Adopted Repeal of 7 TAC §33.21; and Amendments to 7 TAC §33.27

Title 7. Banking and Securities
Part 2. Texas Department of Banking
Chapter 33. Money Services Businesses
7 TAC §33.21, §33.27

NOTE: This document was submitted to the Texas Register on the date indicated below. This is not the actual publication; the editorial staff of the Texas Register sometimes edits the submission. The Texas Department of Banking therefore does not guarantee the exact accuracy of this document.

Date: December 13, 2013

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), adopts the repeal of §33.21, concerning how to renew a license; and amendments to §33.27, concerning what fees must be paid to get and maintain a license, without changes to the proposed text as published in the November 1, 2013, issue of the Texas Register (38 TexReg 7552).

Section 33.21 is repealed to conform to changes in Texas Finance Code, §151.207, eliminating renewal requirements for money transmission and currency exchange licenses. Amendments to §33.27 are adopted to increase certain application fees applicable to money services businesses in addition to making conforming changes.

The 83rd Texas legislature enacted H.B. 2134, effective September 1, 2013, which made several amendments to Texas Finance Code, Chapter 151, known as the Money Services Act, relating to the regulation of money services businesses. One of these amendments changed Finance Code §151.207, to eliminate license renewal requirements. Under the prior law, money transmission and currency exchange licenses automatically expired on July 1 of each year unless renewed by the license holder. Under the revised law, licenses do not expire. As before, license holders must still annually file a report and pay a license fee to maintain a license, but there is no longer a mandated deadline specified in the statute. Annual reporting deadlines will be established by the Banking Commissioner. Because licenses will no longer be renewed and the deadline required by statute no longer exists, §33.21 has become unnecessary and is repealed.

The adopted amendments to §33.27 revise references to license renewal to conform to H.B. 2134 and, in addition, increase certain application fees pertaining to money services businesses.

Pursuant to Finance Code, §16.003, the department is charged with responsibility for all direct and indirect costs of its existence and operation, and may not directly or indirectly cause the general revenue fund to incur any of such costs. Under Finance Code, §151.102(a)(5), the commission may adopt rules as necessary or appropriate to  recover the cost of administering and enforcing the Money Services Act and other applicable law by imposing and collecting proportionate and equitable fees for notices, applications, examinations, investigations, and other actions required to achieve the purposes of the Money Services Act.

Most regulatory programs administered by the department are supported by similar language, requiring each regulated industry to pay its proportionate share of the cost of regulation. The purpose of a fee charged by the department, whether the fee is for an application, an examination, or another purpose, is to enable the department to be self-supporting and each regulatory program to be self-sustaining. The department therefore must periodically evaluate its operations to determine whether the department’s fee structure equitably allocates the cost of regulation as required by statute.

A key regulatory function for which the cost of operations is no longer adequately funded by existing fees is applications processing for banks, trust companies, and money services businesses. Application fees for money services businesses are addressed in this adoption. Adopted amendments to §15.2, concerning application fees for state banks, and §21.2, concerning application fees for trust companies, appear elsewhere in this issue of the Texas Register.

Section 33.27 specifies filing and investigation fees applicable to corporate applications filed with the department by money services businesses and others pursuant to the Money Services Act. The adopted fee increases are necessary because revenue from applications and other corporate filings has not kept pace with the department’s operational costs, which have increased over the years due to inflation, the need to attract, hire and retain qualified personnel, and the additional time and attention required by the increasing complexity of filed applications. Revenue generated by these fees covered only about one-half of the cost of the application processing function.

Adopted amendments to §33.27 increase the amount of most money service business application fees, and these adjustments are long overdue. Most of these fees have not been adjusted since 2006, see the August 25, 2006, issue of the Texas Register (31 TexReg 6643). Based upon the department's experience since that time in processing and acting upon applications, renewals and other approvals required in connection with the regulation of money services businesses, several fees are increased to better match actual cost of regulation with the service provided. The application fee for a money transmission license increased from $2,500 to $10,000, the fee for a temporary money transmission license increased from $1,500 to $2,500, and the application fee for a currency exchange license increased from $2,500 to $5,000. In addition, the application fee for a change of control increased from $600 to $1,000, and the fee for a request for prior determination of control increased from $300 to $500.

The Department received no comments regarding the proposed repeal and amended section.

The repeal of §33.21 is adopted pursuant to Finance Code, §151.102(a), which authorizes the commission to adopt rules to administer and enforce Finance Code, Chapter 151.

§33.21. How Do I Renew My License?

The amendment of §33.27 is adopted pursuant to Finance Code, §151.102(a), specifically §151.102(a)(5), which authorizes the commission to adopt rules necessary or appropriate to recover the cost of maintaining and operating the department and the cost of administering and enforcing Finance Code, Chapter 151, and other applicable law by imposing and collecting proportionate and equitable fees and costs for notices, applications, examinations, investigations, and other actions required to achieve the purposes of Chapter 151. Certain of the fees adopted for amendment in §33.27 are also authorized by Finance Code, §§151.207(b)(1), 151.304(b)(1), 151.306(a)(5), 151.504(b)(1), 151.605(c)(3), and 151.605(i).

§33.27. What Fees Must I Pay to Get and Maintain a License?

(a) Does this section apply to me?  This section applies if you hold a money transmission or currency exchange license issued under Finance Code, Chapter 151, or are an applicant for a new money transmission or currency exchange license, as applicable. This section also applies if you are a person other than a license holder or applicant and are investigated under the authority of Finance Code, §151.104.

(b) Definitions.

(1) “Annual Assessment”--the fee assessed annually to pay the costs incurred by the department to examine a license holder and administer Finance Code, Chapter 151.

(2) “Examination”--the process, either by on-site or off-site review, of evaluating the books and records of a license holder under the authority of Finance Code, §151.601, relating to its money services activities. For purposes of this section, the term does not include an investigation conducted under the authority of Finance Code, §§151.104, 151.305, or 151.505.

(c) What provisions of Finance Code, Chapter 151, authorize the fees, assessments, and reimbursements required under this section?  The fees, assessments, and reimbursements established by or required under this section are authorized by one or more of the following provisions of Finance Code, Chapter 151: §§151.102(a)(5), 151.104(e), 151.207(b)(1), 151.304(b)(1), 151.306(a)(5), 151.504(b)(1), 151.605(c)(3), and 151.605(i).

(d) What fees must I pay to obtain a new license?

(1) You must pay a non-refundable $10,000 application fee to obtain a new money transmission license or a non-refundable $5,000 application fee to obtain a currency exchange license. You may also be required to pay the following additional fees:

(A) If the commissioner determines that it is necessary to conduct an on-site investigation of your business, you must pay a non-refundable investigation fee at a rate of $75 per hour for each department examiner required to conduct the investigation and all associated travel expenses;

(B) If the commissioner determines that it is necessary to employ a third-party screening service to assist with the investigation of your license application, you must pay the department for the reasonable costs for the third-party investigation; and

(C) If the commissioner determines it is necessary to perform background checks using fingerprint identification records, you must either submit payment for the costs of this service at the time you file your application or pay the department upon request.

(2) To apply for a temporary money transmission license authorized under Finance Code, §151.306, you must pay a non-refundable $2,500 temporary license application fee in addition to the fees required under paragraph (1) of this subsection.

(3) The commissioner may reduce the fees required under paragraphs (1) or (2) of this subsection, if the commissioner determines that a lesser amount than would otherwise be collected is necessary to administer and enforce Finance Code, Chapter 151, and this chapter.

(e) What fees must I pay to maintain my license?

(1) If you hold a currency exchange license, you must pay an annual license fee of $500.

(2) If you hold a money transmission license, you must pay an annual license fee of $1,500.

(f) What fees must I pay in connection with a proposed change of control of my money transmission or currency exchange business?

(1) You must pay a non-refundable $1,000 fee at the time you file an application requesting approval of your proposed change of control.

(2) You must pay a non-refundable $500 fee to obtain the department's prior determination of whether a person would be considered a person in control and whether a change of control application must be filed. If the department determines that a change of control application is required, the prior determination fee will be applied to the fee required under paragraph (1) of this subsection.

(3) If the department’s review of your change of control application or prior determination request requires more than eight employee hours, you must pay an additional review fee of $75.00 per employee hour for every hour in excess of eight hours.

(4) The commissioner may reduce the filing fees described in paragraph (1) or (2) of this subsection, if the commissioner determines that a lesser amount than would otherwise be collected is necessary to administer and enforce Finance Code, Chapter 151, and this chapter.

(g) What fees must I pay in connection with a department investigation?

(1) If the commissioner considers it necessary or appropriate to investigate you or another person in order to administer and enforce Finance Code, Chapter 151, as authorized under §151.104, you or the investigated person must pay the department an investigation fee calculated at a rate of $75.00 per employee hour for the investigation and all associated travel expenses.

(2) If the commissioner determines that it is necessary to employ a third-party screening service to assist with an investigation, you must pay the department for the costs incurred for the third-party investigation.

(3) If the commissioner determines it is necessary to perform background checks using fingerprint identification records in an investigation, you must pay the department the costs incurred for this service.

(h) What fees must I pay for an examination?

(1) You must pay an annually assessed examination fee (annual assessment). The amount of the fee is based on the total annual dollar amount of your Texas money transmission and or currency exchange transactions, as applicable, as reflected on the most recent annual report you have filed with the department. You must pay the annual assessment specified in the following table:

Figure: 7 TAC §33.27(h)(1) (No change.)

(2) If more than one examination is required in the same fiscal year because of your failure to comply with Finance Code, Chapter 151, this chapter, or a department directive, you must pay for the additional examination at a rate of $75 per hour for each examiner required to conduct the additional examination and all associated travel expenses. A fiscal year is the 12-month period from September 1st of one year to August 31st of the following year.

(3) If you are a new license holder and have not yet filed your first annual report required under Finance Code, §151.207(b)(2), you must pay an examination fee of $75 per hour for each examiner and all associated travel expenses. Your subsequent annual assessments will be calculated in accordance with paragraph (1) of this subsection.

(4) If the department travels out-of-state to conduct your examination, you must pay for all associated travel expenses.

(5) If the commissioner determines it is necessary to conduct an on-site examination of your authorized delegate to ensure your compliance with Finance Code, Chapter 151, you must pay an examination fee of $75 per hour for each examiner and any associated travel expenses.

(i) How and when do I need to pay for the fees required by this section?

(1) You must pay the license application fees required under subsections (d)(1) and (d)(2) of this section at the time you file your application for a license.

(2) The department will bill you by written invoice for any investigation and third-party screening service fees under subsections (d)(1)(A), (B), or (C) of this section. You must pay the fees within 10 days of receipt of the department’s written invoice.

(3) You must pay the annual license fee required under subsection (e) of this section at the time you file your completed annual report. Additionally:

(A) You must pay the fee by ACH debit, or by another method if directed to do so by the department. At least 15 days prior to the scheduled ACH transfer, the department will send you a notice specifying the amount of the fee and the date the department will initiate payment of the fee by ACH debit; and

(B) if the department does not receive both your completed annual report and license fee by the specified deadline, you must pay a late fee of $100 per day for each business day after the deadline that the department does not receive your completed annual report and license fee. You must pay this fee immediately upon receipt of the department’s written invoice.

(4) You must pay the filing fees required by subsection (f) of this section at the time you file your proposed change of control or prior determination request. You must pay any required additional fees within 10 days of receipt of the department’s written invoice.

(5) You or another person must pay the investigation fee required under subsection (g) of this section within 10 days of receipt of the department’s written invoice.

(6) Your annual assessment required under subsection (h)(1) of this section may be billed in quarterly or fewer installments in such periodically adjusted amounts as reasonably necessary to pay for the costs of examination and to administer Finance Code, Chapter 151. You must pay the annual assessment fee by ACH debit, or by another method if directed to do so by the department. At least 15 days prior to the scheduled ACH transfer, the department will send you a notice specifying the amount of the payment due and the date the department will initiate payment by ACH debit. The commissioner may decrease your annual assessment if it is determined that a lesser amount than would otherwise be collected is necessary to administer the Act.

(7) The department will bill you for any additional examination fees required under subsections (h)(2), (3), (4), or (5) of this section by written invoice. You must pay this additional examination fee within 10 days of receipt of the department’s written invoice.

(8) A fee is considered paid as of the date the department receives payment.

(j) What if I cannot afford the annual assessment?

(1) This subsection applies only if you hold a currency exchange license. If you are experiencing financial difficulties, you may be able to obtain a temporary reduction in the amount of your annual assessment for one year by meeting the requirements of this subsection.

(2) To request a reduction in your annual assessment, you must file a written application as described in paragraph (2)(A) of this subsection and the commissioner must find that your application satisfies the requirements described in paragraph (2)(B) of this subsection. If the commissioner decides to reduce your annual assessment, the commissioner has discretion to determine the amount of the reduction.

(A) To request a reduction in your annual assessment, you must:

(i) file a written application with the department not later than 10 days before the date the current annual assessment is due, accompanied by a written business recovery plan and other supporting documentation sufficient to demonstrate that you satisfy each factor described in paragraph (2)(B) of this subsection; and

(ii) file any additional documentation the department requests not later than the seventh day after the date you receive the written request.

(B) The commissioner will not reduce your annual assessment unless the commissioner finds, based on your application and supporting documentation, that:

(i) Your payment of the full assessment will cause you to become financially insolvent, and your current or impending financial condition is temporary and you reasonably expect to have the ability to pay your annual assessment in full by at least the third year after the year in which your request is made, based on a written business recovery plan that is reasonable and attainable; or

(ii) your business is temporarily closed during the annual assessment period and you have conducted no currency exchange activities during that period.

Effective date: January 2, 2014, 38 TexReg 9486.