Amendments to 7 TAC §§31.11, 31.14 and 31.32

Title 7. Banking and Securities
Part 2. Texas Department of Banking
Chapter 31. Private Child Support Enforcement Agencies
Subchapter B. How Do I Register My Agency to Engage in the Business of Child Support Enforcement?
7 TAC §31.11, §31.14
Subchapter C. What Are My Agency’s Responsibilities After Registration?
7 TAC §31.32

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes to amend §31.11, concerning requirements to engage in the business of child support enforcement in Texas; §31.14, concerning the requirements for submission of the proposed contract for services with an agency’s clients; and §31.32, concerning annual fee requirements. The rule amendments are proposed to update the name of one of the documents that may be submitted with an application; to eliminate one of the electronic formats used to submit forms included in applications and a conforming change to eliminate certain font types used for those forms; and to make uniform the date by which licensees must pay annual fees.

The proposed amendment to §31.11(b)(6) changes the name of the Texas Secretary of State form that may be submitted in support of an application from a certificate of good standing to a franchise tax account status. This change is proposed to reflect the current terminology for the form issued by the Secretary of State’s office.

The proposed change to §31.11(b)(8) eliminates WordPerfect as one of the possible formats in which to submit a proposed contract. This change is proposed to make the format consistent with the more widely used and readable Word format. The proposed changes to §31.14(d)(1), (2)(O) and (P) are conforming changes that eliminate font types that are not available in the Word format and correct a misspelling of the Arial font type.

The proposed amendment to §31.32 changes the time for payment of the annual fee from the anniversary of the date of registration to a fixed date of January 31 each year. The change is required to simplify recordkeeping and processing of renewals by the department.

Mr. Daniel Frasier, Director of Corporate Activities, Texas Department of Banking, has determined that for the first five-year period the proposed rules are in effect, there will be minimal fiscal implications for state government or for local government as a result of enforcing or administering the rule.

Mr. Frasier also has determined that, for each year of the first five years the rules as proposed are in effect, the public benefit anticipated as a result of enforcing the rules is that the efficiency of the department in processing applications will be improved.

For each year of the first five years that the rules will be in effect, there will be minimal economic costs to persons required to comply with the rules as proposed.

There will be minimal adverse economic effect on small businesses or micro-businesses. There will be no difference in the cost of compliance for small businesses as compared to large businesses.

To be considered, comments on the proposed amended sections must be submitted no later than 5:00 p.m. on December 1, 2014. 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 B. How do I Register My Agency to Engage in the Business of Child Support Enforcement?
7 TAC §31.11, §31.14

The amendments are proposed under Finance Code, §396.051, which authorizes the Finance Commission to adopt necessary rules to administer the chapter concerning private child support enforcement agencies.

Finance Code, §396.101 and §396.103, are affected by the proposed amended sections.

§31.11. What must I do to legally engage in the business of child support enforcement in Texas?

(a) First, you must submit an application to the department for a certificate of registration that includes the following information:

(1) with respect to your agency and its principal owner, the name, title, physical street address, mailing address, business telephone number, fax number, web site address, and e-mail address of:

(A) the principal owner;

(B) each person with a controlling interest;

(C) each officer and director;

(D) the principal business office; and

(E) each additional registered office;

(2) the name, address, states in which operated, and current license status of any agency ever operated in any state by:

(A) your agency;

(B) your agency’s principal owner;

(C) an officer or director of your agency or your agency’s principal owner; or

(D) a person owning a controlling interest in your agency or principal owner;

(3) a notarized statement by your agency’s principal owner or chief executive officer stating that the application and accompanying information is accurate and truthful in all respects and that the agency is able to meet its financial obligations as they become due; and

(4) such other information as the banking commissioner may require you to submit.

(b) Second, you must submit the following documents with your application:

(1) a copy of your agency’s assumed name certificate if it is doing business or intends to do business in this state under a different name; financial disclosures that comply with this chapter;

(2) a list containing information on each pending lawsuit, civil or criminal (other than lawsuits filed on behalf of clients), involving your agency, including:

(A) the parties;

(B) a synopsis of the facts alleged by each party;

(C) the nature of the action;

(D) the court in which it is pending; and

(E) the amount in controversy;

(3) a list, containing the information required in paragraph (2) of this subsection, on each pending lawsuit involving an owner of a controlling interest in your agency that:

(A) is related to child support enforcement (other than lawsuits filed on behalf of clients); or

(B) may affect your agency.

(4) a list for the previous ten years of each judgment awarded against your agency or any owner of a controlling interest in the agency and a statement as to whether an appeal is pending;

(5) a surety bond in the amount of $50,000 that meets the requirements of §31.12;

(6) a certificate of account status from the Texas Comptroller of Public Accounts or a franchise tax account status [certificate of good standing] from the Texas Secretary of State, if you are a Texas business corporation or a foreign business corporation;

(7) a copy of the findings from any supervisory enforcement actions taken against your agency by a governmental entity for the previous 5 years;

(8) a paper and electronic (Word [or WordPerfect]) copy of the form contract your agency will use for an obligee to engage its services to enforce a child support obligation and the scores you calculated under §31.14(d) and the readability statistics you generated; and

(9) such other information as the banking commissioner may require you to submit.

(c) Third, you must submit a certified financial statement with your application containing the following:

(1) information that demonstrates the financial solvency of your agency;

(2) for your agency’s most recent fiscal year:

(A) a balance sheet; and

(B) an income statement.

(3) if the end of your agency’s most recent fiscal year was more than 120 days prior to submission of your application, an interim version of each document required under paragraph (2) of this subsection covering the period from the end of the most recent fiscal year to a date less than 120 days prior to submission;

(4) a written certification by your agency’s chief financial officer or accountant that it is a true and correct statement of the agency’s financial position; and

(5) any information the banking commissioner requests you to submit to demonstrate your agency’s financial solvency, including an audited financial statement.

(d) Fourth, you must submit the following fees with your application:

(1) a nonrefundable filing fee of $500 for each location you want to register; and

(2) a $500 fee to cover the annual cost of regulation.

§31.14. What are the requirements for the contract for services with my agency’s clients?

(a) Is my agency required to use a contract that is in compliance with the requirements of this section with all of its clients? No, your agency is only required to use a contract that complies with this section when contracting with clients who are Texas residents at the time the contract is executed for the enforcement of child support owed to the client.

(b) What elements must be in my agency’s contract with clients for engaging my agency’s child support enforcement services? The contract your agency, or a foreign agency authorized to engage in business under Subchapter F of this chapter, must:

(1) be dated;

(2) be signed by both parties;

(3) be written in clear language;

(4) include a provision stating the maximum length of time between the agency's receipt of any child support owed and the transmittal of child support to the client; and

(5) be approved by the department.

(c) Does the department provide sample clear language provisions? On the department's website, dob.texas.gov, the department provides a sample clear language contract that your agency, or a foreign agency authorized to engage in business under Subchapter F of this chapter, may use in preparing its contract for services with its clients.

(d) How will I know if my agency’s contract with clients is in "clear language"?

(1) The department will apply automated readability tests commonly available in Microsoft Word [or Corel WordPerfect] software to your proposed contract. Whenever you submit a proposed contract for the department to consider, you must disclose the readability scores you generated for it. Because mechanical readability formulas do not evaluate the substantive content of the contract, the department will exercise judgment when considering the readability statistics generated by these tests. However, absent explanatory circumstances or additional justification persuasive to the banking commissioner, your contract will ordinarily not be approved if:

(A) over 21% of its sentences are passive in structure;

(B) the average sentence length exceeds 19 words;

(C) the Flesch Reading ease score is less than 47.0; and

(D) the Flesch-Kincaid grade level score is higher than 11.0.

(2) The department considers "clear language" to be synonymous with the more commonly known concept of "plain language." In evaluating your proposed contract, the department will consider the extent to which you have incorporated clear language principles into its organization, language, and design. At a minimum, your proposed contract should substantially comply with each of the clear language writing principles identified in this paragraph.

(A) You must organize the material in clear, concise sections, paragraphs and sentences, in an order that emphasizes the main ideas first, then progress down to the details and eliminates repetitious information.

(B) You should divide and caption the contract in a meaningful sequence such that each section contains an underlined, bold-faced, or otherwise conspicuous title or caption at the beginning of the section that indicates the nature or subject matter included or covered by the section of the contract.

(C) You should use informative tables, especially "if, then" tables, with respect to your fees and the length of the term of the contract.

(D) You should make complex information more understandable by using an example scenario or by writing sections in a question and answer format.

(E) You may use tabular presentations or bullet lists to simplify disclosure of complex material. You may also use pictures, logos, charts, graphs, or other design elements so long as the design is not misleading and the required information is clear.

(F) You should write in a clear and coherent manner.

(G) You should use first-person plural (we, us, our/ours) and second-person singular (you, your/yours) pronouns to write directly to the reader.

(H) You should write to one reader.

(I) Whenever possible, you should use the active voice with strong verbs in short explanatory sentences and bullet lists. Passive voice, while not banned, should be used sparingly.

(J) You should use everyday words whenever possible and avoid the use of legal and highly technical business terminology. In those instances where no clear language alternative is apparent, you should explain what the term means when the term is first used. Use of a definition may improve readability in such instances.

(K) You should attempt to use an average sentence length of less than 15 words.

(L) You should use paper that does not measure more than 8-1/2 inches by 11 inches if at all possible.

(M) You must align the text flush on the left, with a loose, or ragged, right edge. Although discouraged, you may seek approval of a document with full justification (text aligned flush on both left and right sides), but your proposed document must at a minimum use a larger type size than specified in subparagraph (N) of this paragraph. You should also add other readability enhancements, such as a more readable typeface or greater use of white space, including wider margins and additional leading between lines.

(N) You must use typeface size that is at least as large as 10-point type in the Times typeface. Line spacing must be at least 120% of the point size. For example, a 10-point typeface should be set with 12-point leading (two additional leading between the lines). At the request of your agency, the banking commissioner has the discretion to approve smaller typeface size or denser line spacing in limited circumstances, such as keeping related information grouped together. However, you must offset smaller typeface size or denser line spacing by use of other readability enhancements such as more readable typeface or greater use of white space through wider margins or divisions between sections of the document.

(O) The text of your proposed contract must be set in a serif typeface. Popular serif typefaces include Times, [Scala, Caslon,] Century Schoolbook, and Garamond.

(P) A sans serif typeface may be used for titles, headings, subheadings, captions, and illustrative or explanatory tables or sidebars to distinguish between different levels of information or provide emphasis. Popular sans serif typefaces include [Scala Sans,] Franklin Gothic, [Frutiger,] Helvetica, Arial [Ariel], and Univers.

(Q) In preparing your proposed contract, you should not:

(i) include a term in definitions unless the meaning of the term is unclear from the context and cannot be easily explained in context, or rely on artificially defined terms as the primary means of explaining information;

(ii) use superfluous words (words that can be replaced with fewer words that mean the same thing) that detract from understanding;

(iii) rely on legalistic or overly complex presentations;

(iv) copy complex information directly from legal documents, statutes, or rules without a clear and concise explanation of the material;

(v) unnecessarily repeat information in different sections of the contract; or

(vi) use multiple negatives.

(R) You should avoid capitalizing words that are not typically capitalized in the English language. Defined words, that are not typically capitalized in the English language, should only be capitalized when the same word is also used in the contract with a different meaning. To the extent possible, defined words should only be used for their defined meanings.

(3) If your agency submits a contract that does not meet the requirements under paragraph (1) of this subsection, in the discretion of the banking commissioner, the contract may be approved if your contract otherwise uses the techniques of clear language and you submit a statement specifying:

(A) the reasonable efforts your agency made to draft the contract in clear language;

(B) the clear language techniques that were used in the drafting; and

(C) the reasons why the required readability level was not achieved.

(e) Are there any other contractual requirements? A written contract with a client for the enforcement of child support executed by your agency, or a foreign agency authorized to engage in business under Subchapter F of this chapter, must contain the following provision in substantially similar language in a font at least as large as the other provisions of the contract, but no smaller than 10-point with line spacing at least 120% of the point size: If you have a complaint, first contact (Name of Agency). If you still have an unresolved complaint, please contact the Texas Department of Banking. Complaints must be in writing. Texas Department of Banking, 2601 North Lamar, Austin, Texas 78705-4294, (877) 276-5554 (toll free telephone), (512) 475-1313 (fax), consumer.complaints@dob.texas.gov (e-mail), http://www.dob.texas.gov (website).

Subchapter C. What Are My Agency’s Responsibilities After Registration?
7 TAC §31.32

The amendments are proposed under Finance Code, §396.051, which authorizes the Finance Commission to adopt necessary rules to administer the chapter concerning private child support enforcement agencies.

Finance Code, §396.108 is affected by the proposed amended section.

§31.32. Is there an annual fee requirement?

The $500 fee for cost of regulation must be paid annually to the department on or before January 31 [the anniversary date of your certificate of registration].