Texas Finance Code

Texas Finance Code
Name	Texas Finance Code
Enacted by	Texas Legislature
Enacted	1995
Status	current

Texas Finance Code is a codified compilation of statutes enacted by the Texas Legislature that governs non-tax financial regulation in the State of Texas. It consolidates preexisting statutes and creates a regulatory framework affecting banking industry participants, consumer protection statutes, lending practices, and licensing schemes administered by state agencies. The Code interacts with federal statutes such as the Gramm–Leach–Bliley Act, the Dodd–Frank Wall Street Reform and Consumer Protection Act, and the Truth in Lending Act through preemption, conformity, or state-specific supplementation.

Overview

The Code governs commercial activity involving mortgage lenders, depository institutions, credit unions, consumer finance companies, and securities professionals within Texas. It defines licensing requirements for mortgage brokers, money transmitters, check cashers, and pawnbrokers and sets standards for interest rate calculations, usury limits, and consumer credit disclosures. The Code operates alongside the Texas Business and Commerce Code, the Texas Penal Code for criminal violations, and federal regulators such as the Federal Reserve System and the Consumer Financial Protection Bureau.

Structure and Organization

The Code is organized into subtitles, chapters, subchapters, and sections that mirror organizational frameworks used by other state statutes such as the California Financial Code and the New York Banking Law. Major subtitles address mortgage lending, debt management, savings associations, and industrial loan companies. Administrative provisions assign rulemaking authority and adjudicatory powers to agencies like the Texas Department of Banking and the Office of Consumer Credit Commissioner. Legislative drafting committees, including those in the Texas Senate and the Texas House of Representatives, periodically propose reorganizations similar to federal codification efforts like the United States Code revisions.

Key Provisions and Chapters

Key chapters regulate mortgage loan originators and prescribe licensing, disclosure, and bonding requirements. Provisions mirror model acts such as the Uniform Consumer Credit Code in sections dealing with retail installment sales, and align with national standards exemplified by the Model State Credit Code for debt collection practices. Chapters covering small loan providers and non-bank lenders set maximum rates and permissible fees, interacting with cases decided by the Supreme Court of Texas and rulings from the U.S. Court of Appeals for the Fifth Circuit. Other notable chapters include those on money transmission, which require registration akin to statutes in New York and California, and chapters regulating foreclosure procedures that reference timelines similar to provisions scrutinized in litigation involving Wells Fargo, Bank of America, and JPMorgan Chase.

Enforcement and Regulatory Agencies

Primary enforcement lies with the Office of Consumer Credit Commissioner for consumer credit and the Texas Department of Savings and Mortgage Lending for mortgage-related matters. The Texas Department of Banking supervises state-chartered banks and savings associations, while the Texas State Securities Board polices securities fraud and licensure for investment advisers and broker-dealers. Enforcement actions may involve administrative orders, civil penalties, or referrals for criminal prosecution to county prosecutors and the Texas Attorney General; federal coordination can include referrals to the Department of Justice or the Securities and Exchange Commission. Adjudication of contested agency actions proceeds through the State Office of Administrative Hearings and appeals to the Travis County District Court or other district courts, with final appellate review by the Supreme Court of Texas or the Texas Court of Criminal Appeals when jurisdictionally appropriate.

Amendments and Legislative History

Enactment in 1995 consolidated numerous predecessor statutes and was amended in response to crises such as the 2008 financial crisis and legislative reforms following reports by the Texas Sunset Advisory Commission. Subsequent amendments addressed mortgage servicing after high-profile litigation involving Countrywide, mandated disclosures akin to those required after the Home Affordable Modification Program rollout, and updated money transmitter provisions influenced by decisions in the Third Circuit and regulatory guidance from the Financial Crimes Enforcement Network. Legislative sessions that produced significant amendments include those of the 74th Texas Legislature, the 79th Texas Legislature, and the 84th Texas Legislature.

Impact and Legal Interpretation

Judicial interpretation by the Supreme Court of Texas and federal courts such as the U.S. District Court for the Northern District of Texas shaped enforcement contours, particularly on preemption questions involving the National Bank Act and state regulatory authority recognized in cases like those heard before the Fifth Circuit. Academic commentary in law reviews from the University of Texas School of Law and policy analyses by the Texas Public Policy Foundation examine the Code’s effects on access to credit, market entry for community banks such as Texas Capital Bank, and consumer protections affecting institutions like Prosper Marketplace and Navient. Regulatory guidance from the Conference of State Bank Supervisors and the American Bankers Association also influences compliance practices.

Category:Texas statutes