dates and Procedures. [(a) The commission will comply with the open meetings law and may hold quarterly meetings throughout each calendar year, time and place to be determined by the presiding officer and executive director, in March, June, September, and December, unless:] [(1) the date, and location is altered by vote of the commissioners; or] [(2) more frequent meetings are called by the presiding officer on the presiding officer's own motion or upon the written request of five voting commissioners.] (a) [(b)] At least once every two years, a regular or special meeting will receive public comment on training and standards for officers, jailers, and telecommunicators. (b) [(c)] Each meeting will be conducted by the presiding officer or, in the absence of the presiding officer, by the assistant presiding officer, the secretary, the most senior commissioner, or another commissioner selected by vote, in that order. (c) [(d)] The effective date of this section is February 1, 2016.[March 1, 2001.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 12, 2015. TRD-201504279 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code, §1701.151, General Powers of the Commission; Rulemaking Authority, and Texas Government Code §2001.028, Notice of Proposed Law Enforcement Rules. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and Texas Government Code §2001.028, Notice of Proposed Law Enforcement Rules. No other code, article, or statute is affected by this proposal. §211.13. Notice of Commission Rulemaking. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 12 2015. TRD-201504280 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §211.13 The Texas Commission on Law Enforcement (Commission) proposes new §211.13, concerning Notice of Commission Rulemaking. This new rule conforms with Texas Government Code §2001.028. This new rule is necessary to conform with Texas Government Code §2001.028. 37 TAC §211.13 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of §211.13, concerning Notice of Commission Rulemaking. This repeal is being replaced by a new §211.13. This repeal is necessary to conform with Texas Government Code §2001.028. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this subsection. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by conforming with Texas Government Code §2001.028. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be a positive benefit to the public by conforming to Texas Government Code §2001.028. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed repeal. The new rule is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and Texas Government Code §2001.028, Notice of Proposed Law Enforcement Rules. 40 TexReg 7580 October 30, 2015 Texas Register The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority and Texas Government Code, §2001.028, Notice of Proposed Law Enforcement Rules. No other code, article, or statute is affected by this proposal. §211.13. Notice of Commission Rulemaking. (a) When required by Texas Government Code Chapter 2001, the commission will notify each law enforcement agency of adopted rules. (b) The effective date of this section is February 1, 2016. §211.16. Establishment of an Appointing Entity. (a) On or after September 1, 2009, an entity authorized by statute or by the constitution to create a law enforcement agency or police department and commission, appoint, or employ peace officers that first creates a law enforcement agency or police department and first begins to commission, appoint, or employ peace officers shall make application to the commission. (b) On creation of the law enforcement agency or police department, and as part of the application process, the entity shall submit to the commission the [current agency number,] application form, any associated application fee, and information regarding: The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. (1) the need for the law enforcement agency or police department in the community; Filed with the Office of the Secretary of State on October 12, (2) the funding sources for the law enforcement agency or police department; 2015. (3) the physical resources available to officers; TRD-201504281 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ (4) the physical facilities that the law enforcement agency or police department will operate, including descriptions of the evidence room, dispatch area, and public area; (5) law enforcement policies of the law enforcement agency or police department, including policies on: (A) ♦ use of force; (B) vehicle pursuit; 37 TAC §211.16 (C) professional conduct of officers; The Texas Commission on Law Enforcement (Commission) proposes an amendment to §211.16, concerning Establishment of an Appointing Entity. Subsection (b) is amended to remove the reference to the current agency number as that number is assigned only after the application has been approved. Subsection (c) is amended to accurately reflect the reference to the Local Government Code. Subsection (f) is amended to reflect the effective date of the changes. These amendments are necessary to correct the application requirement and the reference to the Local Government Code. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by providing the public with competent law enforcement agencies. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed section. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.163, Information Provided by Commissioning Entities. The rule amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.163, Information Provided by Commissioning Entities. (D) domestic abuse protocols; (E) response to missing persons; (F) supervision of part-time officers; (G) impartial policing; and (H) fitness for duty. (6) the administrative structure of the law enforcement agency or police department; (7) liability insurance; and (8) any other information the commission requires [by rule]. (c) An entity authorized by Local Government Code, §361.022 [§511.0092] to operate a correctional facility to house inmates, in this state, convicted of offenses committed against the laws of another state of the United States, and appoint jailers requiring licensure by the commission, may make application for an agency number by submitting the current agency number application form, any associated application fee, and a certified copy of the contract under which the facility will operate. (d) A political subdivision wanting to establish a consolidated emergency telecommunications center and appoint telecommunicators, as required by Texas Occupations Code, §1701.405, may make application for an agency number by submitting the current agency number application form, any associated application fee and a certified copy of the consolidation contract. (e) The Texas Department of Criminal Justice - Pardon and Parole Division, a community supervision and corrections department, or a juvenile probation department may make application for an agency number if seeking firearms training certificates for parole officers, community supervision and corrections officers, or juvenile probation of- No other code, article, or statute is affected by this proposal. PROPOSED RULES October 30, 2015 40 TexReg 7581 ficers by submitting the current agency number application form and any associated application fee. (b) The effective date of this section is February 1, 2016. [March 1, 2008.] (f) The effective date of this section is February 1, 2016. [January 1, 2012.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504282 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §211.25 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §211.25, concerning Date of Appointment. Subsection (a) is amended to include telecommunicators to the list of licensees. Subsection (b) reflects the effective date. This amendment is necessary to add telecommunicators to the licensee list. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by adding telecommunicators to the licensee list. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, §1701.152, Rules Relating to Hiring Date of Peace Officer, and §1701.405, Telecommunicators. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.152, Rules Relating to Hiring Date Of Peace Officer; and §1701.405, Telecommunicators. No other code, article, or statute is affected by this proposal. §211.25. Date of Appointment. (a) If a proper report of appointment is received by the commission for the appointment as a peace officer, [and/or] county jailer, or telecommunicator, the commission shall accept the date of appointment that is reported to the commission by the appointing agency. 40 TexReg 7582 October 30, 2015 Texas Register TRD-201504283 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §211.29 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §211.29, concerning Responsibilities of Agency Chief Administrators. Subsection (c) removes the cross-reference to Subchapter L of the Texas Occupations Code, Chapter 1701. Subsection (q) reflects the effective date. This amendment is necessary to remove the cross-reference to Subchapter L of the Texas Occupations Code, Chapter 1701. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by removing a cross-reference. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.303, License Application; Duties of Appointing Entity; §1701.551, Criminal Penalty for Appointment or Retention of Certain Persons; §1701.552, Criminal Penalty for Appointment of Person Not Certified for Investigative Hypnosis; and §1701.553, Criminal Penalty for Appointment or Retention of Persons with Certain Convictions. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.303, License Application; Duties of Appointing Entity; §1701.551, Criminal Penalty for Appointment or Retention of Certain Persons; §1701.552, Criminal Penalty for Appointment of Person Not Certified for Investigative Hypnosis; and §1701.553, Criminal Penalty for Appointment or Retention of Persons with Certain Convictions. No other code, article, or statute is affected by this proposal. §211.29. Responsibilities of Agency Chief Administrators. (a) An agency chief administrator is responsible for making any and all reports and submitting any and all documents required of that agency by the commission. (b) An individual who is appointed or elected to the position of the chief administrator of a law enforcement agency shall notify the Commission of the date of appointment and title, through a form prescribed by the Commission within 30 days of such appointment. (c) An agency chief administrator must comply with the appointment and[/or] retention requirements under [Subchapter L of the] Texas Occupations Code, Chapter 1701. (d) An agency chief administrator must report to the commission within 30 days, any change in the agency's name, physical location, mailing address, electronic mail address, or telephone number. (e) An agency chief administrator must report, in a standard format, incident-based data compiled in accordance with Texas Occupations Code §1701.164. (f) Line of duty deaths shall be reported to the commission in current peace officers' memorial reporting formats. (g) An agency chief administrator has an obligation to determine that all appointees are able to safely and effectively perform the essential job functions. An agency chief administrator may require a fit for duty review upon identifying factors that indicate an appointee may no longer be able to perform job-related functions safely and effectively. These factors should be based on objective evidence and a reasonable basis that the cause may be attributable to a medical or psychological condition or impairment. (h) An agency must provide training on employment issues identified in Texas Occupations Code §1701.402 and field training. (i) An agency must provide continuing education training required in Texas Occupations Code §1701.351 and §1701.352. (j) Before an agency appoints any licensee to a position requiring a commission license it shall complete the reporting requirements of Texas Occupations Code §1701.451. (k) An agency appointing a person who does not hold a commission license must file an application for the appropriate license with the commission. (l) An agency must notify the commission electronically following the requirements of Texas Occupations Code §1701.452, when a person under appointment with that agency resigns or is terminated. (m) An agency chief administrator must comply with orders from the commission regarding the correction of a report of resignation/termination or request a hearing from SOAH. (n) An agency shall notify the commission electronically within 30 days, when it receives information that a person under appointment with that agency has been arrested, charged, indicted, or convicted for any offense above a Class C misdemeanor, or for any Class C misdemeanor involving the duties and responsibilities of office or family violence. (o) Except in the case of a commission error, an agency that wishes to report a change to any information within commission files about a licensee shall do so in a request to the commission, containing: (1) the licensees name, date of birth, last four digits of the social security number, or PID; (p) An agency chief administrator may not appoint an applicant subject to pending administrative action based on: (1) enrollment or licensure ineligibility; or (2) statutory suspension or revocation. (q) The effective date of this section is February 1, 2016. [January 17, 2013.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504284 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §211.35 The Texas Commission on Law Enforcement (Commission) proposes new §211.35, concerning Tuition Reimbursement for Commission Employees. This new rule is necessary to comply with a new legislative requirement for all state agencies concerning approval of tuition reimbursement. This new rule is necessary to comply with HB 3337 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by ensuring that reimbursement will first be approved by the executive director. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The new rule is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; Texas Government Code §656.047, Payment of Program Expenses; and §656.048, Rules Related to Training and Education. The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; Texas Government Code §656.047, Payment of Program Expenses; and §656.048, Rules Related to Training and Education. (2) the requested change; and No other code, article, or statute is affected by this proposal. (3) the reason for the change. §211.35. Tuition Reimbursement for Commission Employees. PROPOSED RULES October 30, 2015 40 TexReg 7583 (a) Before a Commission employee may receive reimbursement for tuition, the reimbursement must be approved by the Executive Director. (b) §215.9. Training Coordinator. (a) A training coordinator must hold a valid instructor license or certificate and must be a full-time paid employee. The effective date of this section is February 1, 2016. (b) The training coordinator must: The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. lines: Filed with the Office of the Secretary of State on October 13, (2) prepare, maintain, and submit the following reports within the time frame specified: (1) 2015. ensure compliance with commission rules and guide- (A) TRD-201504285 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ (ii) (B) self-assessment reports as required by the commis- sion; (C) a copy of advisory board minutes during an on-site 37 TAC §215.9 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §215.9, concerning Training Coordinator. Subsection (b)(2)(D) creates additional options for posting of training calendars. Subsection (b)(3)(B)(i) - (v) defines minimum requirement of training files. Subsection (b)(3)(J) added training files to the retention period. Subsection (e) reflects the effective date. (D) training calendars-schedules must be available for review and [or] posted on the internet, or another public venue, no later than 30 days prior to the beginning of each calendar quarter or academic semester. A continually updated and posted (live) calendar will meet this requirement; (E) John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by defining the posting of a training calendar and requirements of training files. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.251, Training Programs; Instructors. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701. 251, Training Programs; Instructors. No other code, article, or statute is affected by this proposal. Texas Register any other reports or records as requested by the commission; (3) be responsible for the administration and conduct of each course, including those conducted at ancillary sites, and specifically: This amendment is necessary to define the posting of a training calendar and requirements of training files. October 30, 2015 within 30 days of completion of continuing ed- ucation course; evaluation; CHAPTER 215. TRAINING AND EDUCATIONAL PROVIDERS 40 TexReg 7584 reports of training: (i) basic licensing course shall be submitted prior to students attempting a licensing exam; and (A) appointing and supervising qualified instructors; (B) maintaining course schedules and training files. At a minimum, training files shall contain: [course files, including lesson plans;] (i) complete lesson plan; (ii) clear learning objectives; (iii) instructor biography indicating subject matter expertise and teaching experience; (iv) approved class roster and original sign-in sheet; (v) course evaluation; and (C) enforcing all admission, attendance, retention, and other standards set by the commission and approved by the advisory board; (D) securing and maintaining all facilities necessary to meet the inspection standards of this section; (E) controlling the discipline and demeanor of each student and instructor during class; (F) distributing a current version of the Texas Occupations Code, Chapter 1701 and commission rules to all students at the time of admission to any course that may result in the issuance of a license; (G) distributing learning objectives to all students at the beginning of each course; (H) ensuring that all learning objectives are taught and forcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. (I) proctoring or supervising all examinations to ensure fair, honest results; and The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.254, Risk Assessment and Inspections. evaluated; (J) maintaining training files, records of tests, and other evaluation instruments for a period of five years. (4) receive all commission notices on behalf of the training provider and forward each notice to the appointing authority; and (5) attend or have a designee attend each academy coordinator's workshop conducted by the commission. No person may serve as a representative for more than one provider per conference. Each representative must be affiliated with the training provider. (c) If the position of training coordinator becomes vacant, upon written request from the chief administrator of the training provider the commission may, at the discretion of the executive director, waive the requirements for a period not to exceed six months. (d) Upon written request from the chief administrator of a training provider that does not have a full-time paid staff, the commission may, at the discretion of the executive director, waive the requirements in subsection (a) of this section. (e) The effective date of this section is February 1, 2016. [November 1, 2014.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.254, Risk Assessment and Inspections. No other code, article, or statute is affected by this proposal. §215.13. Risk Assessment. (a) A training provider may be found at risk and placed on at-risk probationary status if: (1) for those providing licensing courses, the passing rate on a licensing exam for first attempts for any three consecutive state fiscal years[, beginning with state fiscal year 2007 (September 1, 2006 through August 31, 2007)] is less than 80 percent of the students attempting the licensing exam; (2) courses taught by academic alternative providers are not conducted in compliance with Higher Education Program Guidelines accepted by the commission; (3) commission required learning objectives are not taught; (4) (5) examination and other evaluative scoring documentation is not on file; Filed with the Office of the Secretary of State on October 13, 2015. lesson plans for classes conducted are not on file; (6) the training provider submits false reports to the com- (7) the training provider makes repeated errors in report- mission; TRD-201504286 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ing; (8) the training provider does not respond to commission requests for information; (9) the training provider does not comply with commission rules or other applicable law; ♦ (10) the training provider does not achieve the goals identified in its application for a contract; 37 TAC §215.13 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §215.13, concerning Risk Assessment. Subsection (a)(1) removes redundant information. Subsection (h) reflects the effective date. This amendment is necessary to remove redundant information. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by removing redundant information. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law En- (11) the training provider does not meet the needs of the officers and law enforcement agencies served; or (12) the commission has received sustained complaints or evaluations from students or the law enforcement community concerning the quality of training or failure to meet training needs for the service area. (b) A training provider may be found at risk and placed on at-risk probationary status if: (1) the contractor provides licensing courses and fails to comply with the passing rates in subsection (a)(1) of this section; (2) lesson plans for classes conducted are not on file; (3) examination and other evaluative scoring documentation is not on file; (4) the provider submits false reports to the commission; (5) the provider makes repeated errors in reporting; (6) the provider does not respond to commission requests for information; PROPOSED RULES October 30, 2015 40 TexReg 7585 (7) the provider does not comply with commission rules or other applicable law; (8) the provider does not achieve the goals identified in its application for a contract; (9) the provider does not meet the needs of the officers and law enforcement agencies served; or (10) the commission has received sustained complaints or evaluations from students or the law enforcement community concerning the quality of training or failure to meet training needs for the service area. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504287 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ (c) An academic alternative provider may be found at risk and placed on at-risk probationary status if: CHAPTER 217. ENROLLMENT, LICENSING, APPOINTMENT, AND SEPARATION (1) the academic alternative provider fails to comply with the passing rates in subsection (a)(1) of this section; 37 TAC §217.1 (2) courses are not conducted in compliance with Higher Education Program Guidelines accepted by the commission; (3) the commission required learning objectives are not (4) the program submits false reports to the commission; (5) the program makes repeated errors in reporting; taught; (6) the program does not respond to commission requests for information; (7) the program does not comply with commission rules or other applicable law; (8) the program does not achieve the goals identified in its application for a contract; (9) the program does not meet the needs of the students and law enforcement agencies served; or (10) the commission has received sustained complaints or evaluations from students or the law enforcement community concerning the quality of education or failure to meet education needs for the service area. (d) If at risk, the chief administrator of the sponsoring organization, or the training coordinator, must report to the commission in writing within 30 days what steps are being taken to correct deficiencies and on what date they expect to be in compliance. (e) The chief administrator of the sponsoring organization, or the training coordinator, shall report to the commission the progress toward compliance within the timelines provided in the management response as provided in subsection (d) of this section. (f) The commission shall place providers found at-risk on probationary status for one year. If the provider remains at-risk after a 12-month probationary period, the commission shall begin the revocation process. If a provider requests a settlement agreement, the commission may enter into an agreement in lieu of revocation. (g) A training or educational program placed on at-risk probationary status must notify all students and potential students of their at-risk status. (h) The effective date of this section is February 1, 2016. [February 1, 2014.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. 40 TexReg 7586 October 30, 2015 Texas Register The Texas Commission on Law Enforcement (Commission) proposes an amendment to §217.1, concerning Minimum Standards for Enrollment and Initial Licensure. Subsection (b)(7) raises the standards for licensure for offenses involving family violence. If the individual was convicted or placed on community supervision, then the individual is barred from licensure. Subsection (j) reflects the effective date. This amendment is necessary to raise the standards for licensure. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by raising the standards for licensure. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.251, Training Programs; Instructors; §1701.255, Enrollment Qualifications; §1701.307, Issuance of Officer or County Jailer License; §1701.3071, Issuance of Telecommunicator License; §1701.3075, Qualified Applicant Awaiting Appointment; §1701.310, Appointment of County Jailer; Training Required; §1701.311, Provisional License for Workforce Shortage; §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision; and §1701.405, Telecommunicators. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.251, Training Programs; Instructors; §1701.255, Enrollment Qualifications; §1701.307, Issuance of Officer or County Jailer License; §1701.3071, Issuance of Telecommunicator License; §1701.3075, Qualified Applicant Awaiting Appointment; §1701.310, Appointment of County Jailer; Training Required; §1701.311, Provisional License for Workforce Shortage; §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision; and §1701.405, Telecommunicators. No other code, article, or statute is affected by this proposal. §217.1. Minimum Standards for Enrollment and Initial Licensure. (a) In order for an individual to enroll in any basic licensing course the provider must have on file documentation that the individual meets eligibility for licensure and: (1) a high school diploma; (2) a high school equivalency certificate; or (3) for the basic peace officer training course, an honorable discharge from the armed forces of the United States after at least 24 months of active duty service; (b) The commission shall issue a license to an applicant who meets the following standards: (1) age requirement: (A) for peace officers and public security officers, is 21 years of age; or 18 years of age if the applicant has received: (i) an associate's degree; or 60 semester hours of credit from an accredited college or university; or (ii) has received an honorable discharge from the armed forces of the United States after at least two years of active service; (B) for jailers and telecommunicators is 18 years of age; (2) minimum educational requirements: (A) has passed a general educational development (GED) test indicating high school graduation level; or (B) holds a high school diploma; (3) is fingerprinted and is subjected to a search of local, state and U.S. national records and fingerprint files to disclose any criminal record; (4) has never been on court-ordered community supervision or probation for any criminal offense above the grade of Class B misdemeanor or a Class B misdemeanor within the last ten years from the date of the court order; (5) is not currently charged with any criminal offense for which conviction would be a bar to licensure; (6) has never been convicted of an offense above the grade of a Class B misdemeanor or a Class B misdemeanor within the last ten years; (7) has never been convicted or placed on community supervision in any court of an offense involving family violence as defined under Chapter 71, Texas Family Code; (8) for peace officers, is not prohibited by state or federal law from operating a motor vehicle; (9) for peace officers, is not prohibited by state or federal law from possessing firearms or ammunition; (10) has been subjected to a background investigation; (11) examined by a physician, selected by the appointing or employing agency, who is licensed by the Texas Medical Board. The physician must be familiar with the duties appropriate to the type of license sought and appointment to be made. The appointee must be declared by that professional, on a form prescribed by the commission, within 180 days before the date of appointment by the agency to be: (A) physically sound and free from any defect which may adversely affect the performance of duty appropriate to the type of license sought; (B) show no trace of drug dependency or illegal drug use after a blood test or other medical test; and (C) for the purpose of meeting the requirements for initial licensure, an individual's satisfactory medical exam that is conducted as a requirement of a basic licensing course may remain valid for 180 days from the individual's date of graduation from that academy, if accepted by the appointing agency; (12) examined by a psychologist, selected by the appointing, employing agency, or the academy, who is licensed by the Texas State Board of Examiners of Psychologists. This examination may also be conducted by a psychiatrist licensed by the Texas Medical Board. The psychologist or psychiatrist must be familiar with the duties appropriate to the type of license sought. The individual must be declared by that professional, on a form prescribed by the commission, to be in satisfactory psychological and emotional health to serve as the type of officer for which the license is sought. The examination must be conducted pursuant to professionally recognized standards and methods. The examination process must consist of a review of a job description for the position sought; review of any personal history statements; review of any background documents; at least two instruments, one which measures personality traits and one which measures psychopathology; and a face to face interview conducted after the instruments have been scored. The appointee must be declared by that professional, on a form prescribed by the commission, within 180 days before the date of the appointment by the agency; (A) the commission may allow for exceptional circumstances where a licensed physician performs the evaluation of psychological and emotional health. This requires the appointing agency to request in writing and receive approval from the commission, prior to the evaluation being completed; or (B) the examination may be conducted by qualified persons identified by Texas Occupations Code §501.004. This requires the appointing agency to request in writing and receive approval from the commission, prior to the evaluation being completed; and (C) for the purpose of meeting the requirements for initial licensure, an individual's satisfactory psychological exam that is conducted as a requirement of a basic licensing course may remain valid for 180 days from the individual's date of graduation from that academy, if accepted by the appointing agency; (13) has never received a dishonorable or other discharge based on misconduct which bars future military service; (14) has not had a commission license denied by final order or revoked; (15) is not currently on suspension, or does not have a surrender of license currently in effect; (16) meets the minimum training standards and passes the commission licensing examination for each license sought; (17) is a U.S. citizen. (c) For the purposes of this section, the commission will construe any court-ordered community supervision, probation or conviction for a criminal offense to be its closest equivalent under the Texas Penal Code classification of offenses if the offense arose from: PROPOSED RULES October 30, 2015 40 TexReg 7587 (1) another penal provision of Texas law; or (2) a penal provision of any other state, federal, military or foreign jurisdiction. (d) A classification of an offense as a felony at the time of conviction will never be changed because Texas law has changed or because the offense would not be a felony under current Texas laws. (e) ments: A person must meet the training and examination require(1) training for the peace officer license consists of: (A) the current basic peace officer course(s); (B) a commission recognized, POST developed, basic law enforcement training course, to include: (i) A person who fails to comply with the standards set forth in this section shall not accept the issuance of a license and shall not accept any appointment. If an application for licensure is found to be false or untrue, it is subject to cancellation or recall. (j) The effective date of this section is February 1, 2016. [November 1, 2014.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. (i) out of state licensure or certification; and Filed with the Office of the Secretary of State on October 13, (ii) submission of the current eligibility application 2015. and fee; or (C) a commission approved academic alternative program, taken through a licensed academic alternative provider and at least an associate's degree. (2) training for the jailer license consists of the current basic county corrections course(s) or training recognized under Texas Occupations Code §1701.310; (3) training for the public security officer license consists of the current basic peace officer course(s); (4) training for telecommunicator license consists of telecommunicator course; and (5) passing any examination required for the license sought while the exam approval remains valid. (f) The commission may issue a provisional license, consistent with Texas Occupations Code §1701.311, to an agency for a person to be appointed by that agency. An agency must submit all required applications currently prescribed by the commission and all required fees before the individual is appointed. Upon the approval of the application, the commission will issue a provisional license. A provisional license is issued in the name of the applicant; however, it is issued to and shall remain in the possession of the agency. Such a license may neither be transferred by the applicant to another agency, nor transferred by the agency to another applicant. A provisional license may not be reissued and expires: (1) 12 months from the original appointment date; (2) on leaving the appointing agency; or (3) on failure to comply with the terms stipulated in the provisional license approval. (g) The commission may issue a temporary jailer license, consistent with Texas Occupations Code §1701.310. An agency must submit all required applications currently prescribed by the commission and all required fees before the individual is appointed. Upon the approval of the application, the commission will issue a temporary jailer license. A temporary jailer license expires: (1) the commission and all required fees before the individual is appointed. Upon the approval of the application, the commission will issue a temporary telecommunicator license. A temporary telecommunicator license expires 12 months from the original appointment date. 12 months from the original appointment date; or (2) on completion of training and passing of the jailer licensing examination. (h) The commission may issue a temporary telecommunicator license, consistent with Texas Occupations Code §1701.405. An agency must submit all required applications currently prescribed by 40 TexReg 7588 October 30, 2015 Texas Register TRD-201504288 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ CHAPTER 218. ♦ ♦ CONTINUING EDUCATION 37 TAC §218.9 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §218.9, concerning Continuing Firearms Proficiency Requirements. Subsection (c)(1) removes misnomer language. Subsection (f) reflects the effective date. This amendment is necessary to remove the phrase "including at least five rounds of ammunition." John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by removing unnecessary information. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.308, Weapons Proficiency; and §1701.355, Continuing Demonstration of Weapons Proficiency. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.308, Weapons Proficiency; and §1701.355, Continuing Demonstration of Weapons Proficiency. No other code, article, or statute is affected by this proposal. §218.9. (a) cer shall: (f) The effective date of this section is February 1, 2016. [February 1, 2014.] Continuing Firearms Proficiency Requirements. Each agency or entity that employs at least one peace offi- (1) require each peace officer that it employs to successfully complete the current firearms proficiency requirements at least once each calendar year for each type of firearm carried; (2) designate a firearms proficiency officer to be responsible for the documentation of annual firearms proficiency. The documentation for each officer shall include: (A) date of qualification; (B) identification of officer; (C) firearm manufacturer, model; (D) results of qualifying; and Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504289 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ 37 TAC §218.11 (3) keep on file and in a format readily accessible to the commission a copy of all records of this proficiency. The annual firearms proficiency requirements shall in- clude: (1) an external inspection by the proficiency officer, range officer, firearms instructor, or gunsmith to determine the safety and functioning of the weapon(s); (2) a proficiency demonstration in the care and cleaning of the weapon(s) used; and (3) a course of fire that meets or exceeds the minimum standards. (c) The minimum standards for the annual firearms proficiency course of fire shall be: (1) handguns - a minimum of 50 rounds, [including at least five rounds of ammunition,] fired at ranges from point-blank to at least 15 yards with at least 20 rounds at or beyond seven yards, including at least one timed reload; (2) shotguns - a minimum of five rounds of ammunition fired at a range of at least 15 yards; (3) precision rifles - a minimum of 20 rounds of ammunition fired at a range of at least 100 yards; however, an agency may, in its discretion, allow a range of less than 100 yards but not less than 50 yards if the minimum passing percentage is raised to 90; (4) patrol rifles - a minimum of 30 rounds of ammunition fired at a range of at least 50 yards, including at least one timed reload; however, an agency may, in its discretion, allow a range of less than 50 yards but not less than 10 yards if the minimum passing percentage is raised to 90; (5) fully automatic weapons - a minimum of 30 rounds of ammunition fired at ranges from seven to at least 10 yards, including at least one timed reload, with at least 25 rounds fired in full automatic (short bursts of two or three rounds), and at least five rounds fired semiautomatic, if possible with the weapon. (d) firearm. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. ♦ (E) course(s) of fire; (b) (e) The executive director may, upon written agency request, waive a peace officer's demonstration of weapons proficiency based on a determination that the requirement causes a hardship. The minimum passing percentage shall be 70 for each The Texas Commission on Law Enforcement (Commission) proposes new §218.11, concerning Child Safety Check Alert List Training. This new rule is necessary to reflect legislative changes. This new rule is necessary to reflect legislative changes from HB 2053 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by providing training and knowledge regarding the child safety check list. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The new rule is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.262, Training Program Relating to Child Safety Check Alert List, as passed under HB 2053 (84R). The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.262, Training Program Relating to Child Safety Check Alert List, as passed under HB 2053 (84R). No other code, article, or statute is affected by this proposal. §218.11. Child Safety Check Alert List Training. (a) An education and training program on the Texas Crime Information Center's child safety check alert list will include instruction relating to: PROPOSED RULES October 30, 2015 40 TexReg 7589 (1) the procedures for placing a child or other person on the child safety check alert list; (2) the manner in which an officer should interact with a child or other person on the child safety check alert list whom the officer locates; and (3) the procedures for removing a child or other person from the child safety check alert list. (b) The training program will be made available to employees in the child protective services division of the Department of Family and Protective Services, including caseworkers, supervisors, and special investigators. (c) The effective date of this section is February 1, 2016. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504290 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ CHAPTER 219. PRELICENSING, REACTIVATION, TESTS, AND ENDORSEMENTS 37 TAC §219.1 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §219.1, concerning Eligibility to Take State Examinations. Subsection (c) clarifies the minimum enrollment and licensure language. Subsection (i) reflects the effective date. This amendment is necessary to clarify language concerning enrollment and licensure. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by clarifying language. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement 6330, E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.304, Examination. 40 TexReg 7590 October 30, 2015 Texas Register The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.304, Examination. No other code, article, or statute is affected by this proposal. §219.1. Eligibility to Take State Examinations. (a) An individual may not take a licensing exam for a license they actively hold. (b) To be eligible to take a state licensing exam, an individual must: (1) have successfully completed a commission-approved basic licensing course or academic alternative program; (2) meet the requirements for reactivation if the individual is currently licensed; (3) meet the requirements for reinstatement if the individual is currently licensed; (4) meet the requirements if an individual is an out of state peace officer, federal criminal investigator, or military; or (5) be eligible to take the county corrections licensing exam as provided in Texas Occupations Code, Chapter 1701, §1701.310. (c) To maintain eligibility to attempt a licensing exam the applicant must meet the minimum [basic licensing enrollment] standards for enrollment and initial licensure.[; or if previously licensed, meet minimum initial licensing standards.] (d) An eligible examinee will be allowed three attempts to pass the examination. All attempts must be completed within 180 days from the completion date of the licensing course. Any remaining attempts become invalid on the 181st day from the completion date of the licensing course, or if the examinee passes the licensing exam. If an attempt is invalidated for any other reason, that attempt will be counted as one of the three attempts. (e) The examinee must repeat the basic licensing course for the license sought if: (1) the examinee fails all three attempts to pass the licensing exam; (2) the examinee fails to complete all three attempts within 180 days from the completion date of the licensing course; or (3) the examinee is dismissed from an exam for cheating. If dismissed from an exam for cheating, all remaining attempts are invalidated. (f) An examinee that is required to repeat a basic licensing course under the provisions in subsection (e) of this section will not be allowed to repeat an academic alternative program. (g) If an individual is not licensed within 2 years from the date of their successful completion of the licensing exam, the basic licensing course must be repeated. (h) When applicable and in addition to this section, school marshal licenses are subject to the requirements of Chapter 227 of this title. (i) The effective date of this section is February 1, 2016. [February 1, 2014.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 30, Filed with the Office of the Secretary of State on October 13, 2015. 2015. TRD-201504291 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 TRD-201504293 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ ♦ ♦ ♦ 37 TAC §219.11 37 TAC §219.11 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes new §219.11, concerning Reactivation of a License. This new rule conforms to statutory amendments concerning the reactivation of a license. The Texas Commission on Law Enforcement (Commission) proposes the repeal of §219.11, concerning Reactivation of a License. The repealed section was replaced with new rule §219.11. This new rule is necessary to conform with HB 872 (84R) and incorporates the former honorably retired reactivation provision. This repeal is necessary to comply with HB 872 (84R) which addresses reactivation requirements for individuals holding an inactive peace officer license. Due to the new requirements, a more streamlined rule was developed to ensure clarification of the reactivation process. It also incorporates honorably retired reactivation. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by clarifying the reactivation process. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. This repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.316, Reactivation of Peace Officer License; and §1701.3161, Reactivation of Peace Officer License: Retired Peace Officers. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking; §1701.316, Reactivation of Peace Officer License; and §1701.3161, Reactivation of Peace Officer License: Retired Peace Officers. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by lessening the time restrictions for certain inactive peace officer licensees to return to public service. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The new rule is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.316, Reactivation of Peace Officer License; and §1701.3161, Reactivation of Peace Officer License: Retired Peace Officers. The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.316, Reactivation of Peace Officer License; and §1701.3161, Reactivation of Peace Officer License: Retired Peace Officers. No other code, article, or statute is affected by this proposal. §219.11. Reactivation of a License. (a) The commission will place all licenses in an inactive status at the end of the most recent training unit or cycle in which the licensee: (1) was not appointed at the end of the unit or cycle; and (2) No other code, article, or statute is affected by this proposal. §219.11. (b) did not meet continuing education requirements. The holder of an inactive license is unlicensed for all pur- poses. Reactivation of a License. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. (c) This section includes any permanent peace officer qualification certificate with an effective date before September 1, 1981. PROPOSED RULES October 30, 2015 40 TexReg 7591 (d) The requirements to reactivate a license for a person with less than 10 years of full-time service are: (1) (3) If less than two years from last appointment: (A) (B) quirements; and meet current licensing standards; successfully complete continuing education re- (C) make application and submit any required fee(s) in the format currently prescribed by the commission. (2) (D) (A) meet current licensing standards; (B) successfully complete continuing education requirements, and, if applicable, a supplemental peace officer training course; (C) make application and submit any required fee(s); and (D) (3) If more than five years but less than ten years from last appointment: (A) meet current licensing standards; (B) successfully complete continuing education requirements, and, if applicable, a supplemental peace officer training course and a skills assessment course; (C) make application and submit any required fee(s); pass the reactivation exam. (f) Unless exempted by Texas Occupations Code Section 1701.356, the requirements to reactivate a license for an honorably retired peace officer are: (C) make application and submit any required fee(s); pass the licensing exam. meet current licensing standards; (B) successfully complete continuing education requirements, and, if applicable, a supplemental peace officer training course and a skills assessment course; and (D) If more than five years from last appointment: (A) If two years but less than five years from last appoint- ment: pass the reactivation exam. (1) meet current licensing standards; (2) meet current continuing education requirements; and (3) make application and submit any required fee(s). (g) School marshal licenses are subject to the reactivation and renewal procedures related to school marshals under of Chapter 227 of this title. (h) The effective date of this section is February 1, 2016. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. and (D) pass the licensing exam. (4) Ten years or more from last appointment: (A) meet current enrollment standards; (B) meet current licensing standards; (C) successfully complete the applicable basic licens- TRD-201504312 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ing course; (D) make application and submit any required fee(s); and (E) pass the licensing exam. (e) The requirements to reactivate a license for a person with 10 years but less than 15 years of full-time service are: (1) If less than two years from last appointment: (A) meet current licensing standards; (B) successfully complete continuing education requirements; and (C) make application and submit any required fee(s) in the format currently prescribed by the commission. (2) If two years but less than five years from last appoint- ment: (A) meet current licensing standards; (B) successfully complete continuing education requirements, and, if applicable, a supplemental peace officer training course; (C) make application and submit any required fee(s); and 40 TexReg 7592 October 30, 2015 Texas Register ♦ ♦ 37 TAC §219.13 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of §219.13, concerning Retired Peace Officer Reactivation. The repealed section was consolidated into new rule §219.11. This repeal is necessary to consolidate all reactivation processes into one rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by consolidating peace officer reactivation. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.316, Reactivation of Peace Officer License; and §1701.3161, Reactivation of Peace Officer License: Retired Peace Officers. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.315, License Requirements for Persons with Military Special Forces Training. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.316, Reactivation of Peace Officer License; and §1701.3161, Reactivation of Peace Officer License: Retired Peace Officers. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.315, License Requirements for Persons with Military Special Forces Training. No other code, article, or statute is affected by this proposal. No other code, article, or statute is affected by this proposal. §219.13. §219.25. License Requirements for Persons with Military Special Forces Training. (a) In this section, "special forces" means a special forces component of the United States armed forces, including: Retired Peace Officer Reactivation. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. (1) the United States Army Special Forces; Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504294 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ (2) the United States Navy SEALs; (3) the United States Air Force Pararescue; (4) the United States Marine Corps Force Reconnaissance; and (5) any other component of the United States Special Operations Command approved by the commission. (b) An applicant qualifies [The commission shall adopt rules to allow an applicant to qualify] to take the basic licensing [an] examination [described by Texas Occupations Code, §1701.304] if the applicant: ♦ 37 TAC §219.25 The Texas Commission on Law Enforcement (Commission) proposes amendments to §219.25, concerning License Requirements for Persons with Military Special Forces Training. The proposed amendments update the qualifications to take the state licensing examination outlined in subsection (b). New licensing standards are added as subsection (b)(1) and the subsequent paragraphs are amended and renumbered. The proposed amendments remove service time restrictions from subsection (b)(2). New subsection (b)(3) adds a special forces training course and eliminates the need for the individual to show proof of completion. New subsection (b)(4) is amended for grammatical change. Subsections (c) and (d) are removed because of redundancy. Subsection (e) is relettered as subsection (c) and reflects the new effective date. These amendments are necessary to streamline the licensing process for persons with military special forces training. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by lessening the time restrictions for military special forces to begin public service. (1) meets minimum licensing standards; (2) [(1)] has provided military service records documenting that the applicant has served in the special forces [for 2 continuous years within the 4 years prior to application]; (3) [(2)] [has] successfully completes [completed] a [special forces] training course developed for special forces veterans; and [and provides to the commission documentation verifying completion of the course;] (4) [(3)] completes a supplemental peace officer training course.[; and] [(4) completes any other training required by the commission after the commission has reviewed the applicant's military training.] [(c) Commission rules adopted under subsection (b) of this section shall include rules:] [(1) to determine acceptable forms of documentation that satisfy the requirements of subsection (b) of this section;] [(2) under which the commission may waive any other license requirement for an applicant described by subsection (b) of this section based on other relevant military training the applicant has received, as determined by the commission, including intelligence or medical training; and] PROPOSED RULES October 30, 2015 40 TexReg 7593 [(3) to establish an expedited application process for an applicant described by subsection (b) of this section.] [(d) The commission shall review the content of the training course for each special forces component described by subsection (a) of this section and in adopting rules under subsection (b) of this section specify the training requirements an applicant who has completed that training course must complete and the training requirements from which an applicant who has completed that training course is exempt.] (c) [(e)] The effective date of this section is February 1, 2016.[February 1, 2014.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504319 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ CHAPTER 221. ♦ ♦ PROFICIENCY CERTIFICATES This repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.402, Proficiency Certificates. No other code, article, or statute is affected by this proposal. §221.3. Peace Officer Proficiency. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504295 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §221.3 The Texas Commission on Law Enforcement (Commission) proposes new §221.3, concerning Proficiency Certificates. This new rule condenses the Peace Officer, Jailer, and Telecommunicator Proficiency requirements into one rule. 37 TAC §221.3 This new rule is necessary to condense the Peace Officer, Jailer, and Telecommunicator Proficiency requirements into one rule. (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. The Texas Commission on Law Enforcement (Commission) proposes the repeal of §221.3, concerning Peace Officer Proficiency. The repealed section is replaced with new rule §221.3, which combines Peace Officer, Jailer, and Telecommunicator Proficiency Certificates into one rule. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by condensing similar rules. This repeal is necessary to condense the Peace Officer, Jailer, and Telecommunicator Proficiency requirements into one rule. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by condensing similar rules. The new rule is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.402, Proficiency Certificates; and §1701.405, Telecommunicators. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.402, Proficiency Certificates. 40 TexReg 7594 October 30, 2015 Texas Register The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.402, Proficiency Certificates; and §1701.405, Telecommunicators. No other code, article, or statute is affected by this proposal. §221.3. Proficiency Certificates. (a) To qualify for a basic, intermediate, advanced, or master proficiency certificate, an applicant must meet all current proficiency requirements set by the commission. (b) The effective date of this section is February 1, 2016. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. ♦ TRD-201504320 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ TRD-201504296 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ 37 TAC §221.13 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) ♦ 37 TAC §221.5 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of §221.5, concerning Jailer Proficiency. The repealed section was replaced with new rule §221.3, which combines Peace Officer, Jailer, and Telecommunicator Proficiency Certificates into one rule. This repeal is necessary to condense the Peace Officer, Jailer, and Telecommunicator Proficiency requirements into one rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by condensing similar rules. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The Texas Commission on Law Enforcement (Commission) proposes the repeal of §221.13, concerning Emergency Telecommunications Proficiency. The repealed section was replaced with new rule §221.3, which combines Peace Officer, Jailer, and Telecommunicator Proficiency Certificates into one rule. This repeal is necessary to condense the Peace Officer, Jailer, and Telecommunicator Proficiency requirements into one rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by condensing similar rules. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.405, Telecommunicators. This repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority and §1701.405, Telecommunicators. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.402, Proficiency Certificates. §221.13. Emergency Telecommunications Proficiency. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority and §1701.402, Proficiency Certificates. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. No other code, article, or statute is affected by this proposal. Filed with the Office of the Secretary of State on October 13, §221.5. 2015. Jailer Proficiency. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. No other code, article, or statute is affected by this proposal. TRD-201504297 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 PROPOSED RULES October 30, 2015 40 TexReg 7595 ♦ ♦ ♦ Filed with the Office of the Secretary of State on October 13, 37 TAC §221.43 2015. The Texas Commission on Law Enforcement (Commission) proposes new §221.43, concerning School-Based Law Enforcement Proficiency Certificate. This new rule is necessary to reflect legislative changes. TRD-201504321 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 This new rule is necessary to reflect legislative changes from HB 2684 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by having highly trained and qualified individuals holding this proficiency certificate. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The new rule is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.262, Training for School District Peace Officers and School Resource Officers, as passed by HB 2684 (84R); §1701.263, Education and Training Program for School District Peace Officers and School Resource Officers; and Texas Education Code §37.0812, Training Policy: School District Peace Officers and School Resource Officers. The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.262, Training for School District Peace Officers and School Resource Officers, as passed by HB 2684 (84R); §1701.263, Education and Training Program for School District Peace Officers and School Resource Officers; and Texas Education Code §37.0812, Training Policy: School District Peace Officers and School Resource Officers. No other code, article, or statute is affected by this proposal. §221.43. School-Based Law Enforcement Proficiency Certificate. (a) To qualify for a school-based law enforcement proficiency certificate, an applicant must complete a course approved by the commission under Texas Occupations Code §1701.262. (b) School district peace officers and school resource officers providing law enforcement at a school district with an enrollment of 30,000 or more students must obtain a school-based law enforcement proficiency certificate within 120 days of the officer's commission or placement in the district or campus of the district. (c) The effective date of this section is February 1, 2016. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. ♦ CHAPTER 223. ♦ ♦ ENFORCEMENT 37 TAC §223.1 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §223.1, concerning License Action and Notification. Subsection (a) removes redundancies appearing in other existing rules and proposed amendments. Subsection (b) is relettered as subsection (a) and removes unnecessary wording. New (a)(3) adds the last known address provision, providing more efficient and accurate notifications to licensees. Subsection (c) is relettered to (b). New subsection (c) reflects the effective date. This amendment is necessary to remove the redundancy and to add provisions to provide more efficient and accurate notifications to licensees. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by removing the redundancy and to add provisions to provide more efficient and accurate notifications to licensees. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority. No other code, article, or statute is affected by this proposal. §223.1. License Action and Notification. [(a) The commission shall revoke or suspend a license, place on probation a person whose license has been suspended, or reprimand a license holder for a violation of:] [(1) Texas Occupations Code, Chapter 1701;] [(2) the reporting requirements provided by Articles 2.132 and 2.134, Code of Criminal Procedure; or] 40 TexReg 7596 October 30, 2015 Texas Register [(3) a commission rule.] (a) [(b)] The holder of a commission issued license or certificate can [must] be sent notice of any hearing, or other action or matter before the commission at: (1) the address of the agency shown in commission records to have the holder under current or last appointment; (2) the address shown on the Texas driver's license record of the holder; [or] (3) the last known address on record with the commission; or Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.505, Administrative Procedure. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.505, Administrative Procedure. No other code, article, or statute is affected by this proposal. (4) [(3)] any other address requested by the holder in a written request to the executive director. (b) [(c)] An action by the commission to deny, suspend, or revoke one license operates [will, if so pled, also operate] against any other commission license or certificate held by the same person. (c) [(d)] The effective date of this section is February 1, 2016. [January 14, 2010.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504322 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §223.3 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §223.3, concerning Answer Required. Amendments to subsections (a) - (e) remove redundancies appearing in other existing rules and proposed amendments. Subsection (a) removes unnecessary wording. Relettered subsection (e) reflects the effective date. This amendment is necessary to remove redundancies appearing in other existing rules and proposed amendments and removes unnecessary wording. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by removing redundancies and unnecessary wording. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim §223.3. Answer Required. (a) In order to preserve the right to a hearing as described under this subchapter, an [in §223.1 of this chapter (relating to License Action and Notification), a person whose license the executive director proposes to deny, cancel, suspend, or revoke must file an answer either consenting to the penalty recommended by the executive director in his petition, or requesting a contested case hearing. An] answer must be filed not later than 20 days after the date the respondent is provided with notice of the executive director's petition or notice of violation. Failure to file a timely answer may result in the issuance of a default order. (b) The answer [described in subsection (a) of this section] may be in the form of a general denial as that term is used in the district courts of the State of Texas. (c) [If a respondent fails to file a timely answer as required by subsection (a) of this section, the executive director may recommend to the commission that it enter a default order against the respondent. The executive director may support the motion with documentary evidence, including affidavits, exhibits and pleadings, and oral testimony, as may be appropriate to demonstrate that the respondent received the petition and failed to file a timely answer. The commission will consider motions for default orders at its quarterly commission meetings. If the executive director moves for issuance of a default order under this section, it is not necessary to set the matter for hearing under §223.7 of this chapter (relating to Contested Cases and Hearings).] The commission may grant the default order [requested by the executive director,] or refer the case [may order the case referred] to SOAH for a contested case hearing. (d) If a person files a timely answer as required by [subsection (a) of] this section, but fails to appear at the contested case hearing after receiving timely and adequate notice, the executive director may move for default judgment against the respondent as provided by SOAH rules [rule, 1 Texas Administrative Code, §155.55]. [(e) Upon issuance of a default order by the commission, notice shall be provided to the respondent in accordance with §223.1 of this chapter (relating to License Action and Notification).] (e) [(f)] The effective date of this section is February 1, 2016. [March 1, 2002.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504323 PROPOSED RULES October 30, 2015 40 TexReg 7597 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ ♦ 37 TAC §223.5 37 TAC §223.5 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes new §223.5, concerning Contested Cases and Hearings. This new rule consolidates and recodifies contested case procedures. The Texas Commission on Law Enforcement (Commission) proposes the repeal of §223.5, concerning Filing of Documents. The repealed section is recodified into new rule §223.5. This new rule is necessary to consolidate and recodify contested case procedures. This repeal is necessary to combine several rules into one to simplify the process. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on contested cases and hearings. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.505, Administrative Procedure; and Texas Government Code §2001.004, Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.505, Administrative Procedure; and Texas Government Code §2001.004, Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. No other code, article, or statute is affected by this proposal. §223.5. Filing of Documents. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by streamlining wording regarding contested case procedures. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The new rule is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.505, Administrative Procedure; and Texas Government Code §2001.004, Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.505, Administrative Procedure; and Texas Government Code §2001.004, Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. No other code, article, or statute is affected by this proposal. §223.5. Contested Cases and Hearings. (a) Contested cases, hearings and appeals will be conducted pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001. (b) The commission may consider exceptions or briefs filed within 20 days after a party's notification of a proposal for decision. Responses are due within 15 days after exceptions are filed. (c) All or part of the proceedings of a contested case will be transcribed upon the written request of a party with cost to that party, unless the executive director provides otherwise. (d) Any party who appeals a final decision must pay all preparation costs for the original or certified copy of the record of any proceeding to be submitted to the court. TRD-201504298 (e) parties. 40 TexReg 7598 October 30, 2015 Texas Register The commission may assess transcript costs to one or more (f) The effective date of this section is February 1, 2016. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, Filed with the Office of the Secretary of State on October 13, 2015. 2015. TRD-201504299 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 TRD-201504324 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ ♦ ♦ ♦ 37 TAC §223.9 37 TAC §223.7 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of §223.7, concerning Contested Cases and Hearings. The repealed section is recodified into new rule §223.5. This repeal is necessary to combine several rules into one to simplify the process. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on contested cases and hearings. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.505, Administrative Procedure, and Texas Government Code §2001.004, Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.505, Administrative Procedure; and Texas Government Code §2001.004, Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of §223.9, concerning Place and Nature of Hearings. The repealed section is recodified into new rule §223.5. This repeal is necessary to combine several rules into one to simplify the process. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on contested cases and hearings. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.505, Administrative Procedure; and Texas Government Code §2001.004, Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.505, Administrative Procedure; and Texas Government Code §2001.004, Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. No other code, article, or statute is affected by this proposal. No other code, article, or statute is affected by this proposal. §223.9. Place and Nature of Hearings. §223.7. Contested Cases and Hearings. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. PROPOSED RULES October 30, 2015 40 TexReg 7599 Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504301 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §223.11 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) TRD-201504302 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §223.14 The Texas Commission on Law Enforcement (Commission) proposes new §223.14, concerning Construction of Other Laws. This new rule recodifies previous rules related to criminal dispositions. This new rule is necessary to recodify previous rules related to criminal dispositions. The Texas Commission on Law Enforcement (Commission) proposes the repeal of §223.11, concerning Proposal for Decision and Exceptions or Briefs. The repealed section is recodified into new rule §223.5. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. This repeal is necessary to combine several rules into one to simplify the process. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on criminal dispositions. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on contested cases and hearings. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.505, Administrative Procedure; and Texas Government Code §2001.004, Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.505, Administrative Procedure; and Texas Government Code §2001.004, Requirement to Adopt Rules of Practice and Index Rules, Orders, and Decisions. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The new rule is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision. The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision. No other code, article, or statute is affected by this proposal. §223.14. Construction of Other Laws. (a) A criminal disposition under the law of Texas, another state, federal, military, tribal, or foreign jurisdiction, will be construed under the closest equivalent under the Texas Penal Code classification of offenses. (b) A classification of an offense as a felony at the time of conviction will never be changed because Texas law has changed or because the offense would not be a felony under current Texas laws. No other code, article, or statute is affected by this proposal. §223.11. Proposal for Decision and Exceptions or Briefs. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. (c) The effective date of this section is February 1, 2016. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, Filed with the Office of the Secretary of State on October 13, 2015. 2015. TRD-201504325 40 TexReg 7600 October 30, 2015 Texas Register Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ ♦ ♦ ♦ 37 TAC §223.15 37 TAC §223.15 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes new §223.15, concerning License Suspension. This new rule recodifies the previous rules related to license suspension. The Texas Commission on Law Enforcement (Commission) proposes the repeal of §223.15, concerning Suspension of License. The repealed section is recodified into new rule §223.15. This repeal is necessary to recodify into a new rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by rewriting the rule on license suspension. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.1524, Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision; and §1701.4521, License Suspension for Officer Dishonorably Discharged. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.1524, Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision; and §1701.4521, License Suspension for Officer Dishonorably Discharged. No other code, article, or statute is affected by this proposal. §223.15. Suspension of License. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504303 This new rule is necessary to recodify previous rules related to license suspension. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp also has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on license suspension. Mr. Beauchamp also has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The new rule is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.1524, Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision; and §1701.4521, License Suspension for Officer Dishonorably Discharged. The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.1524, Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision; and §1701.4521, License Suspension for Officer Dishonorably Discharged. No other code, article, or statute is affected by this proposal. §223.15. License Suspension. (a) Unless revocation is required, the commission may suspend a license or certificate for violating any provision of the Texas Occupations Code, Chapter 1701 or commission rule. (b) The license of a person charged with a felony and placed on community supervision shall be suspended for thirty years. (c) The license of a person convicted or placed on community supervision for any offense above the grade of Class C misdemeanor may be suspended for 10 years. (d) A suspension based on a Class A misdemeanor shall be at least 120 days. PROPOSED RULES October 30, 2015 40 TexReg 7601 (e) A suspension based on a Class B misdemeanor shall be at least 60 days. (f) The license of a person who fails to comply with legislative continuing education requirements may be suspended: (1) up to 90 days for first-time noncompliance; (2) up to 180 days for second-time noncompliance; and (3) one year for third-time noncompliance. (g) The commission may suspend the license of a person who has previously received two written reprimands from the commission. (h) Factors the commission may consider in determining a term of suspension include: (1) the seriousness of the conduct resulting in the arrest; (2) the required mental state of the disposition offense; (3) whether the disposition offense contains an element of actual or threatened bodily injury or coercion against another person under the Texas Penal Code or the law of the jurisdiction where the offense occurred; (4) the licensee's previous violations of commission statutes or rules; (5) actual or potential harm to public safety, including personal injury and property damage, resulting from the conduct resulting in the arrest; (6) aggravating evidence existing in a particular case; and (7) evidence used in rebuttal to mitigating factors. (i) A suspension can begin no sooner than the date of the statute or rule violation. (j) A suspension or probation may be ordered to run concurrently or consecutively with any other suspension or probation. (k) The effective date of this section is February 1, 2016. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp also has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by consolidating rules. Mr. Beauchamp also has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.1524, Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; §1701.302, Certain Elected Law Enforcement Officers; License Required; §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision; and §1701.4521, License Suspension for Officer Dishonorably Discharged. . The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.1524, Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; §1701.302, Certain Elected Law Enforcement Officers; License Required; §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision; and §1701.4521, License Suspension for Officer Dishonorably Discharged. No other code, article, or statute is affected by this proposal. §223.16. Suspension of License for Constitutionally Elected Officials. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504327 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 2015. TRD-201504304 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ 37 TAC §223.16 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of §223.16, concerning Suspension of License for Constitutionally Elected Officials. This repealed section is consolidated in new §223.15. This repeal is necessary to consolidate in new §223.15. 40 TexReg 7602 October 30, 2015 Texas Register ♦ ♦ 37 TAC §223.16 The Texas Commission on Law Enforcement (Commission) proposes new §223.16, concerning Probation and Mitigating Factors. This new rule recodifies the previous rules related to license suspension. This new rule is necessary to recodify previous rules related to license suspension. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on license suspension. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The new rule is proposed under Texas Occupations Code, Chapter 1701, §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.1524, Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision; and §1701.4521, License Suspension for Officer Dishonorably Discharged. The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.1524, Rules Relating to Consequences of Criminal Conviction or Deferred Adjudication; §1701.312, Disqualification: Felony Conviction or Placement on Community Supervision; and §1701.4521, License Suspension for Officer Dishonorably Discharged. No other code, article, or statute is affected by this proposal. §223.16. Probation and Mitigating Factors. (a) The commission may consider probating a suspension term or issue a written reprimand based on proof of the following mitigating factors: (1) the licensee's history of compliance with the terms of court-ordered community supervision; (2) the licensee's post-arrest continuing rehabilitative efforts not required by the terms of community supervision; (3) the licensee's post-arrest employment record; and (4) the type and amount of any post-arrest, non-court ordered restitution made by the licensee. (b) The commission may impose reasonable terms of probation, including: (c) (1) continued employment requirements; (2) special reporting conditions; (3) special document submission conditions; (4) voluntary duty requirements; or (5) any other reasonable term of probation. (4) (d) revoked. A suspended license remains suspended until: (1) the term of suspension has expired and the term of court-ordered community supervision has been completed; and (2) a written request for reinstatement has been received from the licensee and accepted by the commission; or (3) the remainder of the suspension is probated and the license is reinstated. (e) The effective date of this section is February 1, 2016. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504328 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §223.17 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §223.17, concerning Reinstatement of a License. Cross-references have been removed from subsections (a), (b), (b)(1)(A) and (B), (b)(2)(A) and (D), and (b)(3)(A) and (E). Subsection (c) reflects the effective date. This amendment is necessary to remove redundant cross-references. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by removing redundant crossreferences. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. A probated or suspended license remains as such until: (1) the term of suspension has expired; (2) all other terms of probation have been fulfilled; and (3) a written request for reinstatement has been received and accepted by the commission from the licensee unless the probation has been revoked by the commission for violation of probation; or The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.501, Disciplinary Action; and §1701.502, Felony Conviction or Placement on Community Supervision. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.501, Disciplinary Action; and PROPOSED RULES October 30, 2015 40 TexReg 7603 §1701.502, Felony Conviction or Placement on Community Supervision. No other code, article, or statute is affected by this proposal. §223.17. Reinstatement of a License. (a) To reinstate a suspended or probated license for a licensee that meets current training requirements and has continually maintained [the] legislatively required continuing education [provided in §217.11 of this title] for the duration of the suspension or probation, a licensee must: (1) make application for reinstatement in the format currently prescribed by the commission; and (2) submit any required fee(s). (b) A licensee that does not meet current training requirements, or has failed to continually maintain the legislatively required continuing education [provided in §217.11 of this title] for the duration of the suspension or probation, must meet the following requirements: (1) If less than two years from last appointment held: (A) meet [the] current licensing standards [as provided in §217.1 of this title]; (B) successfully complete [the] legislatively required continuing education [as provided in §217.11 of this title]; and (C) make application and submit any required fee(s) in the format currently prescribed by the commission. (2) ment held: If two years but less than five years from last appoint- (A) meet [the] current licensing standards [as provided in §217.1 of this title]; (B) successfully complete a supplementary peace officer training course approved by the commission; (C) make application and submit any required fee(s) in the format currently prescribed by the commission; and (D) pass the licensing exam [as provided in §219.1 of this title]. (3) If five years or more from last appointment held: (A) meet [the] current enrollment standards [in §217.23 of this title]; (B) meet [the] current licensing standards [in §217.1 of this title]; (C) successfully complete the basic licensing course for the license sought; (D) make application and submit any required fee(s) in the format currently prescribed by the commission; and (E) pass the licensing exam [as provided in §219.1 of this title]. (c) The effective date of this section is February 1, 2016. [July 12, 2012.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. 40 TexReg 7604 October 30, 2015 Texas Register TRD-201504329 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §223.18 The Texas Commission on Law Enforcement (Commission) proposes new §223.18, concerning Suspension Following Felony Arrest. The proposed rule allows the commission to suspend the license of an appointed person arrested or indicted for certain felony offenses. The rule is necessary to protect the safety and welfare of the public and the integrity of the profession by preventing licensed felony arrestees from engaging in the duties of peace officers, jailers, and telecommunicators during the pendency of a criminal disposition. This new rule is necessary to protect the safety and welfare of the public and the integrity of the profession. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there may be an effect on state or local governments as a result of administering this section due to the removal of some of their Commission licensed workforce. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by ensuring that the public is served by highly trained and ethical law enforcement personnel. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The new rule is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and Texas Government Code §2001.054, Licenses. The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and Texas Government Code §2001.054, Licenses. No other code, article, or statute is affected by this proposal. §223.18. Suspension Following Felony Arrest. (a) The commission may suspend the license of a person arrested or indicted for a felony offense which would constitute an immediate peril to the public health, safety or welfare if the person were to remain licensed during the pendency of criminal proceedings. (b) By virtue of their nature, the following felony arrests constitute immediate peril: (1) Sexual offenses; (2) Assaultive offenses; and (3) Offenses directly relating to the duties and responsibilities of any related office held by that person. (c) In determining whether any other felony arrest creates an immediate peril to the public health, safety or welfare, factors the commission may consider include: (1) the seriousness of the conduct resulting in the arrest; (2) the required mental state of the alleged offense; (3) whether the alleged offense contains an element of actual or threatened bodily injury or coercion against another person under the Texas Penal Code or the law of the jurisdiction where the offense occurred; (4) the licensee's previous violations of commission statutes or rules; (5) actual or potential harm to public safety resulting from the conduct resulting in the arrest; and (6) aggravating circumstances existing in a particular case. (d) If an offense constitutes immediate peril, the commission will notify the person of the summary suspension order and the intention to initiate proceedings, if applicable, upon final disposition of criminal proceedings. (e) If a person does not receive notice of the intent to initiate proceedings within 30 days of the commission's order, the person may appeal to the Travis County district court. (f) A person may request a hearing regarding the summary suspension within 20 days after the summary suspension order is received. Otherwise, the license remains suspended until final disposition of the case. (g) The effective date of this section is February 1, 2016. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504331 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ Mr. Beauchamp has also determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by rewriting the rule on license revocation. Mr. Beauchamp has also determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.4521, License Suspension for Officer Dishonorably Discharged; §1701.501, Disciplinary Action; and §1701.502, Felony Conviction or Placement on Community Supervision. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.4521, License Suspension for Officer Dishonorably Discharged; §1701.501, Disciplinary Action; and §1701.502, Felony Conviction or Placement on Community Supervision. No other code, article, or statute is affected by this proposal. §223.19. Revocation of License. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504305 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §223.19 The Texas Commission on Law Enforcement (Commission) proposes new §223.19, concerning License Revocation. This new rule recodifies the previous rules related to license revocation. ♦ 37 TAC §223.19 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of §223.19, concerning Revocation of License. The repealed section is recodified into new rule §223.19. This repeal is necessary to recodify into a new rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. This new rule is necessary to recodify previous rules related to license revocation. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has also determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by simplifying the rules on license revocation. Mr. Beauchamp has also determined that for each year of the first five years the section as proposed will be in effect, there will PROPOSED RULES October 30, 2015 40 TexReg 7605 be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The new rule is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.4521, License Suspension for Officer Dishonorably Discharged; §1701.501, Disciplinary Action; and §1701.502, Felony Conviction or Placement on Community Supervision. The new rule as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.4521, License Suspension for Officer Dishonorably Discharged; §1701.501, Disciplinary Action; and §1701.502, Felony Conviction or Placement on Community Supervision. No other code, article, or statute is affected by this proposal. §223.19. License Revocation. (a) The license of a person convicted of a felony shall be immediately revoked. (b) The license of a person convicted or placed on community supervision for an offense directly related to the duties and responsibilities of any related office held by that person may be revoked. In determining whether an offense directly relates to such office, the commission will consider: (1) the nature and seriousness of the crime; (2) the relationship of the crime to the purpose for requiring a license for such office; (3) the extent to which a license might offer an opportunity to engage in further criminal activity of the same type as that in which the person previously had been involved; and (4) the relationship of the crime to the ability, capacity, or fitness required to perform the duties and discharge the responsibilities of such office. (c) The license of a person convicted or placed on community supervision for any offense involving family violence shall be revoked. (d) The license of a person who is noncompliant for the third time in obtaining continuing education shall be revoked. (e) The license of a person who has received a dishonorable or other discharge based on misconduct which bars future military service shall be revoked. (f) The license of a person who has made, submitted, caused to be submitted, or filed a false or untruthful report to the commission may be revoked. (g) The license of a person who has been found to be in unauthorized possession of any commission licensing examination or portion of a commission licensing examination, or a reasonable facsimile shall be revoked. (h) Revocation permanently bars the person from any future licensing or certification by the commission. (i) A revoked license cannot be reinstated unless the licensee provides proof of facts supporting the revocation have been negated, such as: 40 TexReg 7606 October 30, 2015 Texas Register (1) the felony conviction has been reversed or set aside on direct or collateral appeal, or a pardon based on subsequent proof of innocence has been issued; (2) the dishonorable or bad conduct discharge has been upgraded to above dishonorable or bad conduct conditions; or (3) the report alleged to be false or untruthful was found to be truthful. (j) During the direct appeal of any appropriate conviction, a license may be revoked pending resolution of the mandatory direct appeal. The license will remain revoked unless and until the holder proves that the conviction has been set aside on appeal. (k) The holder of any revoked license may informally petition the executive director for reinstatement of that license based upon proof by the licensee that the facts supporting the revocation have been negated. (l) If granted, the executive director shall inform the commissioners of such action no later than at their next regular meeting. (m) If denied, the holder of a revoked license may petition the commission for a hearing to determine reinstatement based upon the same proof. (n) The effective date of this section is February 1, 2016. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504332 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §223.20 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of §223.20 concerning Revocation of License for Constitutionally Elected Officials. The repealed section is consolidated into new §223.19. This repeal is necessary to consolidate into new §223.19. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by consolidating rules. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.4521, License Suspension for Officer Dishonorably Discharged; §1701.501, Disciplinary Action; and §1701.502, Felony Conviction or Placement On Community Supervision. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.4521, License Suspension for Officer Dishonorably Discharged; §1701.501, Disciplinary Action; and §1701.502, Felony Conviction or Placement On Community Supervision. forcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.506, Appeal; and Texas Government Code, Chapter 2001, Administrative Procedure Act. The repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.506, Appeal; and Texas Government Code, Chapter 2001, Administrative Procedure Act. No other code, article, or statute is affected by this proposal. §223.21. Appeal. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. No other code, article, or statute is affected by this proposal. Filed with the Office of the Secretary of State on October 13, §223.20. cials. 2015. Revocation of License for Constitutionally Elected Offi- The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, TRD-201504307 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 2015. ♦ TRD-201504306 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ CHAPTER 227. ♦ ♦ SCHOOL MARSHALS 37 TAC §227.1 The Texas Commission on Law Enforcement (Commission) proposes amendment to §227.1, concerning School District Responsibilities. The rule title is amended. Subsection (a)(3) and (4) and subsections (b) and (c) amend the rule to include public junior college. Subsection (d) reflects the effective date. ♦ 37 TAC §223.21 (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of §223.21, concerning Appeal. The repealed section is recodified in new rule §223.5. This repeal is necessary to be recodified in a new rule. John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by simplifying the rule on appeals. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law En- This amended rule is necessary to reflect legislative changes from SB 386 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by allowing public junior colleges to appoint school marshals. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.260, Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School PROPOSED RULES October 30, 2015 40 TexReg 7607 Marshal; Texas Education Code §51.220, Public Junior College School Marshals; and Texas Code of Criminal Procedure, §2.127, School Marshals. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.260, Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code §51.220, Public Junior College School Marshals; and Texas Code of Criminal Procedure, §2.127, School Marshals. No other code, article, or statute is affected by this proposal. §227.1. Appointing Entity Responsibilities [School District Responsibilities]. (a) A school district or public junior college shall: (1) submit and receive approval for an application to appoint a person as a school marshal; (2) upon authorization, notify the commission using approved format prior to appointment; (3) report to the commission, within seven days, when a person previously authorized to act as a school marshal is no longer employed with the school district or public junior college; (4) report to the commission, within seven days, when a person previously authorized to act as a school marshal is no longer authorized to do so by the school district, public junior college, commission standards, another state agency, or under other law; and (5) immediately report to the commission a school marshal's violation of any commission standard, including the discharge of a firearm carried under the authorization of this chapter outside of a training environment. (b) A school district or public junior college shall not appoint or employ an ineligible person as a school marshal. (c) For five years, the school district or public junior college must retain documentation that the district and person has met all requirements under law in a format readily accessible to the commission. This requirement does not relieve a school district or public junior college from retaining all other relevant records not otherwise listed. amended to include public junior college. Subsection (c) reflects the effective date. This amended rule is necessary to reflect legislative changes from SB 386. John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by allowing public junior colleges to appoint school marshals. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.260, Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code §51.220, Public Junior College School Marshals; and Texas Code of Criminal Procedure, §2.127, School Marshals. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.260, Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code §51.220, Public Junior College School Marshals; and Texas Code of Criminal Procedure, §2.127, School Marshals. No other code, article, or statute is affected by this proposal. §227.3. School Marshal Licensing and Reporting Requirements. (d) The effective date of this section is February 1, 2016. [February 1, 2014.] (a) To be eligible for appointment as a school marshal, an applicant shall: The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. training; Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504333 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §227.3 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §227.3, concerning School Marshal Licensing and Reporting Requirements. Subsection (b)(1) is 40 TexReg 7608 October 30, 2015 Texas Register (1) successfully complete all prerequisite commission (2) pass the state licensing exam; (3) district; and be employed and appointed by an authorized school (4) cal fitness. meet all statutory requirements, including psychologi- (b) Once appointed, a school marshal shall: (1) immediately report to the commission and school district any circumstance which would render them unauthorized to act as a school marshal by virtue of their employment with the school district or public junior college, failure to meet the standards of the commission, another state agency, or under law; (2) immediately report to the commission any violation of applicable commission standards, including any discharge of a firearm carried under the authorization of this chapter outside of training environment; and (3) comply with all requirements under law, including Texas Education Code, §37.0811. (c) The effective date of this section is February 1, 2016. [February 1, 2014.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. ♦ (b) The training program must be preapproved and conducted by commission staff or approved provider. The training program shall include 80 hours of instruction designed to: (1) emphasize strategies for preventing school shootings and for securing the safety of potential victims of school shootings; (2) educate a trainee about legal issues relating to the duties of peace officers and the use of force or deadly force in the protection of others; TRD-201504335 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ §227.5. School Marshal Training Entities. (a) A school marshal training program is open to any employee of a school district, open-enrollment charter school, or public junior college who holds a license to carry a [concealed] handgun issued under Texas Government Code, Chapter 411, Subchapter H. (3) introduce the trainee to effective law enforcement strategies and techniques; (4) ♦ improve the trainee's proficiency with a handgun; and (5) enable the trainee to respond to an emergency situation requiring deadly force, such as a situation involving an active shooter. 37 TAC §227.5 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §227.5, concerning School Marshal Training Entities. Subsection (a) is amended to include public junior colleges. Subsection (c) reflects the effective date. This amended rule is necessary to reflect legislative changes from SB 386 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by allowing public junior colleges to appoint school marshals. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.260, Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code §51.220, Public Junior College School Marshals; and Texas Code of Criminal Procedure, §2.127, School Marshals. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.260, Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code §51.220, Public Junior College School Marshals; and Texas Code of Criminal Procedure, §2.127, School Marshals. No other code, article, or statute is affected by this proposal. (c) The effective date of this section is February 1, 2016. [February 1, 2014.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504336 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ 37 TAC §227.9 The Texas Commission on Law Enforcement (Commission) proposes an amendment to §227.9, concerning License Action. Subsection (a) and subsection (b)(1) are amended to remove the term "concealed" in response to legislative changes. This amended rule reflects legislative changes from HB 910 (84R). John Beauchamp, General Counsel, has determined that for each year of the first five years the section as proposed will be in effect, there will be no effect on state or local governments as a result of administering this section. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be a positive benefit to the public by ensuring no school marshals remain licensed when ineligible. Mr. Beauchamp has determined that for each year of the first five years the section as proposed will be in effect, there will be no anticipated cost to small businesses, individuals, or both as a result of the proposed section. Comment on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law En- PROPOSED RULES October 30, 2015 40 TexReg 7609 forcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. The amendment is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.260, Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code §51.220, Public Junior College School Marshals; and Texas Code of Criminal Procedure, §2.127, School Marshals. The amendment as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority; §1701.260, Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal; Texas Education Code §51.220, Public Junior College School Marshals; and Texas Code of Criminal Procedure, §2.127, School Marshals. No other code, article, or statute is affected by this proposal. §227.9. License Action. (a) The commission shall immediately revoke a school marshal license if the license holder's ability to carry a [concealed] handgun has been suspended or revoked by the Texas Department of Public Safety. (b) A person whose school marshal license is revoked may obtain recertification by: (1) furnishing proof to the commission that the person's [concealed] handgun license has been reinstated; and (2) completing initial training to the satisfaction of the commission staff, paying the fee for the training, and demonstrating psychological fitness on the psychological examination. (c) If a school marshal license holder violates any commission standard, the commission shall immediately suspend the license for ten years. Mitigating factors are inapplicable to a suspension action under this chapter. (d) The effective date of this section is February 1, 2016. [February 1, 2014.] The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504337 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Commission on Law Enforcement or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) The Texas Commission on Law Enforcement (Commission) proposes the repeal of §227.11, concerning Confidentiality of Information. This is redundant information that is already in statute. October 30, 2015 John Beauchamp, General Counsel, has determined that for each year of the first five years the repeal as proposed will be in effect, there may be little to no effect on state or local governments as a result of administering this repeal. Mr. Beauchamp has determined that for each year of the first five years, the repeal as proposed will be in effect, there will be a positive benefit to the public by removing redundant information. Mr. Beauchamp has determined that for each year of the first five years the repeal as proposed will be in effect, there will be no anticipated cost to small business, individuals, or both as a result of the proposed repeal. Comments on the proposal may be submitted electronically to public.comment@tcole.texas.gov or in writing to Mr. Kim Vickers, Executive Director, Texas Commission on Law Enforcement, 6330 E. Highway 290, Suite 200, Austin, Texas 78723-1035. This repeal is proposed under Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.260, Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal. This repeal as proposed is in compliance with Texas Occupations Code §1701.151, General Powers of the Commission; Rulemaking Authority, and §1701.260, Training for Holders of License to Carry Handgun; Certification for Eligibility for Appointment as School Marshal. No other code, article, or statute is affected by this proposal. §227.11. Confidentiality of Information. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504308 Kim Vickers Executive Director Texas Commission on Law Enforcement Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 936-7713 ♦ ♦ ♦ PART 15. TEXAS FORENSIC SCIENCE COMMISSION CHAPTER 651. DNA, CODIS, FORENSIC ANALYSIS, AND CRIME LABORATORIES 37 TAC §227.11 40 TexReg 7610 This repeal is necessary to comply with SB 386 and SB 996 (84R), which address the confidentiality of information on school marshals. Texas Register The Texas Forensic Science Commission ("Commission") proposes amendments to 37 Texas Administrative Code §§651.1, 651.3 - 651.11 and 651.101 - 651.105 to correct references to the Texas Department of Public Safety ("DPS") and internal rule citations. The Commission also proposes the repeal of §651.12. The amendments and the repeal are necessary to update rule language to reflect the transfer of the rules from Title 37, Part 1, Chapter 28 to new Part 15, Chapter 651. The transfer was made in accordance with Senate Bill 1287, which was passed in the 84th Legislative Session. Fiscal Note. Leigh Tomlin, Associate General Counsel, has determined that for each year of the first five years the proposed amendments and repeal will be in effect, there will be no fiscal impact to state or local governments as a result of the enforcement or administration of the proposal. There will be no anticipated effect on local employment or the local economy as a result of the proposal. Public Benefit/Cost Note. Ms. Tomlin has also determined that for each year of the first five years the proposed amendments and repeal are in effect, the anticipated public benefit will be accurate and updated rules. (d) Statutory Commission [DPS] accreditation. A laboratory may apply to the Commission [director] for [statutory DPS] accreditation if accreditation is required for evidence admissibility under Code of Criminal Procedure, Article 38.35. §651.3. Recognition Process. The Commission [director] shall recognize an accrediting body under this section if the Commission [director] determines that the accrediting body: (1) issues an accreditation that is accepted throughout the relevant scientific community and appropriate or available to a laboratory; (2) has established adequate accreditation criteria reasonably likely to ensure trustworthy forensic analysis; Economic Impact Statement and Regulatory Flexibility Analysis for Small and Micro Businesses. As required by the Government Code §2006.002(c) and (f), Ms. Tomlin has determined that the proposed amendments and repeal will not have an adverse economic effect on any small or micro business because there are no anticipated economic costs to any person who is required to comply with the rules as proposed. (3) requires a periodic competency audit or review of the personnel, facilities, and procedures employed by a laboratory to conduct a forensic analysis; and Takings Impact Assessment. Ms. Tomlin has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under the Government Code §2007.043. §651.4. List of Recognized Accrediting Bodies. (a) The Commission [director] recognizes the accrediting bodies in this subsection, subject to the stated discipline or subdiscipline limitations: Request for Public Comment. The Texas Forensic Science Commission invites comments on the proposal from any member of the public. Please submit comments to Leigh Tomlin, 1700 North Congress Avenue, Suite 445, Austin, Texas 78701 or leigh@fsc.texas.gov. Comments must be received by November 29, 2015 to be considered by the commission. SUBCHAPTER A. ACCREDITATION 37 TAC §§651.1, 651.3 - 651.11 Statutory Authority. The amendments are proposed under Tex. Code Crim. Proc. art 38.01 §4-d. Cross reference to statute. The proposal affects 37 TAC §§651.1 - 651.11. §651.1. Purpose. (a) Generally. This subchapter contains the Texas Forensic Science Commission (Commission) [director's] rules adopted under Government Code, §411.0205, that govern: (1) the recognition of an accrediting body by the Commission [director]; and (2) the accreditation of an individual laboratory or other entity by the Commission [director]. (b) Accreditation sequence. To be accredited by the Commission [director] under this subchapter, a laboratory must first be accredited by a recognized accrediting body. (c) Source of evidence predicate. The Code of Criminal Procedure, Article 38.35, requires Commission [DPS] accreditation of an individual laboratory or other entity for admission of evidence or testimony if the laboratory or entity conducts a forensic analysis of physical evidence for use in a criminal proceeding. (4) withholds, grants, or withdraws its accreditation of a laboratory based on its own determination of a reasonable likelihood of meaningful corrective action for each deficiency noted during the periodic audit or review. (1) American Board of Forensic Toxicology (ABFT)--recognized for accreditation of toxicology discipline only. (2) American Society of Crime Laboratory Directors, Laboratory Accreditation Board (ASCLD/LAB)--recognized for accreditation of all disciplines which are eligible for accreditation under this subchapter. (3) ANSI-ASQ National Accreditation Board (ANAB) formerly known as Forensic Quality Services (FQS and FQS-I) or National Forensic Science Technology Center (NFSTC)--recognized for accreditation of all disciplines which are eligible for accreditation under this subchapter. (4) Substance Abuse and Mental Health Services Administration of the Department of Health and Human Services (HHS/SAMSHA) [(HHS/SAMHA)], formerly known as the National Institute on Drug Abuse of the Department of Health and Human Services (HHS/NIDA)--recognized for accreditation of toxicology discipline in the subdiscipline of Urine Drug Testing for all classes of drugs approved by the accrediting body. (5) College of American Pathologists (CAP)--recognized for accreditation of toxicology discipline. (6) American Association for Laboratory Accreditation (A2LA)--recognized for accreditation of all disciplines which are eligible for accreditation under this chapter. (b) If an accrediting body is recognized under subsection (a) of this section and the recognized body approves a new discipline, subdiscipline, or procedure, the Commission [director] may temporarily recognize the new discipline, subdiscipline, or procedure. A temporary approval shall be effective for 120 days. §651.5. Disciplines and Subdisciplines Subject to Commission [DPS] Accreditation. (a) 'Forensic analysis'/recognized accreditation. This section describes a discipline or subdiscipline that involves forensic analysis PROPOSED RULES October 30, 2015 40 TexReg 7611 for use in a criminal proceeding and for which accreditation is available from a recognized accrediting body. by the Code of Criminal Procedure, Article 38.35, or by this subchapter based on their nature. (b) By entire discipline. A laboratory may apply [to the director] for Commission [DPS] accreditation for one or more of the following disciplines: (1) This paragraph describes a discipline, subdiscipline, or procedure that is excluded from the definition of forensic analysis or otherwise exempted by the Code of Criminal Procedure, Article 38.35, and for which no recognized accreditation is appropriate or available. A laboratory may not apply for Commission [to the director for DPS] accreditation for: (1) controlled substances; (2) toxicology; (3) biology; (4) firearms/toolmark; (5) questioned documents; (6) (A) (B) latent print examination; (C) digital evidence (including computer forensics, audio, or imaging); or trace evidence; or (7) other discipline if approved by a recognized accrediting body and the Commission [director]. (c) Limited to subdiscipline. A laboratory may apply [to the director] for Commission [DPS] accreditation limited to one or more of the following subdisciplines: (1) under the controlled substances discipline, subdiscipline may include controlled substances marihuana, precursor analysis, and clandestine laboratory analysis; (2) under the toxicology discipline, subdiscipline may include forensic toxicology, urine drug testing, and blood alcohol analysis; (3) under the biology discipline, subdiscipline may include biology, serology, and DNA; (4) under the firearms/toolmark discipline, subdiscipline may include: firearms, ballistics, and toolmarks; (5) under the questioned documents discipline, subdiscipline may include questioned documents, handwriting, and ink analysis (including forensic handwriting comparison); (6) under the trace evidence discipline, subdiscipline may include: fire debris, explosives, fibers, gun shot residue, glass, hairs, paint, filaments, and unknown substances; and (7) other discipline and its related subdiscipline if accredited by a recognized accrediting body and the Commission [director]. (d) A laboratory may choose to assign a particular subdiscipline to a different administrative section or unit in the laboratory. For example, the subdiscipline of impression evidence, including footwear, tiretrack, and similar impression evidence, may be administratively assigned by the laboratory to its trace evidence section, firearms section, or questioned document section. The Commission [director] deems impression evidence to be a subdiscipline of several disciplines under this subchapter, including trace evidence, firearms/toolmark, or questioned documents. (e) If an accreditation for a subdiscipline is accompanied by the term 'only' or a similar notation, the Commission [director] will deem the accreditation to exclude other subdisciplines in that discipline. (f) Accreditation of a confirmation test procedure does not carry automatic accreditation of an associated field, spot, screening, or other presumptive test. §651.6. Disciplines, Subdisciplines, and Procedures to Which Statutory Commission [DPS] Accreditation Does Not Apply. This section describes disciplines, subdisciplines, or procedures excluded from the definition of forensic analysis or otherwise exempted 40 TexReg 7612 October 30, 2015 breath specimen testing under Transportation Code, Chapter 724; Texas Register (D) an examination or test excluded by rule under Government Code, §411.0205(c). (E) the portion of an autopsy conducted by a medical examiner or other forensic pathologist who is a licensed physician. (2) This paragraph describes a discipline, subdiscipline, or procedure that does not normally involve forensic analysis of physical evidence for use in a criminal proceeding and for which recognized accreditation is inappropriate or unavailable. A laboratory may not apply for Commission [to the director for DPS] accreditation for: (A) forensic photography; (B) non-criminal paternity testing; (C) urine, or tissue; non-criminal testing of human or nonhuman blood, (D) a crime scene search team (whether or not associated with an accredited laboratory) if the team does not engage in forensic analysis because it only engages in the location, identification, collection, or preservation of physical evidence and the activity is not integral to an expert examination or test; (E) other evidence processing or handling that is excluded under §651.2(2) [§28.142(2)] of this title (relating to Definitions); or (F) other discipline or subdiscipline so determined by the Commission [director]. §651.7. Disciplines, Subdisciplines, and Procedures Exempt from Statutory Commission [DPS] Accreditation. (a) This section describes a discipline, subdiscipline, or procedure that is 'forensic analysis' but is not subject to accreditation by one or more recognized accrediting bodies. (b) Even though a discipline or subdiscipline is forensic analysis, the Commission [director] has determined that no accreditation is appropriate or available from a recognized accrediting body for the following disciplines, subdisciplines, or procedures and a laboratory may not apply for Commission [to the director for DPS] accreditation for: (1) sexual assault examination of the person; (2) forensic anthropology, entomology, or botany; (3) environmental testing; (4) facial or traffic accident reconstruction; (5) serial number restoration; (6) polygraph examination; (7) voice stress, voiceprint, or similar voice analysis; (8) forensic hypnosis; (9) statement analysis; (10) (a) Issuance and renewal. The Commission [director] may issue provisional accreditation under this section that is non-renewable for that discipline, subdiscipline, or procedure. profiling; or (11) other discipline or subdiscipline so determined by the Commission [director], including those identified and listed at the Commission's [department's] website. (c) A request for exemption shall be submitted in writing to the Commission [director]. §651.8. Full Commission [DPS]Accreditation. (a) Issuance and renewal. The Commission [director] may issue or renew accreditation under this section. (b) Application. An applicant for full Commission [DPS] accreditation shall complete and submit to the Commission [director] a current Laboratory Accreditation Form [form LAB-5] and attach copies of the following: (1) an accreditation certificate and letter of notification of accreditation from a recognized accrediting body; and (2) each document provided by the recognized accrediting body that identifies the discipline or subdiscipline for which the laboratory has received accreditation and any limitation or restriction regarding that accreditation. (c) Additional information. The Commission [director] may require additional information to properly evaluate the application either as part of the original application or as supplemental information. (d) Reports to the Commission [director]. (1) If accredited by ASCLD/LAB, a laboratory shall provide the Commission [director] with a copy of each Annual Accreditation Review Report. If accredited by another recognized accrediting body, a laboratory shall provide the Commission [director] with a copy of each equivalent annual accreditation assessment document. The copy shall be submitted to the Commission [director] at the same time that it is due to the recognized accrediting body. (2) A laboratory shall provide the Commission [director] with a copy of correspondence and each report or communication between the laboratory and the recognized accrediting body. The laboratory shall submit the copy to the Commission [director] no later than 30 days after the date the laboratory receives or transmits the correspondence, report, or communication. (3) A laboratory that discontinues a specific forensic discipline or subdiscipline: (A) if known beforehand, should submit written notification to the Commission [director] at least 30 days before the effective date of the discontinuation; or (B) if unknown beforehand, shall submit written notification to the Commission [director] at least 5 business days after the effective date of the discontinuation. (e) Federal forensic laboratories. A federal forensic laboratory is deemed to be accredited by the Commission [director] without application provided that the laboratory is accredited by a recognized accrediting body as provided under §651.4 [§28.144] of this title (relating to List of Recognized Accrediting Bodies). A laboratory deemed accredited is not subject to the reporting requirements of this subchapter or the processes provided under Subchapter B [J] of this chapter (relating to Complaints, Special Review, and Administrative Action). §651.9. (b) Application. An applicant for provisional Commission [DPS] accreditation shall complete and submit to the Commission [director] a current Laboratory Accreditation Form [form LAB-5] as referenced in §651.8(b) [§28.148(b)] of this title (relating to Full Commission [DPS] Accreditation) and attach copies of the following: (1) the application for accreditation by a recognized accrediting body; (2) the initial audit, inspection, or review report from an independent auditor based on the standards of the recognized accrediting body; (3) a full response in writing to the initial audit, inspection, or review report described in paragraph (2) of this subsection; and (4) each document provided by the recognized accrediting body that identifies the discipline or subdiscipline for which the laboratory seeks accreditation. (c) Provisional-Interim. If a laboratory is in good standing with its accrediting body and has made application to renew or replace its accreditation, the laboratory may apply for Provisional Commission [DPS] Accreditation if necessary to cover a period between times that it qualifies for full Commission [DPS] accreditation. For this Provisional Commission [DPS] Accreditation, the laboratory may complete and submit to the Commission [director] a current Laboratory Accreditation Form [form LAB-5] as referenced in §651.8(b) [28.148(b)] of this title and attach copies of the following: (1) the application for accreditation by a recognized accrediting body; and (2) each document provided by the recognized accrediting body that identifies the discipline or subdiscipline for which the laboratory seeks accreditation. (d) Additional information. The Commission [director] may require additional information to properly evaluate the application either as part of the original application or as supplemental information. (e) Reports to the Commission [director]. (1) The laboratory shall request that the recognized accrediting body provide the Commission [director] with a copy of each audit, inspection, or review report conducted before full Commission [DPS] accreditation. (2) A laboratory shall provide the Commission [director] with a copy of correspondence and each report or communication between the laboratory and the recognized accrediting body. The laboratory shall submit the copy to the Commission [director] no later than 30 days after the date the laboratory receives or transmits the correspondence, report, or communication. (3) A laboratory that discontinues a specific forensic discipline, subdiscipline, or procedure shall submit written notification to the Commission [director] at least 30 days before the effective date of the discontinuation. (f) Second sample required. A laboratory with provisional Commission [DPS] accreditation under this section must: (1) preserve one or more separate samples of the physical evidence for use by the defense attorney or use under order of the convicting court; and Provisional Commission [DPS] Accreditation. PROPOSED RULES October 30, 2015 40 TexReg 7613 (2) agree to preserve, and preserve those samples until all appeals in the criminal case are final. the Texas Forensic Science Commission or in the Texas Register office, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) §651.10. Accreditation Term. (a) Normal term. The normal term for Commission [DPS] accreditation: Statutory Authority. The repeal is proposed under Tex. Code Crim. Proc. art 38.01 §4-d. (1) begins on the date of issuance of the initial Commission [DPS] accreditation letter; and (2) extends until withdrawn by the recognized accrediting body or by the Commission [director] under §651.11 [§28.164] of this title (relating to Automatic Withdrawal of Commission [DPS] Accreditation). (b) Provisional term. (2) If a currently accredited laboratory is in the process of renewing or replacing its accreditation from a recognized accrediting body, prior to the end of its term, and applies for provisional Commission [DPS] accreditation, the term of that provisional accreditation may not exceed six (6) months. (c) Limited term. A laboratory, including an out of state, federal, or private laboratory, may request Commission [DPS] accreditation for a term less than the term normally available under this subchapter. §651.11. Automatic Withdrawal of Commission [DPS] Accreditation. The Commission [director] shall automatically withdraw: (1) the full Commission [DPS] accreditation for a laboratory, discipline, or subdiscipline at the date and time that the recognized accrediting body withdraws its relevant laboratory, discipline, or subdiscipline accreditation; or (2) the provisional Commission [DPS] accreditation for a laboratory, discipline, or subdiscipline at the date and time that the recognized accrediting body notifies the Commission [director] that the laboratory has withdrawn its application for the relevant laboratory, discipline, or subdiscipline accreditation. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504378 Leigh Tomlin Associate General Counsel Texas Forensic Science Commission Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 784-0037 ♦ §651.12. Consent to Cooperate with the Texas Forensic Science Commission. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. (Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of October 30, 2015 2015. TRD-201504393 Leigh Tomlin Associate General Counsel Texas Forensic Science Commission Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 784-0037 ♦ ♦ ♦ SUBCHAPTER B. COMPLAINTS, SPECIAL REVIEW, AND ADMINISTRATIVE ACTION 37 TAC §§651.101 - 651.105 Statutory Authority. The amendments are proposed under Tex. Code Crim. Proc. art 38.01 §4-d. Cross reference to statute. §§651.101 - 651.105. The proposal affects 37 TAC §651.101. Complaint Process. (a) Question or complaint. If the Commission [director] learns of a fact, circumstance, or complaint that raises a question about the integrity or trustworthiness of a laboratory, or a procedure, examination, or test conducted by the laboratory since the date of application for Commission [DPS] accreditation, the Commission [director] may take any of the following actions: (1) communicate further with the source of the complaint to assess the appropriateness of further action; (2) refer the matter to the laboratory's director for evaluation, audit, correction, or other appropriate action; (3) initiate an audit under §651.102 [§28.162] of this title (relating to Unscheduled Audit); (4) issue a letter to the laboratory: (A) of the matter; demanding an immediate response and explanation (B) demanding that the laboratory permit or arrange for an immediate inspection or audit of the matter; or (C) explaining the action to be taken by the Commission [director] in the matter; (5) notify or refer the matter to a law enforcement agency or prosecutor and recommend appropriate criminal action; ♦ 37 TAC §651.12 40 TexReg 7614 The proposal affects 37 TAC Filed with the Office of the Secretary of State on October 16, (1) A laboratory or its discipline or subdiscipline that applies for accreditation from a recognized accrediting body may apply to the Commission [director] for [a] provisional [DPS] accreditation in accordance with §651.9 [§28.139] of this title (relating to Provisional Commission [DPS] Accreditation) for a term not to exceed one year from the date the Commission [director] issues the accreditation unless formally extended for good cause by the Commission [director]. ♦ Cross reference to statute. §651.12. Texas Register (6) refer the matter to a district judge and recommend appropriate action to convene a court of inquiry under Code of Criminal Procedure, Chapter 52; and [(7) refer the matter to the Texas Forensic Science Commission; and] (7) [(8)] any other actions deemed appropriate by the Commission [director]. (b) Source and scope. A question or complaint may be raised by any source, including an individual, entity, or audit. The scope of any action taken or proposed by the Commission [director] under this section shall be determined by the Commission [director], based on the nature of the question or complaint. (c) Records. The Commission [director] may maintain a public record of a laboratory's accreditation or approval status. (1) The Commission [director] may maintain on the public record a notation of an action taken under this subchapter, including a question, complaint, or audit. (2) A question, complaint, or audit is public information when in the possession of the Commission [director]. §651.102. Unscheduled Audit. (a) If the Commission [director] determines that there is reasonable cause to believe that a laboratory has failed to maintain quality assurance standards as provided under the laboratory's specific policy required by its recognized accrediting body or the FBI DNA Quality Assurance Audit Document, or has violated any rule in this chapter, the Commission [director] may take appropriate action, including one or more of the following: (1) direct the laboratory to conduct an internal audit and implement appropriate corrective action; (2) order the laboratory to obtain, at its own expense, a special external audit by an auditor approved by the laboratory's recognized accrediting body and provide that report to the Commission [director] within a reasonable time frame determined by the Commission [director] not to exceed 60 days from the date of the order; (3) notify the laboratory that further testing is not approved by the Commission [DPS]; (4) initiate an evaluation of continued accreditation under Subchapter A [I] of this chapter (relating to Accreditation); or [(5) provide appropriate compliance information to the Texas Forensic Science Commission and/or any entity that may be responsible for oversight of the laboratory; or] (b) A proposed corrective action plan under this section must fully address each non-compliance finding and identify corrective action that meets or exceeds the standards: (1) required by the laboratory's recognized accrediting body; and (2) approved by the Commission [director]. (c) The Commission [director] shall promptly review a proposed corrective action plan and take the following action: (1) approve the corrective plan if it meets the requirements of this section; or (2) decline to approve the corrective plan and identify necessary revisions to the plan. (d) The Commission [director] shall notify the laboratory of approval or disapproval of the audit response. If disapproved, the Commission [director] shall notify the laboratory of required corrective action, and the laboratory shall implement the corrective action in a timely manner specified in the notification, except as provided by subsection (e) of this section. (e) A laboratory shall implement and complete an approved corrective action plan described in subsection (d) of this section, unless the laboratory demonstrates good cause for extension to the Commission [director] before the due date for completion. §651.104. Withdrawal of Commission [DPS] Accreditation. The Commission [director] may withdraw [DPS] accreditation for a laboratory, discipline, or subdiscipline if the laboratory: (1) violates this chapter; (2) fails to respond meaningfully within five business days to a letter issued by the Commission [director] under this subchapter; (3) fails to timely submit an audit required under this subchapter; or (4) fails to allow or substantially interferes with an inspection or audit conducted under this subchapter. §651.105. Review by the Commission [Director]. (a) Reconsideration. A laboratory that has been ordered to take action under this subchapter may request reconsideration by the Commission [director] in writing within 15 days of the order. (b) An audit under this subchapter [subsection] shall comply with minimum standards for audits or inspections as established by the Commission [director of the department's Crime Laboratory Service]. (b) Reinstatement. An accredited laboratory that has had Commission [DPS] accreditation withdrawn automatically under §651.11 [§28.151] of this title (relating to Automatic Withdrawal of Commission [DPS] Accreditation) may have its accreditation reinstated by the Commission [director] if the laboratory shows that it presently meets or exceeds the quality assurance standards required by the laboratory's recognized accrediting body. (c) The Commission [director of the department] may enter an accredited laboratory at any reasonable time to conduct an inspection or audit under this chapter. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. §651.103. Filed with the Office of the Secretary of State on October 16, (5) [(6)] any other actions deemed appropriate by the Commission [director]. Corrective Action Plan. (a) If a laboratory is subject to an unscheduled audit that has resulted in a finding of non-compliance, the laboratory shall propose a corrective action plan and submit the plan to the Commission [director] within 30 days from the date that the laboratory receives the audit results. If the laboratory has been notified that further testing is not approved, the plan should identify the date that the laboratory intends to reinstate approved testing. 2015. TRD-201504380 Leigh Tomlin Associate General Counsel Texas Forensic Science Commission Earliest possible date of adoption: November 29, 2015 For further information, please call: (512) 784-0037 PROPOSED RULES October 30, 2015 40 TexReg 7615 TITLE 10. COMMUNITY DEVELOPMENT PART 1. TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS CHAPTER 80. MANUFACTURED HOUSING SUBCHAPTER A. CODES, STANDARDS, TERMS, FEES AND ADMINISTRATION 10 TAC §80.3 The Texas Department of Housing and Community Affairs withdraws proposed amendments to §80.3 which appeared in the May 1, 2015, issue of the Texas Register (40 TexReg 2365). The Texas Department of Housing and Community Affairs withdraws proposed amendments to §80.41 which appeared in the May 1, 2015, issue of the Texas Register (40 TexReg 2365). Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504384 Joe A. Garcia Executive Director, Manufactured Housing Division Texas Department of Housing and Community Affairs Effective date: October 16, 2015 For further information, please call: (512) 475-4999 ♦ Filed with the Office of the Secretary of State on October 16, SUBCHAPTER E. 2015. 10 TAC §80.73 TRD-201504382 Joe A. Garcia Executive Director, Manufactured Housing Division Texas Department of Housing and Community Affairs Effective date: October 16, 2015 For further information, please call: (512) 475-4999 ♦ ♦ ♦ ENFORCEMENT The Texas Department of Housing and Community Affairs withdraws proposed amendments to §80.73 which appeared in the May 1, 2015, issue of the Texas Register (40 TexReg 2365). Filed with the Office of the Secretary of State on October 16, 2015. ♦ SUBCHAPTER C. LICENSEES' RESPONSIBILITIES AND REQUIREMENTS 10 TAC §§80.30, 80.32, 80.36 The Texas Department of Housing and Community Affairs withdraws proposed amendments to §§80.30, 80.32, and 80.36 which appeared in the May 1, 2015, issue of the Texas Register (40 TexReg 2365). Filed with the Office of the Secretary of State on October 16, TRD-201504387 Joe A. Garcia Executive Director, Manufactured Housing Division Texas Department of Housing and Community Affairs Effective date: October 16, 2015 For further information, please call: (512) 475-4999 ♦ ♦ ♦ SUBCHAPTER G. STATEMENTS OF OWNERSHIP AND LOCATION 10 TAC §80.90 2015. TRD-201504383 Joe A. Garcia Executive Director, Manufactured Housing Division Texas Department of Housing and Community Affairs Effective date: October 16, 2015 For further information, please call: (512) 475-4999 ♦ SUBCHAPTER D. 10 TAC §80.41 ♦ ♦ LICENSING ♦ The Texas Department of Housing and Community Affairs withdraws proposed amendments to §80.90 which appeared in the May 1, 2015, issue of the Texas Register (40 TexReg 2365). Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504389 Joe A. Garcia Executive Director, Manufactured Housing Division Texas Department of Housing and Community Affairs Effective date: October 16, 2015 For further information, please call: (512) 475-4999 WITHDRAWN RULES October 30, 2015 40 TexReg 7617 ♦ ♦ ♦ ♦ TITLE 43. TRANSPORTATION PART 10. TEXAS DEPARTMENT OF MOTOR VEHICLES CHAPTER 215. MOTOR VEHICLE DISTRIBUTION SUBCHAPTER D. FRANCHISED DEALERS, MANUFACTURERS, DISTRIBUTORS, AND CONVERTERS 43 TAC §215.102 The Texas Department of Motor Vehicles withdraws proposed amendments to §215.102 which appeared in the June 19, 2015, issue of the Texas Register (40 TexReg 3754). Filed with the Office of the Secretary of State on October 15, 2015. TRD-201504355 David D. Duncan General Counsel Texas Department of Motor Vehicles Effective date: October 15, 2015 For further information, please call: (512) 465-5665 40 TexReg 7618 October 30, 2015 Texas Register ♦ ♦ SUBCHAPTER E. GENERAL DISTINGUISHING NUMBERS 43 TAC §215.133 The Texas Department of Motor Vehicles withdraws the proposed repeal of §215.133 which appeared in the June 19, 2015, issue of the Texas Register (40 TexReg 3754). Filed with the Office of the Secretary of State on October 15, 2015. TRD-201504356 David D. Duncan General Counsel Texas Department of Motor Vehicles Effective date: October 15, 2015 For further information, please call: (512) 465-5665 ♦ ♦ ♦ TITLE 1. ADMINISTRATION Section 20.66 affects Title 15 of the Election Code. PART 2. TEXAS ETHICS COMMISSION The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. CHAPTER 20. REPORTING POLITICAL CONTRIBUTIONS AND EXPENDITURES SUBCHAPTER B. GENERAL REPORTING RULES Filed with the Office of the Secretary of State on October 7, 2015. 1 TAC §20.66 (Editor's Note: The Texas Ethics Commission filed the following notice of adoption for publication in the October 23, 2015, issue of the Texas Register. Due to a Texas Register staff error, the notice was omitted from the October 23 issue. The delayed date of publication does not change the effective date of the adopted rule.) TRD-201504197 Natalia Luna Ashley Executive Director Texas Ethics Commission Effective date: October 27, 2015 Proposal publication date: August 28, 2015 For further information, please call: (512) 463-5800 ♦ ♦ ♦ The Texas Ethics Commission (the commission) adopts new Texas Ethics Commission Rule §20.66, relating to the term "discount" for purposes of Title 15 of the Election Code. The new rule is adopted without changes to the proposed text as published in the August 28, 2015, issue of the Texas Register (40 TexReg 5390). The rule will not be republished. PART 12. COMMISSION ON STATE EMERGENCY COMMUNICATIONS Under Title 15 of the Election Code, a contribution is defined as "a direct or indirect transfer of money, goods, services, or any other thing of value and includes an agreement or other obligation incurred, whether legally enforceable or not, to make a transfer." Section 251.001(2), Election Code. Texas Ethics Commission Rule §20.1(8) clarifies that an in-kind contribution is "a contribution of goods, services, or any other thing of value, except money, and includes an agreement made or other obligation incurred, whether legally enforceable or not, to make such a contribution." Additionally, Texas Ethics Commission Rule §20.1(3) clarifies that a contribution "does not include a transfer for consideration of any thing of value pursuant to a contract that reflects the usual and normal business practice of the vendor." The new rule defines the term discount and clarifies when a discount constitutes a political contribution. The Commission on State Emergency Communications (CSEC) adopts amended §252.8, relating to the establishment and governance of CSEC's Emergency Communications Advisory Committee. The proposed amended section is being adopted without changes to the proposed text as published in the June 5, 2015, issue of the Texas Register (40 TexReg 3289). The public benefit will be clarity in the commission's rules regarding the meaning of discount under the campaign finance laws and the circumstances in which a discount is or is not a political contribution. There will not be an effect on small businesses. There is no anticipated economic cost to persons who are required to comply with the adopted rule. No written comments were received on the adopted rule. Section 20.66 is adopted under Texas Government Code §571.062, which authorizes the commission to adopt rules concerning the laws administered and enforced by the commission. The laws administered and enforced by the commission include Title 15 of the Election Code. CHAPTER 252. ADMINISTRATION 1 TAC §252.8 The amendment to §252.8 changes the date that the ECAC is abolished, unless renewed, to September 1, 2020. CSEC has determined that the purposes for which the statutory advisory committee was established remain, and will likely continue to remain through the end of fiscal year 2020. No comments were received by CSEC on the proposed adopted section. The amended section is adopted under Health and Safety Code §771.051(a)(1), (2), (4), (7), (8), (9), (10), §771.0511, and §771.052; Government Code Chapter 2110. No other statutes, articles or codes are affected by the adoption. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 15, 2015. TRD-201504358 ADOPTED RULES October 30, 2015 40 TexReg 7619 Patrick Tyler General Counsel Commission on State Emergency Communications Effective date: November 4, 2015 Proposal publication date: June 5, 2015 For further information, please call: (512) 305-6922 ♦ ♦ ♦ TITLE 7. BANKING AND SECURITIES PART 1. TEXAS FINANCE COMMISSION OF CHAPTER 3. STATE BANK REGULATION SUBCHAPTER B. GENERAL 7 TAC §3.36, §3.37 The Finance Commission of Texas (commission), on behalf of the Texas Department of Banking (the department), adopts amendments to §3.36, concerning annual assessments and specialty examination fees, and §3.37, concerning the calculation of annual assessment for banks. The amendments are adopted without changes to the proposed text as published in the September 4, 2015, issue of the Texas Register (40 TexReg 5599) and will not be republished. Amendments to §3.36 revise the section to conform to changes in §3.37 concerning the manner in which assessments applicable to state banks are calculated. Amendments to §3.37 increase the amount of each bank's annual assessment to offset increased operational costs of the department, beginning with the quarterly installment due in March 2016. In addition, assessment rates are to be adjusted for inflation beginning in September 2017. The assessment system for state banks, set forth in §3.36 and §3.37, determines how much each state bank must pay for supervision by the department. This system has advantages for both the department and state banks, in that it allows banks to calculate and accrue for the amounts due to the department in support of its supervisory functions; provides an equitable structure by which banks pay for the costs of supervision; allows the department to more accurately predict and manage its cash flows; allows the department to more adequately provide for and schedule necessary staff training; and avoids the inordinate accumulation of excess funds. Section 3.36 provides that each bank's assessment is calculated annually effective September 1 of each year and is paid to the department by electronic payment/ACH transfer in quarterly installments to be debited effective September 15, December 15, March 15, and June 15 of each year, or by other means if directed by the department. Section 3.37 provides a table that specifies calculations and rates for assessment fees and sets out the steps for calculating a bank's annual assessment as described in §3.36. As reflected in the table, a state bank's assessment is calculated on the basis of its assessable assets using two factors: the base assessment amount and the marginal assessment rate applicable to the bank's assessable asset group. In addition, the department levies a surcharge on a bank that requires increased supervisory resources, currently reflected by the bank's assigned examination frequency. 40 TexReg 7620 October 30, 2015 Texas Register The adopted increase in bank assessments will support bank supervision functions and will not subsidize other regulatory responsibilities of the department. The increased revenue will permit the department to uphold the professional standards that the Texas banking industry deserves and has come to expect by providing its examiners the tools and training needed to effectively regulate an increasingly complex banking industry for the foreseeable future. Further, the Department possesses bilateral authority in regulatory matters under its cooperative bank examination agreements with the Federal Deposit Insurance Corporation and with the Federal Reserve Bank of Dallas. Retaining this stature requires the Department to maintain staff and processes that equal or exceed federal standards. The department has a solid history of fiscal responsibility and will continue to carefully and prudently evaluate the amount of funds needed to fulfill the department's statutory responsibilities. As amended, §3.37(a) the marginal assessment rates reflect increases of 12 percent for assessable asset groups 1-9, and by 14.75 percent for assessable asset groups 10-14 (assessable assets in excess of $10 billion). The base assessment amounts are also increased as a result because each base assessment amount is the sum of the assessments applicable to all lower-tier assessable asset groups. In addition, the factor determining whether a surcharge is to be applied will no longer be based on a bank's assigned examination frequency, but instead will be based on a bank's CAMELS composite rating as determined at the bank's most recent examination. The CAMELS score is a numerical rating assigned by supervisors to reflect their assessment of the overall financial condition of a bank and in fact is a major determinant of examination frequency. The score ranges from 1 (low risk) to 5 (high risk). As amended, a CAMELS composite rating of 1 or 2 will generate an assessment multiplier of 1.0, meaning there is no additional surcharge. A CAMELS composite rating of 3, 4 or 5 will generate an assessment multiplier of 2.0, meaning a surcharge equal to the calculated assessment is applied, and the total billable annual assessment would be double that applicable to a similar-sized bank with a CAMELS composite rating of 1 or 2. Finally, a bank with assessable assets of $500 million or less and a CAMELS composite rating of 1 or 2 will apply a multiplier of 0.875. Amended §3.37(b) will automatically escalate marginal assessment rates annually based on the percentage change in an inflation index, beginning September 1, 2017. The inflation index is the Gross Domestic Product Implicit Price Deflator (GDPIPD), published quarterly by the Bureau of Economic Analysis, United States Department of Commerce. Effective each September 1, the marginal assessment rates (and the derivative base assessment amounts) set forth in §3.37(a) will be revised upward (or downward) by an amount equal to the percentage change in the GDPIPD index values from the first quarter value of the previous calendar year to the first quarter value of the current calendar year (the previous March-to-March period). An increase in the GDPIPD will automatically increase marginal assessment rates, but it will not necessarily result in a proportionate increase in annual assessments. As provided by §3.36(g), the department may periodically forgive a portion of assessments otherwise due in a year when the additional funds are not needed to fund the department's operations, specifically with respect to bank and trust supervision. Section §3.36 is amended primarily to conform to and be consistent with changes in §3.37(a). However, with respect to the fiscal year beginning September 1, 2015, new paragraph (4) of §3.36(d) will require the last two quarterly installments of the fiscal year to be based on the new assessment rates. The Department received no comments regarding the proposed amendments. The amended sections are adopted pursuant to Finance Code, §31.003(a)(4) and §31.106, which authorize the commission to adopt rules necessary or reasonable to recover the cost of supervision and regulation by imposing and collecting ratable and equitable fees. As required by Finance Code, §31.003(b), the commission considered the need to promote a stable banking environment, provide the public with convenient, safe, and competitive banking services, preserve and promote the competitive position of state banks with regard to national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system, and allow for economic development in this state. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. CHAPTER 6. DISTRICTS ♦ As adopted, §6.1 states the purpose of the chapter and clarifies that establishing a banking development district does not affect requirements applicable to reinvestment zones and tax abatement agreements pursuant to the Tax Increment Financing Act or the Property Redevelopment and Tax Abatement Act (Government Code, Chapters 311 and 312, respectively). Section 6.2 provides definitions applicable to the chapter. Definitions in the statute are repeated for ease of use. Content requirements for an application are set forth in adopted §6.3, and §6.4 sets out how an application will be processed. Adopted §6.5 sets out the criteria for the designation of a banking development district, consisting of the five, statutorily required factors from Finance Code, §279.052(b), and two additional factors. The two additional factors are the physical size and cohesiveness of the proposed district, and the history of a lack of banking services in the proposed district. Finally, §6.6 imposes a minimal reporting requirements on the local government applicant in order to permit the commission to "monitor" the program as required by Finance Code, §279.051. The only required notice would inform the commission when a financial institution opens or closes a branch in an approved banking development district. TRD-201504365 Catherine Reyer General Counsel Finance Commission of Texas Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 475-1301 ♦ (within the Office of the Governor) to adopt rules regarding the criteria for the designation of banking development districts. (Finance Code, §279.102, imposes the same requirement on the Texas Credit Union Commission.) The commission must initially adopt these rules not later than January 1, 2016, see Acts 2015, 84th Legislature, R.S., Chapter 967, §2. The Department received one comment regarding the proposed sections, pointing out that Texas law does not require a financial institution or a credit union to be federally insured in order to qualify as a depository, contrary to the language proposed for the definitions set forth in §6.2(5) and (8). The Department agrees and has modified those definitions for adoption. In addition, a typographical error was corrected in §6.3(b)(3) by removing a duplicate phrase. ♦ BANKING DEVELOPMENT 7 TAC §§6.1 - 6.6 The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), adopts new §§6.1 - 6.6, concerning banking development districts. Section 6.1 and §§6.4 - 6.6 are adopted without changes to the proposed text as published in the September 4, 2015, issue of the Texas Register (40 TexReg 5602). Section 6.2 and §6.3 are adopted with nonsubstantive changes and will be republished. Finance Code, Chapter 279, requires the commission to administer and monitor a banking development district program to encourage the establishment of branches of financial institutions in areas where there is a demonstrated need for banking services. Chapter 279 became effective on September 1, 2015, see Acts 2015, 84th Legislature, R.S., Chapter 967, §1. The Texas Credit Union Commission is similarly required to administer and monitor a credit union development district program to encourage the establishment of branches of credit unions in areas where there is a demonstrated need for such services. Under Finance Code, Chapter 279, a local government may apply for the designation of a banking or credit union development district if a financial institution or credit union is participating and intends to apply to open a branch in a proposed development district at the time the local government submits the application. Finance Code, §279.052, requires the commission, in consultation with the Texas Economic Development and Tourism Office The new rules are adopted pursuant to Finance Code, §279.052(a), which requires the commission to adopt rules to implement Subchapters B and D of Chapter 279 with respect to financial institutions in banking development districts. As required by Finance Code, §279.052(b), the commission consulted with the Texas Economic Development and Tourism Office regarding the criteria for the designation of banking development districts. §6.2. Definitions. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise: (1) "Alternative providers" means check cashers, licensed money transmitters, licensed lenders, and licensed residential mortgage lenders. (2) "Banking services" include deposit taking, check-cashing, and origination of residential mortgages, commercial mortgages, or other secured or unsecured consumer or commercial loans. (3) "Branch" means a full-service main office or branch office of a financial institution or credit union. (4) "Commission" means the Finance Commission of (5) "Credit union" means a state or federal credit union. Texas. ADOPTED RULES October 30, 2015 40 TexReg 7621 (6) "Department" means the Texas Department of Banking. (7) "District" means a banking development district under this chapter. (8) "Financial institution" means a state or national bank, a state or federal savings bank, or a state or federal savings and loan association. (9) "Local government" means a municipality or county. §6.3. Application Requirements. (a) Basic application. A local government, in conjunction with a financial institution, may submit an application to the commission for the designation of a proposed banking development district, as provided by §6.4 of this title (relating to Submission and Processing of Application). The application must include the following information to the extent available: (1) identification of the local government applicant and evidence of the approval of the application by its governing body; (2) identification of the participating financial institution by type and name, and identification of its primary state and/or federal regulator; (3) a description of the geographic area comprising the proposed district, including a map that identifies the borders of the proposed district; (4) a compilation and explanation of the population demographics included within the proposed district, including the number of residents and the percentage of the population that can be described as comprised of, for example, elderly (age 64 and over), disabled, non-English speaking, and identifiable racial, ethnic or other minorities; (2) indications of community support or opposition for the application, as evidenced by letters from entities such as local chambers of commerce, local businesses, community-based organizations, nonprofit organizations, government officials, or community residents; and (3) such other information that the applicant believes will demonstrate that the proposed district meets the standards set forth in §6.5 of this title (relating to Criteria for Approval). The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504362 Catherine Reyer General Counsel Finance Commission of Texas Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 475-1301 ♦ ♦ ♦ PART 2. TEXAS DEPARTMENT OF BANKING CHAPTER 33. BUSINESSES MONEY SERVICES 7 TAC §33.4 (5) a compilation and explanation of economic indicators pertinent to the proposed district, to the extent available, including per capita annual income, median household annual income, unemployment data, percentage of the population at or below the poverty level, and percentage of the population receiving public assistance within the proposed district; The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), adopts new §33.4, concerning payment processors. The section is adopted without changes to the proposed text as published in the September 4, 2015, issue of the Texas Register (40 TexReg 5605). The rule will not be republished. (6) a description of the type and nature of commercial businesses located in the proposed district, including the number and percentage of which constitute small business, as that term is defined by Government Code §2006.001(2); The new rule excludes from money services business (MSB) licensure two types of payment processors that might otherwise be required to obtain money transmission licenses under Finance Code Chapter 151. The new rule clarifies regulatory requirements and allows the department to more efficiently enforce the Texas Money Services Act (Act). (7) a compilation and summary of significant business developments within the past three years, including corporate restructurings, plant closings, other business closings, and recent or proposed business openings or expansions; (8) the location, number, and proximity of sites where banking services are available in or near the proposed district, including branches of financial institutions and credit unions, and deposit-taking ATMs other than those located at branches; (9) a compilation and description of alternate providers in the proposed district; (10) a description of the anticipated impact that additional banking services would have on potential economic development within the proposed district. (b) Optional information. An application for designation of a banking development district may also include: (1) a description of other local government and community initiatives proposed to be undertaken and coordinated with establishment of the proposed district; 40 TexReg 7622 October 30, 2015 Texas Register Finance Code §151.003(10) authorizes the commission to adopt rules that exclude from licensing any person, transaction, or class of persons or transactions on a finding that licensing the person or transaction is not necessary to achieve the purposes of the Act. The purposes of the Act, as expressed in Finance Code §151.102, are to preserve and protect the safety and soundness of MSBs, to protect the interests of purchasers of money services, and to protect against money laundering and similar financial crimes. The department has found that regulation of the payment processors described in the new rule is not necessary to achieve these aims. New §33.4 expands and clarifies two exclusions that already exist under Texas law. First, Finance Code §151.003(7) excludes a person acting as an intermediary on behalf of a license holder to assist in transmitting funds after they are received by the license holder. The rationale behind this exclusion is that because regulation of the license holder is designed to achieve the goals of the Act with respect to the entire transaction, additional regulation of any intermediaries is unnecessary. New §33.4(c) extends this reasoning to payment processors acting on behalf of a non-license-holder that has been excluded or exempted from licensing. The rationale behind this provision is that the reasons a person selling money services does not need a license - for example, because the person is a bank and is therefore already heavily regulated - extend to any intermediaries acting on that person's behalf. Second, as expressed in the department's Legal Opinion 14-01, a payment processor who is appointed in a written contract as a merchant's agent to receive payments is not conducting money transmission. That is because under the common law doctrine of agency, payment to the merchant is complete upon receipt of funds by the agent. New §33.4(d) expands the application of Legal Opinion 14-01 to some situations where there is no explicit agency appointment in a contract. Provided that the requirements of new §33.4(d) are met, under Texas common law the processor is an agent of the merchant even absent an express contractual appointment. Consequently, under those circumstances neither the payment processor nor the merchant is conducting money transmission. Essentially then, new §33.4(d) merely codifies existing Texas law. The Department received no comments regarding the proposed section. The new rule is adopted pursuant to Finance Code §151.102 which authorizes the commission to adopt rules to administer and enforce Chapter 151, and pursuant to Finance Code §151.003(10) which authorizes the commission to adopt rules that exclude from licensing a person, transaction, or a class of persons or transactions. Finance Code §151.003 and §151.302 are affected by the new section. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504370 Catherine Reyer General Counsel Texas Department of Banking Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 475-1301 ♦ ♦ 7 TAC §80.203(b)(2) contains the advertising requirements of residential mortgage loans offered by or through a mortgage company or originator. As amended, §80.203(b)(2) will more closely resemble the advertising requirements of residential mortgage loans offered by or through mortgage bankers or originators contained in 7 TAC §81.203(b)(2). 7 TAC §80.204(b) lists the mortgage applications books and records that must be maintained by each company or originator. As amended §80.204(b) will incorporate the integrated disclosure requirements of TILA/RESPA effective October 3, 2015. The Department did not receive any comments regarding the proposed amendments. The amendments are adopted pursuant to Finance Code §11.306, which authorizes the Finance Commission to adopt residential mortgage loan origination rules as provided by Chapter 156 and under §156.102, which provides that the Finance Commission may adopt rules to ensure compliance with Chapter 156, to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 and to adopt rules regarding the books and records required to be kept. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. 2015. PART 4. TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING 7 TAC §§80.201, 80.203, 80.204 7 TAC §80.201(a) formerly required that whenever a conditional qualification was provided to a mortgage applicant, written confirmation of conditional qualification was required to include the information in Form A, Figure: 7 TAC §80.201(a). As amended, §80.201(a) will clarify that whenever a conditional qualification is provided to prospective mortgage applicants as well as to mortgage applicants, written confirmation of conditional qualification shall include the information in Form A, Figure: 7 TAC §80.201(a). Filed with the Office of the Secretary of State on October 16, ♦ CHAPTER 80. TEXAS RESIDENTIAL MORTGAGE LOAN COMPANIES SUBCHAPTER C. DUTIES AND RESPONSIBILITIES The Finance Commission of Texas (the commission), on behalf of the Department of Savings and Mortgage Lending (the department), adopts amendments to §80.201 concerning loan status forms, §80.203 concerning advertising, and §80.204 concerning books and records, without changes to the proposed text as published in the September 4, 2015, issue of the Texas Register (40 TexReg 5606). TRD-201504376 Ernest C. Garcia General Counsel Texas Department of Savings and Mortgage Lending Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 475-1297 ♦ ♦ ♦ CHAPTER 81. MORTGAGE BANKERS AND RESIDENTIAL MORTGAGE LOAN ORIGINATORS SUBCHAPTER C. DUTIES AND RESPONSIBILITIES 7 TAC §§81.200, 81.201, 81.204 ADOPTED RULES October 30, 2015 40 TexReg 7623 The Finance Commission of Texas (the commission), on behalf of the Department of Savings and Mortgage Lending (the department), adopts amendments to §81.200, concerning required disclosures, §81.201, concerning loan status forms, and §81.204, concerning books and records, without changes to the proposed text as published in the September 4, 2015, issue of the Texas Register (40 TexReg 5607). 7 TAC §81.200(a) requires an originator to provide a Texas Mortgage Banker Disclosure Notice to a residential mortgage loan applicant and the form notice formerly referred to §157.007 of the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act, Chapter 157, Texas Finance Code. Section 157.007 was previously renumbered as §157.0021, therefore the Texas Mortgage Banker Disclosure Notice as amended will now refer to §157.0021. 7 TAC §81.201 formerly required that whenever a conditional qualification was provided to a mortgage applicant, written confirmation of conditional qualification was to include the information in Form A, Figure: 7 TAC §81.201(a). As amended, §81.201(a) will clarify that whenever a conditional qualification is provided to prospective mortgage applicants as well as to mortgage applicants, written confirmation of conditional qualification shall include the information in Form A, Figure: 7 TAC §81.201(a). 7 TAC §81.204(b) lists the mortgage applications books and records that must be maintained by each originator. As amended §81.204(b) will incorporate the integrated disclosure requirements of TILA/RESPA effective October 3, 2015. The Department did not receive any comments regarding the proposed amendments. The amendments are adopted pursuant to Texas Finance Code §157.0023, which provides that the Finance Commission may adopt rules necessary to implement or fulfill the purpose of Chapter 157, as well as rules and forms for use by mortgage bankers, and to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504377 Ernest C. Garcia General Counsel Texas Department of Savings and Mortgage Lending Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 475-1297 ♦ ♦ ♦ PART 5. OFFICE OF CONSUMER CREDIT COMMISSIONER CHAPTER 84. MOTOR VEHICLE INSTALLMENT SALES The Finance Commission of Texas (commission) adopts amendments to 7 TAC Chapter 84, concerning Motor Vehicle Install- 40 TexReg 7624 October 30, 2015 Texas Register ment Sales. The commission adopts the majority of the amendments to Chapter 84 (specifically, §§84.102, 84.801, 84.805, and 84.807) without changes to the proposed text as published in the September 4, 2015, issue of the Texas Register (40 TexReg 5608). The commission adopts the amendments to §§84.802, 84.808, and 84.809 with changes to the proposed text as published in the September 4, 2015, issue of the Texas Register (40 TexReg 5608). These changes are being made in order to incorporate suggested comments, as discussed in the following paragraph. The commission received three written comments on the proposal related to Chapter 84 from the following organizations: the American Financial Services Association, the Texas Automobile Dealers Association, and the Texas Independent Automobile Dealers Association. The first commenter offered a suggested model clause regarding collection contacts. The latter two commenters generally supported the amendments but requested clarification regarding the disclosure of the inspection fee as contained in §84.808 and §84.809. The commission's response to the three official comments is included after the purpose discussion regarding §84.808. In general, the purpose of the amendments governing plain language contract provisions is to implement changes resulting from the commission's review of Chapter 90 under Texas Government Code, §2001.039, along with corresponding revisions to §86.101 and the plain language rules in Chapter 84, concerning Motor Vehicle Installment Sales. The adopted amendments revise plain language non-standard contract submission procedures relating to readability levels, typefaces, and font sizes. Additionally, the amendments provide updated references to state and federal law and make technical corrections. In Chapter 84, amendments have been made to §84.102, concerning Definitions, and to the following sections in Subchapter H, concerning Retail Installment Sales Contract Provisions: §§84.801, 84.802, 84.805, 84.807, 84.808, and 84.809. In Chapter 86, amendments are contained in §86.101, concerning Consumer Notifications. The majority of the adopted amendments center on changes made throughout several sections of rule text, as well as multiple figures, in order to provide consistency throughout the plain language rules. In the following paragraphs, most of the amendments will be outlined on an issue-by-issue basis. First, a basic statement of the rule issue will be provided. Second, the purpose and background of the changes will be described. And third, a list of the relevant provisions containing amendments related to that rule issue will be provided. Additionally, certain amendments isolated to one or a small number of rules will be discussed on a section-by-section basis, as appropriate. In §84.102, the agency's acronym "OCCC," which stands for Office of Consumer Credit Commissioner, has been adopted as a new defined term in §84.102(12) to allow appropriate use throughout the chapter. The remaining definitions have been renumbered accordingly. Section 84.801 is the purpose section that outlines the purpose of the plain language contract provisions in Subchapter H, which are applicable to motor vehicle retail installment sales contracts. The term "commissioner" is being replaced with "OCCC." The agency believes that the use of "OCCC" will provide better clarity to the rules when the context calls for action by the agency, as opposed to the commissioner specifically. The agency's non-standard contract submission procedure has been revised in order to provide more efficiency and clarity. In §84.802(b), the certification of readability includes amendments adding a list of the typefaces and font sizes used in the contract, as well as the Flesch-Kincaid Grade Level score of the contract. Since the proposal, technical corrections have been made to §84.802(b). The filing requirements in §84.802(c) contain amendments requiring submission in both Microsoft Word and PDF format. Paper filings or other formats will not be accepted under the new submission procedure. New provisions contained in §84.802(c)(4) set the maximum Flesch-Kincaid Grade Level score for Chapter 348 retail installment contracts, which is grade 11. This grade level requirement will help ensure that agreements are readable and accessible to consumers. The agency's experience indicates that contracts can be drafted to comply with the rule's requirements. Section 86.101 outlines the consumer notifications that must be provided on all Chapter 345, 347, and 348 contracts. In accordance with instructions from the Texas Department of Information Resources, the OCCC has updated its website and e-mail address with the "texas.gov" extension: occc.texas.gov and consumer.complaints@occc.texas.gov. In order to provide consumers with the best contact information for the agency, this adoption amends several provisions and figures with the OCCC's updated contact information. Other revisions have been made to the text of the consumer notice to provide more clarity to consumers regarding the role of the OCCC in resolving complaints. Previously, this notice has been referenced in the rules as the "Complaints and inquiries notice" or the "Consumer credit commissioner notice." To continue the use of the agency's acronym and provide consistency throughout the rules, this consumer notice has been relabeled as the "OCCC Notice." Adopted amendments to §86.101(a) also require creditors and lenders to include a statement that consumers can contact the phone number for questions or complaints, and allow creditors to include one or more of the following: mailing address, fax number, website, or e-mail. Changes to update references to the notice with the new label ("OCCC Notice") are contained in the following provisions: §§84.805(a), 84.807(19), and 84.808(19). Adopted revisions to update the text of the OCCC Notice are contained in §84.808(19). Additionally, figure §84.809(b) contains the OCCC Notice as revised for this adoption. The rules often cite other state and federal law, federal regulations, as well as refer to other sections within Title 7 of the Texas Administrative Code. Since the last review of the plain language rules, state laws have been added or revised, certain federal regulations have been relocated, and the Consumer Financial Protection Bureau (CFPB) has been created and assumed the duties of other federal agencies. The amendments include revisions to update existing citations, provide more accurate or specific citations, remove obsolete citations, or provide new or revised language in accordance with other law. Revisions to update legal citations and references are included in the following provisions: §84.808(8)(E), (9)(C) - (D) (deleted), (37), (40)(B), (41) - (43), and §84.809(c). Certain provisions have been renumbered or relettered accordingly. Amendments are contained in §84.808(8) and the accompanying figures relating to inspection fees on a motor vehicle retail installment sales contract. Under a recent amendment to Texas Transportation Code, §548.509, the Texas Department of Motor Vehicles (TxDMV) or a county assessor-collector will collect the portion of the inspection fee paid to the state. This amendment is implemented by TxDMV's "Two Steps, One Sticker" program. Under this program, the proof of registration and proof of inspection have been combined into one sticker, effective March 1, 2015. In figures 7 TAC §84.808(8)(A) and §84.808(8)(B), an optional disclosure has been updated to remove a reference to the seller keeping $7 of the inspection fee, because this amount does not apply to all counties. In these same figures, the word "and/or" has been replaced with "and" in the section on government license and registration fees. New subparagraph (E) in §84.808(8) specifies how creditors should disclose the inspection fee in the itemization of amount financed. This provision explains that the creditor may use either of two methods. First, under clause (i), the creditor may include the entire inspection fee in the "Government vehicle inspection fees" section, with the separate amounts paid to the state and the inspection station documented immediately below this section. Second, under clause (ii), the creditor may include the portion remitted to the state in the "Government license and registration fees" section, and the portion remitted to the inspection station in the "Government vehicle inspection fees" section. Two commenters requested that the accompanying figures include graphics showing how to separately disclose the portion of the inspection fee paid to the state and the portion paid to the inspection station. In response to these comments, the separate disclosures of these amounts have been added to figures 7 TAC §84.808(8)(A) and §84.808(8)(B), and conforming changes are contained in the model contract at figure 7 TAC §84.809(b). One of these commenters expressed concern that "if a licensee/creditor includes an inspection fee, or a portion of the inspection fee, in the 'Government license and registration fees' itemized charge line on the retail installment contract, even if it is the portion remitted to the state, and then itemizes the portion of the inspection fee that is maintained or remitted to the inspection station in the 'Government vehicle inspection fees section,' that the inclusion of any inspection fee in a license and registration fee line will be misinforming the consumer and may be, at best, confusing to both the buyer and to the seller." The commission disagrees with this comment. The state collects its portion of the inspection fee at registration and in connection with registration, so it is not misleading to include this portion in the "registration fees" line. This portion of the fee is disclosed on the title application receipt, together with other fees collected at registration. The agency also understands that TxDMV has recognized the approach described in §84.808(8)(E)(ii) as a valid method of disclosing the inspection fee. In addition, both §84.808(8) of the rule text and the official commentary to Regulation Z, 12 C.F.R. part 226, supp. I, para. 18(c)2., part 1026, supp. I, para. 18(c)2., provide that creditors have "considerable flexibility" in disclosing amounts on the itemization of amount financed. Disclosing the state's portion of the fee in the "registration fees" line is consistent with this flexibility. Of course, creditors must ensure that all disclosed amounts are accurate and that the retail buyer is not charged twice for the same fee. Additional amendments are included throughout §84.808 to provide technical corrections for motor vehicle retail installment contracts. Amendments are contained in figure 7 TAC §84.808(7), the Truth in Lending Act disclosure for motor vehicle retail installment sales contracts, to update references to earnings methods. ADOPTED RULES October 30, 2015 40 TexReg 7625 Outdated provisions regarding documentary fees charged before August 1, 2010, have been deleted from §84.808(9)(C) - (E). Clarifying language has been added to §84.808(10) regarding how to disclose a downpayment. Since the proposed version, a change has been made to §84.808(10) to specify that the dollar amount of the downpayment must be included in the total of payments if the deferred downpayment amount is disclosed in the payment schedule. A statement providing a maximum insurance deductible for required property insurance has been added to figure 7 TAC §84.808(11). Conforming changes regarding insurance have been made to the model clause at §84.808(25). Clarifying changes have been made to §84.808(16)(A) to specify that the finance charge for the add-on method is calculated on an annual basis and is not the same as the annual percentage rate. Clarifying changes have been made to §84.808(16)(B) - (C) to specify that the contract rate disclosure should be provided in transactions where sales tax is deferred. A clarifying change has been made to §84.808(23) to specify that the clause on interest on the matured amount applies to contracts using the scheduled installment earnings method or the sum of the periodic balances method. A clarifying change has been made to §84.808(34)(E) to specify that the 10-day period to provide the notice of disposition applies when the creditor sells the vehicle at a public or private sale, in accordance with Texas Business and Commerce Code, §§9.610 - 9.612. Conforming changes are contained in the model contract at figure 7 TAC §84.809(b). One commenter requested that the model contract for motor vehicle retail installment contracts include a statement about servicing and collection contacts. The Telephone Consumer Protection Act, 47 U.S.C. §227(b)(1)(A) - (B), generally prohibits creditors and other persons from calling a residential telephone line using an automatic telephone dialing system or an artificial or prerecorded message without the prior express consent of the called party. Based on this requirement, the commenter suggested adding the following model clause: "Servicing and Collection Contacts: I agree that you may try to contact me in writing, by e-mail, or using prerecorded/artificial voice messages, text messages, and automatic telephone dialing systems, as the law allows. I also agree that you may try to contact me in these and other ways at any address or telephone number I provide you, even if the telephone number is a cell phone number or the contact results in a charge to me." In response to this comment, new §84.808(37) includes the following model clause for servicing and collection contact: "You may try to contact me at any mailing address, e-mail address, or phone number I give you, as the law allows. You may try to contact me in writing (including mail, e-mail, and text messages) and by phone (including prerecorded or artificial voice messages and automatic telephone dialing systems)." A conforming change is contained in the model contract at figure 7 TAC §84.809(b). The commission disagrees with the commenter's suggestion to include the phrase "even if the telephone number is a cell phone number or the contact results in a charge to me." The Texas Debt Collection Act, Texas Finance Code, §392.302(d), prohibits debt collectors from "causing a person to incur a long distance telephone toll, telegram fee, or other charge by a medium of communication without first disclosing the name of the person making the communication." In addition, the Consumer Financial Protection Act, 15 U.S.C. §5531(a), and the Fair Debt Collection Practices Act, 15 U.S.C. §1692f, prohibit creditors and debt collectors from engaging in unfair practices to collect debts. Unfair practices may include "[c]ausing charges to be made to any person for communications by concealment of the true purpose of 40 TexReg 7626 October 30, 2015 Texas Register the communication. Such charges include, but are not limited to, collect telephone calls and telegram fees." 15 U.S.C. §1692f(5). If the model clause included the commenter's suggested phrase, this could be read as a waiver of the prohibition on unfair practices. For this reason, the model clause does not include the phrase "even if the telephone number is a cell phone number or the contact results in a charge to me." The rule does not prohibit creditors from contacting consumers' cell phones, but creditors must ensure that they do not engage in unfair, abusive, or illegal practices. New §84.808(38) specifies that the creditor may charge a returned check fee up to $30, as authorized under Texas Business and Commerce Code, §3.506. New §84.808(41)(B) contains a model clause for commercial vehicle retail installment contracts, specifying that Texas Finance Code, Chapter 353 applies to the transaction. Additional technical changes and updates to citations are included throughout §84.808. Conforming changes are contained in the model contract at figure 7 TAC §84.809(b). The remaining amendments adopted throughout the rules relate to improvements in consistency, clarity, grammar, punctuation, and formatting. Any rules not included in this adoption will be maintained in their current form. All new non-standard contracts submitted on or after the amendments' effective date will have to be submitted under the amended submission requirements, and will have to contain clauses that comply with the amended rules (including the updated OCCC notification). However, the agency will allow a delayed implementation period for certain licensees. For those licensees utilizing the model contracts, the prior model language is acceptable and the agency will permit licensees to use the prior model language (without a non-standard contract submission) until December 31, 2016, to deplete supplies of existing forms during a 13-month transition period after the anticipated effective date of the rules. If licensees submitted compliant non-standard contracts under the prior rules, the agency will permit them to continue using these contracts until December 31, 2016. If licensees intend to continue using non-standard contracts, they must ensure that they submit an updated non-standard contract in compliance with the amended requirements by December 31, 2016. The agency encourages licensees to submit the updated contracts earlier. Starting January 1, 2017, licensees may no longer use contracts submitted under the prior rules. At any time, if the agency determines that a non-standard contract submitted under prior rules contains a substantive violation (e.g., an excessive late charge), it may order the licensee to resubmit the contract. If the contract is resubmitted on or after the amendments' effective date, it will have to comply with the amended requirements. SUBCHAPTER A. GENERAL PROVISIONS 7 TAC §84.102 The amendments are adopted under Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. All of the plain language amendments are adopted under Texas Finance Code, §341.502, which authorizes the commission to adopt rules governing the form of contracts for a loan under Chapter 342, a retail installment transaction under Chapter 348, or a home equity loan regulated by the Office of Consumer Credit Commissioner. The amendments regarding the OCCC notice are adopted under Texas Finance Code, §14.104, which requires that a written contract of an authorized lender subject to the OCCC's regulation must contain the name, mailing address, and telephone number of the office. The OCCC believes that a modernized interpretation of §14.104 would include the agency's updated website and email address. The amendments concerning motor vehicle contracts are adopted under Texas Finance Code, §348.513 which grants the commission the authority to adopt rules to enforce the motor vehicle installment sales chapter. Additionally, §348.513 also authorizes the commission to modify the standard form required by §348.0091 to conform to the provisions of the Truth in Lending Act or a regulation issued under authority of that Act. The statutory provisions affected by the adopted amendments are contained in Texas Finance Code, Chapter 348. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. ♦ §84.802. Non-Standard Contract Filing Procedures. (a) Non-standard contracts. A non-standard contract is a contract that does not use the model contract provisions. Non-standard contracts submitted in compliance with the provisions of Texas Finance Code, §341.502(c) will be reviewed to determine that the contract is written in plain language. (b) Certification of readability. Contract filings subject to this chapter must be accompanied by a certification signed by an officer of the creditor or the entity submitting the form on behalf of the creditor. The certification must state that the contract is written in plain language and that the contract can be easily understood by the average consumer. The certification must state that the contract is printed in an easily readable font and type size, including a list of the typefaces used in the contract, the font sizes used in the contract, and the Flesch-Kincaid Grade Level score of the contract. The OCCC will prescribe the form of the certification. (c) Filing requirements. Contract filings must be identified as to the transaction type. Contract filings must be submitted in accordance with the following requirements: (1) Microsoft Word format. One copy must be submitted in a Microsoft Word format with the document having either a .doc or .docx extension. The Flesch-Kincaid Grade Level score of the contract must be based on the Microsoft Word readability statistics function for the Microsoft Word version of the contract. TRD-201504397 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 936-7621 ♦ The statutory provisions affected by the adopted amendments are contained in Texas Finance Code, Chapter 348. (2) PDF format. One copy must be submitted in a PDF format so that the contract may be visually reviewed in its entirety. (3) No other formats permitted. The OCCC will not accept paper filings or any other unlisted formats for non-standard contract filings. ♦ SUBCHAPTER H. RETAIL INSTALLMENT SALES CONTRACT PROVISIONS (4) Maximum Flesch-Kincaid score. The maximum Flesch-Kincaid Grade Level score for a Chapter 348 contact filing is grade 11. 7 TAC §§84.801, 84.802, 84.805, 804.807 - 804.809 The amendments are adopted under Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. All of the plain language amendments are adopted under Texas Finance Code, §341.502, which authorizes the commission to adopt rules governing the form of contracts for a loan under Chapter 342, a retail installment transaction under Chapter 348, or a home equity loan regulated by the Office of Consumer Credit Commissioner. The amendments regarding the OCCC notice are adopted under Texas Finance Code, §14.104, which requires that a written contract of an authorized lender subject to the OCCC's regulation must contain the name, mailing address, and telephone number of the office. The OCCC believes that a modernized interpretation of §14.104 would include the agency's updated website and email address. The amendments concerning motor vehicle contracts are adopted under Texas Finance Code, §348.513 which grants the commission the authority to adopt rules to enforce the motor vehicle installment sales chapter. Additionally, §348.513 also authorizes the commission to modify the standard form required by §348.0091 to conform to the provisions of the Truth in Lending Act or a regulation issued under authority of that Act. (d) Contact person. One person must be designated as the contact person for each filing submitted. Each submission must provide the name, address, phone number, and if available, the email address and fax number of the contact person for that filing. If the contracts are submitted by anyone other than the company itself, the contracts must be accompanied by a dated letter which contains a description of the anticipated users of the contracts and designates the legal counsel or other designated contact person for that filing. (e) Commercial vehicle. Pursuant to Texas Finance Code, §341.502(a), a motor vehicle retail installment sales contract involving a commercial vehicle does not have to be submitted in accordance with this section. §84.808. Model Clauses. The following model clauses provide the plain language equivalent of provisions found in contracts subject to Texas Finance Code, Chapter 348. (1) Identification of parties. This information identifies the parties to the contract. (A) The model identification clause lists the name and address of the creditor, the date of the contract, and the name and address of the buyer. At the creditor's option, a creditor may include an account number or contract number. The model clause reads: Figure: 7 TAC §84.808(1)(A) (No change.) ADOPTED RULES October 30, 2015 40 TexReg 7627 (B) The Buyer is referred to as "I" or "me." The Seller is referred to as "you" or "your." (2) Assignment of contract. The model clause regarding assignment of contract reads: "This contract may be transferred by the Seller." (3) Buyer's affirmation and promise to pay. The model clause regarding buyer's affirmation and promise to pay reads: "The credit price is shown below as the "Total Sales Price." The "Cash Price" is also shown below. By signing this contract, I choose to purchase the motor vehicle on credit according to the terms of this contract. I agree to pay you the Amount Financed, Finance Charge, and any other charges in this contract. I agree to make payments according to the Payment Schedule in this contract. If more than one person signs as a buyer, I agree to keep all the promises in this agreement even if the others do not." (4) Inspection acknowledgment. The model clause regarding inspection acknowledgment reads: "I have thoroughly inspected, accepted, and approved the motor vehicle in all respects." (5) Identification of motor vehicle. The motor vehicle identification information provision should contain the following information about the motor vehicle: the seller's stock number; the manufacturer's year model; the manufacturer's make; the manufacturer's model type or number; the vehicle identification number; the license plate number (if applicable); a new/used designation; and the primary purpose designation. The primary purpose designation may be used to determine whether the vehicle was purchased primarily for commercial purposes or primarily for personal, family or household purposes. Unless the retail seller or holder has actual knowledge that the representation is not true, the retail seller or holder may rely upon the representation made in the primary purpose designation, as permitted by Texas Finance Code, §348.0015(b). The seller's stock number and the license number are both optional; the omission will not make a contract non-standard. The motor vehicle identification information provision may include additional information about the vehicle including, odometer reading, color, the designation as a heavy commercial vehicle, and key code. If the creditor includes this additional information about the motor vehicle, the change will not make the provision a non-standard provision. The model clause regarding identification of the motor vehicle reads: Figure: 7 TAC §84.808(5) (No change.) (6) Trade-in vehicle description. The model clause regarding trade-in vehicle description reads: Figure: 7 TAC §84.808(6) (No change.) (7) Truth in Lending Act disclosure. The model clause regarding Truth in Lending Act disclosure reads: Figure: 7 TAC §84.808(7) (8) Itemization of amount financed. The creditor drafting the contract is given considerable flexibility regarding the itemization of amount financed disclosure so long as the itemization of amount financed disclosure complies with the Truth in Lending Act. As an example, a creditor may disclose the manufacturer's rebate either as: a component of the downpayment; or a deduction from the cash price of the motor vehicle. The model contract provision for the itemization of the amount financed discloses the manufacturer's rebate as a component of the downpayment. If the creditor elected to disclose the manufacturer's rebate as a deduction from the cash price of the motor vehicle, the cash price component of the itemization of amount financed would be amended to reflect the dollar amount of the manufacturer's rebate being deducted from the cash price of the motor vehicle. 40 TexReg 7628 October 30, 2015 Texas Register (A) The model clause regarding itemization of amount financed-sales tax advance reads: Figure: 7 TAC §84.808(8)(A) (B) The model clause regarding itemization of amount financed-sales tax deferred reads: Figure: 7 TAC §84.808(8)(B) (C) Plate transfer fee. Under Texas Transportation Code, §502.453, the creditor may charge under the itemization of amount financed a $5.00 fee for transferring license plates and receiving new registration insignia. The creditor may document the plate transfer fee in the Other Charges section with the following language: "to State for Plate Transfer Fee." (D) Compliance fee prohibited. Under Texas Transportation Code, §503.0631(f), the creditor is prohibited from assessing an itemized charge under the itemization of amount financed for costs associated with complying with the temporary tag database. (E) Inspection fee. Under Texas Transportation Code, §548.509, at the time of registration, the Texas Department of Motor Vehicles or a county assessor-collector will collect a portion of the inspection fee to be remitted to the state. The creditor may disclose the inspection fee by either of the following methods: (i) including the entire inspection fee in the "Government vehicle inspection fees" section, with the amounts paid to the state and the inspector documented immediately below this section with the following language: "to state $________" and "to inspection station $________"; or (ii) including the portion remitted to the state in the "Government license and registration fees" section, and the portion remitted to the inspection station in the "Government vehicle inspection fees" section. (9) Documentary fee. (A) The following notice satisfies the requirements of Texas Finance Code, §348.006 if printed in type that is boldfaced, capitalized, underlined, or otherwise set out from surrounding written material so as to be conspicuous and within reasonable proximity to the place at which the fee is disclosed. The model clause is contained in the Itemization of Amount Financed. The documentary fee clause reads: "A documentary fee is not an official fee. A documentary fee is not required by law, but may be charged to buyers for handling documents relating to the sale. A documentary fee may not exceed a reasonable amount agreed to by the parties. This notice is required by law." (B) The following notices are sufficient Spanish translations of the documentary fee disclosure required by Texas Finance Code, §348.006. The Spanish translation may read: (i) "Un honorario de documentación no es un honorario ofícial. Un honorario de documentación no es requerido por la ley, pero puede ser cargada al comprador como gastos de manejo de documentos relacionados con una venta. Un honorario de documentación no puede exceder una cantidad razonable acordada por las partes. Esta notifícación es requerida por la ley."; or (ii) "Un cargo documental no es un cargo ofícial. La ley no exige que se imponga un cargo documental. Pero éste podría cobrarse a los compradores por el manejo de la documentación en relación con la venta. Un cargo documental no puede exceder una cantidad razonable acordada por las partes. Esta notifícación se exige por ley." (10) Deferred downpayments. The creditor has considerable flexibility in disclosing the deferred downpayments. The model provision discloses the deferred downpayments by placing the infor- mation, the due date and dollar amount of the deferred downpayments, in several boxes. If a creditor uses this model provision, the creditor would enter the due date and dollar amount of each deferred downpayment in the appropriate boxes. As an alternative to this model provision, a creditor may disclose the deferred downpayments in the Payment Schedule of the Amount Financed in the federal disclosure box. If a creditor elects this option, the due date and the dollar amount of the deferred downpayment must be shown. If the total amount of the deferred downpayment is not satisfied by the date of the second regularly scheduled installment, the deferred downpayment must be included in the Payment Schedule. As another alternative, the creditor may disclose the deferred downpayment amount in the Payment Schedule. If the deferred downpayment amount is disclosed in the Payment Schedule, then the dollar amount of the deferred downpayment must be included in the Total of Payments. The model clause regarding deferred downpayments reads: Figure: 7 TAC §84.808(10) (No change.) (11) Required physical damage insurance. The creditor may choose to omit the statement of the retail buyer's right to obtain substitute coverage from another source. The model clause regarding required physical damage insurance reads: Figure: 7 TAC §84.808(11) (12) Optional insurance coverages and debt cancellation agreement. (A) The model clause regarding optional insurance coverages and debt cancellation agreement reads: Figure: 7 TAC §84.808(12)(A) (No change.) (B) A retail seller at its option may create a separate disclosure for the authorization of the debt cancellation agreement. (13) Optional credit life and accident and health insurance. The model clause regarding optional credit life and accident and health insurance reads: Figure: 7 TAC §84.808(13) (No change.) (14) Liability insurance. If liability insurance coverage is not included in the contract, any of the following notices are sufficient to satisfy the requirements of Texas Finance Code, §348.205 if printed in a size equal to at least 10-point type that is boldfaced, capitalized, underlined, or otherwise set out from surrounding written material so as to be conspicuous: (A) "THIS CONTRACT DOES NOT INCLUDE INSURANCE COVERAGE FOR PERSONAL LIABILITY AND PROPERTY DAMAGE CAUSED TO OTHERS." (B) "UNLESS A CHARGE FOR LIABILITY INSURANCE IS INCLUDED IN THE ITEMIZATION OF AMOUNT FINANCED, LIABILITY INSURANCE COVERAGE FOR BODILY INJURY AND PROPERTY DAMAGE CAUSED TO OTHERS IS NOT INCLUDED IN THIS CONTRACT." (C) "UNLESS A CHARGE FOR LIABILITY INSURANCE IS INCLUDED IN THE ITEMIZATION OF AMOUNT FINANCED, ANY INSURANCE REFERRED TO IN THIS CONTRACT DOES NOT INCLUDE COVERAGE FOR PERSONAL LIABILITY AND PROPERTY DAMAGE CAUSED TO OTHERS." (15) Prohibition against oral modifications. The contract may include a provision barring oral modifications of the contract. A unilateral change to a contract may nevertheless occur as prescribed by the procedures in Texas Finance Code, Chapter 349, Subchapter C. The model clause regarding prohibition against oral modifications reads: Figure: 7 TAC §84.808(15) (No change.) (A) Regular transaction using sum of the periodic balances method. (i) Sales tax advance. At the creditor's option a creditor may choose one of the following model clauses regarding sales tax advance: (I) "You figure the Finance Charge using the add-on method as defined by the Texas Finance Commission Rule. Add-on Finance Charge is calculated on the full amount of the unpaid principal balance and added as a lump sum to the unpaid principal balance for the full term of the contract." Or (II) "The Finance Charge will be calculated by using the add-on method. Add-on Finance Charge is calculated on the full amount of the unpaid principal balance and added as a lump sum to the unpaid principal balance for the full term of the contract. The add-on Finance Charge is calculated at a rate of $____ per $100.00 per year. This rate is not the same as the Annual Percentage Rate." (ii) Deferred sales tax. The model clause regarding deferred sales tax reads: "The Finance Charge will be calculated by using the add-on method. Add-on Finance Charge is calculated on the full amount of the unpaid principal balance subject to a finance charge and added as a lump sum to the unpaid principal balance subject to a Finance Charge for the full term of the contract. The add-on Finance Charge is calculated at a rate of $____ per $100.00 per year. This rate is not the same as the Annual Percentage Rate." (B) True daily earnings method. (i) Sales tax advance. At the creditor's option a creditor may choose one of the following model clauses regarding sales tax advance: (I) "You figure the Finance Charge using the true daily earnings method as defined by the Texas Finance Code. Under the true daily earnings method, the Finance Charge will be figured by applying the daily rate to the unpaid portion of the Amount Financed for the number of days the unpaid portion of the Amount Financed is outstanding. The daily rate is 1/365th of the Annual Percentage Rate. The unpaid portion of the Amount Financed does not include late charges or returned check charges." Or (II) If a retail seller requires a retail buyer to purchase credit life or credit accident and health insurance and the sales tax is not deferred, the contract rate disclosure should read: "The contract rate is _____%. This contract rate may not be the same as the Annual Percentage Rate. You will figure the Finance Charge by applying the true daily earnings method as defined by the Texas Finance Code to the unpaid portion of the principal balance. The daily rate is 1/365th of the contract rate. The unpaid principal balance does not include the late charges or returned check charges." (ii) Deferred sales tax: If sales tax is deferred, the contract rate disclosure should read: "The contract rate is _____%. This contract rate may not be the same as the Annual Percentage Rate. You will figure the Finance Charge by applying the true daily earnings method as defined by the Texas Finance Code to the unpaid portion of the principal balance subject to a Finance Charge. The daily rate is 1/365th of the contract rate. The unpaid principal balance subject to a finance charge does not include the late charges, sales tax, or returned check charges." (C) Scheduled installment earnings method. (i) Sales tax advance. At the creditor's option a creditor may choose one of the following model clauses regarding sales tax advance: (16) Finance charge earnings methods: ADOPTED RULES October 30, 2015 40 TexReg 7629 (I) "You figure the Finance Charge using the scheduled installment earnings method as defined by the Texas Finance Code. Under the scheduled installment earnings method, the Finance Charge is figured by applying the daily rate to the unpaid portion of the Amount Financed as if each payment will be made on its scheduled payment date. The daily rate is 1/365th of the Annual Percentage Rate. The unpaid portion of the Amount Financed does not include late charges or returned check charges." Or (II) If a retail seller requires a retail buyer to purchase credit life or credit accident and health insurance and the sales tax is not deferred, the contract rate disclosure should read: "The contract rate is _____%. This contract rate may not be the same as the Annual Percentage Rate. You will figure the Finance Charge by applying the scheduled installment earnings method as defined by the Texas Finance Code to the unpaid portion of the principal balance. You based the Finance Charge, Total of Payments, and Total Sale Price as if all payments were made as scheduled. The unpaid principal balance does not include the late charges or returned check charges." (ii) Deferred sales tax. If sales tax is deferred, the contract rate disclosure should read: "The contract rate is _____%. This contract rate may not be the same as the Annual Percentage Rate. You figured the Finance Charge by applying the scheduled installment earnings method as defined by the Texas Finance Code to the unpaid portion of the principal balance subject to a Finance Charge. You based the Finance Charge, Total of Payments, and Total Sale Price as if all payments were made as scheduled. The unpaid principal balance subject to a Finance Charge does not include the late charges, sales tax, or returned check charges." (17) Consumer warning. The following notices satisfy the requirements of Texas Finance Code §348.102(d) if printed in at least 10-point type that is boldfaced, capitalized, underlined, or otherwise set out from surrounding written material so as to be conspicuous. (A) For contracts using the sum of the periodic balances method (Rule of 78s) or the scheduled installment earnings method, the notice may read: (i) "NOTICE TO THE BUYER--I WILL NOT SIGN THIS CONTRACT BEFORE I READ IT OR IF IT CONTAINS ANY BLANK SPACES. I AM ENTITLED TO A COPY OF THE CONTRACT I SIGN. UNDER THE LAW, I HAVE THE RIGHT TO PAY OFF IN ADVANCE ALL THAT I OWE AND UNDER CERTAIN CONDITIONS MAY OBTAIN A PARTIAL REFUND OF THE FINANCE CHARGE. I WILL KEEP THIS CONTRACT TO PROTECT MY LEGAL RIGHTS." Or (ii) "NOTICE TO THE BUYER--THE BUYER SHOULD NOT SIGN THIS CONTRACT BEFORE READING IT OR IF IT CONTAINS ANY BLANK SPACES. THE BUYER IS ENTITLED TO A COPY OF THE SIGNED CONTRACT. UNDER THE LAW, THE BUYER HAS THE RIGHT TO PAY OFF IN ADVANCE ALL THAT THE BUYER OWES AND UNDER CERTAIN CONDITIONS MAY OBTAIN A PARTIAL REFUND OF THE FINANCE CHARGE. THE BUYER SHOULD KEEP THIS CONTRACT TO PROTECT ITS LEGAL RIGHTS." (B) For contracts using the true daily earnings method, the notice may read: "NOTICE TO THE BUYER--I WILL NOT SIGN THIS CONTRACT BEFORE I READ IT OR IF IT CONTAINS ANY BLANK SPACES. I AM ENTITLED TO A COPY OF THE CONTRACT I SIGN. UNDER THE LAW, I HAVE THE RIGHT TO PAY OFF IN ADVANCE ALL THAT I OWE AND UNDER CERTAIN CONDITIONS MAY SAVE A PORTION OF THE FINANCE CHARGE. I WILL KEEP THIS CONTRACT TO PROTECT MY LEGAL RIGHTS." 40 TexReg 7630 October 30, 2015 Texas Register (18) Buyer's acknowledgment of contract receipt. (A) The following acknowledgments conform to the requirements of Texas Finance Code, §348.112 if they appear directly above the place for the buyer's signature in at least 10-point type that is boldfaced, capitalized, underlined, or otherwise set out from surrounding written material so as to be conspicuous. A creditor may choose the most appropriate option: (i) If the buyer's signature is dated. If this clause is chosen, the copy must be mailed within a reasonable period of time. A reasonable period of time would ordinarily be three days, excluding Sundays and holidays. The model acknowledgment may read: "I AGREE TO THE TERMS OF THIS CONTRACT. WHEN I SIGN THE CONTRACT, I WILL RECEIVE THE COMPLETED CONTRACT. IF NOT, I UNDERSTAND THAT A COPY WILL BE MAILED TO ME WITHIN A REASONABLE TIME." (ii) If the buyer's signature is not dated. The model acknowledgment may read: "I AGREE TO THE TERMS OF THIS CONTRACT. I CONFIRM THAT BEFORE I SIGNED THIS CONTRACT, YOU GAVE IT TO ME, AND I WAS FREE TO TAKE IT AND REVIEW IT. I RECEIVED THE COMPLETED CONTRACT ON ___________ (MO.) (DAY) (YR.)." (iii) If the buyer's signature is not dated. If this clause is chosen, the copy must be mailed within a reasonable period of time. The model acknowledgment may read: "I SIGNED THIS CONTRACT ON _________ AND A COPY WILL BE MAILED TO ME WITHIN A REASONABLE TIME." (iv) If the buyer's signature is not dated but the contract contains the date of the transaction. The model acknowledgment may read: "I AGREE TO THE TERMS OF THIS CONTRACT AND ACKNOWLEDGE RECEIPT OF A COMPLETED COPY OF IT. I CONFIRM THAT BEFORE I SIGNED THIS CONTRACT, YOU GAVE IT TO ME, AND I WAS FREE TO TAKE IT AND REVIEW IT." (B) Acceptance of contract receipt. The model clause regarding acceptance of contract receipt reads: Figure: 7 TAC §84.808(18)(B) (No change.) (19) OCCC notice. The following notice satisfies the requirements of Texas Finance Code, §14.104 and §86.101 of this title (relating to Consumer Notifications). The telephone number of the retail seller, creditor, or holder may be printed in conjunction with the name and address of the retail seller, creditor, or holder elsewhere on the contract or agreement provided the notice required by Texas Finance Code, §14.104 is amended to direct the reader's attention to the area of the contract where the telephone number may be found. The OCCC notice reads: "For questions or complaints about this contract, contact (insert name of creditor) at (insert creditor's phone number and, at creditor's option, one or more of the following: mailing address, fax number, website, e-mail address). The Office of Consumer Credit Commissioner (OCCC) is a state agency, and it enforces certain laws that apply to this contract. If a complaint or question cannot be resolved by contacting the creditor, consumers can contact the OCCC to file a complaint or ask a general credit-related question. OCCC address: 2601 N. Lamar Blvd., Austin, Texas 78705. Phone: (800) 538-1579. Fax: (512) 936-7610. Website: occc.texas.gov. E-mail: consumer.complaints@occc.texas.gov." (20) Finance charge refund method. If a contract uses the finance charge refunding method of the sum of the periodic balances or the scheduled installment earnings method, the finance charge refund provision reads: "If I prepay in full, I may be entitled to a refund of part of the Finance Charge." On contracts using the true daily earnings method, this finance charge refund provision should not be disclosed because it is not applicable. (A) Contracts using the sum of the periodic balances method. (i) Name of method. The model clause to identify the method of refunding finance charge reads: "You will figure the Finance Charge refund by using the sum of the periodic balances method as defined by the Texas Finance Commission rule." (ii) Optional description of method. The creditor may include the following additional description of the method. The model clause reads: "You will figure the Finance Charge refund using the sum of the periodic balances method as defined by the Texas Finance Commission rule. The Finance Charge Refund will be computed upon the entire Finance Charge minus the Acquisition Cost. I will not get a refund if it is less than $1.00." (iii) Optional description of method for use in contracts for heavy commercial vehicles. At the creditor's option, a contract for a heavy commercial vehicle, as defined in the Texas Finance Code, may include the following description of the method. The model clause reads: "You will figure the Finance Charge refund using the sum of the periodic balances method as defined by the Texas Finance Commission rule. The Finance Charge refund will be computed based upon the entire Finance Charge calculated using the sum of the periodic balances method. Then you will subtract the Acquisition Cost from that amount. I will not get a refund if it is less than $1.00." (B) Contracts using the scheduled installment earnings method. (i) Name of method. The model clause to identify the method of refunding finance charge reads: "You will figure the Finance Charge refund by the scheduled installment earnings method as defined by the Texas Finance Commission rule." (ii) Optional description of method. The creditor may include the following additional description of the method: "You will figure my refund by deducting earned finance charges from the Finance Charge. You will figure earned finance charges by applying a daily rate to the unpaid principal balance as if I paid all my payments on the date due. If I prepay between payment due dates, you will figure earned finance charges for the partial payment period. You do this by counting the number of days from the due date of the prior payment through the date I prepay. You then multiply that number of days times the daily rate. The daily rate is 1/365th of the Annual Percentage Rate. You will also add the acquisition cost of $25 (or $150 for a heavy commercial vehicle) to the earned finance charge. I will not get a refund if it is less than $1.00." (C) Flexible contract forms designed to accommodate alternative methods. Creditors may use a flexible contract form with alternative earnings methods, so long as the method used on a particular contract is permissible for that contract. The following clause illustrates one way that this flexibility may be accomplished: "You will figure the Finance Charge refund using the sum of the periodic balances method as defined by the Texas Finance Commission rule if: this contract is a Regular Payment Contract as defined by the Texas Finance Commission rule, and this contract does not have a term greater than 61 months. If this contract is not a Regular Payment Contract or if it has a term greater than 61 months, you will figure the Finance Charge refund using the scheduled installment earnings method as defined by the Texas Finance Commission rule. I will not get a refund if it is less than $1.00." (21) Application of payments. In this provision, the term "finance charge" should not be construed to have the same meaning as Finance Charge as defined by the Truth in Lending Act. A default or late charge is considered to be a finance charge under Texas law; therefore, a default or late charge can be charged and collected as part of the earned finance charge. At the creditor's option the creditor may modify the application of payments language by adding "and late charges" following the phrase "earned but unpaid finance charge." The model clause reads: Figure: 7 TAC §84.808(21) (No change.) (22) Effect of early and late payments. For contracts using the true daily earnings method, the model clause reads: "You based the Finance Charge, Total of Payments, and Total Sale Price as if all payments were made as scheduled. If I do not timely make all my payments in at least the correct amount, I will have to pay more Finance Charge and my last payment will be more than my final scheduled payment. If I make scheduled payments early, my Finance Charge will be reduced (less). If I make my scheduled payments late, my Finance Charge will increase." (23) Interest on matured amount. For contracts using the scheduled installment earnings method or the sum of the periodic balances method, the model provision for interest on any matured amount at any rate permitted by law reads: "If I don't pay all I owe when the final payment becomes due, or I do not pay all I owe if you demand payment in full under this contract, I will pay an interest charge on the amount that is still unpaid. That interest charge will be the higher rate of 18% per year or the maximum rate allowed by law, if that rate is higher. The interest charge for this amount will begin the day after the final payment becomes due." In this provision, the maximum rate allowed by law refers to the rate found in Texas Finance Code, Chapter 303. (24) Balloon payments. If the contract has a balloon payment, the creditor must include a provision in the contract that allows the buyer to refinance the balloon payment over time. The provision must comply with Texas Finance Code, §348.123. The model provision for defining the balloon payment reads: "A balloon payment is a scheduled payment more than twice the amount of the average of my scheduled payments, other than the downpayment, that are due before the balloon payment." (A) Paying the balloon payment. If a retail installment contract contains a balloon payment that is the final payment, the contract must also provide the right for the retail buyer to pay the balloon payment. The model provision for paying the amount of the final scheduled balloon payment reads: "I can pay all I owe when the balloon payment is due and keep my motor vehicle." (B) Balloon payment alternatives. If the retail installment contract contains the right for a retail buyer to refinance a balloon installment, the contract provision to refinance the installment must comply with either clause (i) or (ii) of this subparagraph. A contract under clause (ii) of this subparagraph must also contain the right of the retail buyer to sell the motor vehicle back to the holder or the retail seller. (i) The model clause to describe a buyer's right to refinance a balloon installment under Texas Finance Code, §348.123(a), when applicable reads: "If I buy the motor vehicle primarily for personal, family, or household use, I can enter into a new written agreement to refinance the balloon payment when due without a refinancing fee. If I refinance the balloon payment, my periodic payments will not be larger or more often than the payments in this contract. The annual percentage rate in the new agreement will not be more than the Annual Percentage Rate in this contract. This provision does not apply if my Payment Schedule has been adjusted to my seasonal or irregular income." ADOPTED RULES October 30, 2015 40 TexReg 7631 (ii) If the contract contains a balloon payment and the seller intends Texas Finance Code, §348.123(b)(5) to apply to the contract: (I) Special right to refinance balloon payment under Texas Finance Code, §348.123(b)(5)(B)(iii). The model clause reads: "I can enter into a new agreement to refinance my last installment if I am not in default. I can refinance at an annual percentage rate up to 5 points greater than the Annual Percentage Rate shown in this contract. The rate will not be more than applicable law allows. The new agreement will allow me to refinance the last installment for at least 24 months with equal monthly payments. You and I can also agree to refinance the last installment over another time period or on a different payment schedule." (II) Repurchase option. If the contract includes a balloon payment, the creditor must draft a provision addressing the repurchase option. (25) Agreement to keep motor vehicle insured. The model clause regarding agreement to keep the motor vehicle insured reads: "I agree to have physical damage insurance covering loss or damage to the motor vehicle for the term of this contract. The insurance must cover your interest in the vehicle. The insurer must be authorized to do business in Texas." The creditor may include one or both of the following optional provisions: (A) "The insurance must include collision coverage and either comprehensive or fire, theft, and combined additional coverage." (B) "The maximum deductible is $________." (26) Creditor's right to purchase required insurance if buyer fails to keep motor vehicle insured. The model clause regarding agreement to allow the creditor to purchase required insurance if the buyer fails to keep the motor vehicle insured reads: "If I fail to give you proof that I have insurance, you may buy physical damage insurance. You may buy insurance that covers my interest and your interest in the motor vehicle, or you may buy insurance that covers your interest only. I will pay the premium for the insurance and a finance charge at the contract rate. If you obtain collateral protection insurance, you will mail notice to my last known address shown in your file." (27) Physical damage insurance proceeds. The model clause regarding physical damage insurance proceeds reads: "I must use physical damage insurance proceeds to repair the motor vehicle, unless you agree otherwise in writing. However, if the motor vehicle is a total loss, I must use the insurance proceeds to pay what I owe you. I agree that you can use any proceeds from insurance to repair the motor vehicle, or you may reduce what I owe under this contract. If you apply insurance proceeds to the amount I owe, they will be applied to my payments in the reverse order of when they are due. If my insurance on the motor vehicle or credit insurance doesn't pay all I owe, I must pay what is still owed. Once all amounts owed under this contract are paid, any remaining proceeds will be paid to me." (28) Returned insurance premiums and service contract charges. The contract may authorize a creditor to apply charges returned to the creditor for canceled insurance, service contract, and extended warranty charges to the buyer's obligation under the agreement as permitted by law, regardless of whether or not the buyer is in default under the contract. (A) The model clause for contracts using the true daily earnings method reads: "If you get a refund on insurance or service contracts, or other contracts included in the cash price, you will subtract it from what I owe. Once all amounts owed under this contract are paid, any remaining refunds will be paid to me." 40 TexReg 7632 October 30, 2015 Texas Register (B) For contracts using the scheduled installment earnings or sum of the periodic balances methods, the creditor may substitute the following clause: "If you get a refund of insurance or service contract charges, you will apply it and the unearned finance charges on it in the reverse order of the payments to as many of my payments as it will cover. Once all amounts owed under this contract are paid, any remaining refunds will be paid to me." (29) Application of credits. The model clause regarding application of credits reads: "Any credit that reduces my debt will apply to my payments in the reverse order of when they are due, unless you decide to apply it to another part of my debt. The amount of the credit and all finance charge or interest on the credit will be applied to my payments in the reverse order of my payments." (30) Transfer of rights. The seller does not have a duty to disclose the terms on which a contract or a balance under a contract is acquired, including any discount or difference between the rates, charges, or balance under the contract and the rates, charges, or balance acquired as provided by Texas Finance Code, §348.301. The model clause regarding transfer of rights reads: "You may transfer this contract to another person. That person will then have all your rights, privileges, and remedies." (31) Grant of security interest in collateral. The model clause regarding a description of a security interest granted in a typical motor vehicle installment sale reads: Figure: 7 TAC §84.808(31) (No change.) (32) Agreements regarding use and transfer of motor vehicle. The contract may contain a provision prohibiting a buyer from transferring any interest in the motor vehicle without the creditor's written permission, requiring the buyer to notify the seller of change of address, or prohibiting the removal of the motor vehicle from Texas. The transfer fee limitation establishes the maximum fee that a creditor could contract for, charge, or collect for transferring the buyer's equity in the motor vehicle to another party. If desired, a creditor may amend the model provision to reflect a lower transfer fee amount. The model clause concerning agreements regarding the use and transfer of the motor vehicle reads: "I will not sell or transfer the motor vehicle without your written permission. If I do sell or transfer the motor vehicle, this will not release me from my obligations under this contract, and you may charge me a transfer of equity fee of $25 ($50 for a heavy commercial vehicle). I will promptly tell you in writing if I change my address or the address where I keep the motor vehicle. I will not remove the motor vehicle (Optional: motor vehicle or other collateral) from Texas for more than 30 days unless I first get your written permission." (33) Care of motor vehicle. The contract may obligate the buyer to keep the motor vehicle free of liens and encumbrances, require the buyer to keep the motor vehicle in good working order and repair, or prohibit the buyer from allowing the motor vehicle to be exposed to seizure, confiscation, or other involuntary transfer. The model clause regarding care of the motor vehicle reads: "I agree to keep the motor vehicle free from all liens and claims except those that secure this contract. I will timely pay all taxes, fines, or charges pertaining to the motor vehicle. I will keep the motor vehicle in good repair. I will not allow the motor vehicle to be seized or placed in jeopardy, or use it illegally. I must pay all I owe even if the motor vehicle is lost, damaged or destroyed. If a third party takes a lien or claim against or possession of the motor vehicle, you may pay the third party any cost required to free the motor vehicle from all liens or claims. You may immediately demand that I pay you the amount paid to the third party for the motor vehicle. If I do not pay this amount, you may repossess the motor vehicle and add that amount to the amount I owe. If you do not repossess the motor vehicle, you may still demand that I pay you, but you cannot compute a finance charge on this amount." (34) Default rights and repossession provisions. This paragraph details agreements allowing acceleration of the buyer's obligation upon the buyer's default or upon the creditor's determination of insecurity as permitted by Texas Business and Commerce Code, §1.309. The following provisions are samples of model clauses regarding some of the default rights and remedies of a creditor in a typical motor vehicle installment sale transaction: (G) Cancellation of optional insurance or service contracts. The model clause regarding cancellation of optional insurance or service contracts reads: "This contract may contain charges for insurance or service contracts or for services included in the cash price. If I default, I agree that you can claim benefits under these contracts to the extent allowable, and terminate them to obtain refunds of unearned charges to reduce what I owe or repair the motor vehicle." (A) Acceleration and default. The model clause regarding acceleration and default reads: Figure: 7 TAC §84.808(34)(A) (No change.) (35) Acceleration, waiver of notice of intent to accelerate, and notice of acceleration. A model clause regarding the holder's right to accelerate maturity of the contract and to waive the buyer's or co-buyer's common law right to notice of intent to accelerate, notice of acceleration, or both reads: "If I default, or you believe in good faith that I am not going to keep any of my promises, you can demand that I immediately pay all that I owe. You don't have to give me notice that you are demanding or intend to demand immediate payment of all that I owe." (B) Late charge. The model clause regarding late charge reads: "I will pay you a late charge as agreed to in this contract when it accrues." (C) Repossession. At the creditor's option, a creditor may choose one of the following model provisions pertaining to repossession. The model clauses regarding repossession read: (i) "If I default, you may repossess the motor vehicle from me if you do so peacefully. If any personal items are in the motor vehicle, you can store them for me and give me written notice at my last address shown on your records within 15 days of discovering that you have my personal items. If I do not ask for these items back within 31 days from the day you mail or deliver the notice to me, you may dispose of them as applicable law allows. Any accessory, equipment, or replacement part stays with the motor vehicle." In this provision, the term "peacefully" is intended to have the same meaning as "without breaching the peace," as determined by the Texas courts, and as found under clause (ii) of this subparagraph. Or (ii) "If I default, you may repossess the motor vehicle from me if you do so without breaching the peace. If any personal items are in the motor vehicle, you can store them for me and give me written notice at my last address shown on your records within 15 days of discovering that you have my personal items. If I do not ask for these items back within 31 days from the day you mail or deliver the notice to me, you may dispose of them as applicable law allows. Any accessory, equipment, or replacement part stays with the motor vehicle." (D) Buyer's right to redeem. The model clause regarding buyer's right to redeem reads: "If you take my motor vehicle, you will tell me how much I have to pay to get it back. If I do not pay you to get the motor vehicle back, you can sell it or take other action allowed by law. My right to redeem ends when the motor vehicle is sold or you have entered into a contract for sale or accepted the collateral as full or partial satisfaction of a contract." (E) Disposition of motor vehicle. The model clause regarding disposition of the motor vehicle reads: "If I don't pay you to get the motor vehicle back, you can sell it or take other action allowed by law. If you sell the motor vehicle in a public or private sale, you will send me notice at least 10 days before you sell it. You can use the money you get from selling it to pay allowed expenses and to reduce the amount I owe. Allowed expenses are expenses you pay as a direct result of taking the motor vehicle, holding it, preparing it for sale, and selling it. If any money is left, you will pay it to me unless you must pay it to someone else. If the money from the sale is not enough to pay all I owe, I must pay the rest of what I owe you plus interest. If you take or sell the motor vehicle, I will give you the certificate of title and any other document required by state law to record transfer of title." (F) Collection costs. The model clause regarding collection costs reads: "If you hire an attorney who is not your employee to enforce this contract, I will pay reasonable attorney's fees and court costs as the applicable law allows." (36) Refund upon acceleration. For contracts using the sum of the periodic balances or scheduled installment earnings methods, the model clause regarding the buyer's right to a finance charge refund upon acceleration of the contract reads: "If you demand that I pay you all that I owe, you will give me a credit of part of the Finance Charge as if I had prepaid in full." (37) Servicing and collection contact. The Telephone Consumer Protection Act, 47 U.S.C. §227(b)(1)(A) - (B), generally prohibits creditors and other persons from calling a residential telephone line using an automatic telephone dialing system or an artificial or prerecorded message without the prior express consent of the called party. The model clause for servicing and collection contact reads: "You may try to contact me at any mailing address, e-mail address, or phone number I give you, as the law allows. You may try to contact me in writing (including mail, e-mail, and text messages) and by phone (including prerecorded or artificial voice messages and automatic telephone dialing systems)." (38) Dishonored check fee. Under Texas Business and Commerce Code, §3.506, the holder of a payment device (including a check) may charge a processing fee up to $30 if the payment device is dishonored. The model clause for a dishonored check fee reads: "I agree to pay you a fee of up to $30 for a returned check. You can add the fee to the amount I owe or collect it separately." (39) Integration and severability. (A) The contract may include an integration clause indicating that the parties to the contract intend it to be the final written expression of their agreement. The model clause regarding integration reads: "This contract contains the entire agreement between you and me relating to the sale and financing of the motor vehicle." (B) The contract may also include a severability clause providing that the invalidity of any portion of the contract does not render invalid other parts of the contract that would otherwise be valid. The model clause regarding severability reads: "If any part of this contract is not valid, all other parts stay valid." (40) No waiver and limitations on creditor's rights and usury savings. (A) A model clause to prevent a creditor's delay in enforcing rights under the contract from affecting a waiver of those rights reads: "If you don't enforce your rights every time, you can still enforce them later." (B) A provision establishing limitations on the creditor's rights reads: "You will exercise all of your rights in a lawful way." ADOPTED RULES October 30, 2015 40 TexReg 7633 (C) The model clause regarding usury savings reads: "I don't have to pay finance charge or other amounts that are more than the law allows. This provision prevails over all other parts of this contract and over all your other acts." (41) Applicable law. (A) General model clause. A model clause to establish the law that will apply to the contract reads: "Federal law and Texas law apply to this contract." (B) Additional clause for commercial vehicles. Under Texas Finance Code, §353.009(b), if a commercial vehicle retail installment sales contract does not state that Texas Finance Code, Chapter 353 applies, then the contract is subject to Texas Finance Code, Chapter 348. In a commercial vehicle retail installment sales contract, the creditor may include the following clause to specify that Chapter 353 applies: "Chapter 353 of the Texas Finance Code applies to this contract." (42) Warranty disclaimer. The disclaimer of express and implied warranties should be set out from the surrounding text so that the disclosure is conspicuous. A disclaimer of express and implied warranties, such as the following, is permitted by Texas Business and Commerce Code, §2.316, and reads: "Unless the seller makes a written warranty, or enters into a service contract within 90 days from the date of this contract, the seller makes no warranties, express or implied, on the motor vehicle, and there will be no implied warranties of merchantability or of fitness for a particular purpose. This provision does not affect any warranties covering the motor vehicle that the motor vehicle manufacturer may provide." (43) Preservation of consumer's claims and defenses notice. This notice only applies if the motor vehicle financed in the contract was purchased for personal, family, or household use. The preservation of consumer's claims and defenses notice disclosure should be set out from the surrounding text so that the disclosure is in all capitals, boldfaced and in at least 10-point type. The preservation of consumer's claims and defenses notice, as required by the Federal Trade Commission's Holder in Due Course Rule, 16 C.F.R. §433.2, reads: "NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER. This provision applies to this contract only if the motor vehicle financed in the contract was purchased for personal, family, or household use." (44) Used car buyer's guide. The used car buyer's guide disclosure should be set out from the surrounding text so that the disclosure is conspicuous. The disclosure should be prefaced by the words "In this box only, the word "you" refers to the Buyer." The used car buyer's guide disclosure, as required by the Federal Trade Commission's Used Car Rule, 16 C.F.R. Part 455, reads: (A) "Used Car Buyer's Guide. The information you see on the window form for this vehicle is part of this contract. Information on the window form overrides any contrary provisions in the contract of sale." (B) Spanish Translation: "Guía para compradors de vehículos usados. La información que ve en el formulario de la ventanilla para este vehículo forma parte del presente contrato. La información del formulario de la ventanilla deja sin efecto toda disposición en contrario contenida en el contrato de venta." 40 TexReg 7634 October 30, 2015 Texas Register (45) Negotiability and assignment. The disclosure of the negotiability of the contract should be placed on the front side of the contract and may read: (A) "The Annual Percentage Rate may be negotiated with the Seller. The Seller may assign this contract and retain its right to receive a part of the Finance Charge"; (B) "The rates of this contract are negotiable. The seller may assign or otherwise sell this contract and receive a discount or other payment for the difference between the rate, charges, or balance"; or (C) "A customer may obtain their own financing. The finance charge may be negotiable. The dealership may assign the retail installment contract. There is no duty to disclose the terms for the sale of this contract (for example, price paid to retail seller to purchase retail installment contract)." §84.809. Permissible Changes. (a) Creditors may make the following types of changes to the model clauses and the model contracts and may still be eligible for the defenses provided by Texas Finance Code, §349.101: (1) Deleting inapplicable disclosures; (2) Using a line for the consumer to initial, rather than a checkbox; (3) Adding a signature line to the insurance disclosures to reflect joint policies; (4) Substituting another term for "buyer," "seller," or "creditor" that has the same meaning, or use of pronouns such as "you," "we," and "us" or "it"; (5) Changing the person of the pronouns to refer to the seller as "I" or "me" and the buyer as "you" or "your"; (6) Substituting the word "vehicle" for the term "motor vehicle"; (7) Presenting the model clauses in any order, and combining or further segregating the model clauses; (8) Inserting descriptive headings or number provisions; (9) Changing the case of a word if otherwise permitted by the Texas Finance Code; (10) Omitting references to different provisions for heavy commercial vehicles where the creditor elects to treat buyers of heavy commercial vehicles under the rules applicable to other vehicles; (11) Moving provisions from one side of the form to the other and directing the buyer to see the other side, or placing all of the provisions on the same side of the form; or (12) Changing any provision to comply with federal law. (b) A sample model motor vehicle retail installment sales contract is presented in the following example. Figure: 7 TAC §84.809(b) (c) A contract may include other provisions that are not prohibited by law, but the contract including the other provisions must be submitted to the OCCC under §84.802 of this title (relating to NonStandard Contract Filing Procedures). (d) Nothing in this regulation prohibits a contract from including provisions that provide more favorable results for the buyer than those that would result from the use of a model clause. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504399 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 936-7621 ♦ ♦ The amendments are adopted under Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. The amendments regarding the OCCC notice are adopted under Texas Finance Code, §14.104, which requires that a written contract of an authorized lender subject to the OCCC's regulation must contain the name, mailing address, and telephone number of the office. The OCCC believes that a modernized interpretation of §14.104 would include the agency's updated website and e-mail address. The statutory provisions affected by the adopted amendments are contained in Texas Finance Code, Chapters 345, 347, and 348. ♦ CHAPTER 86. RETAIL CREDITORS SUBCHAPTER A. REGISTRATION OF RETAIL CREDITORS 7 TAC §86.101 The Finance Commission of Texas (commission) adopts amendments to 7 TAC Chapter 86, concerning Retail Creditors. Amendments are being adopted in §86.101, concerning Consumer Notifications. The commission adopts the amendments to §86.101 without changes to the proposed text as published in the September 4, 2015, issue of the Texas Register (40 TexReg 5616). In general, the purpose of the amendments governing plain language contract provisions is to implement changes resulting from the commission's review of Chapter 90 under Texas Government Code, §2001.039, along with corresponding revisions to §86.101 to update the agency's contact information. Section 86.101 outlines the consumer notifications that must be provided on all Chapter 345, 347, and 348 contracts. In accordance with instructions from the Texas Department of Information Resources, the Office of Consumer Credit Commissioner (OCCC) has updated its website and e-mail address with the "texas.gov" extension: occc.texas.gov and consumer.complaints@occc.texas.gov. In order to provide consumers with the best contact information for the agency, this adoption amends several provisions and figures with the OCCC's updated contact information. Other revisions have been made to the text of the consumer notice to provide more clarity to consumers regarding the role of the OCCC in resolving complaints. Previously, this notice has been referenced in the rules as the "Complaints and inquiries notice" or the "Consumer credit commissioner notice." To continue the use of the agency's acronym and provide consistency throughout the rules, this consumer notice has been relabeled as the "OCCC Notice." Adopted amendments to §86.101(a) also require creditors and lenders to include a statement that consumers can contact the phone number for questions or complaints, and allow creditors to include one or more of the following: mailing address, fax number, website, or e-mail. The remaining amendments relate to improvements in clarity and formatting, by providing taglines to both subsections of §86.101. The commission received no written comments in response to the proposed amendments to §86.101. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504396 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ CHAPTER 90. CHAPTER 342, PLAIN LANGUAGE CONTRACT PROVISIONS The Finance Commission of Texas (commission) adopts amendments to 7 TAC Chapter 90, concerning Chapter 342, Plain Language Contract Provisions. The commission also adopts new 7 TAC §90.703, which was repealed and replaced. The commission adopts the majority of the amendments to Chapter 90 (specifically, §§90.101 - 90.103, 90.105, 90.201 - 90.204, 90.301, 90.302, 90.401, 90.402, 90.404, 90.501, 90.502, 90.504, 90.601, 90.602, 90.604, 90.701, the repeal of 90.703, and new 90.703) without changes to the proposed text as published in the September 4, 2015, issue of the Texas Register (40 TexReg 5618). The commission adopts the amendments to §§90.104, 90.303, 90.304, 90.403, 90.503, and 90.603 with changes to the proposed text as published in the September 4, 2015, issue of the Texas Register (40 TexReg 5618). These changes are being made in order to make technical corrections and provide further clarification related to high-cost mortgage loans. The commission received no written comments in response to the proposed amendments to Chapter 90. In general, the purpose of the amendments, repeal and new rule governing plain language contract provisions is to implement changes resulting from the commission's review of Chapter 90 under Texas Government Code, §2001.039. Corresponding revisions to §86.101 and the plain language rules in Chapter 84, concerning Motor Vehicle Installment Sales, are being adopted separately in this issue of the Texas Register. ADOPTED RULES October 30, 2015 40 TexReg 7635 The adopted amendments revise plain language non-standard contract submission procedures relating to readability levels, typefaces, and font sizes. The rule changes also update plain language contracts to conform with federal TILA-RESPA integrated disclosures, including a new rule that was repealed and replaced. Additionally, the amendments provide updated references to state and federal law and make technical corrections. The adopted changes affect the rules listed, as contained in the following subchapters of Chapter 90: Subchapter A, concerning General Provisions (§§90.101 - 90.105); Subchapter B, concerning Secured Consumer Installment Loans (Chapter 342, Subchapter E) (§§90.201 - 90.204); Subchapter C, concerning Signature Loans (Chapter 342, Subchapter F) (§§90.301 - 90.304); Subchapter D, concerning Second Lien Home Equity Loans (Chapter 342, Subchapter G) (§§90.401 - 90.404); Subchapter E, concerning Second Lien Purchase Money Loans (Chapter 342, Subchapter G) (§§90.501 - 90.504); Subchapter F, concerning Second Lien Home Improvement Contracts (Chapter 342, Subchapter G) (§§90.601 - 90.604); and Subchapter G, concerning Spanish Disclosures (§90.701 and §90.703). The notice of intention to review 7 TAC Chapter 90 was published in the July 17, 2015, issue of the Texas Register (40 TexReg 4707). The commission received no comments in response to that notice. The majority of the adopted amendments center on changes made throughout several sections of rule text, as well as multiple figures, in order to provide consistency throughout the plain language rules. In the following paragraphs, most of the amendments will be outlined on an issue-by-issue basis. First, a basic statement of the rule issue will be provided. Second, the purpose and background of the changes will be described. And third, a list of the relevant provisions containing amendments related to that rule issue will be provided. Additionally, certain amendments isolated to one or a small number of rules will be discussed on a section-by-section basis, as appropriate. In §90.101(6), the agency's acronym "OCCC," which stands for Office of Consumer Credit Commissioner, has been adopted as a new defined term to allow appropriate use throughout the chapter. The remaining definitions have been renumbered accordingly. In Chapter 90, each subchapter contains a purpose section that outlines the purpose of the particular plain language contract provisions provided in that subchapter. In each respective purpose section, the term "commissioner" is being replaced with "OCCC." The agency believes that the use of "OCCC" will provide better clarity to the rules when the context calls for action by the agency, as opposed to the commissioner specifically. The following rules include amendments to replace "commissioner" with "OCCC": §§90.201, 90.301, 90.401, 90.501, and 90.601. The agency's non-standard contract submission procedure has been revised in order to provide more efficiency and clarity. In §90.104(b), the certification of readability includes amendments adding a list of the typefaces and font sizes used in the contract, as well as the Flesch-Kincaid Grade Level score of the contract. To provide consistency, the list of easily readable typefaces and use of the typeface "Times New Roman" instead of "Times" has been revised in §90.103 to match the language in current §84.103. Since the proposal, technical corrections have been made to §90.104(b). 40 TexReg 7636 October 30, 2015 Texas Register The filing requirements in §90.104(c) contain amendments requiring submission in both Microsoft Word and PDF format. Paper filings or other formats will not be accepted under the new submission procedure. New provisions contained in §90.104(c)(4) set the maximum Flesch-Kincaid Grade Level scores for each type of contract submitted, which are as follows: grade 8 for Chapter 342, Subchapter F loans; grade 9 for Chapter 342, Subchapter E loans; and grade 10 for Chapter 342, Subchapter G loans. These grade level requirements will help ensure that agreements are readable and accessible to consumers. The agency's experience indicates that contracts can be drafted to comply with these requirements. Section 90.105 specifies the consumer notices for Chapter 342 contracts. In accordance with instructions from the Texas Department of Information Resources, the OCCC has updated its website and e-mail address with the "texas.gov" extension: occc.texas.gov and consumer.complaints@occc.texas.gov. In order to provide consumers with the best contact information for the agency, this adoption amends several provisions and figures with the OCCC's updated contact information. Other revisions have been made to the text of the consumer notice to provide more clarity to consumers regarding the role of the OCCC in resolving complaints. Previously, this notice has been referenced in the rules as the "Complaints and inquiries notice" or the "Consumer credit commissioner notice." To continue the use of the agency's acronym and provide consistency throughout the rules, this consumer notice has been relabeled as the "OCCC Notice." In addition, an amendment to §90.105(b)(1) requires the lender to include its phone number in the OCCC notice of each Chapter 342 loan contract. This is similar to the phone number requirement that already exists under §86.101 for contracts under Chapters 345, 347, and 348. The new provision adopted in §90.105(b)(6) specifies that the phone number may be included in a portion of the contract other than the OCCC notice, as long as the reader's attention is directed to the area of the document where the phone number may be found. Adopted amendments to §90.105(b)(1) also require creditors and lenders to include a statement that consumers can contact the phone number for questions or complaints, and allow creditors to include one or more of the following: mailing address, fax number, website, or e-mail. Changes to update references to the notice with the new label ("OCCC Notice") are contained in the following provisions: §§90.105 (rule title), 90.202(23), 90.203(b)(24), 90.302(22), 90.303(b)(21), 90.402(a)(21), 90.403(b)(21), 90.502(a)(21), 90.503(b)(21), 90.602(a)(2)(X), (4)(Y), and 90.603(c)(24), (e)(25). Certain provisions have been renumbered or relettered accordingly. Adopted revisions to update the text of the OCCC Notice are contained in the following provisions: §§90.105(b), 90.203(b)(24), 90.303(b)(21), 90.403(b)(21), 90.503(b)(21), and 90.603(c)(24), (e)(25). Certain provisions have been renumbered or relettered accordingly. The following figures contain the OCCC Notice as revised for this adoption: §§90.204(a)(7) - (8), 90.304(a)(7) - (9), 90.404(a)(8), 90.504(a)(8), and 90.604(a)(14), (16). Certain figures have been renumbered or relettered accordingly. The rules often cite other state and federal law, federal regulations, as well as refer to other sections within Title 7 of the Texas Administrative Code. Since the last review of the plain language rules, state laws have been added or revised, certain federal regulations have been relocated, and the Consumer Financial Protection Bureau (CFPB) has been created and assumed the duties of other federal agencies. The amendments include revisions to update existing citations, provide more accurate or specific citations, remove obsolete citations, or provide new or revised language in accordance with other law. Revisions to update legal citations and references are included in the following provisions: §§90.102, 90.303(b)(3), 90.402(c), 90.403(b)(1)(A), (b)(3)(B), (c)(1)(P), 90.404(a)(7), 90.502(c), 90.503(b)(1)(A), (b)(3)(B), (c)(1)(O), 90.504(a)(7), 90.602(b), 90.603(b)(12), (c)(1)(A), (c)(5)(B), (c)(26), (d)(20), (e)(1)(A), (e)(5)(B), (f)(1)(P), 90.604(a)(1), (a)(12), 90.701(a) - (b), and 90.703. Additionally, citations have been added to or updated in the following figures: §§90.404(a)(8) - (9), 90.504(a)(8) - (9), and 90.604(a)(14), (16) - (17). Certain provisions have been renumbered or relettered accordingly. In §90.203(b)(5) regarding contracts under Subchapter E of Chapter 342, a clarifying change has been made to specify that the clause on interest on the matured amount applies to contracts using the scheduled installment earnings method of the sum of the periodic balances method. The rate bracket amounts for loans governed by Subchapter E of Texas Finance Code, Chapter 342 are adjusted on an annual basis. In order to direct the reader to the most recent rate bracket amounts, the following sentence has been added to §90.203(b)(7): "The model finance charge earnings and refund method clauses include rate bracket amounts that are updated annually in the Texas Credit Letter." Conforming changes to update the rate bracket amounts for Subchapter E loans are contained in the following figures: §90.203(b)(7)(A), (b)(7)(C), and (b)(7)(E). The amounts included in the figures reflect those published in the March 3, 2015, issue of the Texas Register, and the amounts are applicable to loans made July 1, 2015 to June 30, 2016. In addition, the phrase "per year" has been added to figure §90.203(b)(7)(A) after "$100.00" in two instances to provide clarification. Amendments throughout §90.303 provide model provisions for Chapter 342, Subchapter F loan contracts using the scheduled installment earnings method and the true daily earnings method. The amendments implement Texas Finance Code, §342.260, enacted by the Texas Legislature in 2013. New §90.303(b)(2)(B) provides the promise to pay for contracts using the true daily earnings method. New §90.303(b)(5)(B) provides the model prepayment clause for contracts using the true daily earnings method, stating that the borrower can make any payment early. New §90.303(b)(6)(C) - (D) include the finance charge earnings and refund method provisions for contracts using the scheduled installment earnings and true daily earnings methods. These amendments include provisions on the order in which the lender will apply payments, in accordance with Texas Finance Code, §342.260(d), as well as a statement that the acquisition charge will be collected on a straight-line basis in accordance with 7 TAC §83.606(i)(2). Since the proposed version, clarifying language has been added to §90.303(b)(4) to specify that the after maturity interest clause applies to contracts using the add-on method or the scheduled installment earnings method. In addition, since the proposed version, clarifying language has been added to §90.303(b)(7) to specify that the deferment clause applies to contracts using the add-on method or the scheduled installment earnings method. Additional amendments throughout §90.303 specify that current provisions apply to contracts using the add-on method. A new model Subchapter F contract using the scheduled installment earnings method, and incorporating the model provisions, has been added as figure 7 TAC §90.304(a)(8). Since the proposed version, the model deferment clause has been added to the contract at figure 7 TAC §90.304(a)(8), and a technical correction has been made to the language on after maturity interest. A new model Subchapter F contract using the true daily earnings method, and incorporating the model provisions, has been added as figure 7 TAC §90.304(a)(9). Amendments throughout Chapter 90 add the lender's Nationwide Mortgage Licensing System & Registry (NMLS) ID number to the model contracts for Subchapter G secondary mortgages. A recent amendment to Regulation Z, 12 C.F.R. §1026.36(g), requires promissory notes and security documents in mortgage transactions to include the following items: the lender's NMLS ID number, the name of the individual residential mortgage loan originator, and the originator's NMLS ID number. The official commentary to 12 C.F.R. §1026.36(g) explains that the lender may omit its NMLS ID if it does not have an NMLS ID and is not legally required to obtain one. The lender's NMLS ID, the originator's name, and the originator's NMLS ID have been added to the following model provisions that currently include the lender's contact information: §§90.403(b)(1)(A), (c)(1)(D), 90.503(b)(1)(A), (c)(1)(D), and 90.603(b)(2)(C), (c)(1)(A), (d)(2)(C), (e)(1)(A), (f)(1)(C). Conforming changes have been made to the model contracts in the figures accompanying the following provisions: §§90.404(a)(8) (9), 90.504(a)(8) - (9), and 90.604(a)(13) - (17). New provisions have been added in the following sections to describe permissible changes allowed under Regulation Z, 12 C.F.R. §1026.36(g) and the official commentary to that section: §§90.404(a)(7), 90.504(a)(7), and 90.604(a)(12). Certain provisions have been renumbered or relettered accordingly. Amendments throughout Chapter 90 have been made to ensure conformity with the TILA-RESPA integrated disclosures required under recent amendments to Regulation Z, 12 C.F.R. §§1026.19, 1026.37, and 1026.38. One of the integrated disclosures is the Closing Disclosure, a form that integrates and replaces the HUD-1 settlement statement required under the Real Estate Settlement Procedures Act and the final Truth in Lending Act disclosure. The Consumer Financial Protection Bureau (CFPB) has adopted model forms for the Closing Disclosure, which must be provided to the consumer at least three days before consummation of the loan. The new requirements will go into effect on October 3, 2015. Four types of changes have been made to ensure conformity with the TILA-RESPA integrated disclosures. First, the box containing the final TILA disclosure has been removed from the Subchapter G model contracts, because this disclosure has been replaced with the CFPB's Closing Disclosure, which must be provided separately. Second, the payment schedule that is currently in the final TILA disclosure has been moved into the promise to pay. Third, the statement that there is no prepayment penalty, which is currently in the final TILA disclosure, has been moved into the provisions on the finance charge earnings and refund method. Fourth, in the model provisions for promissory notes for home improvement loans, the description of the property subject to the lien has been moved into the provision on security for payment. The following provisions and accompanying figures relating to the final TILA disclosure have been deleted: §§90.402(a)(2) - (3), 90.403(b)(2) - (3), 90.502(a)(2) - (3), 90.503(b)(1) - (3), 90.602(2)(B) - (C), (4)(B) - ADOPTED RULES October 30, 2015 40 TexReg 7637 (C), and 90.603(c)(2) - (3), (e)(2) - (3). Certain provisions have been renumbered or relettered accordingly. Amendments and new figures are contained in the following sections to add the payment schedule to the promise to pay: §§90.403(b)(2)(C), 90.503(b)(2)(C), and 90.603(c)(4)(C), (e)(4)(C). Amendments to the following provisions and accompanying figures add a statement that there is no prepayment penalty: §§90.403(b)(6), 90.503(b)(6), and 90.603(c)(8), (e)(8). Amendments to the following provisions add the property description to the clause on security for payment: §90.603(c)(2) and (e)(2). Conforming changes have been made to the model contracts in the figures accompanying the following provisions: §§90.404(a)(8), 90.504(a)(8), and 90.604(a)(14), (16). New provisions are included in the following sections to specify that the model provisions are separate from the TILA-RESPA integrated disclosures: §§90.402(c), 90.502(c), and 90.603(b). Amendments throughout Chapter 90 have been adopted to ensure conformity with the provision on late charges for high-cost mortgage loans in Regulation Z, 12 C.F.R. §1026.34(a)(8). Regulation Z limits the late charge for high-cost mortgage loans to 4% of the amount of the payment past due. This is less than the 5% limitation that generally applies to secondary mortgage loans under Texas Finance Code, §342.302(e). Amendments to the following provisions describe the late charge limitation for high-cost mortgages, in addition to the general limitation: §§90.403(b)(3), 90.503(b)(3), and 90.603(c)(5), (e)(5). While the proposed amendments stated that the late charge for high-cost mortgage loans is "4% of the scheduled payment," the adopted amendments specify that the late charge is "4% of the amount of the payment past due," to more closely conform to the requirement in Regulation Z, 12 C.F.R. §1026.34(a)(8)(i). Conforming changes have been made to the model contracts in the figures accompanying the following provisions: §§90.404(a)(8), 90.504(a)(8), and 90.604(a)(14), (16). Since the proposed version, clarifying language has been added to the following sections to specify that the after maturity interest clause applies to contracts using the scheduled installment earnings method: §§90.403(b)(4), 90.503(b)(4), 90.603(b)(6), and 90.603(e)(6). An amendment to §90.604(a)(1) provides an updated citation to the CFPB's model form for the right of rescission notice required for mortgage loans under Regulation Z, 12 C.F.R. §1026.23(b). Amendments related to Spanish disclosures are contained in §90.701, to provide clarity regarding which forms must be provided, and to conform to revised §90.703. Adopted new §90.703 replaces the former version of this section, which has been repealed. Subsection (a) provides that for a Chapter 342 loan negotiated in Spanish, the licensee must provide a Spanish disclosure, and that the disclosure must be completed with amounts that are accurate within the tolerances described by Regulation Z, 12 C.F.R. Part 1026. Paragraph (1) provides that for a Subchapter E loan, the lender may provide either a Spanish translation of the loan contract or the "Notificación de Crédito Al Consumidor (Préstamo a Plazos)" (a figure that has been renumbered without changes from former §90.703(a)(2)). Paragraph (2) provides that for a Subchapter F loan, the lender may provide either a Spanish translation of the loan contract or both of the following: the "Notificación de Crédito Al Consumidor (Préstamo)" (a figure that has been renumbered without changes from former §90.703(a)(3)(A)) and the "Conceptos Financieros" (a figure that has been renumbered without changes from former §90.703(a)(3)(B)). Paragraph (3) 40 TexReg 7638 October 30, 2015 Texas Register provides that for a Subchapter G secondary mortgage loan, the lender must provide copies of the CFPB's Spanish translations of both the TILA-RESPA integrated disclosures. This paragraph replaces the former provision and accompanying figure located at §90.703(a)(4), the "Notificación de Crédito Al Consumidor (Préstamo de Segunda Hipoteca)." Subsection (b) provides that for a Chapter 348 transaction, the creditor may provide a Spanish translation of the retail installment sales contract or the "Notificación de Crédito Al Consumidor (Contrato de Menudeo a Plazos para Vehículo Automotor)" (a figure that has been renumbered without changes from former §90.703(a)(5)). Subsection (c) provides that a licensee may delete inapplicable provisions of the model disclosures, except for the TILA-RESPA integrated disclosures required under subsection (a)(3). In addition, the two Subchapter E loan contracts and the three Subchapter F loan contracts include an updated statement (in both English and Spanish) acknowledging that the borrower received a summary of the contract in Spanish. This statement is included in the following figures: §90.204(a)(7) - (8) and §90.304(a)(7) - (9). The provisions relating to Spanish disclosures are adopted under Texas Finance Code, §341.502(a-1), which provides that if the terms of a Chapter 342 loan are negotiated in Spanish, "a copy of a summary of those terms and other pertinent information shall be provided to the debtor in Spanish in a form identical to disclosures required for a closed-end transaction under 12 C.F.R. Section 226.18." The provisions are intended to ensure that the Spanish disclosures are in the same form as the disclosures required under Regulation Z, which has been recodified from 12 C.F.R. Part 226 to 12 C.F.R. Part 1026. The remaining amendments adopted throughout the rules relate to improvements in consistency, clarity, grammar, punctuation, and formatting. Any rules not included in this adoption will be maintained in their current form. All new non-standard contracts submitted on or after the amendments' effective date will have to be submitted under the amended submission requirements, and will have to contain clauses that comply with the amended rules (including the updated OCCC notification). However, the agency will allow a delayed implementation period for certain licensees. For those licensees utilizing the model contracts, the prior model language is acceptable and the agency will permit licensees to use the prior model language (without a non-standard contract submission) until December 31, 2016, to deplete supplies of existing forms during a 13-month transition period after the anticipated effective date of the rules. If licensees submitted compliant non-standard contracts under the prior rules, the agency will permit them to continue using these contracts until December 31, 2016. If licensees intend to continue using non-standard contracts, they must ensure that they submit an updated non-standard contract in compliance with the amended requirements by December 31, 2016. The agency encourages licensees to submit the updated contracts earlier. Starting January 1, 2017, licensees may no longer use contracts submitted under the prior rules. At any time, if the agency determines that a non-standard contract submitted under prior rules contains a substantive violation (e.g., an excessive late charge), it may order the licensee to resubmit the contract. If the contract is resubmitted on or after the amendments' effective date, it will have to comply with the amended requirements. For those licensees performing mortgage transactions subject to the federal TILA-RESPA integrated disclosures, compliance with federal law should be completed in accordance with any guidance or deadlines issued by the CFPB. SUBCHAPTER A. GENERAL PROVISIONS (A) grade 8 for Subchapter F (signature loans); (B) grade 9 for Subchapter E (secured installment loans); 7 TAC §§90.101 - 90.105 The amendments are adopted under Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. All of the plain language amendments and new rule are adopted under Texas Finance Code, §341.502, which authorizes the commission to adopt rules governing the form of contracts for a loan under Chapter 342, a retail installment transaction under Chapter 348, or a home equity loan regulated by the Office of Consumer Credit Commissioner. The amendments regarding the OCCC notice are adopted under Texas Finance Code, §14.104, which requires that a written contract of an authorized lender subject to the OCCC's regulation must contain the name, mailing address, and telephone number of the office. The OCCC believes that a modernized interpretation of §14.104 would include the agency's updated website and email address. The regulated lender amendments are adopted under Texas Finance Code, §342.551 which grants the commission the authority to adopt rules to enforce the consumer loans chapter. The statutory provisions affected by the adopted amendments are contained in Texas Finance Code, Chapters 342 and 348. §90.104. Non-Standard Contract Filing Procedures. (a) Non-standard contracts. A non-standard contract is a contract that does not use the model contract provisions. Non-standard contracts submitted in compliance with the provisions of Texas Finance Code, §341.502(c) will be reviewed to determine that the contract is written in plain language. (b) Certification of readability. Contract filings subject to this chapter must be accompanied by a certification signed by an officer of the licensee or the entity submitting the form on behalf of the licensee. The certification must state that the contract is written in plain language and that the contract can be easily understood by the average consumer. The certification must also state that the contract is printed in an easily readable font and type size, including a list of the typefaces used in the contract, the font sizes used in the contract, and the Flesch-Kincaid Grade Level score of the contract. The OCCC will prescribe the form of the certification. (c) Filing requirements. Contract filings must be identified as to the transaction type. Contract filings must be submitted in accordance with the following requirements: (1) Microsoft Word format. One copy must be submitted in a Microsoft Word format with the document having either a .doc or .docx extension. The Flesch-Kincaid Grade Level score of the contract must be based on the Microsoft Word readability statistics function for the Microsoft Word version of the contract. (2) PDF format. One copy must be submitted in a PDF format so that the contract may be visually reviewed in its entirety. (3) No other formats permitted. The OCCC will not accept paper filings or any other unlisted formats for non-standard contract filings. (C) grade 10 for Subchapter G, computed by scoring the note and security document in one continuous Microsoft Word document (home equity loans, second lien purchase money loans, and second lien home improvement contracts). (d) Contact person. One person shall be designated as the contact person for each filing submitted. Each submission should provide the name, address, phone number, and fax number, if available, of the contact person for that filing. If the contracts are submitted by anyone other than the licensee itself, the contracts must be accompanied by a dated letter which contains a description of the anticipated users of the contracts and designates the legal counsel or other designated contact person for that filing. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504400 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ SUBCHAPTER B. SECURED CONSUMER INSTALLMENT LOANS (SUBCHAPTER E) 7 TAC §§90.201 - 90.204 The amendments are adopted under Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. All of the plain language amendments are adopted under Texas Finance Code, §341.502, which authorizes the commission to adopt rules governing the form of contracts for a loan under Chapter 342, a retail installment transaction under Chapter 348, or a home equity loan regulated by the Office of Consumer Credit Commissioner. The amendments regarding the OCCC notice are adopted under Texas Finance Code, §14.104, which requires that a written contract of an authorized lender subject to the OCCC's regulation must contain the name, mailing address, and telephone number of the office. The OCCC believes that a modernized interpretation of §14.104 would include the agency's updated website and email address. The regulated lender amendments are adopted under Texas Finance Code, §342.551 which grants the commission the authority to adopt rules to enforce the consumer loans chapter. The statutory provisions affected by the adopted amendments are contained in Texas Finance Code, Chapters 342 and 348. (4) Maximum Flesch-Kincaid score. The maximum Flesch-Kincaid Grade Level scores for Chapter 342 contract filings are: ADOPTED RULES October 30, 2015 40 TexReg 7639 The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504401 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ SUBCHAPTER C. SIGNATURE LOANS (SUBCHAPTER F) 7 TAC §§90.301 - 90.304 The amendments are adopted under Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. All of the plain language amendments are adopted under Texas Finance Code, §341.502, which authorizes the commission to adopt rules governing the form of contracts for a loan under Chapter 342, a retail installment transaction under Chapter 348, or a home equity loan regulated by the Office of Consumer Credit Commissioner. The amendments regarding the OCCC notice are adopted under Texas Finance Code, §14.104, which requires that a written contract of an authorized lender subject to the OCCC's regulation must contain the name, mailing address, and telephone number of the office. The OCCC believes that a modernized interpretation of §14.104 would include the agency's updated website and email address. your address above. I will make the payments on the dates and in the amounts shown in the Payment Schedule." (B) For contracts using the true daily earnings method: "I promise to pay the unpaid principal balance plus the accrued interest to the order of you, the Lender. I will make the payments at your address above. I will make the payments on the dates and in the amounts shown in the Payment Schedule." (3) Late charge. The late charge model provisions in this paragraph may be used for loans that are regular transactions under Texas Finance Code, §342.001(2). At the licensee's option, the late charge clause may be made applicable only to loans with more than one installment. As other options, a licensee may include one of the model late charge clause options, as set out in subparagraphs (A) and (B) of this paragraph, in both single and multiple installment loans, so long as the licensee does not collect a default charge on a single payment loan or omit the late charge clause for loans with a single repayment. The licensee may use one of the following late charge model provisions: (A) Option 1: "If I don't pay all of the payment within 10 days after it is due, you can charge me a late charge. The late charge will be 5% of the scheduled payment."; or (B) Option 2: "If I don't pay all of the payment within 10 days after it is due, you can charge me a late charge. If the amount financed is less than $100, the late charge will be 5% of the amount of the installment. If the amount financed is $100 or more, the late charge will be the greater of $10 or 5% of the amount of the installment." (4) After maturity interest. The after maturity interest model clause for contracts using the add-on method or the scheduled installment earnings method reads: "If I don't pay all I owe by the date the final payment becomes due, I will pay interest on the amount that is still unpaid. That interest will be at a rate of 18% per year and will begin the day after the final payment becomes due." (5) Prepayment clause. The model prepayment clause reads: (A) For contracts using the add-on method or the scheduled installment earnings method: "I can make a whole payment early." The regulated lender amendments are adopted under Texas Finance Code, §342.551 which grants the commission the authority to adopt rules to enforce the consumer loans chapter. (B) For contracts using the true daily earnings method: "I can make any payment early." The statutory provisions affected by the adopted amendments are contained in Texas Finance Code, Chapters 342 and 348. (A) Add-on method. For contracts using the add-on method, the model finance charge earnings and refund method clause reads: "The acquisition charge on this loan will not be refunded if I pay off early. If I pay all I owe before the beginning of the last monthly period, I will save part of the installment account handling charge. You will figure the amount I save by the sum of the periodic balances method. This method is explained in the Finance Commission rules. You don't have to refund or credit any amount less than $1.00." §90.303. Model Clauses. (a) Generally. These model clauses are the plain language rendition of contract clauses that have typically been stated in technical legal terms. Nothing in this regulation prohibits a contract from including provisions that provide more favorable results for the borrower than those that would result from the use of a model clause. (b) Model clauses for a Chapter 342, Subchapter F signature loan contract. (1) Pronoun designation of parties. The model clauses refer to the Borrower as "I" or "me." The Lender is referred to as "you" or "your." (2) Promise to pay. The model clause for the borrower's promise to pay reads: (A) For contracts using the add-on method or the scheduled installment earnings method: "I promise to pay the Total of Payments to the order of you, the Lender. I will make the payments at 40 TexReg 7640 October 30, 2015 Texas Register (6) Finance charge earnings and refund method. (B) Add-on method for loans of $30 or less. At the licensee's option, the licensee may include the following model finance charge and refund method language if the licensee makes loans of $30 or less using the add-on method: "The acquisition charge on this loan will not be refunded if I pay off early. If this loan is for more than $30 and I pay all I owe before the beginning of the last monthly period, I will save part of the installment account handling charge. You will figure the amount I save by the sum of the periodic balances method. This method is explained in the Finance Commission rules. You don't have to refund or credit any amount less than $1.00." (C) Scheduled installment earnings method. For contracts using the scheduled installment earnings method, the model fi- nance charge earnings and refund method clause reads: "The annual rate of interest is ___%. This interest rate may not be the same as the Annual Percentage Rate. You figure the interest charge (also called the installment account handling charge) by applying the scheduled installment earnings method as defined by the Texas Finance Code to the unpaid principal balance. At the start of the loan, the unpaid principal balance equals the Amount Financed. The unpaid principal balance does not include the acquisition charge, the interest charge, late charges, charges to extend a payment, or returned check fees. You calculate the Finance Charge and Total of Payments as if I will make each payment on the day it is due. You will apply each of my payments in this order: (1) part of the acquisition charge (figured on a straight-line basis under Finance Commission rules), (2) late charges, (3) returned check fees, (4) accrued interest, and (5) the unpaid principal balance. If I pay off the loan in full early, I may save part of the interest charge. However, you can still collect the unpaid acquisition charge, and the acquisition charge will not be refunded. You don't have to refund or credit any amount less than $1.00." (D) True daily earnings method. For contracts using the true daily earnings method, the model finance charge earnings and refund method clause reads: "The annual rate of interest is ___%. This interest rate may not be the same as the Annual Percentage Rate. You figure the interest charge (also called the installment account handling charge) by applying the true daily earnings method as defined by the Texas Finance Code to the unpaid principal balance. At the start of the loan, the unpaid principal balance equals the Amount Financed. The unpaid principal balance does not include the acquisition charge, the interest charge, late charges, charges to extend a payment, or returned check fees. You calculate the Finance Charge and Total of Payments as if I will make each payment on the day it is due. You will apply payments on the date they are received. This may result in a different Finance Charge or Total of Payments. You will apply each of my payments in this order: (1) part of the acquisition charge (figured on a straight-line basis under Finance Commission rules), (2) late charges, (3) returned check fees, (4) accrued interest, and (5) the unpaid principal balance. If I pay off the loan in full early, you can still collect the unpaid acquisition charge, and the acquisition charge will not be refunded." (7) Deferment clause. The deferment model clause for contracts using the add-on method or the scheduled installment earnings method reads: "If I ask for more time to make any payment and you agree, I will pay more interest to extend the payment. The extra interest will be figured under the Finance Commission rules." (8) Default clause. The model default clause reads: "If I break any of my promises in this document, you can demand that I immediately pay all that I owe. You can also do this if you in good faith believe that I am not going to be willing or able to keep all of my promises." (9) Waiver of notice of intent to accelerate and waiver of notice of acceleration clause. The model waiver of notice of intent to accelerate and waiver of notice of acceleration clause reads: "I agree that you don't have to give me notice that you are demanding or intend to demand immediate payment of all that I owe." (10) Fee for dishonored check clause. The model clause specifies the maximum allowable dishonored check fee. The licensee may always choose a lesser amount. The fee for dishonored check model clause reads: "I agree to pay you a fee of up to $30 for a returned check. You can add the fee to the amount I owe or collect it separately." (11) Signature block. At the licensee's option, a witness signature block may be added. (12) Clause describing collateral. (A) In the Truth in Lending Act disclosure box, the model clause describing the collateral reads: "You will have a security interest in the following described collateral ________________." (B) At the licensee's option, if the promissory note is unsecured, the licensee may use the following clause: "This note is unsecured." (13) Security agreement clause. The model clause setting out the security agreement in case of default reads: "If I am giving collateral for this loan, I will see the separate security agreement for more information and agreements." (14) Mailing of notice to borrower. The model agreement regarding the mailing of notices to the borrower reads: "You can mail any notice to me at my last address in your records. Your duty to give me notice will be satisfied when you mail it." (15) Statement of truthful information. The following clause is sufficient as the borrower's agreement that the information provided to the licensee is true: "I promise that all information I gave you is true." (16) No waiver of lender's rights. The model agreement regarding the lender's rights reads: "If you don't enforce your rights every time, you can still enforce them later." (17) Modifications in writing. The model agreement requiring any change to be in writing reads: "Any change to this agreement has to be in writing. Both you and I have to sign it." (18) Application of law. The model clause regarding the law to be applied to the contract reads: "Federal law and Texas law apply to this contract." (19) Joint liability. The model joint liability agreement reads: "I will keep all of my promises in this document. If there is more than one Borrower, each Borrower agrees to keep all of the promises in the loan document." (20) Usury savings clause. The model usury savings clause reads: "I don't have to pay interest or other amounts that are more than the law allows." (21) OCCC notice. Under §90.105 of this title (relating to OCCC Notice), the following required notice must be given by licensees to let consumers know how to file complaints: "For questions or complaints about this loan, contact (insert name of lender) at (insert lender's phone number and, at lender's option, one or more of the following: mailing address, fax number, website, e-mail address). The lender is licensed and examined under Texas law by the Office of Consumer Credit Commissioner (OCCC), a state agency. If a complaint or question cannot be resolved by contacting the lender, consumers can contact the OCCC to file a complaint or ask a general credit-related question. OCCC address: 2601 N. Lamar Blvd., Austin, Texas 78705. Phone: (800) 538-1579. Fax: (512) 936-7610. Website: occc.texas.gov. E-mail: consumer.complaints@occc.texas.gov." (22) Security agreement. The model clause setting out the security agreement reads: "We are entering into this security agreement at the same time that we are entering into a loan. In exchange for the loan referenced above, I agree to the follow terms and conditions: To secure this loan, I give you a security interest in the collateral. The collateral includes the property listed below, anything that becomes attached to it, and all proceeds of the collateral. This security interest also secures all other debt I owe you now. I understand that all collateral that I have given to secure loans may also be used to secure this and any other loans you may make to me. I own the collateral. I won't sell or transfer it without your written permission. I won't allow anyone else to have an interest in the collateral except you. I will keep the collateral ADOPTED RULES October 30, 2015 40 TexReg 7641 at my address shown above. I will promptly tell you in writing if I change my address. I won't permanently remove the collateral from Texas unless you give me written permission. I will timely pay all taxes and license fees on the collateral. I will keep it in good repair. I won't use the collateral illegally. Any change to this security agreement has to be in writing. Both you and I have to sign it. Any default under my agreements with you will be a default of this security agreement. Federal law and Texas law apply to this security agreement. If I don't keep any of my promises, you can take the collateral. You will only take the collateral lawfully and without a breach of the peace. If you take my collateral, you will tell me how much I have to pay to get it back. If I don't pay you to get the collateral back, you can sell it or take other action allowed by law. You will send me notice at least 10 days before you sell it. My right to get the collateral back ends when you sell it. You can use the money you get from selling it to pay amounts the law allows, and to reduce the amount I owe. If any money is left, you will pay it to me. If the money from the sale is not enough to pay all I owe, I must pay the rest of what I owe you plus interest." §90.304. Permissible Changes. (a) A licensee may consider making the following types of changes to the signature loans plain language model clauses: (1) Adding information related to information set forth in the model clauses that is not otherwise prohibited by law; (2) Substituting another term for "Lender" or "Borrower" that has the same meaning, or using pronouns such as "you," "we," and "us"; (3) Presenting model clauses in any order, and combining or further segregating the model clauses; (4) Inserting descriptive headings or number provisions; Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ SUBCHAPTER D. SECOND LIEN HOME EQUITY LOANS (SUBCHAPTER G) 7 TAC §§90.401 - 90.404 The amendments are adopted under Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. All of the plain language amendments are adopted under Texas Finance Code, §341.502, which authorizes the commission to adopt rules governing the form of contracts for a loan under Chapter 342, a retail installment transaction under Chapter 348, or a home equity loan regulated by the Office of Consumer Credit Commissioner. The amendments regarding the OCCC notice are adopted under Texas Finance Code, §14.104, which requires that a written contract of an authorized lender subject to the OCCC's regulation must contain the name, mailing address, and telephone number of the office. The OCCC believes that a modernized interpretation of §14.104 would include the agency's updated website and email address. (5) Changing the case of a word if otherwise permitted by the Texas Finance Code; or The regulated lender amendments are adopted under Texas Finance Code, §342.551 which grants the commission the authority to adopt rules to enforce the consumer loans chapter. (6) Making other changes that do not affect the substance of the disclosures. The statutory provisions affected by the adopted amendments are contained in Texas Finance Code, Chapters 342 and 348. (7) A sample model contract using the add-on method is presented in the following example. Figure: 7 TAC §90.304(a)(7) §90.403. (8) A sample model contract using the scheduled installment earnings method is presented in the following example. Figure: 7 TAC §90.304(a)(8) Model Clauses. (a) Generally. These model clauses are the plain language rendition of contract clauses that have typically been stated in technical legal terms. Nothing in this regulation prohibits a contract from including provisions that provide more favorable results for the borrower than those that would result from the use of a model clause. (9) A sample model contract using the true daily earnings method is presented in the following example. Figure: 7 TAC §90.304(a)(9) (b) Model clauses for a Chapter 342, Subchapter G second lien home equity loan contract. (10) A sample model security agreement is presented in the following example. Figure: 7 TAC §90.304(a)(10) (A) The model identification clause lists the account or contract number, the name and address of the lender, the date of the note, and the name and address of the borrower. It also lists the following items that must be included on the promissory note under Regulation Z, 12 C.F.R. §1026.36(g): (b) A licensee has considerable flexibility to arrange the format of the model form if the revised format does not significantly adversely affect the substance, clarity, or meaningful sequence of the disclosures. The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt. Filed with the Office of the Secretary of State on October 16, Identification. (i) the lender's Nationwide Mortgage Licensing System and Registry identification number (labeled "Creditor/Lender NMLS ID"); (ii) the name of the individual residential mortgage loan originator with primary responsibility for the origination (labeled "Loan Originator"); and (iii) the originator's Nationwide Mortgage Licensing System and Registry identification number (labeled "Loan Originator NMLS ID"). 2015. TRD-201504402 40 TexReg 7642 October 30, 2015 (1) Texas Register (B) The model clause identifying the pronouns used for the borrower and the lender reads: "A word like "I" or "me" means each person who signs as a Borrower. A word like "you" or "your" means the Lender or "Note Holder." The Lender is _________. The Lender may sell or transfer this Note. The Lender or anyone who is entitled to receive payments under this Note is called the "Note Holder." You will tell me in writing who is to receive my payments." (2) Promise to pay. One permissible change to the model language for the scheduled installment earnings method would be to allow partial prepayments of the principal during the term of the loan. This variation on the Texas scheduled installment earnings method would allow periodic reductions of the principal balance by partial prepayments. This variation would allow reductions of the principal balance that were not originally scheduled. The model clause for the borrower's promise to pay reads: "This loan is an Extension of Credit defined by Section 50(a)(6), Article XVI of the Texas Constitution." (A) For contracts using the scheduled installment earnings method: "I promise to pay the Total of Payments to the order of you. (The "principal" or "cash advance" is $________. This amount plus interest must be paid by _________ (maturity date).) I will make payments to you at the address above or as you direct. I will make the payments on the dates and in the amounts shown in the Payment Schedule." (B) For contracts using the true daily earnings method: "I promise to pay the cash advance plus the accrued interest to the order of you. (The "principal" or "cash advance" is $________. This amount plus interest must be paid by _________ (maturity date).) I will make payments to you at the address above or as you direct. I will make the payments on the dates and in the amounts shown in the Payment Schedule." (C) The model payment schedule reads: Figure: 7 TAC §90.403(b)(2)(C) (3) Late charge. (A) Generally. The general model late charge provision for contracts using the scheduled installments earnings method or the true daily earnings method reads: "If I don't pay all of a payment within 10 days after it is due, you can charge me a late charge. The late charge will be 5% of the scheduled payment." (B) High-cost mortgage loans. The model late charge provision for high-cost mortgage loans subject to the limitation on late charges in Regulation Z, 12 C.F.R. §1026.34(a)(8), reads: "If I don't pay all of a payment within 15 days after it is due, you can charge me a late charge. The late charge will be 4% of the amount of the payment past due." (4) After maturity interest. The model provision for after maturity interest for contracts using the scheduled installment earnings method reads: "If I don't pay all I owe when the final payment becomes due, I will pay interest on the amount that is still unpaid. That interest will be the higher of the rate of 18% per year or the maximum rate allowed by law. That interest will begin the day after the final payment becomes due." (5) Prepayment clause. The model prepayment clause options read: (A) For contracts using the scheduled installment earnings method: "I can make a whole payment early. Unless you agree otherwise in writing, I may not skip payments. If I make a payment early, my next payment will still be due as scheduled." I may not skip payments. If I make a payment early, my next payment will still be due as scheduled." (6) Finance charge earnings and refund method. The model provision options specifying the finance charge earnings and refund method read: (A) For contracts using the scheduled installment earnings method - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.403(b)(6)(A) (B) For contracts using the scheduled installment earnings method with prepayments option - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.403(b)(6)(B) (C) For contracts using the true daily earnings method - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.403(b)(6)(C) (7) Fee for dishonored check clause. The model clause specifies the maximum allowable dishonored check fee. A licensee may always choose a lesser amount. The fee for dishonored check model clause reads: "I agree to pay you a fee of up to $30 for a returned check. You may add the fee to the amount I owe or collect it separately." (8) Default clause. The model provision specifying the conditions causing default reads: Figure: 7 TAC §90.403(b)(8) (9) Property insurance. The model provision regarding property insurance reads: Figure: 7 TAC §90.403(b)(9) (10) Credit insurance. If single premium credit insurance is allowable, a permissible change to the disclosure can be to offer a single charge for the entire term of the loan. The term for the single premium charge should be shown for the original term of the loan, unless otherwise specified. The licensee has the option of including language that reads: "The insurance will cancel on the date when the total past due premiums equal or exceed (insert number) times the first month's premium." The industry standard regarding the relationship between total past due premiums and the first month's premium in this equation appears to be four times. However, if a different time frame is more appropriate, that time frame may be used. The model credit insurance disclosure box reads: Figure: 7 TAC §90.403(b)(10) (11) Mailing of notices to borrower. The model provision regarding the mailing of notices to the borrower reads: "You or I may mail or deliver any notice to the address above. You or I may change the notice address by giving written notice. Your duty to give me notice will be satisfied when you mail it by first class mail." (12) Due on sale clause, notice of intent to accelerate, and notice of acceleration. The model provision regarding the due on sale clause, notice of intent to accelerate, and notice of acceleration reads: "If all or any interest in the homestead is sold or transferred without your prior written consent, you may require immediate payment in full of all that I owe under this Loan Agreement. You will not exercise this option if prohibited by law. If you exercise this option, you will give me notice of acceleration (i.e., payment of all I owe at once). This notice will give me a period of not less than 21 days from the date of the notice within which I must pay all that I owe under this Loan Agreement. If I fail to pay all that I owe before the end of this period, you may use any remedy allowed by the Loan Agreement." (B) For contracts using the true daily earnings method: "I can make any payment early. Unless you agree otherwise in writing, ADOPTED RULES October 30, 2015 40 TexReg 7643 (13) No waiver of lender's rights. The model provision expressing no waiver of the lender's rights reads: "If you don't enforce your rights every time, you can still enforce them later." (14) Collection expenses clause. The model collection expenses clause reads: "If you require me to pay all that I owe at once, you will have the right to be paid back by me for all of your costs and expenses in enforcing this Loan Agreement to the extent not prohibited by law, including Section 50(a)(6), Article XVI of the Texas Constitution. These expenses include, for example, reasonable attorneys' fees. I understand that these fees are not for maintaining or servicing this Loan Agreement." (15) Joint liability. The model provision providing for joint liability reads: "I understand that you may seek payment from only me without first looking to any other Borrower. You can enforce your rights under this Loan Agreement solely against the homestead. This Loan Agreement is made without personal liability against each owner of the homestead and the spouse of each owner unless the owner or spouse obtained this loan by actual fraud. If this loan is obtained by actual fraud, I will be personally liable for the debt, including a judgment for any deficiency that results from your sale of the homestead for an amount less than is owed under this Loan Agreement." (16) Usury savings clause. The model usury savings clause reads: "I do not have to pay interest or other amounts that are more than the law allows." (17) Savings clause. The model savings clause stating that if any part of the contract is invalid, the rest remains valid reads: "If any part of this Loan Agreement is declared invalid, the rest of the Loan Agreement remains valid. If any part of this Loan Agreement conflicts with any law, that law will control. The part of the Loan Agreement that conflicts with any law will be modified to comply with the law. The rest of the Loan Agreement remains valid." (18) Contract supersedes prior agreements. For loan agreements exceeding $50,000, this notice must be boldfaced, capitalized, underlined, or otherwise set out from the surrounding written material to be conspicuous. The model integration clause providing that the contract supersedes prior agreements reads: "This written Loan Agreement is the final agreement between you and me and may not be changed by prior, current, or future oral agreements between you and me. There are no oral agreements between you and me relating to this Loan Agreement. Any change to this Loan Agreement must be in writing. Both you and I have to sign written agreements." (19) Security document. The model provision stating that the homestead described in the loan agreement is subject to the lien of the security document reads: "The homestead described above by the property address is subject to the lien of the Security Document. I will see the separate Security Document for more information about my rights and responsibilities." (20) Application of law. The model clause specifying that federal law and Texas law apply to the contract reads: "Federal law and Texas law apply to this Loan Agreement. The Texas Constitution will be applied to resolve any conflict between the Texas Constitution and any other law." (21) OCCC notice. Under §90.105 of this title (relating to OCCC Notice), the following required notice must be given by licensees to let consumers know how to file complaints: "For questions or complaints about this loan, contact (insert name of lender) at (insert lender's phone number and, at lender's option, one or more of the following: mailing address, fax number, website, e-mail address). The lender is licensed and examined under Texas law by the Office of Consumer Credit Commissioner (OCCC), a state agency. If 40 TexReg 7644 October 30, 2015 Texas Register a complaint or question cannot be resolved by contacting the lender, consumers can contact the OCCC to file a complaint or ask a general credit-related question. OCCC address: 2601 N. Lamar Blvd., Austin, Texas 78705. Phone: (800) 538-1579. Fax: (512) 936-7610. Website: occc.texas.gov. E-mail: consumer.complaints@occc.texas.gov." (22) Clause describing collateral. The model provision describing the collateral reads: "The homestead described above by the property address is subject to the lien of the Security Document." (23) Signature blocks. The licensee may also provide additional signature lines for witness signatures. The model provision regarding signature blocks reads: Figure: 7 TAC §90.403(b)(23) (c) Model clauses for the security document for a Chapter 342, Subchapter G second lien home equity loan contract. (1) The model definitions section reads: (A) "Loan Agreement" means the Note, Security Document, deed of trust, any other related document, or any combination of those documents, under which you have extended credit to me. (B) "Security Document" means this document, which is dated ________, together with all Riders to this document. (C) "I" or "me" means _________________________ ________________, the grantor under this Security Document and the person who signed the Note ("Borrower"). (D) "You" means _____________________________ _____________, the Lender and any holder entitled to receive payments under the Note. Your address is ________________________ _________________. Your NMLS ID is __________. You are the beneficiary under this Security Document. The loan originator's name is _________________________________________. The loan originator's NMLS ID is __________. (E) "Trustee" is ______________________________. Trustee's address is ___________________________________. (F) "Note" means the promissory Note signed by me and dated ______________. The Note states that the amount I owe you is _________________ dollars (U.S. $_______) plus interest. I have promised to pay this debt in regular Periodic Payments and to pay the debt in full not later than ______________________________ (maturity date). (G) "My Homestead" means the property that is described below under the heading "Transfer of Rights in the Property." (H) "Extension of Credit" means the debt evidenced by the Note, as defined by Section 50(a)(6), Article XVI of the Texas Constitution and all the documents executed in connection with the debt. (I) "Riders" means all Riders to this Security Document that I execute. Figure: 7 TAC §90.403(c)(1)(I) (No change.) (J) "Applicable Law" means all controlling applicable federal, Texas and local constitutions, statutes, regulations, administrative rules, local ordinances, judicial and administrative orders (that have the effect of law) as well as all applicable final, non-appealable judicial opinions. (K) "Community Association Dues, Fees, and Assessments" means all dues, fees, assessments and other charges that are imposed on me or My Homestead by a condominium association, homeowners association, or similar organization. (L) "Electronic Funds Transfer" means any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, which is initiated through an electronic terminal, telephonic instrument, computer, or magnetic tape so as to order, instruct, or authorize a financial institution to debit or credit an account. The term includes point-of-sale transfers, automated teller machine transactions, transfers initiated by telephone, wire transfers, and automated clearinghouse transfers. (M) "Escrow Items" means those items that are described in Section ___ of this Security Document. (N) "Miscellaneous Proceeds" means any compensation, settlement, award of damages, or proceeds paid by any third party (other than proceeds paid under my insurance) for: damage or destruction of My Homestead; condemnation or other taking of all or any part of My Homestead; conveyance instead of condemnation; or misrepresentations or omissions related to the value or condition of My Homestead. (O) "Periodic Payment" means the regularly scheduled amount due for principal and interest under the Note plus any amounts under this Security Document. (P) "RESPA" means the Real Estate Settlement Procedures Act (12 U.S.C. §§2601-2617) and Regulation X (12 C.F.R. Part 1024), as amended, or any additional or successor legislation or regulation that governs the same subject matter. As used in this Security Document, "RESPA" refers to all requirements and restrictions that are imposed in regard to a "federally related mortgage loan" even if the Loan Agreement does not qualify as a "federally related mortgage loan" under RESPA. (Q) "Successor in Interest of me" means any party that has taken title to My Homestead, whether or not that party has assumed my obligations under the Loan Agreement. (R) "Ground Rents" means amounts I owe if I rented the real property under the buildings covered by this Security Document. Such an arrangement usually takes the form of a long-term "ground lease." (2) Secured agreement. The model provision regarding the secured nature of the agreement reads: "To secure this loan, I give you a security interest in My Homestead including existing and future improvements, easements, fixtures, attachments, replacements and additions to the property, insurance refunds, and proceeds. This security interest is intended to be limited to the homestead property and not other collateral, as required under the Texas Constitution." (3) Transfer of rights in property. The model provision regarding a transfer of rights in the property reads: Figure: 7 TAC §90.403(c)(3) (No change.) (4) Borrower and Lender's promise. The model provision regarding the borrower and lender's promise to comply with the terms of the security document reads: "YOU AND I PROMISE:". (5) Late charges and prepayment. The model provision regarding late charges and prepayment of principal and interest reads: Figure: 7 TAC §90.403(c)(5) (No change.) (6) Funds for escrow items. The model provision regarding the funds for escrow items reads: Figure: 7 TAC §90.403(c)(6) (No change.) (7) Charges and liens. The model provision regarding charges and liens reads: Figure: 7 TAC §90.403(c)(7) (No change.) (8) Property insurance. The model provision regarding property insurance reads: Figure: 7 TAC §90.403(c)(8) (No change.) (9) Homestead. The model provision stating that the borrower occupies the property as the borrower's homestead reads: "I now occupy and use the property secured by this Security Document as my Texas homestead." (10) Preservation, maintenance, protection, and inspection of property. The model provision regarding preservation, maintenance, protection, and inspection of the property reads: "I will not destroy, damage or impair My Homestead, allow it to deteriorate, or commit waste. Whether or not I live in My Homestead, I will maintain it in order to prevent it from deteriorating or decreasing in value due to its condition. I will promptly repair the damage to My Homestead to avoid further deterioration or damage unless you and I agree in writing that it is economically unreasonable. I will be responsible for repairing or restoring My Homestead only if you release the insurance or condemnation proceeds for the damage to or the taking of My Homestead. You may release proceeds for the repairs and restoration in a single payment or in a series of payments as the work is completed. I still am obligated to complete repairs or restoration of My Homestead even if there are not enough proceeds to complete the work. You or your agent may inspect My Homestead. You may inspect the interior of My Homestead with reasonable cause. You will give me notice stating reasonable cause when or before the interior inspection occurs." (11) Conditions causing actual fraud. The model provision specifying the conditions causing actual fraud reads: Figure: 7 TAC §90.403(c)(11) (No change.) (12) Protection of lender's interest in property and rights under security document. The model provision regarding the protection of the lender's interest in the property and rights under the security document reads: Figure: 7 TAC §90.403(c)(12) (No change.) (13) Assignment of miscellaneous proceeds and forfeiture. The model provision regarding the assignment of miscellaneous proceeds and forfeiture reads: Figure: 7 TAC §90.403(c)(13) (No change.) (14) Forbearance not a waiver. The model provision specifying that the borrower is not released from liability if the licensee modifies the payment schedule reads: "My successors and I will not be released from liability if you extend the time for payment or modify the payment schedule. If I pay late, you will not have to sue me or my successor to require timely future payments. You may refuse to extend time for payment or modify this Loan Agreement even if I request it. If you do not enforce your rights every time, you may enforce them later." (15) Joint and several liability, security document execution, successors obligated. The model provision regarding joint and several liability and specifying that the person who signs the contract grants ownership in the homestead and binds the person's successors and assigns reads: Figure: 7 TAC §90.403(c)(15) (No change.) (16) Extension of credit charges. The model provision regarding the extension of credit charges reads: Figure: 7 TAC §90.403(c)(16) (No change.) (17) Delivery of notices. The model provision regarding the delivery of notices reads: "Under the Loan Agreement, you and I will give notices to each other in writing. Any notice under the Loan Agreement will be considered given to me when it is mailed by first class mail or when actually delivered to me at my address if given by ADOPTED RULES October 30, 2015 40 TexReg 7645 another means. You will give notice to My Homestead address unless I provide you a different address. I will notify you promptly of any change of address. I will comply with any reasonable procedure for giving a change of address that you provide. There will only be one address for notice under the Loan Agreement. Notice to me will be considered notice to all persons who are obligated under the Loan Agreement unless Applicable Law requires a separate notice. I may give you notice by delivering or mailing it by first class mail to the address provided by you, unless you require a different procedure. You, however, will not receive notice under the Loan Agreement until you actually receive it. Legal requirements governing notices subject to the Loan Agreement will prevail over conditions in the Loan Agreement." (18) Governing law and severability. The model provision regarding the law governing the contract, stating that if any part of the contract is invalid, the rest of the contract remains valid reads: "The Loan Agreement will be governed by Texas law and federal law. If any provision in the Loan Agreement conflicts with any legal requirement, all non-conflicting provisions will remain effective." (19) Rules of construction. The model provision regarding rules of clause construction reads: Figure: 7 TAC §90.403(c)(19) (No change.) (20) Loan agreement copies. The model provision specifying that the lender will give the borrower a copy of all signed documents at the time the loan agreement is made reads: "At the time the Loan Agreement is made, you will give me copies of all documents I sign." (21) Transfer of interest in property. The model provision regarding a transfer of interest in the property reads: ""Interest in My Homestead" means any legal or beneficial interest. This term includes those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or escrow agreement (the intent of which is the transfer of title by me at a future date to a purchaser). If any part of My Homestead is sold or transferred without your prior written permission, you may require immediate payment of all I owe. You will not exercise this option if disallowed by Applicable Law. If you accelerate, you will give me notice. The notice of acceleration will allow me at least 21 days from the date the notice is given to pay all I owe. If I fail to timely pay all I owe, you may pursue any remedy allowed by the Loan Agreement without further notice or demand." (22) Borrower's right to reinstate after acceleration. The model provision regarding the borrower's right to reinstate after acceleration reads: Figure: 7 TAC §90.403(c)(22) (No change.) (23) Sale of note, change of loan servicer, notice of grievance, and lender's right to comply. The model provision regarding the sale of the loan, change of loan servicer, notice of grievance, and the lender's right to comply reads: Figure: 7 TAC §90.403(c)(23) (No change.) (24) Hazardous substances. The model provision regarding hazardous substances reads: Figure: 7 TAC §90.403(c)(24) (No change.) (25) Acceleration and remedies. The model provision regarding acceleration and remedies reads: Figure: 7 TAC §90.403(c)(25) (No change.) (26) Power of sale. The model provision regarding the power of sale reads: Figure: 7 TAC §90.403(c)(26) (No change.) (27) Release. The model provision regarding the release of the lien securing the loan agreement reads: "You will cancel and 40 TexReg 7646 October 30, 2015 Texas Register return the Note to me and give me, in recordable form, a release of lien securing the Loan Agreement or a copy of any endorsement of the Note and assignment of the lien to a lender that is refinancing the Loan Agreement. I will pay only the cost of recording the release of lien. My acceptance of the release or endorsement and assignment will end all of your duties under Section 50(a)(6), Article XVI of the Texas Constitution." (28) Non-recourse liability. The model provision specifying that the loan agreement is given without personal liability against each owner of the homestead and the spouse of each owner reads: Figure: 7 TAC §90.403(c)(28) (No change.) (29) Proceeds. The model provision specifying that the borrower has not been required to repay another debt with the proceeds of the loan reads: "I am not required to apply the proceeds of the Loan Agreement to repay another debt except a debt secured by My Homestead or a debt to another lender." (30) No assignment of wages. The model provision specifying that the borrower has not assigned wages as security for the loan agreement reads: "I have not assigned wages as security for the Loan Agreement." (31) Acknowledgment of fair market value. The model provision specifying that the licensee and the borrower have agreed in writing to the fair market value of the homestead reads: "You and I agreed in writing to the fair market value of My Homestead on the date of the Loan Agreement." (32) Trustees and trustee liability. The model provision regarding trustees and trustee liability reads: Figure: 7 TAC §90.403(c)(32) (No change.) (33) Waiver of additional collateral. The model provision regarding the licensee's waiving additional collateral reads: Figure: 7 TAC §90.403(c)(33) (No change.) (34) Default. The model default provision reads: "Any default of my agreements with you will be a default of this Security Document." (35) Signature blocks. The model provision regarding signature blocks reads: Figure: 7 TAC §90.403(c)(35) (No change.) (36) Non-purchase disclosure. The model provision indicating that the security document does not finance a purchase transaction should appear at the beginning of the document, below the heading and prior to the definitions section. The model non-purchase disclosure provision reads: "This Security Document is not intended to finance Borrower's acquisition of the Property." (37) Notice of confidentiality rights disclosure. The security document must incorporate a "Notice of Confidentiality Rights" disclosure. The disclosure or notice must: (A) appear on the top of the first page of the security document; (B) be in at least 12-point boldfaced type or 12-point uppercase lettering; and (C) be substantially similar to the required notice or disclosure under Texas Property Code, §11.008(b). The model notice of confidentiality rights reads: "NOTICE OF CONFIDENTIALITY RIGHTS: I MAY REMOVE OR STRIKE MY SOCIAL SECURITY NUMBER OR MY DRIVER'S LICENSE NUMBER FROM THIS DOCUMENT BEFORE IT IS FILED IN THE PUBLIC RECORDS." The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504403 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 936-7621 ♦ ♦ (iii) the originator's Nationwide Mortgage Licensing System and Registry identification number (labeled "Loan Originator NMLS ID"). (B) The model clause identifying the pronouns used for the borrower and the lender reads: A word like "I" or "me" means each person who signs as a Borrower. A word like "you" or "your" means the Lender or "Note Holder". The Lender is _________. The Lender may sell or transfer this Note. The Lender or anyone who is entitled to receive payments under this Note is called the "Note Holder." You will tell me in writing who is to receive my payments." ♦ SUBCHAPTER E. SECOND LIEN PURCHASE MONEY LOANS (SUBCHAPTER G) 7 TAC §§90.501 - 90.504 The amendments are adopted under Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. All of the plain language amendments are adopted under Texas Finance Code, §341.502, which authorizes the commission to adopt rules governing the form of contracts for a loan under Chapter 342, a retail installment transaction under Chapter 348, or a home equity loan regulated by the Office of Consumer Credit Commissioner. The amendments regarding the OCCC notice are adopted under Texas Finance Code, §14.104, which requires that a written contract of an authorized lender subject to the OCCC's regulation must contain the name, mailing address, and telephone number of the office. The OCCC believes that a modernized interpretation of §14.104 would include the agency's updated website and email address. The regulated lender amendments are adopted under Texas Finance Code, §342.551 which grants the commission the authority to adopt rules to enforce the consumer loans chapter. The statutory provisions affected by the adopted amendments are contained in Texas Finance Code, Chapters 342 and 348. §90.503. Model Clauses. (a) Generally. These model clauses are the plain language rendition of contract clauses that have typically been stated in technical legal terms. Nothing in this regulation prohibits a contract from including provisions that provide more favorable results for the borrower than those that would result from the use of a model clause. (b) Model clauses for a Chapter 342, Subchapter G second lien purchase money loan contract. (1) (ii) the name of the individual residential mortgage loan originator with primary responsibility for the origination (labeled "Loan Originator"); and Identification. (A) The model identification clause lists the account or contract number, the name and address of the lender, the date of the note, the name and address of the borrower, and the property address. It also lists the following items that must be included on the promissory note under Regulation Z, 12 C.F.R. §1026.36(g): (i) the lender's Nationwide Mortgage Licensing System and Registry identification number (labeled "Creditor/Lender NMLS ID"); (2) Promise to pay. One permissible change to the model language for the scheduled installment earnings method would be to allow partial prepayments of the principal during the term of the loan. This variation on the scheduled installment earnings method would allow periodic reductions of the principal balance by partial prepayments. This variation would allow reductions of the principal balance that were not originally scheduled. The model clause options for the borrower's promise to pay read: (A) For contracts using the scheduled installment earnings method: "I promise to pay the Total of Payments to the order of you. (The "principal" or "cash advance" is $________. This amount plus interest must be paid by _________ (maturity date).) I will make payments to you at the address above or as you direct. I will make the payments on the dates and in the amounts shown in the Payment Schedule." (B) For contracts using the true daily earnings method: "I promise to pay the cash advance plus the accrued interest to the order of you. (The "principal" or "cash advance" is $________. This amount plus interest must be paid by _________ (maturity date).) I will make payments to you at the address above or as you direct. I will make the payments on the dates and in the amounts shown in the Payment Schedule." (C) The model payment schedule reads: Figure: 7 TAC §90.503(b)(2)(C) (3) Late charge. (A) Generally. The general model late charge provision for contracts using the scheduled installment earnings method or the true daily earnings method reads: "If I don't pay all of a payment within 10 days after it is due, you can charge me a late charge. The late charge will be 5% of the scheduled payment." (B) High-cost mortgage loans. The model late charge provision for high-cost mortgage loans subject to the limitation on late charges in Regulation Z, 12 C.F.R. §1026.34(a)(8), reads: "If I don't pay all of a payment within 15 days after it is due, you can charge me a late charge. The late charge will be 4% of the amount of the payment past due." (4) After maturity interest. The model clause specifies the maximum interest rate allowed by law for after maturity interest for contracts using the scheduled installment earnings method. A licensee may always choose a lower rate. The model provision for after maturity interest reads: "If I don't pay all I owe when the final payment becomes due, I will pay interest on the amount that is still unpaid. That interest will be the higher of the rate of 18% per year or the maximum rate allowed by law. That interest will begin the day after the final payment becomes due." ADOPTED RULES October 30, 2015 40 TexReg 7647 (5) Prepayment clause. The model prepayment clause options read: (A) For contracts using the scheduled installment earnings method: "I can make a whole payment early. Unless you agree otherwise in writing, I may not skip payments. If I make a payment early, my next payment will still be due as scheduled." (B) For contracts using the true daily earnings method: "I can make any payment early. Unless you agree otherwise in writing, I may not skip payments. If I make a payment early, my next payment will still be due as scheduled." (6) Finance charge earnings and refund method. The model provision options specifying the finance charge earnings and refund method read: (A) For contracts using the scheduled installment earnings method - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.503(b)(6)(A) (B) For contracts using the scheduled installment earnings method with prepayments option - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.503(b)(6)(B) (C) For contracts using the true daily earnings method - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.503(b)(6)(C) (7) Fee for dishonored check clause. The model clause specifies the maximum allowable dishonored check fee. A licensee may always choose a lesser amount. The model fee for dishonored check provision reads: "I agree to pay you a fee of up to $30 for a returned check. You may add the fee to the amount I owe or collect it separately." (8) Default clause. The model provision specifying the conditions causing default reads: Figure: 7 TAC §90.503(b)(8) (9) Property insurance. The model provision regarding property insurance reads: Figure: 7 TAC §90.503(b)(9) (10) Credit insurance. If single premium credit insurance is offered, a permissible change to the disclosure can be to offer a single charge for the entire term of the loan. The term for the single premium charge should be shown for the original term of the loan, unless otherwise specified. The licensee has the option of including language that reads: "The insurance will cancel on the date when the total past due premiums equal or exceed (insert number) times the first month's premium." The industry standard regarding the relationship between total past due premiums and the first month's premium in this equation appears to be four times. However, if a different time frame is more appropriate, that time frame may be used. The model credit insurance disclosure box reads: Figure: 7 TAC §90.503(b)(10) (11) Mailing of notices to borrower. The duty to give notice is satisfied when it is mailed by first class mail. The model provision regarding the mailing of notices to the borrower reads: "You or I may mail or deliver any notice to the address above. You or I may change the notice address by giving written notice. Your duty to give me notice will be satisfied when you mail it." (12) Due on sale clause, notice of intent to accelerate, and notice of acceleration. The model provision regarding the due on sale clause, notice of intent to accelerate, and notice of acceleration reads: "If all or any interest in the Property is sold or transferred without your 40 TexReg 7648 October 30, 2015 Texas Register prior written consent, you may require immediate payment in full of all that I owe under this Loan Agreement. You will not exercise this option if prohibited by law. If you exercise this option, you will give me notice that you are demanding immediate payment of all that I owe. This notice will give me a period of not less than 21 days from the date of the notice within which I must pay all that I owe under this Loan Agreement. If I fail to pay all that I owe before the end of this period, you may use any remedy allowed by the Loan Agreement." (13) No waiver of lender's rights. The model provision expressing no waiver of the lender's rights reads: "If you don't enforce your rights every time, you can still enforce them later." (14) Collection expenses clause. The model collection expenses clause reads: "If you require me to pay all that I owe at once, you will have the right to be paid back by me for all of your costs and expenses in enforcing this Loan Agreement to the extent not prohibited by Applicable Law. These expenses include, for example, reasonable attorneys' fees." (15) Joint liability. The model provision providing for joint liability reads: "I understand that you may seek payment from only me without first looking to any other Borrower." (16) Usury savings clause. The model usury savings clause reads: "I do not have to pay interest or other amounts that are more than Applicable Law allows." (17) Savings clause. The model savings clause stating that if any part of the contract is invalid, the rest remains valid reads: "If any part of this Loan Agreement is declared invalid, the rest of the Loan Agreement remains valid. If any part of this Loan Agreement conflicts with any law, that law will control. The part of the Loan Agreement that conflicts with any law will be modified to comply with the law. The rest of the Loan Agreement remains valid." (18) Contract supersedes prior agreements. For loan agreements exceeding $50,000, this notice must be boldfaced, capitalized, underlined, or otherwise set out from the surrounding written material to be conspicuous. The model integration clause providing that the contract supersedes prior agreements reads: "This written Loan Agreement is the final agreement between you and me and may not be changed by prior, current, or future oral agreements between you and me. There are no oral agreements between you and me relating to this Loan Agreement. Any change to this Loan Agreement must be in writing. Both you and I have to sign written agreements." (19) Security document. The model provision stating that the property described in the loan agreement is subject to the lien of the security document reads: "In addition to the protections given to the Note Holder under this Note, a Security Document, dated ______________, protects the Note Holder from possible losses that might result if I do not keep the promises that I make in this Note. The Security Document describes how and under what conditions I may be required to make immediate payment in full of any amounts that I owe under this Note." (20) Application of law. The model clause specifying that federal law and Texas law apply to the contract reads: "Federal law and Texas law apply to this Loan Agreement." (21) OCCC notice. Under §90.105 of this title (relating to OCCC Notice), the following required notice must be given by licensees to let consumers know how to file complaints: "For questions or complaints about this loan, contact (insert name of lender) at (insert lender's phone number and, at lender's option, one or more of the following: mailing address, fax number, website, e-mail address). The lender is licensed and examined under Texas law by the Office of Consumer Credit Commissioner (OCCC), a state agency. If a complaint or question cannot be resolved by contacting the lender, consumers can contact the OCCC to file a complaint or ask a general credit-related question. OCCC address: 2601 N. Lamar Blvd., Austin, Texas 78705. Phone: (800) 538-1579. Fax: (512) 936-7610. Website: occc.texas.gov. E-mail: consumer.complaints@occc.texas.gov." (22) Clause describing collateral. The model provision describing the collateral reads: "The collateral described above by the property address is subject to the lien of the Security Document." (23) Signature blocks. The licensee may also provide additional signature lines for witness signatures. The model provision regarding signature blocks reads: Figure: 7 TAC §90.503(b)(23) (c) Model clauses for a security document for a Chapter 342, Subchapter G second lien purchase money loan contract. (1) The model definitions section reads: (A) "Loan Agreement" means the Note, Security Document, deed of trust, any other related document, or any combination of those documents, under which you have made a loan to me. (B) "Security Document" means this document, which is dated ________, together with all Riders to this document. (C) "I" or "me" means _________________________ ________________, the grantor under this Security Document and the person who signed the Note ("Borrower"). (D) "You" means _____________________________ _____________, the Lender and any holder entitled to receive payments under the Note. Your address is ________________________ _________________. Your NMLS ID is __________. You are the beneficiary under this Security Document. The loan originator's name is _________________________________________. The loan originator's NMLS ID is __________. (E) "Trustee" is ______________________________. Trustee's address is _________________________________. (F) "Note" means the Purchase Money Note signed by me and dated ______________. The Note states that the amount I owe you is _________________ dollars (U.S. $______) plus interest. I have promised to pay this debt in regular Periodic Payments and to pay the debt in full not later than ____________________________________ (maturity date). (G) "Property" means the real estate that is described below under the heading "Transfer of Rights in the Property." (H) "Riders" means all Riders to this Security Document that I execute. Figure: 7 TAC §90.503(c)(1)(H) (No change.) (I) "Applicable Law" means all controlling applicable federal, Texas and state constitutions, statutes, regulations, administrative rules, local ordinances, judicial and administrative orders (that have the effect of law) as well as all applicable final, non-appealable judicial opinions. (J) "Community Association Dues, Fees, and Assessments" means all dues, fees, assessments and other charges that are imposed on me or the Property by a condominium association, homeowners association, or similar organization. (K) "Electronic Funds Transfer" means any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, which is initiated through an electronic terminal, telephonic instrument, computer, or magnetic tape so as to order, instruct, or authorize a financial institution to debit or credit an account. The term includes point-of-sale transfers, automated teller machine transactions, transfers initiated by telephone, wire transfers, and automated clearinghouse transfers. (L) "Escrow Items" means those items that are described in Section ___ of this Security Document. (M) "Miscellaneous Proceeds" means any compensation, settlement, award of damages, or proceeds paid by any third party (other than proceeds paid under my insurance) for: damage or destruction of the Property; condemnation or other taking of all or any part of the Property; conveyance instead of condemnation; or misrepresentations or omissions related to the value or condition of the Property. (N) "Periodic Payment" means the regularly scheduled amount due for principal and interest under the Note plus any amounts under this Security Document. (O) "RESPA" means the Real Estate Settlement Procedures Act (12 U.S.C. §§2601-2617) and Regulation X (12 C.F.R. Part 1024), as amended, or any additional or successor legislation or regulation that governs the same subject matter. As used in this Security Document, "RESPA" refers to all requirements and restrictions that are imposed in regard to a "federally related mortgage loan" even if the Loan Agreement does not qualify as a "federally related mortgage loan" under RESPA. (P) "Successor in Interest of me" means any party that has taken title to the Property, whether or not that party has assumed my obligations under the Loan Agreement. (Q) "Ground Rents" means amounts I owe if I rented the real property under the buildings covered by this Security Document. Such an arrangement usually takes the form of a long-term "ground lease." (2) Secured agreement. The model provision regarding the secured nature of the agreement reads: "To secure this Loan Agreement, I give you a security interest in the Property including existing and future improvements, easements, fixtures, attachments, replacements and additions to the Property, insurance refunds, and proceeds." (3) Transfer of rights in property. The model provision regarding a transfer of rights in the property reads: Figure: 7 TAC §90.503(c)(3) (No change.) (4) Borrower and Lender's promise. The model provision regarding the borrower and lender's promise to comply with the terms of the security document reads: "YOU AND I PROMISE:". (5) Late charges and prepayment. The model provision regarding late charges and prepayment of principal and interest reads: Figure: 7 TAC §90.503(c)(5) (No change.) (6) Funds for escrow items. The model provision regarding the funds for escrow items reads: Figure: 7 TAC §90.503(c)(6) (No change.) (7) Charges and liens. The model provision regarding charges and liens reads: Figure: 7 TAC §90.503(c)(7) (No change.) (8) Property insurance. The model provision regarding property insurance reads: Figure: 7 TAC §90.503(c)(8) (No change.) (9) Preservation, maintenance, protection, and inspection of property. The model provision regarding preservation, maintenance, protection, and inspection of the property reads: "I will not destroy, damage or impair the Property, allow it to deteriorate, or commit waste. Whether or not I live in the Property, I will maintain it in order to pre- ADOPTED RULES October 30, 2015 40 TexReg 7649 vent it from deteriorating or decreasing in value due to its condition. I will promptly repair the damage to the Property to avoid further deterioration or damage unless you and I agree in writing that it is economically unreasonable. I will be responsible for repairing or restoring the Property only if you release the insurance or condemnation proceeds for the damage to or the taking of the Property. You may release proceeds for the repairs and restoration in a single payment or in a series of payments as the work is completed. I still am obligated to complete repairs or restoration of the Property even if there are not enough proceeds to complete the work. If this Security Document secures a unit in a condominium or planned unit development, I will perform all of my obligations under the declaration or covenants creating or governing the condominium or planned unit development, and any other relevant document. You or your agent may inspect the Property. You may inspect the interior of the Property with reasonable cause. You will give me notice stating reasonable cause when or before the interior inspection occurs." (10) Protection of lender's interest in property and rights under security document. The model provision regarding the protection of the lender's interest in the property and rights under the security document reads: Figure: 7 TAC §90.503(c)(10) (No change.) (11) Assignment of miscellaneous proceeds and forfeiture. The model provision regarding the assignment of miscellaneous proceeds and forfeiture reads: Figure: 7 TAC §90.503(c)(11) (No change.) (12) Forbearance not a waiver. The model provision specifying that the borrower is not released from liability if the licensee modifies the payment schedule reads: "My successors and I will not be released from liability if you extend the time for payment or modify the payment schedule. If I pay late, you will not have to sue me or my successor to require timely future payments. You may refuse to extend time for payment or modify this Loan Agreement even if I request it. If you do not enforce your rights every time, you may enforce them later." (13) Joint and several liability, security document execution, successors obligated. The model provision regarding joint and several liability and specifying that the person who signs the contract grants his ownership in the property and binds his successors and assigns reads: Figure: 7 TAC §90.503(c)(13) (No change.) (14) Extension of credit charges. The model provision for the extension of credit charges reads: Figure: 7 TAC §90.503(c)(14) (No change.) (15) Delivery of notices. The model provision regarding the delivery of notices reads: "Under the Loan Agreement, you and I will give notices to each other in writing. Any notice under the Loan Agreement will be considered given to me when it is mailed by first class mail or when actually delivered to me at my address if given by another means. You will give notice to the Property address unless I provide you a different address. I will notify you promptly of any change of address. I will comply with any reasonable procedure for giving a change of address that you provide. There will only be one address for notice under the Loan Agreement. Notice to me will be considered notice to all persons who are obligated under the Loan Agreement unless Applicable Law requires a separate notice. I may give you notice by delivering or mailing it by first class mail to the address provided by you, unless you require a different procedure. You, however, will not receive notice under the Loan Agreement until you actually receive it. Legal requirements governing notices subject to the Loan Agreement will prevail over conditions in the Loan Agreement." 40 TexReg 7650 October 30, 2015 Texas Register (16) Governing law and severability. The model provision regarding the law governing the contract, stating that if any part of the contract is invalid, the rest of the contract remains valid reads: "The Loan Agreement will be governed by Texas law and federal law. If any provision in the Loan Agreement conflicts with any legal requirement, all non-conflicting provisions will remain effective." (17) Rules of construction. The model provision regarding rules of clause construction reads: Figure: 7 TAC §90.503(c)(17) (No change.) (18) Loan agreement copies. The model provision specifying that the lender will give the borrower a copy of all signed documents at the time the loan agreement is made reads: "At the time the Loan Agreement is made, you will give me copies of all documents I sign." (19) Transfer of interest in property. The model provision regarding a transfer of interest in the property reads: "Interest in the Property" means any legal or beneficial interest. This term includes those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or escrow agreement (the intent of which is the transfer of title by me at a future date to a purchaser). If any part of the Property is sold or transferred without your prior written permission, you may require immediate payment of all I owe. You will not exercise this option if disallowed by Applicable Law. If you accelerate, you will give me notice. The notice of acceleration will allow me at least 21 days from the date the notice is given to pay all I owe. If I fail to timely pay all I owe, you may pursue any remedy allowed by the Loan Agreement without further notice or demand. (20) Borrower's right to reinstate after acceleration. The model provision regarding the borrower's right to reinstate after acceleration reads: Figure: 7 TAC §90.503(c)(20) (No change.) (21) Sale of note, change of loan servicer, notice of grievance, and lender's right to comply. The model provision regarding the sale of the loan, change of loan servicer, notice of grievance, and the lender's right to comply reads: "A full or partial interest in the Loan Agreement can be sold one or more times without prior notice to me. The sale may result in a change of the company servicing or handling the Loan Agreement. The company servicing or handling the Loan Agreement will collect my monthly payment and will comply with other servicing conditions required by the Loan Agreement or Applicable Law. In some cases, the company servicing or handling the Loan Agreement may change even if the Loan Agreement is not sold. If the company servicing or handling the Loan Agreement is changed, I will be given written notice of the change. The notice will state the name and address of the new company, the address to which my payments should be made, and any other information required by RESPA. Any notice of acceleration and opportunity to cure under the Loan Agreement will satisfy the notice and opportunity to address the alleged violation provisions of this Section. No agreement between you and me or any third party will limit your ability to comply with your duties under the Loan Agreement and the Applicable Law. You and I are limiting all agreements so that all current or future interest or fees in connection with this Loan Agreement will not be greater than the highest amount allowed by Applicable Law. You and I intend to conform the Loan Agreement to the provisions of Applicable Law. If any part of the Loan Agreement is in conflict with the Applicable Law, then that part will be corrected or removed. This correction will be automatic and will not require any amendment or new document. Your right to correct any violation will survive my paying off the Loan Agreement. My right to correct will override any conflicting provision of the Loan Agreement. Your right to comply as provided in this Section will survive the payoff of the Loan Agreement. The provisions of this Section will supersede any inconsistent provision of the Loan Agreement." (22) Hazardous substances. The model provision regarding hazardous substances reads: Figure: 7 TAC §90.503(c)(22) (No change.) (23) Acceleration and remedies. The model provision regarding acceleration and remedies reads: Figure: 7 TAC §90.503(c)(23) (No change.) (24) Assignment of rents, appointment of receiver, and lender in possession. The model provision regarding assignment of rents, appointment of receiver, and the lender in possession reads: "As additional security, I assign to you the rents of the Property, provided that I have the right, prior to acceleration or abandonment of the Property, to collect and retain the rents as they become due. Upon acceleration or abandonment, you, by agent or by court-appointed receiver, will be entitled to enter, take possession, manage the Property, and collect due and past due rents. All rents you or the court-appointed receiver collect will be applied first to payment of the costs of management of the Property and collection of rents, including receiver's fees, premiums on receiver's bonds, and reasonable attorneys' fees, and then to the sums secured by this Security Document. You and the receiver will be liable to account only for rents received." (25) Power of sale. The licensee has the option to choose wording to indicate that a Trustee's deed will convey good title to the Property that cannot be defeated. The model provision regarding the power of sale reads: Figure: 7 TAC §90.503(c)(25) (No change.) (26) Release. If the licensee cannot return the note to the borrower, the licensee may provide the borrower with a discharge and release of all obligations under the loan. The discharge must meet the requirements of Texas Finance Code, §342.454. The model provision regarding the release of the lien securing the loan agreement reads: "Upon payment of all that I owe under this Loan Agreement, you will cancel and return the Note to me and give me, in recordable form, a release of lien securing the Loan Agreement or a copy of any endorsement of the Note and assignment of the lien to a lender that is refinancing the Loan Agreement. If you cannot, you will provide me with a discharge and release of all obligations under the loan. I will pay only the cost of recording the release of lien." (27) Lender's rights and borrower's responsibilities. The model provision specifying that each person who signs the document is responsible for each promise and duty in the security document reads: Figure: 7 TAC §90.503(c)(27) (No change.) (28) Trustees and trustee liability. The model provision regarding trustees and trustee liability reads: Figure: 7 TAC §90.503(c)(28) (No change.) (29) Default. The model default provision reads: "Any default of my agreements with you will be a default of this Security Document." (30) Subrogation. The model provision regarding subrogation reads: "If I ask, you will use proceeds from the Loan Agreement to pay off all valid outstanding liens against the Property. You will then own all rights, superior titles, liens, and interests owned or claimed by any owner or holder of an outstanding lien or debt. You own these things whether the lien or debt is transferred to you or whether it is released by the holder upon payment." (31) Partial invalidity. The model provision regarding what happens if the sums secured and other charges violate applicable law reads: "If any portion of the sums secured by this Security Docu- ment cannot be lawfully secured, payments minus those sums will be applied first to the portions not secured. If any charge provided for in this Loan Agreement, separately or together with other charges that are considered part of this Loan Agreement, violates Applicable Law, the charge is reduced to the extent necessary to eliminate the violation. Lender will refund the amount of interest or other charges paid to Lender in excess of the amount permitted by Applicable Law. At Lender's option, the amount in excess will either be refunded directly to me or will be applied to reduce the principal of the debt." (32) Request for notice of default and foreclosure under superior mortgages or security documents. The model provision regarding the lender and borrower's request for notice of default and foreclosure under superior mortgages or security documents reads: Figure: 7 TAC §90.503(c)(32) (No change.) (33) Signature blocks. The model provision regarding signature blocks reads: Figure: 7 TAC §90.503(c)(33) (No change.) (34) Acknowledgment. The model provision regarding the acknowledgment reads: Figure: 7 TAC §90.503(c)(34) (No change.) (35) Notice of confidentiality rights disclosure. The security document must incorporate a "Notice of Confidentiality Rights" disclosure. The disclosure or notice must: (A) appear on the top of the first page of the security document; (B) be in at least 12-point boldfaced type or 12-point uppercase lettering; and (C) be substantially similar to the required notice or disclosure under Texas Property Code, §11.008(b). The model notice of confidentiality rights reads: "NOTICE OF CONFIDENTIALITY RIGHTS: I MAY REMOVE OR STRIKE MY SOCIAL SECURITY NUMBER OR MY DRIVER'S LICENSE NUMBER FROM THIS DOCUMENT BEFORE IT IS FILED IN THE PUBLIC RECORDS." The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504404 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ SUBCHAPTER F. SECOND LIEN HOME IMPROVEMENT CONTRACTS (SUBCHAPTER G) 7 TAC §§90.601 - 90.604 The amendments are adopted under Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. ADOPTED RULES October 30, 2015 40 TexReg 7651 All of the plain language amendments are adopted under Texas Finance Code, §341.502, which authorizes the commission to adopt rules governing the form of contracts for a loan under Chapter 342, a retail installment transaction under Chapter 348, or a home equity loan regulated by the Office of Consumer Credit Commissioner. The amendments regarding the OCCC notice are adopted under Texas Finance Code, §14.104, which requires that a written contract of an authorized lender subject to the OCCC's regulation must contain the name, mailing address, and telephone number of the office. The OCCC believes that a modernized interpretation of §14.104 would include the agency's updated website and email address. The regulated lender amendments are adopted under Texas Finance Code, §342.551 which grants the commission the authority to adopt rules to enforce the consumer loans chapter. The statutory provisions affected by the adopted amendments are contained in Texas Finance Code, Chapters 342 and 348. §90.603. Model Clauses. (a) Generally. These model clauses are the plain language rendition of contract clauses that have typically been stated in technical legal terms. Nothing in this regulation prohibits a contract from including provisions that provide more favorable results for the borrower than those that would result from the use of a model clause. (b) Model clauses for a Chapter 342, Subchapter G second lien home improvement loan contract for use in a transaction that does not allow for withdrawals or multiple advances. (1) Identification. The model identification clause reads: Figure: 7 TAC §90.603(b)(1) (No change.) (2) Definitions. The model definitions section reads: (A) "Owner" means (name of Owner), whose address is (address of Owner, including county). If Owner and Maker are not the same person, the word "Owner" includes Maker. "I" or "me" means the Owner. (B) "Contractor" means (name of Contractor), whose address is (address of Contractor, including county) and includes those to whom the Contractor has assigned or transferred Contractor's rights and remedies. "You" or "your" means the Contractor. (C) "Lender" means (name of Lender), whose address is (address of Lender, including county) and includes those to whom the Lender has assigned or transferred Lender's rights and remedies. The Lender's NMLS ID is (NMLS ID of Lender). The loan originator's name is (name of loan originator with primary responsibility for the origination). The loan originator's NMLS ID is (NMLS ID of originator). (D) "Trustee" means (name of Trustee), whose address is (address of Trustee, including county). (E) "Property" means the Property at (list address of the Property), whose legal description is (list legal description of the Property). (F) "Work" means the construction project as agreed to in writing between the Owner and Contractor. (G) "Completion Date" means (date on which the Work will be completed). (H) "Contract" means this Texas Home Improvement Mechanic's Lien Contract for Improvement and Power of Sale. 40 TexReg 7652 October 30, 2015 Texas Register (3) Construction of improvements. The model clause regarding construction of improvements reads: "You agree to furnish and pay for all labor and material needed to complete the Work within _____ days from the date of this Contract. The Work will be performed on the Property in a good and workmanlike manner." (4) Contract price. The model clause establishing the contract price reads: "I agree to pay, or cause to be paid, to you, or to your order, the sum of ___________________ dollars (U.S. $_____________________) when the Work is completed." (5) Transfer of lien. The model clause regarding the transfer of the lien reads: "You transfer to Lender all of your rights and interests in this Contract." (6) Completion by contractor, but not lender. The model clause specifying that the lender is not responsible for completing the construction reads: "You will complete the Work by the Completion Date. Lender is not responsible for completing the Work. Lender is not a guarantor of your performance. You will indemnify and hold Lender harmless against all claims related to the Work." (7) Partial lien. The model clause regarding a partial lien reads: "If you do not complete the Work by the Completion Date in a good and workmanlike manner, then Lender will have a valid lien for the contract price, less the amount reasonably necessary to complete the Work. As an alternative, Lender may choose to complete the Work and the lien will be valid for the contract price." (8) Changes and extras. The model clause regarding changes and extras reads: "All labor or material furnished outside of this Contract must be agreed upon in writing or it will be considered as performed under the original Contract and you will receive no extra money." (9) Receipts and releases. The model clause regarding receipts and releases reads: "If I ask, you will give me valid receipts and releases for the Work from any subcontractor, worker, and supplier." (10) No work commenced. The model clause specifying that no work has commenced prior to execution of the contract reads: "This Contract is executed, acknowledged, and delivered before any labor has been performed and any material has been furnished for the Work." (11) Trustee's duties. The model clause regarding the trustee's duties reads: Figure: 7 TAC §90.603(b)(11) (No change.) (12) Preservation of claims and defenses. In accordance with the Federal Trade Commission's Holder in Due Course Rule, 16 C.F.R. §433.2, it is an unfair or deceptive act or practice to take or receive a consumer credit contract in connection with the sale or lease of goods or services to consumers that does not include the following notice. The notice regarding the preservation of claims and defenses reads: "NOTICE. ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER." (13) Owner and contractor responsible. Texas Property Code, §41.007 specifies that a home improvement contract must contain a notice specifying that the owner and the contractor are responsible for meeting the terms of the contract. This notice must appear either in this contract or in the residential construction contract. The Property Code requires that the notice must be conspicuously printed, stamped, or typed in a font size equal to at least 10-point boldfaced type or computer equivalent and appear next to the owner's signature line on the contract. The wording of the notice is specified by the Property Code, which uses the pronouns "you" and "your" to refer to the owner. Licensees are encouraged to explain in the contract, prior to the notice, that "you" and "your" refer to the owner in this notice. The parties' signatures must be notarized. The licensee may use a different notary acknowledgment without having to submit the contract to the agency as a non-standard contract. The notice specifying that the owner and the contractor are responsible for meeting the terms of the contract, the model explanatory clause regarding the use of "you" and "your" in the notice, and the signature blanks read: Figure: 7 TAC §90.603(b)(13) (No change.) (14) Assignment. The parties may use a different assignment or a separate document for the assignment without having to submit the contract to the agency as a non-standard contract. The model assignment in which the contractor transfers and assigns the lien to the licensee reads: Figure: 7 TAC §90.603(b)(14) (No change.) (15) Notice of confidentiality rights disclosure. The security document must incorporate a "Notice of Confidentiality Rights" disclosure. The disclosure or notice must: (A) appear on the top of the first page of the security document; (B) be in at least 12-point boldfaced type or 12-point uppercase lettering; and (C) be substantially similar to the required notice or disclosure under Texas Property Code, §11.008(b). The model notice of confidentiality rights reads: "NOTICE OF CONFIDENTIALITY RIGHTS: I MAY REMOVE OR STRIKE MY SOCIAL SECURITY NUMBER OR MY DRIVER'S LICENSE NUMBER FROM THIS DOCUMENT BEFORE IT IS FILED IN THE PUBLIC RECORDS." (c) Model clauses for a Chapter 342, Subchapter G second lien home improvement loan promissory note for use in a transaction that does not allow for withdrawals or multiple advances. (1) Identification. (A) The model identification clause lists the account or contract number, the name and address of the lender, the date of the note, the name and address of the borrower, the property address, the principal amount, and the terms of payment. It also lists the following items that must be included on the promissory note under Regulation Z, 12 C.F.R. §1026.36(g): (i) the lender's Nationwide Mortgage Licensing System and Registry identification number (labeled "Creditor/Lender NMLS ID"); (ii) the name of the individual residential mortgage loan originator with primary responsibility for the origination (labeled "Loan Originator"); and (iii) the originator's Nationwide Mortgage Licensing System and Registry identification number (labeled "Loan Originator NMLS ID"). (B) The model identification clause reads: Figure: 7 TAC §90.603(c)(1)(B) (2) Security for payment. The model clause relating to the security for payment reads: "Liens created in the Contract secure this Note. You will have a security interest in the following described property: (property description)" (3) Definitions. The model definitions section reads: (A) "Owner" means (name of Owner), whose address is (address of Owner, including county). If Owner and Maker are not the same person, the word "Owner" includes Maker. (B) "Contractor" means (name of Contractor), whose address is (address of Contractor, including county) and includes those to whom the Contractor has assigned or transferred Contractor's rights and remedies. (C) "Contract" means this Texas Home Improvement Mechanic's Lien Contract for Improvement and Power of Sale dated _________________________ between Contractor and Owner. (D) "Property" means the Property at (list address of the Property), whose legal description is (list legal description of the Property). (E) "Note" means the Texas Home Improvement Mechanic's Lien Note signed by me and dated ___________________________ and includes all amounts secured by this Contract. The Note states that the amount I owe you is ______________ dollars (U.S. $___________________) plus interest. I have promised to pay this debt in regular periodic payments and to pay the debt in full not later than _________________. (4) Promise to pay. One permissible change to the model language for the scheduled installment earnings method would be to allow partial prepayments of the principal during the term of the loan. This variation on the scheduled installment earnings method would allow periodic reductions of the principal balance by partial prepayments. This variation would allow reductions of the principal balance that were not originally scheduled. The model clause options for the borrower's promise to pay read: (A) For contracts using the scheduled installment earnings method: "I promise to pay the Total of Payments to the order of you. (The "principal" or "cash advance" is $________. This amount plus interest must be paid by _________ (maturity date).) I will make payments to you at the address above or as you direct. I will make the payments on the dates and in the amounts shown in the Payment Schedule." (B) For contracts using the true daily earnings method: "I promise to pay the cash advance plus the accrued interest to the order of you. (The "principal" or "cash advance" is $________. This amount plus interest must be paid by _________ (maturity date).) I will make payments to you at the address above or as you direct. I will make the payments on the dates and in the amounts shown in the Payment Schedule." (C) The model payment schedule reads: Figure: 7 TAC §90.603(c)(4)(C) (5) Late charge. (A) Generally. The general late charge provision for contracts using the scheduled installment earnings method or the true daily earnings method reads: "If I don't pay all of a payment within 10 days after it is due, you can charge me a late charge. The late charge will be 5% of the scheduled payment." (B) High-cost mortgage loans. The model late charge provision for high-cost mortgage loans subject to the limitation on late charges in Regulation Z, 12 C.F.R. §1026.34(a)(8), reads: "If I don't pay all of a payment within 15 days after it is due, you can charge me a late charge. The late charge will be 4% of the amount of the payment past due." ADOPTED RULES October 30, 2015 40 TexReg 7653 (6) After maturity interest. The model clause specifies the maximum interest rate allowed by law for after maturity interest for contracts using the scheduled installment earnings method. A licensee may always choose a lower rate. The model provision for after maturity interest reads: "If I don't pay all I owe when the final payment becomes due, I will pay interest on the amount that is still unpaid. That interest will be the higher of the rate of 18% per year or the maximum rate allowed by law. That interest will begin the day after the final payment becomes due." (7) Prepayment clause. The model prepayment clause options read: (A) For contracts using the scheduled installment earnings method: "I can make a whole payment early. Unless you agree otherwise in writing, I may not skip payments. If I make a payment early, my next payment will still be due as scheduled." (B) For contracts using the true daily earnings method: "I can make any payment early. Unless you agree otherwise in writing, I may not skip payments. If I make a payment early, my next payment will still be due as scheduled." (8) Finance charge earnings and refund method. The model provision options specifying the finance charge earnings and refund method read: (A) For contracts using the scheduled installment earnings method - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.603(c)(8)(A) (B) For contracts using the scheduled installment earnings method with prepayments option - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.603(c)(8)(B) (C) For contracts using the true daily earnings method - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.603(c)(8)(C) (9) Deferment. The model provision regarding deferment reads: "If I ask for more time to make any payment and you agree, I will pay more interest to extend the payment. The extra interest will be figured under the Finance Commission rules." (10) Fee for dishonored check clause. The model clause specifies the maximum allowable dishonored check fee. A licensee may always choose a lesser amount. The model fee for dishonored check provision reads: "I agree to pay you a fee of up to $30 for a returned check. You may add the fee to the amount I owe or collect it separately." (11) Default. The model provision specifying the conditions causing default reads: Figure: 7 TAC §90.603(c)(11) (12) Property insurance. The model provision regarding property insurance reads: Figure: 7 TAC §90.603(c)(12) (13) Credit insurance. If single premium credit insurance is offered, a permissible change to the disclosure can be to offer a single charge for the entire term of the loan. The term for the single premium charge should be shown for the original term of the loan, unless otherwise specified. The licensee has the option of including language that reads: "The insurance will cancel on the date when the total past due premiums equal or exceed (insert number) times the first month's premium." The industry standard regarding the relationship between total past due premiums and the first month's premium in this equation appears to be four times. However, if a different time frame is more 40 TexReg 7654 October 30, 2015 Texas Register appropriate, that time frame may be used. The model credit insurance disclosure box reads: Figure: 7 TAC §90.603(c)(13) (14) Mailing of notices to borrower. The duty to give notice is satisfied when it is mailed by first class mail. The model provision regarding the mailing of notices to the borrower reads: "You or I may mail or deliver any notice to the address above. You or I may change the notice address by giving written notice. Your duty to give me notice will be satisfied when you mail it." (15) Statement of truthful information. The model provision specifying that the borrower gave truthful information reads: "I promise that all information I gave you is true." (16) Due on sale clause, notice of intent to accelerate, and notice of acceleration. The model provision regarding the due on sale clause, notice of intent to accelerate, and notice of acceleration reads: "If all or any interest in the Property is sold or transferred without your prior written consent, you may require immediate payment in full of all that I owe under this loan agreement. You will not exercise this option if prohibited by law. If you exercise this option, you will give me notice that you are demanding payment of all that I owe. This notice will give me a period of not less than 21 days from the date of the notice within which I must pay all that I owe under this loan agreement. If I fail to pay all that I owe before the end of this period, you may use any remedy allowed by the loan agreement." (17) No waiver of the lender's rights. The model provision expressing no waiver of the lender's rights reads: "If you don't enforce your rights every time, you can still enforce them later." (18) Collection expenses. The model collection expenses clause reads: "If you require me to pay all that I owe at once, you will have the right to be paid back by me for all of your costs and expenses in enforcing this loan agreement to the extent not prohibited by applicable law. These expenses include, for example, reasonable attorneys' fees." (19) Joint liability. The model provision providing for joint liability reads: "I understand that you may seek payment from only me without first looking to any other Borrower." (20) Usury savings clause. The model usury savings clause reads: "I do not have to pay interest or other amounts that are more than applicable law allows." (21) Savings clause. The savings model clause stating that if any part of the contract is invalid, the rest remains valid reads: "If any part of this loan agreement is declared invalid, the rest of the loan agreement remains valid. If any part of this loan agreement conflicts with any law, that law will control. The part of the loan agreement that conflicts with any law will be modified to comply with the law. The rest of the loan agreement remains valid." (22) Prior agreements. For loan agreements exceeding $50,000, this notice must be boldfaced, capitalized, underlined, or otherwise set out from the surrounding written material to be conspicuous. The model clause stating that there are no prior agreements between the parties regarding the loan agreement reads: "This written loan agreement is the final agreement between you and me. It may not be changed by prior, current, or future oral agreements between you and me. There are no oral agreements between you and me relating to this loan agreement. Any change to this loan agreement must be in writing. Both you and I have to sign written agreements." (23) Application of law. The model clause specifying that federal law and Texas law apply to the contract reads: "Federal law and Texas law apply to this loan agreement." (24) OCCC notice. Under §90.105 of this title (relating to OCCC Notice), the following required notice must be given by licensees to let consumers know how to file complaints: "For questions or complaints about this loan, contact (insert name of lender) at (insert lender's phone number and, at lender's option, one or more of the following: mailing address, fax number, website, e-mail address). The lender is licensed and examined under Texas law by the Office of Consumer Credit Commissioner (OCCC), a state agency. If a complaint or question cannot be resolved by contacting the lender, consumers can contact the OCCC to file a complaint or ask a general credit-related question. OCCC address: 2601 N. Lamar Blvd., Austin, Texas 78705. Phone: (800) 538-1579. Fax: (512) 936-7610. Website: occc.texas.gov. E-mail: consumer.complaints@occc.texas.gov." (25) Collateral. The model clause regarding the collateral reads: "The Property is subject to the Contract lien. I am responsible for all obligations in this Note." (26) Preservation of claims and defenses. In accordance with the Federal Trade Commission's Holder in Due Course Rule, 16 C.F.R. §433.2, it is an unfair or deceptive act or practice to take or receive a consumer credit contract in connection with the sale or lease of goods or services to consumers that does not include the following notice. The notice regarding the preservation of claims and defenses reads: "NOTICE. ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER." (27) Signature blocks. Documents for a home improvement loan on a homestead must be signed at the office of the lender, an attorney at law, or a title company. If this provision applies, the model clause, "This document must be signed at the office of the Lender, an attorney at law, or a title company" should appear above the signature of the borrower. The licensee may also provide additional signature lines for witness signatures. The model signature block reads: Figure: 7 TAC §90.603(c)(27) (d) Model clauses for a Chapter 342, Subchapter G second lien home improvement loan contract for use in a transaction that allows for withdrawals or multiple advances. (1) Identification. The model identification clause listing the date and the account or contract number reads: Figure: 7 TAC §90.603(d)(1) (No change.) (2) Definitions. The model definitions section reads: (A) "Owner" means (name of Owner), whose address is (address of Owner, including county). If Owner and Maker are not the same person, the word "Owner" includes Maker. "I" or "me" means the Owner. (B) "Contractor" means (name of Contractor), whose address is (address of Contractor, including county) and includes those to whom the Contractor has assigned or transferred Contractor's rights and remedies. "You" or "your" means the Contractor. (C) "Lender" means (name of Lender), whose address is (address of Lender, including county) and includes those to whom the Lender has assigned or transferred Lender's rights and remedies. The Lender's NMLS ID is (NMLS ID of Lender). The loan originator's name is (name of loan originator with primary responsibility for the origination). The loan originator's NMLS ID is (NMLS ID of originator). (D) "Trustee" means (name of Trustee), whose address is (address of Trustee, including county). (E) "Property" means the Property at (list address of the Property), whose legal description is (list legal description of the Property). (F) "Work" means the construction project as agreed to in writing between the Owner and Contractor. (G) "Completion Date" means (date on which the Work will be completed). (H) "Contract" means this Texas Home Improvement Mechanic's Lien Contract for Improvement, Power of Sale, and Deed of Trust. (I) "Note" means the Texas Home Improvement Mechanic's Lien Note signed by me and dated _________________________________ and includes all amounts secured by this Contract. The Note states that the amount I owe you is _____________________________ dollars (U.S. $___________________) plus interest. (J) "Loan Agreement" means the Note, Contract, and any other related document under which Lender has made a loan to me. (K) "Applicable Law" means all controlling applicable federal, state, and local law. (L) "Tenant at Sufferance" means a person who continues to possess the Property with no current right to possess it. (M) "Forcible Detainer" means a lawsuit to remove a person from the Property. (N) "Periodic Payment" means the regularly scheduled amount due for principal and interest under the Note plus any amount under this Contract. (O) "Successor in Interest" means any party that has taken title to the Property. (P) "Lien" means the Mechanic's and Materialman's Lien on the Property that results from the Contract and the Work performed. The Lien includes all existing and future improvements, easements, and rights in the Property. (3) Construction of improvements. The model clause regarding construction of improvements reads: "You agree to furnish and pay for all labor and material needed to complete the Work within _____ days from the date of this Contract. The Work will be performed on the Property in a good and workmanlike manner." (4) Contract price. The model clause establishing the contract price reads: "I agree to pay, or cause to be paid, to you, or to your order, the sum of _______________ dollars (U.S. $_______________) when the Work is completed." (5) Note payable to lender. The model clause specifying that the note is payable to the lender reads: "In exchange for money from the Lender to you, I have signed a Note to the Lender in the amount of __________________ dollars (U.S. $__________________)." (6) Lien to secure note. The model clause regarding security for the note reads: "To secure the amounts Lender provides to you, and the interest payable to Lender, I give you, and you transfer to Lender, the Lien. The Note is secured by a deed of trust, which I will sign. The deed of trust will renew and extend the Lien created by this Contract." ADOPTED RULES October 30, 2015 40 TexReg 7655 (7) Transfer of lien. The model clause regarding the transfer of the lien reads: "You transfer to Lender all of your rights and interests in this Contract." (8) Exceptions to conveyance and warranty. Any exceptions to conveyance and warranty should be specified in the contract. The model clause regarding the exceptions to conveyance and warranty reads: "The exceptions to conveyance and warranty are: (List any exceptions to conveyance and warranty.)" (9) Completion by contractor, but not lender. The model clause specifying that the lender is not responsible for completing the construction reads: "You will complete the Work by the Completion Date. Lender is not responsible for completing the Work. Lender is not a guarantor of your performance. You will indemnify and hold Lender harmless against all claims related to the Work." (10) Partial lien. The model clause regarding a partial lien reads: "If you do not complete the Work by the Completion Date in a good and workmanlike manner, then Lender will have a valid lien for the contract price, less the amount reasonably necessary to complete the Work. As an alternative, Lender may choose to complete the Work and the lien will be valid for the contract price." (11) Changes and extras. The model clause regarding changes and extras reads: "All labor or material furnished outside of this Contract must be agreed upon in writing or it will be considered as performed under the original Contract and you will receive no extra money." (12) Receipts and releases. The model clause regarding receipts and releases reads: "If I ask, you will give me valid receipts and releases for the Work from any subcontractor, worker, and supplier." (13) No work commenced. The model clause specifying that no work has commenced prior to execution of the contract reads: "This Contract is executed, acknowledged, and delivered before any labor has been performed and any material has been furnished for the Work." (14) Owner's promises and rights. The model clause regarding the owner's promises and rights reads: Figure: 7 TAC §90.603(d)(14) (No change.) (15) Owner's duties. The model clause regarding the owner's duties reads: Figure: 7 TAC §90.603(d)(15) (No change.) (16) Contractor's duties. The model clause regarding the contractor's duties reads: Figure: 7 TAC §90.603(d)(16) (No change.) (17) Contractor's rights. The model clause regarding the contractor's rights reads: Figure: 7 TAC §90.603(d)(17) (No change.) (18) Trustee's duties. The model clause regarding the trustee's duties reads: Figure: 7 TAC §90.603(d)(18) (No change.) (19) General provisions. The model clause regarding general contract provisions reads: Figure: 7 TAC §90.603(d)(19) (No change.) (20) Preservation of claims and defenses. In accordance with the Federal Trade Commission's Holder in Due Course Rule, 16 C.F.R. §433.2, it is an unfair or deceptive act or practice to take or receive a consumer credit contract in connection with the sale or lease of goods or services to consumers that does not include the following notice. The notice regarding the preservation of claims and defenses 40 TexReg 7656 October 30, 2015 Texas Register reads: "NOTICE. ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER." (21) Owner and contractor responsible. Texas Property Code, §41.007 specifies that a home improvement contract must contain a notice specifying that the owner and the contractor are responsible for meeting the terms of the contract. The notice must appear in either this contract or the residential construction contract. The Property Code requires that the notice must be conspicuously printed, stamped, or typed in a font size equal to at least 10-point boldfaced type or computer equivalent and appear next to the owner's signature line on the contract. The wording of the notice is specified by the Property Code, which uses the pronouns "you" and "your" to refer to the owner. Licensees are encouraged to explain in the contract, prior to the notice, that "you" and "your" refer to the owner in this notice. The parties' signatures must be notarized. The licensee may use a different notary acknowledgment without having to submit the contract to the agency as a non-standard contract. The notice specifying that the owner and the contractor are responsible for meeting the terms of the contract, the model explanatory clause regarding the use of "you" and "your" in the notice, and the signature blanks read: Figure: 7 TAC §90.603(d)(21) (No change.) (22) Assignment. The parties may use a different assignment or a separate document for the assignment without having to submit the contract to the agency as a non-standard contract. The model assignment in which the contractor transfers and assigns the lien to the licensee reads: Figure: 7 TAC §90.603(d)(22) (No change.) (23) Notice of confidentiality rights disclosure. The security document must incorporate a "Notice of Confidentiality Rights" disclosure. The disclosure or notice must: (A) appear on the top of the first page of the security document; (B) be in at least 12-point boldfaced type or 12-point uppercase lettering; and (C) be substantially similar to the required notice or disclosure under Texas Property Code, §11.008(b). The model notice of confidentiality rights reads: "NOTICE OF CONFIDENTIALITY RIGHTS: I MAY REMOVE OR STRIKE MY SOCIAL SECURITY NUMBER OR MY DRIVER'S LICENSE NUMBER FROM THIS DOCUMENT BEFORE IT IS FILED IN THE PUBLIC RECORDS." (e) Model clauses for a Chapter 342, Subchapter G second lien home improvement loan promissory note for use in a transaction that allows for withdrawals or multiple advances. (1) Identification. (A) The model identification clause lists the account or contract number, the name and address of the lender, the date of the note, the name and address of the borrower, the property address, the principal amount, and the terms of payment. It also lists the following items that must be included on the promissory note under Regulation Z, 12 C.F.R. §1026.36(g): (i) the lender's Nationwide Mortgage Licensing System and Registry identification number (labeled "Creditor/Lender NMLS ID"); (ii) the name of the individual residential mortgage loan originator with primary responsibility for the origination (labeled "Loan Originator"); and (iii) the originator's Nationwide Mortgage Licensing System and Registry identification number (labeled "Loan Originator NMLS ID"). (B) The model identification clause reads: Figure: 7 TAC §90.603(e)(1)(B) (2) Security for payment. The model clause relating to the security for payment reads: "The Deed of Trust and the Lien created in the Contract secure this Note. You will have a security interest in the following described property: (property description)" (3) Definitions. The model definitions section reads: (A) "Owner" means (name of Owner), whose address is (address of Owner, including county). If Owner and Maker are not the same person, the word "Owner" includes Maker. (B) "Contractor" means (name of Contractor), whose address is (address of Contractor, including county) and includes those to whom the Contractor has assigned or transferred Contractor's rights and remedies. (C) "Lender" means (name of Lender), whose address is (address of Lender, including county) and includes those to whom the Lender has assigned or transferred Lender's rights and remedies. (D) "Trustee" means (name of Trustee), whose address is (address of Trustee, including county). (E) "Property" means the Property at (list address of the Property), whose legal description is (list legal description of the Property). (F) "Work" means the construction project as agreed to in writing between the Owner and Contractor. (G) "Completion Date" means (date on which the Work will be completed). (H) "Contract" means this Texas Home Improvement Mechanic's Lien Contract for Improvement, Power of Sale, and Deed of Trust. (I) "Note" means the Texas Home Improvement Mechanic's Lien Note signed by me and dated ____________________ and includes all amounts secured by this Contract. The Note states that the amount I owe you is _____________________ dollars (U.S. $________________) plus interest. (J) "Loan Agreement" means the Note, Contract, and any other related document under which Lender has made a loan to me. (K) "Applicable Law" means all controlling applicable federal, state, and local law. (L) "Tenant at Sufferance" means a person who continues to possess the Property with no current right to possess it. (M) "Forcible Detainer" means a lawsuit to remove a person from the Property. (N) "Periodic Payment" means the regularly scheduled amount due for principal and interest under the Note plus any amount under this Contract. (O) "Successor in Interest" means any party that has taken title to the Property. (P) "Lien" means the Mechanic's and Materialman's Lien on the Property that results from the Contract and the Work performed. The Lien includes all existing and future improvements, easements, and rights in the Property. (4) Promise to pay. One permissible change to the model language for the scheduled installment earnings method would be to allow partial prepayments of the principal during the term of the loan. This variation on the scheduled installment earnings method would allow periodic reductions of the principal balance by partial prepayments. This variation would allow reductions of the principal balance that were not originally scheduled. The model clause options for the borrower's promise to pay read: (A) For contracts using the scheduled installment earnings method: "I promise to pay the Total of Payments to the order of you. (The "principal" or "cash advance" is $________. This amount plus interest must be paid by _________ (maturity date).) I will make payments to you at the address above or as you direct. I will make the payments on the dates and in the amounts shown in the Payment Schedule." (B) For contracts using the true daily earnings method: "I promise to pay the cash advance plus the accrued interest to the order of you. (The "principal" or "cash advance" is $________. This amount plus interest must be paid by _________ (maturity date).) I will make payments to you at the address above or as you direct. I will make the payments on the dates and in the amounts shown in the Payment Schedule." (C) The model payment schedule reads: Figure: 7 TAC §90.603(e)(4)(C) (5) Late charge. (A) Generally. The general model late charge provision for contracts using the scheduled installment earnings method or the true daily earnings method reads: "If I don't pay all of a payment within 10 days after it is due, you can charge me a late charge. The late charge will be 5% of the scheduled payment." (B) High-cost mortgage loans. The model late charge provision for high-cost mortgage loans subject to the limitation on late charges in Regulation Z, 12 C.F.R. §1026.34(a)(8), reads: "If I don't pay all of a payment within 15 days after it is due, you can charge me a late charge. The late charge will be 4% of the amount of the payment past due." (6) After maturity interest. The model clause specifies the maximum interest rate allowed by law for after maturity interest for contracts using the scheduled installment earnings method. A licensee may always choose a lower rate. The model provision for after maturity interest reads: "If I don't pay all I owe when the final payment becomes due, I will pay interest on the amount that is still unpaid. That interest will be the higher of the rate of 18% per year or the maximum rate allowed by law. That interest will begin the day after the final payment becomes due." (7) tions read: Prepayment clause. The model prepayment clause op- (A) For contracts using the scheduled installment earnings method: "I can make a whole payment early. Unless you agree otherwise in writing, I may not skip payments. If I make a payment early, my next payment will still be due as scheduled." (B) For contracts using the true daily earnings method: "I can make any payment early. Unless you agree otherwise in writing, I may not skip payments. If I make a payment early, my next payment will still be due as scheduled." ADOPTED RULES October 30, 2015 40 TexReg 7657 (8) Finance charge earnings and refund method. The model provision options specifying the finance charge earnings and refund method read: (A) For contracts using the scheduled installment earnings method - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.603(e)(8)(A) (B) For contracts using the scheduled installment earnings method with prepayments option - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.603(e)(8)(B) (C) For contracts using the true daily earnings method - Section 342.301 rate loans, the model language reads: Figure: 7 TAC §90.603(e)(8)(C) (9) Deferment. The model provision regarding deferment reads: "If I ask for more time to make any payment and you agree, I will pay more interest to extend the payment. The extra interest will be figured under the Finance Commission rules." (10) Fee for dishonored check clause. The model clause specifies the maximum allowable dishonored check fee. A licensee may always choose a lesser amount. The model fee for dishonored check provision reads: "I agree to pay you a fee of up to $30 for a returned check. You may add the fee to the amount I owe or collect it separately." (11) Default. The model provision specifying the conditions causing default reads: Figure: 7 TAC §90.603(e)(11) (12) Property insurance. The model provision regarding property insurance reads: Figure: 7 TAC §90.603(e)(12) (13) Credit insurance. If single premium credit insurance is offered, a permissible change to the disclosure can be to offer a single charge for the entire term of the loan. The term for the single premium charge should be shown for the original term of the loan, unless otherwise specified. The licensee has the option of including language that reads: "The insurance will cancel on the date when the total past due premiums equal or exceed (insert number) times the first month's premium." The industry standard regarding the relationship between total past due premiums and the first month's premium in this equation appears to be four times. However, if a different time frame is more appropriate, that time frame may be used. The model credit insurance disclosure box reads: Figure: 7 TAC §90.603(e)(13) (14) Mailing of notices to borrower. The duty to give notice is satisfied when it is mailed by first class mail. The model provision regarding the mailing of notices to the borrower reads: "You or I may mail or deliver any notice to the address above. You or I may change the notice address by giving written notice. Your duty to give me notice will be satisfied when you mail it." (15) Statement of truthful information. The model provision specifying that the borrower gave truthful information reads: "I promise that all information I gave you is true." (16) Due on sale clause, notice of intent to accelerate, and notice of acceleration. The model provision regarding the due on sale clause, notice of intent to accelerate, and notice of acceleration reads: "If all or any interest in the Property is sold or transferred without your prior written consent, you may require immediate payment in full of all that I owe under this Loan Agreement. You will not exercise this option if prohibited by law. If you exercise this option, you will give 40 TexReg 7658 October 30, 2015 Texas Register me notice that you are demanding payment of all that I owe. This notice will give me a period of not less than 21 days from the date of the notice within which I must pay all that I owe under this Loan Agreement. If I fail to pay all that I owe before the end of this period, you may use any remedy allowed by the Loan Agreement." (17) No waiver of the lender's rights. The model provision expressing no waiver of the lender's rights reads: "If you don't enforce your rights every time, you can still enforce them later." (18) Collection expenses. The model collection expenses clause reads: "If you require me to pay all that I owe at once, you will have the right to be paid back by me for all of your costs and expenses in enforcing this Loan Agreement to the extent not prohibited by Applicable Law. These expenses include, for example, reasonable attorneys' fees." (19) Joint liability. The model provision providing for joint liability reads: "I understand that you may seek payment from only me without first looking to any other Borrower." (20) Usury savings. The model usury savings clause reads: "I do not have to pay interest or other amounts that are more than Applicable Law allows." (21) Savings clause. The model savings clause stating that if any part of the contract is invalid, the rest remains valid reads: "If any part of this Loan Agreement is declared invalid, the rest of the Loan Agreement remains valid. If any part of this Loan Agreement conflicts with any law, that law will control. The part of the Loan Agreement that conflicts with any law will be modified to comply with the law. The rest of the Loan Agreement remains valid." (22) Prior agreements. For loan agreements exceeding $50,000, this notice must be boldfaced, capitalized, underlined, or otherwise set out from the surrounding written material to be conspicuous. The model clause stating that there are no prior agreements between the parties regarding the loan agreement reads: "This written Loan Agreement is the final agreement between you and me. It may not be changed by prior, current, or future oral agreements between you and me. There are no oral agreements between you and me relating to this Loan Agreement. Any change to this Loan Agreement must be in writing. Both you and I have to sign written agreements." (23) Note secured by deed of trust. The model clause stating that the note is secured by a deed of trust reads: "In addition to this Note, the Deed of Trust protects the Note holder from losses that might result if I do not keep the promises that I make in this Note. The Deed of Trust describes how and under what conditions I may have to make immediate payment of all that I owe under this Note." (24) Application of law. The model clause specifying that federal law and Texas law apply to the contract reads: "Federal law and Texas law apply to this Loan Agreement." (25) OCCC notice. Under §90.105 of this title (relating to OCCC Notice), the following required notice must be given by licensees to let consumers know how to file complaints: "For questions or complaints about this loan, contact (insert name of lender) at (insert lender's phone number and, at lender's option, one or more of the following: mailing address, fax number, website, e-mail address). The lender is licensed and examined under Texas law by the Office of Consumer Credit Commissioner (OCCC), a state agency. If a complaint or question cannot be resolved by contacting the lender, consumers can contact the OCCC to file a complaint or ask a general credit-related question. OCCC address: 2601 N. Lamar Blvd., Austin, Texas 78705. Phone: (800) 538-1579. Fax: (512) 936-7610. Website: occc.texas.gov. E-mail: consumer.complaints@occc.texas.gov." (26) Collateral. The model clause regarding the collateral reads: "The Property is subject to the Contract lien. I am responsible for all obligations in this Note." (27) Preservation of claims and defenses. The notice regarding the preservation of claims and defenses reads: "NOTICE. ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER." (28) Signature blocks. Documents for a home improvement loan on a homestead must be signed at the office of the lender, an attorney at law, or a title company. If this provision applies, the model clause, "This document must be signed at the office of the Lender, an attorney at law, or a title company" should appear above the signature of the borrower. The licensee may also provide additional signature lines for witness signatures. The model signature block reads: Figure: 7 TAC §90.603(e)(28) (f) Model clauses for a Chapter 342, Subchapter G second lien home improvement loan deed of trust for use in a transaction that allows for withdrawals or multiple advances. (1) Definitions. The model definitions section reads: (A) "Borrower" is _________________. Borrower's address is _____________________. (B) "Contractor" is __________________. Contractor's address is _______________________. (C) "Lender" is ____________________. Lender's address is ___________________________. Lender's NMLS ID is __________. The loan originator's name is _______________________________. The loan originator's NMLS ID is __________. (D) "Trustee" is ____________________. address is _______________________. Trustee's (E) "I" or "me" means __________________________ ______, the grantor under this Deed of Trust and the person who signed the Note ("Borrower"). (F) "Loan Agreement" means the Contract, Note, Security Document, Deed of Trust, any other related document, or any combination of those documents, under which Lender has made a loan to me. imposed on me or the Property by a condominium association, homeowners association, or similar organization. (L) "Electronic Funds Transfer" means any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, which is initiated through an electronic terminal, telephonic instrument, computer, or magnetic tape so as to order, instruct, or authorize a financial institution to debit or credit an account. The term includes point-of-sale transfers, automated teller machine transactions, transfers initiated by telephone, wire transfers, and automated clearinghouse transfers. (M) "Escrow Items" means those items that are described in Section ___ of this Deed of Trust. (N) "Miscellaneous Proceeds" means any compensation, settlement, award of damages, or proceeds paid by any third party (other than proceeds paid under my insurance) for: damage or destruction of the Property; condemnation or other taking of all or any part of the Property; conveyance instead of condemnation; or misrepresentations or omissions related to the value or condition of the Property. (O) "Periodic Payment" means the regularly scheduled amount due for principal and interest under the Note plus any amounts under this Deed of Trust. (P) "RESPA" means the Real Estate Settlement Procedures Act (12 U.S.C. §§2601-2617) and Regulation X (12 C.F.R. Part 1024), as amended, or any additional or successor legislation or regulation that governs the same subject matter. As used in this Deed of Trust, "RESPA" refers to all requirements and restrictions that are imposed in regard to a "federally related mortgage loan" even if the Loan Agreement does not qualify as a "federally related mortgage loan" under RESPA. (Q) "Successor in Interest" means any party that has taken title to the Property. (R) "Ground Rents" means amounts I owe if I rented the real property under the buildings covered by this Deed of Trust. Such an arrangement usually takes the form of a long-term "ground lease." (S) "Contract" means the Texas Home Improvement Mechanic's Lien Contract for Improvement, Power of Sale, and Deed of Trust. (T) "Lien" means the Mechanic's and Materialman's Lien on the Property that results from the Contract and the Work performed. The Lien includes all existing and future improvements, easements, and rights in the Property. (G) "Deed of Trust" means this document, which is dated ________, together with all riders to this document. (2) Transfer of rights in property. The model provision regarding a transfer of rights in the property reads: Figure: 7 TAC §90.603(f)(2) (No change.) (H) "Note" means the Texas Home Improvement Mechanic's Lien Note signed by me and dated ______________ and includes all amounts secured by this Contract. The Note states that the amount I owe Lender is _________________ dollars (U.S. $_________) plus interest. (3) Payment of late charges and prepayment. The model provision regarding the payment of late charges and prepayment of principal and interest reads: Figure: 7 TAC §90.603(f)(3) (No change.) (I) "Property" means the property at (list address of the Property), whose legal description is (list legal description of the Property). (J) "Applicable Law" means all controlling applicable federal, state, and local law. (K) "Community Association Dues, Fees, and Assessments" means all dues, fees, assessments and other charges that are (4) Funds for escrow items. The model provision regarding the funds for escrow items reads: Figure: 7 TAC §90.603(f)(4) (No change.) (5) Charges and liens. The model provision regarding charges and liens reads: Figure: 7 TAC §90.603(f)(5) (No change.) (6) Property insurance. The model provision regarding property insurance reads: ADOPTED RULES October 30, 2015 40 TexReg 7659 Figure: 7 TAC §90.603(f)(6) (No change.) (7) Preservation, maintenance, protection, and inspection of property. The model provision regarding preservation, maintenance, protection, and inspection of the property reads: "I will not destroy, damage, or impair the Property, allow it to deteriorate, or commit waste. Whether or not I live in the Property, I will maintain it in order to prevent it from deteriorating or decreasing in value due to its condition. I will promptly repair the damage to the Property to avoid further deterioration or damage unless Lender and I agree in writing that it is economically unreasonable. I will be responsible for repairing or restoring the Property only if Lender releases the insurance or condemnation proceeds for the damage to or the taking of the Property. Lender may release proceeds for the repairs and restoration in a single payment or in a series of payments as the Work is completed. I still am obligated to complete repairs or restoration of the Property even if there are not enough proceeds to complete the Work. If this Deed of Trust secures a unit in a condominium or planned unit development, I will perform all of my obligations under the declaration or covenants creating or governing the condominium or planned unit development, and any other relevant document. Lender or Lender's agent may inspect the Property. Lender may inspect the interior of the Property with reasonable cause. Lender will give me notice stating reasonable cause when or before the interior inspection occurs." (8) Protection of lender's interest in the property and rights under the deed of trust. The model provision regarding protection of the lender's interest in the property and rights under the deed of trust reads: Figure: 7 TAC §90.603(f)(8) (No change.) (9) Assignment of miscellaneous proceeds and forfeiture. The model provision regarding the assignment of miscellaneous proceeds and forfeiture reads: Figure: 7 TAC §90.603(f)(9) (No change.) (10) Forbearance not a waiver. The model provision specifying that the borrower is not released from liability if the lender modifies the payment schedule reads: "If Lender doesn't enforce Lender's rights every time, Lender can still enforce them later." (11) Joint and several liability, deed of trust execution, successors obligated. The model provision regarding joint and several liability and specifying that the person who signs the contract grants ownership in the homestead and binds the person's successors and assigns reads: Figure: 7 TAC §90.603(f)(11) (No change.) (12) Usury savings clause. The model usury savings clause reads: "I do not have to pay interest or other amounts that are more than Applicable Law allows." ments at the time the loan agreement is made reads: "At the time the Loan Agreement is made, Lender will give me copies of all documents I sign." (17) Due on sale clause, notice of intent to accelerate, and notice of acceleration. The model provision regarding the due on sale clause, notice of intent to accelerate and notice of acceleration reads: "If all or any interest in the Property is sold or transferred without Lender's prior written consent, Lender may require immediate payment in full of all that I owe under this Loan Agreement. Lender will not exercise this option if Applicable Law prohibits. If Lender exercises this option, Lender will give me notice that Lender is demanding payment of all that I owe. This notice will give me a period of not less than 21 days from the date of the notice within which I must pay all that I owe under this Loan Agreement. If I fail to pay all that I owe before the end of this period, Lender may use any remedy allowed by the Loan Agreement." (18) Lender, contractor, and borrower's promises and agreements. The model provision regarding the lender, contractor, and borrower's promises and agreements reads: "LENDER, CONTRACTOR, AND I PROMISE AND AGREE:". (19) Acceleration and remedies. The model provision regarding acceleration and remedies reads: Figure: 7 TAC §90.603(f)(19) (No change.) (20) Power of sale. The model provision regarding the power of sale reads: Figure: 7 TAC §90.603(f)(20) (No change.) (21) Borrower's right to reinstate after acceleration. The model provision regarding the borrower's right to reinstate after acceleration reads: Figure: 7 TAC §90.603(f)(21) (No change.) (22) Assignment of rents, appointment of receiver, and lender in possession. The model provision regarding the assignment of rents, appointment of receiver, and the lender in possession reads: "As additional security, I assign to you the rents of the Property, provided that you have the right, prior to acceleration or abandonment of the Property, to collect and retain the rents as they become due. Upon acceleration or abandonment, you, by agent or by court-appointed receiver, will be entitled to enter, take possession, manage the Property, and collect due and past due rents. All rents you or the court-appointed receiver collect will be applied first to payment of the cost of management of the Property and collection of rents, including receiver's fees, premiums on receiver's bonds, and reasonable attorneys' fees, and then to the sums secured by this Deed of Trust. You and the receiver will be liable to account only for rents received." (13) Mailing of notices to borrower. The duty to give notice is satisfied when it is mailed by first class mail. The model provision regarding the mailing of notices to the borrower reads: "Lender or I may mail or deliver any notice to the address above. Lender or I may change the notice address by giving written notice. Lender's duty to give me notice will be satisfied when Lender mails it." (23) Release. The model provision regarding the release of the lien securing the loan agreement reads: "Lender will cancel and return the Note to me and give me, in recordable form, a release of lien securing the Loan Agreement or a copy of any endorsement of the Note and assignment of the Lien to a Lender that is refinancing the Loan Agreement. I will pay only the cost of recording the release of lien." (14) Application of law. The model clause specifying that federal law and Texas law apply to the contract reads: "Federal law and Texas law apply to this Loan Agreement." (24) Trustees and trustee liability. The model provision regarding trustees and trustee liability reads: Figure: 7 TAC §90.603(f)(24) (No change.) (15) Rules of construction. The model provision regarding rules of clause construction reads: Figure: 7 TAC §90.603(f)(15) (No change.) (25) Assignment of contractor's lien, and commencement of work. The model provision regarding the assignment of the contractor's lien and specifying that no work was commenced before the contract was executed reads: "Contractor and I have entered into the Contract for improvements to be made to the Property. I will perform my duties under the Contract. Under the Contract, I gave Contractor (16) Loan agreement copies. The model provision specifying that the lender will give the borrower a copy of all signed docu- 40 TexReg 7660 October 30, 2015 Texas Register a Lien on the Property. Contractor permanently transfers the Lien and any other interest Contractor has in the Property to Lender. As additional security, Contractor also agrees that the lien created by this Deed of Trust has priority over the Lien. The purpose of the Note is to pay in whole or in part the improvements to be made to the Property by the Contractor. Contractor and I agree that the Lien is for Lender's sole benefit. Any other interest Contractor has in the Property will be merged with the Lien, and may be enforced by Lender according to the terms of this Deed of Trust. Contractor and I further agree that no Work was performed or material delivered before the Contract was executed." (26) Subrogation. The model provision regarding subrogation reads: "If I ask, Lender will use proceeds from the Loan Agreement to pay off all valid outstanding liens against the Property. Lender will then own all rights, superior titles, liens, and interests owned or claimed by any owner or holder of an outstanding lien or debt. Lender owns these things whether the lien or debt is transferred to Lender or whether it is released by the holder upon payment." (27) Partial invalidity. The model provision regarding what happens if the sums secured and other charges violate applicable law reads: "If any portion of the sums secured by this Deed of Trust cannot be lawfully secured, payments minus those sums will be applied first to the portions not secured. If any charge provided for in this Loan Agreement, separately or together with other charges that are considered part of this Loan Agreement, violates Applicable Law, the charge is reduced to the extent necessary to eliminate the violation. Lender will refund the amount of interest or other charges paid to Lender in excess of the amount permitted by Applicable Law. At Lender's option, the amount in excess will either be refunded directly to me or will be applied to reduce the principal of the debt." (28) Renewal and extension. The model provision regarding the renewal and extension of the note secured by the deed of trust reads: "The Note secured by this Deed of Trust is renewed and extended, but not in extinguishment of the debt under the Contract identified in the paragraph entitled "Assignment of Contractor's Lien, Commencement of Work" and the Note." (29) Sale of loan, change of loan servicer, notice of grievance, and lender's right to comply. The model provision regarding the sale of the loan, change of loan servicer, notice of grievance, and the lender's right to comply reads: "A full or partial interest in the Loan Agreement can be sold one or more times without prior notice to me. The sale may result in a change of the company servicing or handling the Loan Agreement. The company servicing or handling the Loan Agreement will collect my monthly payment and will comply with other servicing conditions required by the Loan Agreement or Applicable Law. In some cases, the company servicing or handling the Loan Agreement may change even if the Loan Agreement is not sold. If the company servicing or handling the Loan Agreement is changed, I will be given written notice of the change. The notice will state the name and address of the new company, the address to which my payments should be made, and any other information required by RESPA. Any notice of acceleration and opportunity to cure under the Loan Agreement will satisfy the notice and opportunity to address the alleged violation provisions of this Section. No agreement between Lender and me or any third party will limit Lender's ability to comply with Lender's duties under the Loan Agreement and Applicable Law. Lender and I are limiting all agreements so that all current or future interest or fees in connection with this Loan Agreement will not be greater than the highest amount allowed by Applicable Law. Lender and I intend to conform the Loan Agreement to the provisions of Applicable Law. If any part of the Loan Agreement is in conflict with the Applicable Law, then that part will be corrected or removed. This correction will be automatic and will not require any amendment or new document. Lender's right to cure any violation will survive my paying off the Loan Agreement. My right to cure will override any conflicting provision of the Loan Agreement. Lender's right to comply as provided in this Section will survive the payoff of the Loan Agreement. The provisions of this Section will supersede any inconsistent provision of the Loan Agreement." (30) Hazardous substances. The model provision regarding hazardous substances reads: Figure: 7 TAC §90.603(f)(30) (No change.) (31) Lender's rights and Borrower's responsibilities. The model provision regarding the lender's rights and the borrower's responsibilities reads: Figure: 7 TAC §90.603(f)(31) (No change.) (32) Default. The model provision regarding the borrower's default reads: "Any default of my agreements with Lender will be a default of this Deed of Trust." (33) Request for notice of default and foreclosure under superior mortgages or deeds of trust. The model provision regarding the lender and borrower's request for notice of default and foreclosure under superior mortgages or deeds of trust reads: Figure: 7 TAC §90.603(f)(33) (No change.) (34) Signature blocks. The parties' signatures must be notarized. The licensee may use a different notary acknowledgment without having to submit the deed of trust to the agency as non-standard. Documents for a home improvement loan on a homestead must be signed at the office of the lender, an attorney at law, or a title company. If this provision applies, the model clause, "This document must be signed at the office of the Lender, an attorney at law, or a title company" should appear above the signature of the borrower. The model provision regarding signature blocks reads: Figure: 7 TAC §90.603(f)(34) (No change.) (35) Notice of confidentiality rights disclosure. The security document must incorporate a "Notice of Confidentiality Rights" disclosure. The disclosure or notice must: (A) appear on the top of the first page of the security document; (B) be in at least 12-point boldfaced type or 12-point uppercase lettering; and (C) be substantially similar to the required notice or disclosure under Texas Property Code, §11.008(b). The model notice of confidentiality rights reads: "NOTICE OF CONFIDENTIALITY RIGHTS: I MAY REMOVE OR STRIKE MY SOCIAL SECURITY NUMBER OR MY DRIVER'S LICENSE NUMBER FROM THIS DOCUMENT BEFORE IT IS FILED IN THE PUBLIC RECORDS." The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504405 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 936-7621 ADOPTED RULES October 30, 2015 40 TexReg 7661 ♦ ♦ ♦ SUBCHAPTER G. SPANISH DISCLOSURES 7 TAC §90.701, §90.703 The amendments and new rule are adopted under Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. All of the plain language amendments and new rule are adopted under Texas Finance Code, §341.502, which authorizes the commission to adopt rules governing the form of contracts for a loan under Chapter 342, a retail installment transaction under Chapter 348, or a home equity loan regulated by the Office of Consumer Credit Commissioner. The amendments regarding the OCCC notice are adopted under Texas Finance Code, §14.104, which requires that a written contract of an authorized lender subject to the OCCC's regulation must contain the name, mailing address, and telephone number of the office. The OCCC believes that a modernized interpretation of §14.104 would include the agency's updated website and email address. The regulated lender amendments and new rule are adopted under Texas Finance Code, §342.551 which grants the commission the authority to adopt rules to enforce the consumer loans chapter. The statutory provisions affected by the adopted amendments and new rule are contained in Texas Finance Code, Chapters 342 and 348. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. ♦ ♦ 7 TAC §90.703 The repeal is adopted under Texas Finance Code, §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. All of the plain language amendments are adopted under Texas Finance Code, §341.502, which authorizes the commission to adopt rules governing the form of contracts for a loan under Chapter 342, a retail installment transaction under Chapter 348, or a home equity loan regulated by the Office of Consumer Credit Commissioner. The amendments regarding the OCCC notice are adopted under Texas Finance Code, §14.104, which requires that a written contract of an authorized lender subject to the OCCC's regulation must contain the name, mailing address, and telephone number of the office. The OCCC believes that a modernized interpreta- 40 TexReg 7662 October 30, 2015 The regulated lender amendments are adopted under Texas Finance Code, §342.551 which grants the commission the authority to adopt rules to enforce the consumer loans chapter. The statutory provisions affected by the repeal are contained in Texas Finance Code, Chapters 342 and 348. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504407 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 936-7621 ♦ ♦ ♦ PART 6. CREDIT UNION DEPARTMENT CHAPTER 91. CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS SUBCHAPTER D. POWERS OF CREDIT UNIONS 7 TAC §91.401 The Credit Union Commission (the Commission) adopts amendments to §91.401, concerning the Purchase, Lease, or Sale of Fixed Assets, with changes to the proposed text as published in the July 3, 2015, issue of the Texas Register (40 TexReg 4287). TRD-201504406 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Effective date: November 5, 2015 Proposal publication date: September 4, 2015 For further information, please call: (512) 936-7621 ♦ tion of §14.104 would include the agency's updated website and email address. Texas Register The amendments change the title of the rule to "Credit Union Ownership of Property" to better reflect the scope and purpose of the rule. The amendments streamline and clarify definitions of terms, reduce the requirement for credit unions to obtain prior approval from the Department to invest in premises, explain the standards for evaluating a request to invest in credit union premises in an amount that exceeds the credit union's net worth, explain that the Department may impose special conditions for approval of such a request in order to protect the safety and soundness of the credit union, and eliminate the specific format requirements for the written request to the Department. The Commission received no comments on these proposed changes. The amendments are adopted under Texas Finance Code, §15.402, which authorizes the Commission to adopt reasonable rules for administering Title 2, Chapter 15 and Title 3, Subtitle D of the Texas Finance Code, and under Texas Finance Code, §123.103, which concerns credit union powers to purchase and sell property. The specific section affected by the proposed amended rule is Texas Finance Code, §123.103. §91.401. Credit Union Ownership of Property. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Equipment includes all movable furniture, fixtures, and equipment of the credit union, its branch offices, and consolidated credit union service organizations, including automobiles and other vehicles, and any lien on the above. (2) Immediate family member--a spouse or other family member living in the same household. (3) Premises include the cost less accumulated depreciation, of land and buildings actually owned and occupied (or to be occupied) by the credit union, its branch offices, and consolidated credit union service organizations. This includes vaults, fixed machinery, parking facilities, and real estate acquired and intended, in good faith, for future expansion. It also includes capitalized leases, leasehold improvements, and remodeling costs to existing premises. (4) Senior Management Employee--the chief executive officer, any assistant chief executive officers (e.g. vice presidents and above) and the chief financial officer. (b) Investment Limitations on Premises. Without the prior written consent of the Department, a credit union may not directly or indirectly invest an amount in excess of its net worth in premises. (c) Restrictions on Ownership of Property. A credit union shall not acquire premises for the principal purpose of engaging in real estate rentals or speculation. (d) Transactions with insiders. Without the prior approval of a disinterested majority of the board of directors recorded in the minutes or, if a disinterested majority cannot be obtained, the prior written approval of the commissioner, a credit union may not directly or indirectly: (1) sell or lease an asset of the credit union to a director, committee member, or senior management employee, or immediate family members of such individual; or (2) purchase or lease an asset in which a director, committee member, senior management employee, or immediate family members of such individual has an interest. (e) Use requirement for premises. If real property or leasehold interest is acquired and intended, in good faith, for use in future expansion, the credit union must partially satisfy the "primarily for its own use in conducting business" requirement within five years after the credit union makes the investment. (f) Consent to Exceed Limitation. Generally, a credit union need not obtain the Department's approval to invest in premises. However, prior approval is required if the total aggregate investment in premises will exceed the credit union's net worth. A credit union shall submit such statements and reports as the Department may require in support of the higher investment limit. (1) When analyzing an application for an additional investment in credit union premises, the Department will consider: (A) Consistency with safe and sound credit union practices; (B) The reasonableness of the amount of credit union premises and the annual expenditures required to carry them relative to the credit union's net worth and the nature and volume of operations; and (2) The Department will consider denying a request for an additional investment in credit union premises when: (A) The additional investment would have a material negative effect on the credit union's earnings, capital, or liquidity; or (B) The credit union has not demonstrated a reasonable need for the additional investment. (3) The Department may impose appropriate special conditions for an approval of an additional credit union premises investment, if it determines that they are necessary or appropriate to protect the safety and soundness of the credit union or to further other supervisory or policy considerations. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504435 Harold E. Feeney Commissioner Credit Union Department Effective date: November 8, 2015 Proposal publication date: July 3, 2015 For further information, please call: (512) 837-9236 ♦ SUBCHAPTER H. ♦ ♦ INVESTMENTS 7 TAC §91.802 The Credit Union Commission (the Commission) adopts amendments to §91.802, concerning Other Investments, without changes to the proposed text as published in the July 3, 2015, issue of the Texas Register (40 TexReg 4288). The amendments add definitions of certain terms, clarify and amend existing terms in the rule, and explain the standard for understanding terms not explicitly defined in the rule. The amendments are adopted as a result of the Credit Union Department's general rule review, which was conducted in accordance with Texas Government Code §2001.039. The Commission received no comments on the proposed changes. The amendments are adopted under Texas Finance Code, §15.402, which authorizes the Commission to adopt reasonable rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the Texas Finance Code, and under §124.351 which explains permitted investments. The specific section affected by the proposed amended rule is Texas Finance Code, §124.351. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504438 (C) The effect of the investment on future earnings. ADOPTED RULES October 30, 2015 40 TexReg 7663 purposes of this section, obligor is defined as an issuer, trust, or originator of an investment, including the seller of a loan participation. Harold E. Feeney Commissioner Credit Union Department Effective date: November 8, 2015 Proposal publication date: July 3, 2015 For further information, please call: (512) 837-9236 ♦ ♦ ♦ 7 TAC §91.803 The Credit Union Commission (Commission) adopts amendments to §91.803, concerning Investment Limits and Prohibitions, with nonsubstantive changes to the proposed text as published in the July 3, 2015, issue of the Texas Register (40 TexReg 4292). (b) Designated Depository. As a single exception to subsection (a) of this section, a credit union's board of directors may establish the maximum aggregate deposit limit for a single financial institution approved by the board as the credit union's designated depository. This deposit limit shall be a percentage of net worth and must be based on the credit union's liquidity trends and funding needs as documented by its asset/liability management policy. This authority is contingent upon the credit union appropriately documenting its due diligence to demonstrate that the investments in this designated depository do not pose a safety and soundness concern. The credit union's board of directors shall review and approve at least annually the maximum aggregate deposit limit for its designated depository. The review shall include a current due diligence analysis of the financial institution. As published, the amendments reduce the limitations on investments by exempting federally-insured deposits and investments, to the extent that those amounts are federally insured. The amendments also clarify certain activities in the list of prohibited activities, reduce restrictions on certain activities in the list of prohibited activities, and add certain activities to the list of prohibited activities. As adopted, these ongoing notice requirements have been withdrawn, reverting to the existing rule requirements. The amendments, including some of the non-substantive changes, also correct an erroneous citation and edit the rule for clarity and consistency. (A) Adjusted trading--selling an investment to a counterparty at a price above its current fair value and simultaneously purchasing or committing to purchase from the counterparty another investment at a price above its current fair value. The amendments are adopted as a result of the Credit Union Department's general rule review, which was conducted in accordance with Texas Government Code §2001.039. (C) Commercial mortgage related security--a mortgage related security except that it is collateralized entirely by commercial real estate, such as a warehouse or office building, or a multi-family dwelling consisting of more than four units. The Commission received one written comment on the proposed rule amendments. The commenter was concerned about some technical language differences that might cause some to be concerned about how investments insured or guaranteed by U.S. Government sponsored enterprises would be treated under §91.803(a), and proposed to add the word "sponsored" before the word "enterprise". The Commission agrees with this non-substantive change. (c) Prohibited Activities. (1) Definitions. (B) Collateralized mortgage obligation (CMO)--a multi-class bond issue collateralized by mortgages or mortgage-backed securities. (D) Fair value--the price at which a security can be bought or sold in a current, arm's length transaction between willing parties, other than in a forced or liquidation sale. (E) Real estate mortgage investment conduit (REMIC)--a nontaxable entity formed for the sole purpose of holding a fixed pool of mortgages secured by an interest in real property and issuing multiple classes of interests in the underlying mortgages. The commenter also suggested adding the language "including those referred to in §91.802(c)(10)" to clarify the term U.S. Government sponsored enterprises. The Commission disagrees that this addition will provide clarity, instead finding that this addition is redundant and unnecessary. (F) Residual interest--the remainder cash flows from a CMO/REMIC, or other mortgage-backed security transaction, after payments due bondholders and trust administrative expenses have been satisfied. The amendments are adopted under Texas Finance Code, §15.402, which authorizes the Commission to adopt reasonable rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the Texas Finance Code, and under §124.351 and §124.352 which address permitted investments and limitations on investments for credit unions. seller. The specific sections affected by the proposed amended rule are Texas Finance Code, §124.351 and §124.352. (I) Zero coupon investment--an investment that makes no periodic interest payments but instead is sold at a discount from its face value. The holder of a zero coupon investment realizes the rate of return through the gradual appreciation of the investment, which is redeemed at face value on a specified maturity date. §91.803. Investment Limits and Prohibitions. (a) Limitations. With the exception of deposits held by a Federal Reserve Bank, a credit union may invest no more than 50% of its net worth with any single obligor or related obligors. This limitation also does not apply to the extent that the investment is insured or guaranteed by the United States government, or an agency, sponsored enterprise, corporation, or instrumentality of the United States government, or to any trust or trusts established for investing, directly or collectively, in such securities, obligations, or instruments. For the 40 TexReg 7664 October 30, 2015 Texas Register (G) Short sale--the sale of a security not owned by the (H) Stripped mortgage-backed security--a security that represents either the principal-only or the interest-only portion of the cash flows of an underlying pool of mortgages or mortgage-backed securities. (2) A credit union may not: (A) Use financial derivatives for replication, or for any purposes other than hedging; (B) Engage in adjusted trading or short sales; (C) Purchase stripped mortgage backed securities; (D) Purchase residual interests in CMOs/REMICs, or other structured mortgage backed securities; (E) Purchase mortgage servicing rights as an investment but may retain mortgage servicing rights on a loan originated by the credit union and sold on the secondary market; (F) Purchase commercial mortgage related securities of an issuer other than a U.S. Government sponsored enterprise; (G) Purchase any security that has the capability of becoming a first credit loss piece which supports another more senior security; (H) Purchase a zero coupon investment with a maturity date that is more than 10 years from the settlement date; (I) Purchase investments whereby the underlying collateral consists of foreign receivables or foreign deposits; (J) Purchase securities used as collateral by a safekeeping concern; (K) Purchase exchangeable mortgage backed securities, unless they are fully compliant with the provisions outlined in Part 703 of the National Credit Union Administration Rules and Regulations; or (L) Purchase securities convertible into stock at the option of the issuer. (d) Investment pilot program. (1) The commissioner may authorize a limited number of credit unions to engage in other types of investment activities under an investment pilot program. A credit union wishing to participate in an investment pilot program shall submit a request that addresses the following items: (3) The commissioner may find that an investment pilot program previously authorized is no longer a safe and prudent practice for credit unions generally to engage in, or has become inconsistent with applicable state or federal law, or has ceased to be a safe and prudent practice for one or more particular credit unions in light of their financial condition or management. Upon such a finding, the commissioner will send written notice informing the board of directors of any or all of the credit unions engaging in such a practice that the authority to engage in the practice has been revoked or modified. When the commissioner so notifies any credit union, its directors and officers shall forthwith take steps to liquidate the investments in question or to make such modifications as the commissioner requires. Upon demonstration of good cause, the commissioner may grant a credit union some definite period of time in which to arrange its affairs to comply with the commissioner's direction. Credit unions which continue to engage in investment practices where their authority to do so has been revoked or modified will be deemed to be engaging in an unsound practice. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504437 Harold E. Feeney Commissioner Credit Union Department Effective date: November 8, 2015 Proposal publication date: July 3, 2015 For further information, please call: (512) 837-9236 ♦ ♦ ♦ (A) Board policies approving the activities and establishing limits on them; 7 TAC §91.805 (B) A complete description of the activities, with specific examples of how the credit union will conduct them and how they will benefit the credit union; The Credit Union Commission (the Commission) adopts amendments to §91.805, concerning Loan Participation Investments, without changes to the proposed text as published in the July 3, 2015, issue of the Texas Register (40 TexReg 4294). (C) A demonstration of how the activities will affect the credit union's financial performance, risk profile, and asset-liability management strategies; (D) Examples of reports the credit union will generate to monitor the activities; (E) A projection of the associated costs of the activities, including personnel, computer, audit, etc.; (F) A description of the internal systems to measure, monitor, and report the activities, and the qualifications of the staff and/or official(s) responsible for implementing and overseeing the activities; and (G) The internal control procedures that will be implemented, including audit requirements. (2) In connection with a request to participate in an investment pilot program, the commissioner will consider the general nature and functions of credit unions, as well as the specific financial condition and management of the applicant credit union, as revealed in the request, examinations, or such other information as may be available to the commissioner. The commissioner may approve the request, approve the request conditionally, approve it in modified form, or deny it in whole or in part. A decision by the commissioner concerning participation in an investment pilot program is not appealable. The amendments clarify permitted participation interests and eliminate the specific limitation on aggregate investment amounts, instead requiring credit unions to develop and follow investment policies and agreements to ensure the soundness of each credit union's loan participation investments. The amendments are adopted as a result of the Credit Union Department's general rule review, which was conducted in accordance with Texas Government Code §2001.039. The Commission received no comments on the proposed changes. The amendments are adopted under Texas Finance Code, §15.402, which authorizes the Commission to adopt reasonable rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the Texas Finance Code, and under §124.351 which explains permitted investments for credit unions. The specific section affected by the proposed amended rule is Texas Finance Code, §124.351. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. ADOPTED RULES October 30, 2015 40 TexReg 7665 Filed with the Office of the Secretary of State on October 19, 7 TAC §§91.2000 - 91.2006 2015. The Credit Union Commission (Commission) adopts Subchapter K, §§91.2000 - 91.2006, of 7 TAC Chapter 91, concerning Credit Union Development Districts, without changes to the proposed text as published in the August 28, 2015, issue of the Texas Register (40 TexReg 5401). TRD-201504439 Harold E. Feeney Commissioner Credit Union Department Effective date: November 8, 2015 Proposal publication date: July 3, 2015 For further information, please call: (512) 837-9236 ♦ SUBCHAPTER I. DIVIDENDS ♦ ♦ RESERVES AND 7 TAC §91.901 The Credit Union Commission (the Commission) adopts amendments to §91.901, concerning Reserve Requirements, without changes to the proposed text as published in the July 3, 2015, issue of the Texas Register (40 TexReg 4295). The amendments provide for the development of a financial plan for credit unions that are unable to increase the dollar amount of their net worth reserves, as required by §91.901(b)(1). The plan would require these credit unions to develop a detailed timetable of steps to increase their net worth ratio and ultimately achieve compliance. The financial plan would be filed with the Department and would be enforceable as a written agreement with the commissioner under §122.255 of the Finance Code. The amendments are adopted as a result of the Credit Union Department's general rule review, which was conducted in accordance with Texas Government Code §2001.039. The Commission received no comments on the proposed changes. The amendments are adopted under Texas Finance Code, §15.402, which authorizes the Commission to adopt reasonable rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the Texas Finance Code, and under §124.351 which explains permitted investments for credit unions. The subchapter, entitled Credit Union Development Districts, contains seven rules which describe the procedures for establishment of credit union development districts. (A previous version of Subchapter K of 7 TAC Chapter 91, entitled Residential Mortgage Loan Originators Employed by a Credit Union Subsidiary Organization, was repealed in October 2013 as a result of provisions enacted in the 83rd Session of the Legislature.) The subchapter was proposed in response to House Bill 1626 (HB 1626) enacted by the 84th Legislature. HB 1626 added Chapter 279 to the Texas Finance Code. HB 1626 assigned the Department the duty to administer and monitor a credit union development district program where there is a demonstrated need for services provided by a state or federal credit union, and requires the Commission to adopt rules consistent with this duty not later than January 1, 2016. HB 1626 authorizes a local government to apply for the designation of a credit union development district and authorizes a state or federal credit union to apply to open a branch in a proposed development district at the time the local government submits the application. HB 1626 states that rules regarding the criteria for the designation of credit union development districts must be made in consultation with the Texas Economic Development and Tourism Office (within the Office of the Governor). §91.2000, Purpose and Scope, explains the reason for these rules and clarifies that establishing a credit union development district does not affect requirements applicable to reinvestment zones and tax abatement agreements pursuant to the Tax Increment Financing Act or the Property Redevelopment and Tax Abatement Act (Government Code, Chapters 311 and 312, respectively). §91.2001, Definitions, defines the terms, "credit union," "district," and "local government." The specific section affected by the proposed amended rule is Texas Finance Code, §124.351. §91.2002, Application Requirements to Establish a District, details the application requirements for local governments seeking to establish a credit union development district in conjunction with a credit union. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. §91.2003, Submission and Processing of Application, details how an application will be processed and considered complete and acceptable for filing. Filed with the Office of the Secretary of State on October 19, §91.2004, Criteria for Approval of a District by the Commission, requires the Commission to consider the five, statutorily required factors in HB1626 in determining whether to approve a credit union development district: (1) the location, number, and proximity of sites where services provided by a credit union are available in the proposed credit union development district, (2) consumer needs for services provided by a credit union in the proposed district, (3) the economic viability and local credit needs of the community in the proposed district, (4) the existing commercial development in the proposed district, and (5) the impact additional services provided by a credit union would have on potential economic development in the proposed district. 2015. TRD-201504440 Harold E. Feeney Commissioner Credit Union Department Effective date: November 8, 2015 Proposal publication date: July 3, 2015 For further information, please call: (512) 837-9236 ♦ ♦ ♦ SUBCHAPTER K. CREDIT UNION DEVELOPMENT DISTRICTS 40 TexReg 7666 October 30, 2015 Texas Register §91.2005, Monitoring, imposes minimal reporting requirements on the local government applicant in order to permit the Commission to monitor the program as required by HB 1626. The only required notice would inform the Department when a credit union opens or closes a branch in an approved credit union development district. Finally, §91.2006, Rulemaking and Amendment for this Subchapter, states that the Department will develop policies with the Texas Economic Development and Tourism division of the Governor's Office regarding consultation for the adoption of rules for the designation of credit union development districts. The Commission received no comments on the proposed rules. The rules are adopted under newly added Texas Finance Code §279.102, which permits the Commission to adopt rules to implement the creation of credit union development districts and the depositing of public funds in these district depositories with respect to credit union in credit union development districts. The specific section affected by the proposed rules is Texas Finance Code §279.102. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 19, 2015. ♦ The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504436 Harold E. Feeney Commissioner Credit Union Department Effective date: November 8, 2015 Proposal publication date: August 28, 2015 For further information, please call: (512) 837-9236 ♦ ♦ ♦ TITLE 10. COMMUNITY DEVELOPMENT PART 1. TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS CHAPTER 5. COMMUNITY AFFAIRS PROGRAMS SUBCHAPTER A. GENERAL PROVISIONS TRD-201504434 Harold E. Feeney Commissioner Credit Union Department Effective date: November 8, 2015 Proposal publication date: August 28, 2015 For further information, please call: (512) 837-9236 ♦ The specific sections affected by the proposed new rule is Texas Government Code, §2261.253. 10 TAC §5.12 The Texas Department of Housing and Community Affairs (the "Department") adopts the repeal of §5.12 without changes to the proposal as published in the August 14, 2015, issue of the Texas Register (40 TexReg 5119). ♦ CHAPTER 97. COMMISSION POLICIES AND ADMINISTRATIVE RULES SUBCHAPTER C. DEPARTMENT OPERATIONS 7 TAC §97.206 The Credit Union Commission (Commission) adopts new §97.206, entitled Posting of Certain Contracts: Enhanced Contract and Performance Monitoring, without changes to the proposed text as published in the August 28, 2015, issue of the Texas Register (40 TexReg 5403). The new rule implements procedures for contracts for the purchase of goods or services from private vendors. The new rule was proposed in response to Senate Bill 20 (SB 20) enacted by the 84th Legislature. SB 20 requires each state agency by rule to establish a procedure to identify contracts that require enhanced contract or performance monitoring and prescribes certain reporting requirements. The Commission received no comments on the proposed rule. The rule is adopted under Texas Government Code §2261.253, which requires the Commission to adopt and enforce rules providing for the Commissioner, Credit Union Department, to establish a procedure to identify each contract that requires enhanced contract or performance monitoring and submit information on the contract to the agency's governing body. REASONED JUSTIFICATION. The purpose of the repeal is to remove the existing text in order to consolidate text into one location at 10 TAC §5.10. SUMMARY OF PUBLIC COMMENT: Comments were accepted from August 14, 2015, through September 14, 2015. No comments were received. STATUTORY AUTHORITY. The section is repealed pursuant to Texas Government Code, §2306.053, which authorizes the Department to adopt rules, and §2306.094, which specifically authorizes the Department to adopt rules to govern the administration of its Community Affairs programs. The repeal affects no other code, article, or statute. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504425 Timothy K. Irvine Executive Director Texas Department of Housing and Community Affairs Effective date: November 8, 2015 Proposal publication date: August 14, 2015 For further information, please call: (512) 475-0471 ADOPTED RULES October 30, 2015 40 TexReg 7667 ♦ ♦ ♦ ♦ ♦ ♦ SUBCHAPTER B. COMMUNITY SERVICES BLOCK GRANT (CSBG) SUBCHAPTER E. WEATHERIZATION ASSISTANCE PROGRAM GENERAL 10 TAC §§5.201, 5.203, 5.207, 5.210, 5.213, 5.214 10 TAC §5.503, §5.529 The Texas Department of Housing and Community Affairs (the "Department") adopts amendments to 10 TAC Chapter 5, Community Affairs Programs, Subchapter B, Community Services Block Grant, §5.201, Background and Definitions; §5.203, Distribution of CSBG Funds, §5.207, Subrecipient Performance; §5.210, CSBG Needs Assessment, Community Action Plan, and Strategic Plan; §5.213, Board Structure; and §5.214, Board Administrative Requirements, without changes to the proposed text as published in the August 14, 2015, issue of the Texas Register (40 TexReg 5119). The Texas Department of Housing and Community Affairs (the "Department") adopts amendments to 10 TAC Chapter 5, §5.503, Definitions; and new §5.529, Program Requirements, without changes to the proposed text as published in the August 14, 2015, issue of the Texas Register (40 TexReg 5128). REASONED JUSTIFICATION. The purpose of the amendments to 10 TAC §5.201 is to change the name of the subsection to "Background and Definitions" and to add definitions specific to the CSBG that were removed from Subchapter A, General Provisions. The purpose of the amendment to 10 TAC §5.203 is to remove a reference to a policy that is no longer applicable to the program. The purpose of the amendment to 10 TAC §5.207 is to incorporate the CSBG Organizational Standards, as modified by the Department, into the program rule. The purpose of the amendment to 10 TAC §5.210 is to revise language to fit current program requirements, and to incorporate the new requirement that CSBG Eligible Entities complete a strategic plan into the program rules. The purpose of the amendment to 10 TAC §5.213 is to clarify information regarding tripartite boards. The purpose of the amendment to §5.214 is to establish in the rules that an advisory board established by the governing officials of a public organization to administer the CSBG may not exercise any authority that is not designated in writing by the governing officials of the public organization. SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS. Comments were accepted from August 14, 2015, through September 14, 2015. No comments were received. STATUTORY AUTHORITY. The amended sections are adopted pursuant to Texas Government Code §2306.053, which authorizes the Department to adopt rules, §2105.059, which authorizes the Department to adopt rules for block grant programs, and Chapter 2306, Subchapter E, which authorizes the Department to administer its Community Affairs programs. The amendments affect no other code, article, or statute. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504427 Timothy K. Irvine Executive Director Texas Department of Housing and Community Affairs Effective date: November 8, 2015 Proposal publication date: August 14, 2015 For further information, please call: (512) 475-0471 40 TexReg 7668 October 30, 2015 Texas Register REASONED JUSTIFICATION. The purpose of the amendment to 10 TAC §5.503 is to add Electric Baseload Measure to the list of definitions for the Weatherization Assistance Program ("WAP"). New 10 TAC §5.529 adds general program requirements for the WAP. SUMMARY OF PUBLIC COMMENT. Comments were accepted from August 14, 2015, through September 14, 2015. No comments were received. STATUTORY AUTHORITY. The amended and new section are adopted pursuant to Texas Government Code §2306.053, which authorizes the Department to adopt rules, and Chapter 2306, Subchapter E, which authorizes the Department to administer its Community Affairs programs. The adoption affects no other code, article, or statute. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 19, 2015. TRD-201504428 Timothy K. Irvine Executive Director Texas Department of Housing and Community Affairs Effective date: November 8, 2015 Proposal publication date: August 14, 2015 For further information, please call: (512) 475-0471 ♦ ♦ ♦ TITLE 16. ECONOMIC REGULATION PART 8. TEXAS RACING COMMISSION CHAPTER 311. OTHER LICENSES The Texas Racing Commission adopts amendments to 16 TAC §311.1 and §311.104. Section 311.1 relates to occupational licenses in general and §311.104 relates to the licensure of trainers. The amendments are adopted without changes to the proposed text as published in the September 11, 2015, issue of the Texas Register (40 TexReg 6007) and will not be republished. The amendment to §311.1 deletes language stating that an individual who enters an animal into a race is deemed to be a participant in racing. The amendment to §311.104 allows an unlicensed trainer to enter a horse or greyhound into a race, but also requires the trainer to obtain a license one hour prior to the post time of the first race of the day in which the trainer intends to race the horse or greyhound. No comments were received regarding adoption of the amendments. SUBCHAPTER A. LICENSING PROVISIONS DIVISION 1. OCCUPATIONAL LICENSES The Texas Racing Commission adopts an amendment to 16 TAC §313.110, relating to coupled entries, without changes to the proposed text as published in the September 11, 2015, issue of the Texas Register (40 TexReg 6008). The rule will not be republished. The amendment eliminates the $50,000 threshold for horses with common ownership interests to run as separate betting interests in stakes races. 16 TAC §311.1 No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Revised Civil Statutes Annotated, Article 179e, §3.02, which authorizes the Commission to adopt rules to administer the Act. The amendment is adopted under Texas Revised Civil Statutes Annotated, Article 179e, §3.02, which authorizes the Commission to adopt rules to administer the Act. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 13, Filed with the Office of the Secretary of State on October 13, 2015. 2015. TRD-201504313 Mark Fenner General Counsel Texas Racing Commission Effective date: November 2, 2015 Proposal publication date: September 11, 2015 For further information, please call: (512) 833-6699 ♦ ♦ TRD-201504315 Mark Fenner General Counsel Texas Racing Commission Effective date: November 2, 2015 Proposal publication date: September 11, 2015 For further information, please call: (512) 833-6699 ♦ ♦ SUBCHAPTER B. SPECIFIC LICENSES 16 TAC §311.104 The amendment is adopted under Texas Revised Civil Statutes Annotated, Article 179e, §3.02, which authorizes the Commission to adopt rules to administer the Act. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504314 Mark Fenner General Counsel Texas Racing Commission Effective date: November 2, 2015 Proposal publication date: September 11, 2015 For further information, please call: (512) 833-6699 ♦ ♦ ♦ CHAPTER 321. PARI-MUTUEL WAGERING SUBCHAPTER C. REGULATION OF LIVE WAGERING DIVISION 2. DISTRIBUTION OF PARI-MUTUEL POOLS 16 TAC §321.322 The Texas Racing Commission adopts new 16 TAC §321.322, relating to the Triple Trifecta wager, without changes to the proposed text as published in the September 11, 2015, issue of the Texas Register (40 TexReg 6008). The rule will not be republished. The new rule creates a new wager based on the correct selection of the first three race animals, in order, in three successive races. No comments were received regarding adoption of the amendment. ♦ CHAPTER 313. OFFICIALS AND RULES OF HORSE RACING SUBCHAPTER B. ENTRIES, SCRATCHES, AND ALLOWANCES DIVISION 1. ENTRIES 16 TAC §313.110 ♦ The new rule is adopted under Texas Revised Civil Statutes Annotated, Article 179e, §3.02, which authorizes the Commission to adopt rules to administer the Act, and §11.01, which authorizes the Commission to adopt rules to regulate pari-mutuel wagering on greyhound races and horse races. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 13, 2015. TRD-201504317 ADOPTED RULES October 30, 2015 40 TexReg 7669 The amendments are adopted under Texas Government Code Chapters 404, 552, 2256, and §492.013 and §2263.004. Mark Fenner General Counsel Texas Racing Commission Effective date: November 2, 2015 Proposal publication date: September 11, 2015 For further information, please call: (512) 833-6699 ♦ ♦ Cross Reference to Statutes: None. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. ♦ TITLE 37. PUBLIC SAFETY AND CORRECTIONS PART 6. TEXAS DEPARTMENT OF CRIMINAL JUSTICE CHAPTER 151. GENERAL PROVISIONS 37 TAC §151.25 The Texas Board of Criminal Justice adopts amendments to §151.25, Texas Department of Criminal Justice Tobacco Policy, without changes to the proposed text as published in the July 3, 2015, issue of the Texas Register (40 TexReg 4328). The adopted amendments are necessary to add the use of vapor products and update the formatting. No comments were received regarding the amendments. The amendments are adopted under Texas Government Code §492.013 and §494.010. Cross Reference to Statutes: None. Filed with the Office of the Secretary of State on October 16, 2015. TRD-201504381 Sharon Howell General Counsel Texas Department of Criminal Justice Effective date: November 5, 2015 Proposal publication date: July 3, 2015 For further information, please call: (936) 437-6700 ♦ ♦ ♦ CHAPTER 154. PRIVATE SECTOR PRISON INDUSTRIES PROGRAMS 37 TAC §§154.1 - 154.9, 154.11 The Texas Board of Criminal Justice adopts amendments to §§154.1 - 154.9 and 154.11 in Chapter 154, concerning Private Sector Prison Industries Programs, without changes to the proposed text as published in the July 3, 2015, issue of the Texas Register (40 TexReg 4330). The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. The adopted amendments are necessary non-substantive changes. Filed with the Office of the Secretary of State on October 16, The amendments are adopted under Texas Government Code §§492.0011, 492.013, 497.004(a), 497.006, 497.051, 497.0527, 497.056(a), 497.057, 497.058, 497.0581, 497.059, 497.0595, 497.0596, 497.060, 497.062, and 497.063. 2015. TRD-201504379 Sharon Howell General Counsel Texas Department of Criminal Justice Effective date: November 5, 2015 Proposal publication date: July 3, 2015 For further information, please call: (936) 437-6700 ♦ ♦ Cross Reference to Statutes: Texas Labor Code §302.016. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Filed with the Office of the Secretary of State on October 16, ♦ 2015. 37 TAC §151.75 The Texas Board of Criminal Justice adopts amendments to §151.75, Standards of Conduct for Financial Advisors and Service Providers, without changes to the proposed text as published in the July 3, 2015, issue of the Texas Register (40 TexReg 4329). The adopted amendments are necessary to update the formatting. No comments were received regarding the amendments. 40 TexReg 7670 October 30, 2015 No comments were received regarding the amendments. Texas Register TRD-201504386 Sharon Howell General Counsel Texas Department of Criminal Justice Effective date: November 5, 2015 Proposal publication date: July 3, 2015 For further information, please call: (936) 437-6700 ♦ ♦ ♦ Adopted Rule Reviews Accordingly, the commission finds that the reasons for initially adopting these rules continue to exist and readopts Chapter 17 in accordance with the requirements of the Government Code, §2001.039. Texas Department of Banking Title 7, Part 2 On behalf of the Finance Commission of Texas (commission), the Texas Department of Banking has completed the review of Texas Administrative Code, Title 7, Part 2, Chapter 15 (Corporate Activities), in its entirety, specifically Subchapter A (§§15.1 - 15.7 and §§15.9 15.12); Subchapter B (§15.23 and §15.24); Subchapter C (§§15.41 15.44); Subchapter E (§15.81); Subchapter F (§§15.101 - 15.111 and §§15.113 - 15.117); and Subchapter G (§15.121 and §15.122). Notice of the review of Chapter 15 was published in the August 28, 2015, issue of the Texas Register (40 TexReg 5475). No comments were received in response to the notice. The commission believes the reasons for initially adopting Chapter 15 continue to exist. However, the commission has determined that certain revisions and amendments may be appropriate and necessary. Proposed amendments and revisions to Chapter 15, with discussion of the justification for the proposed changes, will be published in the Texas Register at a later date. Accordingly, the commission finds that the reasons for initially adopting these rules continue to exist and readopts Chapter 15 in accordance with the requirements of the Government Code, §2001.039. TRD-201504366 Catherine Reyer General Counsel Texas Department of Banking Filed: October 16, 2015 ♦ TRD-201504367 Catherine Reyer General Counsel Texas Department of Banking Filed: October 16, 2015 ♦ ♦ ♦ On behalf of the Finance Commission of Texas (commission), the Texas Department of Banking has completed the review of Texas Administrative Code, Title 7, Part 2, Chapter 19 (Trust Company Loans and Investments), in its entirety, specifically Subchapter A (§19.1); Subchapter B (§19.21 and §19.22); and Subchapter C (§19.51). Notice of the review of Chapter 19 was published in the August 28, 2015, issue of the Texas Register (40 TexReg 5475). No comments were received in response to the notice. The commission finds that the reasons for initially adopting the rules in Subchapters B and C of Chapter 19 continue to exist. However, the commission has determined that certain revisions and amendments may be appropriate and necessary. Proposed amendments and revisions to Chapter 19, with discussion of the justification for the proposed changes, will be published in the Texas Register at a later date. With the exception of Subchapter A, §19.1, the commission finds that the reasons for initially adopting these rules continue to exist and readopts Chapter 19 in accordance with the requirements of the Government Code, §2001.039. ♦ ♦ On behalf of the Finance Commission of Texas (commission), the Texas Department of Banking has completed the review of Texas Administrative Code, Title 7, Part 2, Chapter 17 (Trust Company Regulation), in its entirety, specifically Subchapter A (§§17.2 - 17.4); and Subchapter B (§§17.21 - 17.23). Notice of the review of Chapter 17 was published in the August 28, 2015, issue of the Texas Register (40 TexReg 5475). No comments were received in response to the notice. The commission believes the reasons for initially adopting Chapter 17 continue to exist. However, the commission has determined that certain revisions and amendments may be appropriate and necessary. Proposed amendments and revisions to Chapter 17, with discussion of the justification for the proposed changes, will be published in the Texas Register at a later date. TRD-201504368 Catherine Reyer General Counsel Texas Department of Banking Filed: October 16, 2015 ♦ ♦ ♦ On behalf of the Finance Commission of Texas (commission), the Texas Department of Banking has completed the review of Texas Administrative Code, Title 7, Part 2, Chapter 21 (Trust Company Corporate Activities), in its entirety, specifically Subchapter A (§§21.1 - 21.7 and §§21.9 - 21.12); Subchapter B (§21.23 and §21.24); Subchapter C (§21.31 and §21.32); Subchapter D (§21.41 and §21.42); Subchapter E (§21.51); Subchapter F (§§21.61 - 21.64, §§21.67 21.70 and §§21.72 - 21.76); and Subchapter G (§21.91 and §21.92). RULE REVIEW October 30, 2015 40 TexReg 7671 Notice of the review of Chapter 21 was published in the August 28, 2015, issue of the Texas Register (40 TexReg 5476). No comments were received in response to the notice. The commission received no comments in response to that notice. The commission believes that the reasons for initially adopting the rules contained in this chapter continue to exist. The commission believes the reasons for initially adopting Chapter 21 continue to exist. However, the commission has determined that certain revisions and amendments may be appropriate and necessary. Proposed amendments and revisions to Chapter 21, with discussion of the justification for the proposed changes, will be published in the Texas Register at a later date. As a result of internal review by the agency, the commission has determined that certain revisions are appropriate and necessary. Those rule changes were published in the September 4, 2015, issue of the Texas Register (40 TexReg 5618). The commission is concurrently adopting the rule changes, including amendments and new rule, in Chapter 90, as published elsewhere in this issue of the Texas Register. Accordingly, the commission finds that the reasons for initially adopting these rules continue to exist and readopts Chapter 21 in accordance with the requirements of the Government Code, §2001.039. Subject to the adopted rule changes in Chapter 90, the commission finds that the reasons for initially adopting these rules continue to exist, and readopts this chapter in accordance with the requirements of Texas Government Code, §2001.039. TRD-201504369 Catherine Reyer General Counsel Texas Department of Banking Filed: October 16, 2015 ♦ This concludes the review of 7 TAC Part 5, Chapter 90. ♦ TRD-201504395 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Filed: October 16, 2015 ♦ Office of Consumer Credit Commissioner ♦ Title 7, Part 5 The Finance Commission of Texas (commission) has completed the review of Texas Administrative Code, Title 7, Part 5, Chapter 83, Subchapter B, concerning Rules for Credit Access Businesses, comprised of §§83.1001 - 83.1002, 83.2001 - 83.2003, 83.3001 - 83.3012, 83.4001 - 83.4007, 83.5001 - 83.5002, and 83.6001 - 83.6008, pursuant to Texas Government Code, §2001.039. Notice of the review of 7 TAC, Part 5, Chapter 83, Subchapter B was published in the Texas Register as required on September 11, 2015, (40 TexReg 6165). The commission received no comments in response to that notice. Aside from the proposed repeal of §83.4004 and §83.3012, the commission believes that the reasons for initially adopting the rules contained in this subchapter continue to exist. As a result of internal review by the agency, the commission has determined that certain revisions are appropriate and necessary. The commission is concurrently proposing amendments, new rules, and repeals in Chapter 83, Subchapter B, as published elsewhere in this issue of the Texas Register. Subject to the proposed changes to Chapter 83, Subchapter B, the commission finds that the reasons for initially adopting these rules continue to exist, and readopts this subchapter in accordance with the requirements of Texas Government Code, §2001.039. This concludes the review of 7 TAC Part 5, Chapter 83, Subchapter B. TRD-201504394 Leslie L. Pettijohn Commissioner Office of Consumer Credit Commissioner Filed: October 16, 2015 ♦ ♦ ♦ Credit Union Department Title 7, Part 6 The Credit Union Commission (Commission) has completed its review of Texas Administrative Code Title 7, §91.6001 (Fiduciary Duties), §91.6002 (Fiduciary Capacities), §91.6003 (Notice Requirements), §91.6004 (Exercise of Fiduciary Powers), §91.6005 (Exemption from Notice), §91.6006 (Policies and Procedures), §91.6007 (Review of Fiduciary Accounts), §91.6008 (Recordkeeping), §91.6009 (Audit), §91.6010 (Custody of Fiduciary Assets), §91.6011 (Trust Funds), §91.6012 (Compensation, Gifts, and Bequests), §91.6013 (Bond Coverage), §91.6014 (Errors and Omissions Insurance), and §91.6015 (Litigation File), as published in the August 21, 2015, issue of the Texas Register (40 TexReg 5353). The Commission proposes to readopt these rules. The rules were reviewed as a result of the Credit Union Department's (Department) general rule review. The Commission received no comments with respect to these rules. The Department believes that the reasons for initially adopting these rules continue to exist. The Commission finds that the reasons for initially adopting §§91.6001, 91.6002, 91.6003, 91.6004, 91.6005, 91.6006, 91.6007, 91.6008, 91.6009, 91.6010, 91.6011, 91.6012, 91.6013, 91.6014, and 91.6015 continue to exist, and readopts these rules without changes pursuant to the requirements of Government Code, §2001.039. TRD-201504431 Harold E. Feeney Commissioner Credit Union Department Filed: October 19, 2015 ♦ The Finance Commission of Texas (commission) has completed the review of Texas Administrative Code, Title 7, Part 5, Chapter 90, concerning Chapter 342, Plain Language Contract Provisions, comprised of §§90.101 - 90.105, 90.201 - 90.204, 90.301 - 90.304, 90.401 - 90.404, 90.501 - 90.504, 90.601 - 90.604, and 90.701 - 90.706, pursuant to Texas Government Code, §2001.039. Notice of the review of 7 TAC, Part 5, Chapter 90 was published in the Texas Register as required on July 17, 2015, (40 TexReg 4707). 40 TexReg 7672 October 30, 2015 ♦ Texas Register ♦ ♦ ♦ Texas Department of Criminal Justice Title 37, Part 6 The Texas Board of Criminal Justice adopts the review of §154.10 concerning Cost Accounting Centers Policies and Procedures, in accordance with Texas Government Code §2001.039, which requires rule review every four years. The proposed rule review was published in the June 26, 2015, issue of the Texas Register (40 TexReg 4225). No comments were received regarding the rule review. ♦ Commission on State Emergency Communications Notice Concluding Annual Review of §255.4 TRD-201504391 Sharon Howell General Counsel Texas Department of Criminal Justice Filed: October 16, 2015 ♦ ♦ Title 1, Part 12 The agency's reason for adopting the rule continues to exist. ♦ ♦ The Commission on State Emergency Communications (CSEC) published notice of its annual review of the definition in §255.4 of "local exchange access line" and "equivalent local exchange access line," in the August 14, 2015, issue of the Texas Register (40 TexReg 5161). CSEC's annual review is required by Health and Safety Code §771.063(c). ♦ The Texas Board of Criminal Justice adopts the review of §154.12 concerning Complaint Investigations, in accordance with Texas Government Code §2001.039, which requires rule review every four years. No comments were received regarding CSEC's notice of annual review. The proposed rule review was published in the June 26, 2015, issue of the Texas Register (40 TexReg 4225). This concludes CSEC's annual review of §255.4. No comments were received regarding the rule review. The agency's reason for adopting the rule continues to exist. TRD-201504392 Sharon Howell General Counsel Texas Department of Criminal Justice Filed: October 16, 2015 CSEC has determined not to propose amendments to the definitions in §255.4, and to leave in effect the rule as adopted in October 2007. TRD-201504357 Patrick Tyler General Counsel Commission on State Emergency Communications Filed: October 15, 2015 ♦ ♦ ♦ RULE REVIEW October 30, 2015 40 TexReg 7673 TABLES AND GRAPHICS October 30, 2015 40 TexReg 7675 40 TexReg 7676 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7677 40 TexReg 7678 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7679 40 TexReg 7680 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7681 40 TexReg 7682 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7683 40 TexReg 7684 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7685 40 TexReg 7686 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7687 40 TexReg 7688 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7689 40 TexReg 7690 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7691 40 TexReg 7692 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7693 40 TexReg 7694 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7695 40 TexReg 7696 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7697 40 TexReg 7698 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7699 40 TexReg 7700 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7701 40 TexReg 7702 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7703 40 TexReg 7704 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7705 40 TexReg 7706 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7707 40 TexReg 7708 October 30, 2015 Texas Register TABLES AND GRAPHICS October 30, 2015 40 TexReg 7709 Capital Area Council of Governments Texas Control Center Services Request for Proposals The Capital Area Council of Governments is requesting proposals from qualified contractor(s) to provide text control center services for 34 Public Safety Answering Points that provide 911 services to residents in CAPCOG's 10-county region - Bastrop, Blanco, Burnet, Caldwell, Fayette, Hays, Lee, Llano, Travis and Williamson counties. Proposals must be received by 4:00 p.m., Monday, December 7, 2015. They can be emailed to Gregg Obuch at gobuch@capcog.org or mailed to the CAPCOG offices, 6800 Burleson Road, Bldg. 310, Suite 165, Austin, Texas. Please put "Text Control Center RFP" in the subject of the email or on the mailed proposal. Go to capcog.org/about-capcog/doing-business-with-capcog/ for an RFP packet and more information. TRD-201504492 Gregg Obuch Director of Emergency Communications Capital Area Council of Governments Filed: October 21, 2015 ♦ ♦ ♦ Comptroller of Public Accounts Notice of Loan Fund Availability and Request for Applications Pursuant to: (1) the LoanSTAR (Saving Taxes and Resources) Revolving Loan Program of the Texas State Energy Plan ("SEP") in accordance with the Energy Policy and Conservation Act (42 U.S.C. 6321, et seq.), as amended by the Energy Conservation and Production Act (42 U.S.C. 6326, et seq.); (2) the Oil Overcharge Restitutionary Act, Chapter 2305 of the Texas Government Code; and (3) Title 34, Texas Administrative Code, Chapter 19, Subchapter D Loan Program for Energy Retrofits; the Texas Comptroller of Public Accounts ("Comptroller") and the State Energy Conservation Office ("SECO") announces its Notice of Loan Fund Availability and Request for Applications RFA #BE-G15-2015 ("NOLFA/RFA") and invites applications from eligible interested governmental entities for loan assistance to perform building energy efficiency and retrofit activities. Texas Comptroller of Public Accounts, at: 111 E. 17th St., Room 201, Austin, Texas 78774, via phone at (512) 305-8673, or by email at contracts@cpa.texas.gov. The NOLFA/RFA Application Packet and a sample loan agreement will be available electronically on the Electronic State Business Daily ("ESBD") at http://esbd.cpa.state.tx.us and on the SECO website at http://www.seco.cpa.state.tx.us/funding/ on Friday, October 30, 2015, after 10:00 a.m. Central Time ("CT"). QUESTIONS: All written questions must be received in the Issuing Office not later than 2:00 p.m. CT on November 24, 2015. Prospective applicants are encouraged to send Questions via email to contracts@cpa.texas.gov or fax to (512) 463-3669 to ensure timely receipt. On or about Friday, December 4, 2015, or as soon thereafter as practical, Comptroller expects to post resp
