86th TEXAS LEGISLATURE – 2019
INDEPENDENT BANKERS ASSOCIATION OF TEXAS
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The Independent Bankers Association of Texas (IBAT) has historically promoted a proactive legislative agenda during each session of the Texas Legislature. IBAT will again be dealing with a number of legislative initiatives impacting issues such as the foreclosure process, fees, taxation, lien law, credit allocation and a host of other issues. We will remain vigilant and engaged to protect the exclusive interests of the community banking industry.
IBAT will focus on the following proactive legislation in the 86th Texas Legislative Session:
Home Equity and Ag Use Valuation. (SB 474, Hancock/HB 1254, Murphy) The Texas Constitution was amended to permit agricultural use valued property to be used as collateral for home equity loans. However, Tax Code Section 23.42(a-1) provides that if land secures a home equity loan, it can’t be designated for agricultural use. This is inconsistent with the authority in the Constitution to use it as collateral. It creates an impediment to the ability of property owners to access the equity they have built up in their own property. Eliminating that section would increase the ability of home owners in rural subdivisions to obtain home equity loans.
Solution. Delete Section 23.42(a-1) from the Tax Code. All banking trade associations have expressed an interest in accomplishing this, and it should be a joint effort. Since the change to the Constitution was not opposed by the Farm Bureau, this change should be acceptable as well.
Community Development. (SB 726, Zaffirini/HB 1175, Lambert) State banks chartered in Texas are limited in the investments they can make by the Texas Finance Code, Sections 34.101 through 34.106. The investments these banks are authorized to make related to community development are spelled out in section 34.106. Community development investments not only benefit the communities in which these banks are located, but they are also important to banks in their efforts to comply with the “investment” test of the Community Reinvestment Act (CRA).
The CRA is intended to encourage banks to help meet the credit needs of the communities in which they operate, including low- and moderate-income areas, consistent with safe and sound banking operations.
However, current state law caps the aggregate of such investments, including loans and loan commitments, at 10 percent of a bank’s capital and surplus. By contrast, a national bank’s aggregate investments in these entities, exclusive of loans and loan commitments, may be up to 15 percent of its capital and surplus. State banks should have parity with national banks.
Solution. Amend Section 34.106 of the Finance Code to clarify the investment limit applies to equity investments, exclusive of loans and loan commitments, and increase the cap to 15 percent provided the bank is at least adequately capitalized. To avoid the possibility of excessive investments in a single community development, cap the aggregate of such investment (plus loans and commitments for loans) at 25 percent of capital and surplus, which is the state lending limit for a single borrower.
This amendment will facilitate the ability of state-chartered community banks to more easily invest in their local communities through prudent investment. This will help banks more easily satisfy the CRA test, and the legislation balances the interests of all stakeholders by containing appropriate limitations to avoid excessive leveraging.
Card Fraud and “Skimmers.” Compromised debit and credit cards create significant losses for financial institutions and multiple headaches for consumers. One of the most common sources of breaches and compromised card information is through skimming devices installed on gasoline pumps. IBAT is working with multiple parties to enhance prosecutorial powers and penalties for this criminal activity, as well as develop minimum standards for gasoline pump security and protocols.
Property Tax Lenders. We continue to receive complaints from bankers who have had issues with property tax lenders. Additionally, there are concerns being raised by consumer advocates that such arrangements are creating additional financial difficulties for already stressed consumers and small businesses. IBAT and other stakeholders, including the property tax lending industry, are exploring several options to address on-going concerns in this area.
Mechanic’s and Materialmen’s Lien. (HB 589, Deshotel) IBAT, along with the other financial services and construction trade groups, has been working collaboratively to address concerns raised by subcontractors in Texas regarding mechanic’s and materialmen’s lien law. This issue has surfaced in legislative sessions for years and unfortunately, has not been resolved. Our coalition will work diligently to try and address concerns of all parties going forward, and we look forward to working with subcontractors to try and address their concerns while also mitigating any negative impact to the interests of those industries represented by our coalition.
Central Filing. As a result of the federal Food Security Act, discussion has circulated since the 1980s about the creation of a central location or database to make available information that allows agricultural buyers, merchants or selling agents to identify farm products that are subject to a security interest. IBAT has worked collaboratively throughout the interim with the agricultural trade associations and other interested parties to create an alternative to “central filing” that is workable for all stakeholders. In particular, IBAT is working on better use of current technology. Discussions about this alternative are ongoing.
Texas Finance Commission Sunset Legislation. (HB 1569, Lambert) The Texas Finance Commission is under review by the Texas Sunset Commission, as are the agencies under the purview of the Finance Commission – the Texas Department of Banking, Texas Department of Savings and Mortgage Lending, and Office of Consumer Credit Commissioner. IBAT participated in the Sunset Review process and will monitor the legislation as it moves through the process.