83rdTEXAS LEGISLATURE – 2013
INDEPENDENT BANKERS ASSOCIATION OF TEXAS
IBAT will be focusing on the following proactive legislation in the 83rd Texas Legislative Session:
Tax Lien Lenders. (SB 247, with additional bills pending) We continue to receive complaints from bankers who have had issues with tax lien lenders. Additionally, there are concerns being raised by consumer advocates that such arrangements are creating additional financial difficulties for already stressed consumers. Several areas should be addressed:
- There is a “super-priority” lien position assumed from a governmental entity by private third party transferees. While we continue to question the legal validity of this lien, and especially the interest and fees accumulated “post-transfer”, the question of whether this is appropriate public policy should be seriously debated this session.
- Parameters establishing a reasonable timeframe for payoff submission upon the request of a prior lienholder should be established. There have been several complaints from bankers that they have been unable to get payoffs from these companies as they are earning up to 18% on a virtually risk free investment. This should include significant penalties for non-compliance.
- The transferee of a property tax lien has a lower standard for foreclosure than does a taxing entity. This should be corrected.
- “Secondary market” sales of these loans have been increasing. We support initiatives to strengthen the requirements for transfers of property tax lien loans.
- Additional disclosures for marketing materials and loan documents should be considered, including but not limited to: full disclosure of interest rates and terms tracking federal requirements; the fact that entering into such a transaction if there is an outstanding mortgage is likely a default event, and could result in foreclosure; and, clear and concise language indicating that the existing lienholder and/or the taxing entity may offer solutions that will be less expensive to the property owner.
There are many other situations in which a bank is served, and all of these should be handled in the same manner. These include service of subpoenas, and every other type of service relating to a customer’s account. Right now, there are still situations in which subpoenas, for example, are simply dropped off at a branch. This can lead to missed deadlines and potentially sanctions against the bank for noncompliance.
We would propose broadening the legislation we worked through the process several sessions ago to include any service, rather than just actions against a financial institution be served on the registered agent, or if none, the president or a branch manager.
Debit/Credit Card Fraud. (HB 244) Losses on debit card transactions continue to plague community banks. We have attempted over the past several sessions to require some level of care at the point of sale.
We are working with the retailers and with Representative Menendez to craft a reasonable compromise to require some level of accountability at the merchant level, and believe that verifying the identity of a customer utilizing photo identification is a reasonable request.
Defensive Issues. As is the case in every Legislative Session, a number of bills are introduced that require attention. We have engaged on several such issues this session, and will no doubt have additional opportunities.
One "holdover" issue from the previous session would require a lender on a real estate project to notify the general contractor in the event of “default”. SB 295 creates the potential for additional liability and litigation risk to the lender, an opportunity to “miss something” as default is thankfully a very rare occurrence, and raises significant issues with the relationship between our borrower – the owner/developer – and the bank if indeed there is communication regarding a contractual relationship shared with a third party. Costs to finance construction projects will increase with added risk, and credit availability in this recovering sector of the economy could be negatively impacted. While we remain sensitive to the concerns of contractors and sub-contractors, we do not believe this is the proper methodology to address those concerns. IBAT has spent significant time and energy on seeking a viable compromise, and will continue to work with all impacted parties.