HBA-JLV C.S.H.B. 1763 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1763 By: McCall Financial Institutions 3/30/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE The Finance Commission of Texas (commission) is the governing body for the Texas Department of Banking, the Savings and Loan Department, and the Office of Consumer Credit Commissioner. As such, it provides overview and policy supervision to these agencies and appoints the commissioners of these three agencies. The commission is a board of private citizens appointed by and responsible to the governor. The Sunset Advisory Commission has recommended that the commission be continued with certain changes to its composition, authority, and status as an independent agency. C.S.H.B. 1763 continues the Finance Commission of Texas for twelve years and adopts the recommendations of the Sunset Advisory Commission. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Finance Commission of Texas in SECTION 12 (Section 11.306, Finance Code) and in SECTION 13 (Section 11.307, Finance Code) of this bill. The bill transfers all rulemaking authority from the savings and loan commissioner, the banking commissioner, the consumer credit commissioner, and the Texas Department of Banking (department) to the Finance Commission of Texas (commission). In addition, rulemaking authority that was previously shared with either of these commissioners or the department and the commission is now reserved solely for the commission. ANALYSIS C.S.H.B. 1763 amends the Finance Code to continue the Finance Commission of Texas (commission) until September 1, 2013 and to set forth standard Sunset Advisory Commission recommendations regarding public representation on the commission, conflicts of interest, commission member removal, standards of conduct, commission member training, and public testimony. The bill sets forth provisions stating the purpose and strategic plan of the commission and requires the commission to carry out its functions to protect consumer interests, to maintain a safe and sound banking system, and to increase the economic prosperity of the state. The bill requires the commission to prepare and periodically update a strategic plan for coordination of the state financial system and requires the Texas Department of Banking, the Savings and Loan Department, and the Office of Consumer Credit Commissioner (finance agencies) to cooperate in preparation of the plan. The commission is the policymaking body for the finance agencies and is not a separate state agency. The bill requires the commission to develop and implement policies that clearly separate the policy-making responsibilities of the commission and the management responsibilities of the banking commissioner, savings and loan commissioner, and consumer credit commissioner and staff of the finance agencies (Sec. 11.111). The bill also requires the commission to direct a finance agency to employ an internal auditor to provide services to and facilitate commission oversight and control over the finance agencies. The bill authorizes the Texas Department of Banking to employ a hearing officer to serve the finance agencies as determined by interagency agreement. The hearing officer's only duty is to preside over matters related to contested cases before a finance agency or the commission (Sec. 11.202). The bill provides that each internal auditor reports to the commission and is not subject to direction by the employing finance agency (Sec. 11.203). The commission may no longer employ staff or purchase equipment and facilities. To reduce administrative costs, the bill requires the finance agencies to share staff, equipment, and facilities. An interagency agreement must provide that the cost of staff used by the commission, including the internal auditor, be charged to the finance agencies. The bill provides that all other costs of the operation of the commission are to be shared by and included in the budgets of the finance agencies (Sec. 11.204). The bill transfers the requirement of the commission to conduct research on financial services and the practices of business entities to the banking commissioner, savings and loan commissioner, or consumer credit commissioner. The bill requires the Texas Department of Banking and the Savings and Loan Department to jointly conduct a continuing review of the condition of the state banking system. The bill provides that the review must include a review of all available national and state economic forecasts, an analysis of changing banking practices, and new banking legislation. The bill also requires the departments to periodically submit a report to the commission on the results of the review (Sec. 11.305). The bill authorizes the commission to adopt mortgage broker rules (Sec. 11.306). The bill transfers all rulemaking authority from the savings and loan commissioner, the banking commissioner, the consumer credit commissioner, and the Texas Department of Banking to the commission. In addition, rulemaking authority that was previously shared with either of these commissioners or the department and the commission is now reserved solely for the commission. The bill repeals provisions authorizing the commission to designate the banking commissioner, savings and loan commissioner, consumer credit commissioner, or another person to serve as executive director of the commission (Sec. 11.201). The bill requires the commission to adopt rules applicable to each entity regulated by the Texas Department of Banking or the Savings and Loan Department specifying the manner in which the entity provides consumers with information on how to file complaints with the appropriate agency and to require the entity to provide the information in each privacy notice that the entity is required by law to provide consumers (Sec. 11.307). EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 1763 modifies the original to add language to the definitions of savings executive, consumer credit executive, and mortgage broker so that industry representatives of the Finance Commission of Texas (commission) remain affiliated with the related industry to be qualified to serve (Sec. 11.102). The substitute modifies the original to clarify that only one internal auditor be employed by an agency designated by the commission to oversee the Texas Department of Banking, the Savings and Loan Department, and the Office of Consumer Credit Commissioner (finance agencies). Whereas, the original required each finance agency to employ an internal auditor. The substitute modifies the original to provide that the hearings officer shared by the finance agencies is now authorized to also hear matters before the commission (Sec. 11.202). The substitute modifies the original to add the Department of Banking to the list of other entities with current rulemaking authority to ensure ongoing applicability of rules adopted by the department until the effective date of this Act (SECTION 104).