81R5428 PMO-D
By: Watson S.B. No. 1938
A BILL TO BE ENTITLED
AN ACT
relating to the maintenance of certain interest-bearing accounts by
escrow officers and the use of the interest on those accounts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2652.005, Insurance Code, is amended to
read as follows:
Sec. 2652.005. ESCROW ACCOUNT AUDIT. Each escrow account
used by a licensed escrow officer for closing a transaction,
including an account established under Section 2652.021, is subject
to the audit requirements of Subchapter D, Chapter 2651.
SECTION 2. Chapter 2652, Insurance Code, is amended by
adding Subchapter A-1 to read as follows:
SUBCHAPTER A-1. MAINTENANCE OF CERTAIN ACCOUNTS
Sec. 2652.021. INTEREST-BEARING ACCOUNT FOR CERTAIN FUNDS;
OTHER ACCOUNTS AND INVESTMENTS AUTHORIZED. (a) An escrow officer
shall establish and maintain at a financial institution an
interest-bearing demand account that is functionally equivalent to
an account commonly known as an Interest on Lawyers Trust Account
(IOLTA) as described by 12 C.F.R. Section 370.2(h)(3)(i) for the
deposit of funds that are nominal in amount or that the escrow
officer reasonably anticipates will be held for a short period of
time.
(b) An account established or maintained under Subsection
(a) may be a single, unsegregated account.
(c) This section does not prohibit an escrow officer from
establishing at the request of a purchaser and seller other
interest-bearing accounts or other investments for a specific
transaction authorized by this title for the deposit of funds that
are not required to be deposited under this subchapter.
Sec. 2652.022. INTEREST ON ACCOUNT. (a) An escrow officer
establishing an interest-bearing account under Section 2652.021
shall attempt in good faith to obtain a rate of interest payable on
the account that is not less than the rate a financial institution
pays to other depositors with accounts of a similar size and
duration.
(b) If a financial institution offers the escrow officer an
account with a higher interest rate or dividend on a deposit meeting
certain time or minimum amount requirements, the escrow officer may
establish that account if the right to withdraw or transfer the
principal is not materially impaired other than by the statutory
notification requirements generally applicable to that type of
account.
Sec. 2652.023. REMITTANCE OF INTEREST ON ACCOUNT; REPORTS.
An escrow officer establishing an interest-bearing account under
Section 2652.021 shall direct the financial institution to:
(1) remit, at least quarterly, interest earned on the
average daily balance in the account, less a reasonable service
charge, to the administrative entity designated by the Texas
Supreme Court;
(2) transmit, with the remittance described by
Subdivision (1), a statement of the name and mailing address of the
escrow officer maintaining the account, the rate or rates of
interest applied to the account, and the amount of service charge
deducted for the period for which the statement is made; and
(3) transmit to the depositing escrow officer and the
department, at the same interval under which a remittance is made
under Subdivision (1), a report showing:
(A) the amount of the remittance under
Subdivision (1);
(B) the rate or rates of interest applied to the
account;
(C) the amount of service charge deducted for the
period for which the report is made; and
(D) the average daily balance for each month of
that period.
Sec. 2652.024. CONSTRUCTION WITH OTHER LAW; OFFICER
LIABILITY. (a) Nothing in this subchapter affects an escrow
officer's obligations concerning funds other than funds required to
be deposited in an interest-bearing account under Section 2652.021.
(b) An escrow officer is not liable for a good faith
determination of which funds must be deposited under Section
2652.021, if the determination is made in accordance with this
subchapter and any applicable commissioner rules.
Sec. 2652.025. RULES. The commissioner shall adopt rules to
ensure compliance with this subchapter, including rules that, for
the purposes of this subchapter:
(1) define "nominal" and "short duration";
(2) prescribe the requirements that a financial
institution must meet before an escrow officer may establish an
account under Section 2652.021 at the institution; and
(3) designate procedures for the collection and
transmittal of interest funds to the administrative entity
designated by the Texas Supreme Court.
SECTION 3. Section 2651.152(a), Insurance Code, is amended
to read as follows:
(a) Each title insurance company shall have an annual audit
made of trust fund accounts, including accounts established under
Section 2652.021, for each county in which it operates in its own
name. The company shall pay for the audit.
SECTION 4. The commissioner of insurance shall adopt rules
required by Section 2652.025, Insurance Code, as added by this Act,
not later than the 90th day after the effective date of this Act.
SECTION 5. The change in law made by this Act applies only
to funds deposited with an escrow officer on or after the effective
date of the rules adopted under Section 2652.025, Insurance Code,
as added by this Act. Funds deposited with an escrow officer before
the effective date of the rules adopted under Section 2652.025,
Insurance Code, as added by this Act, are covered by the law in
effect on the date the funds are deposited, and the former law is
continued in effect for that purpose.
SECTION 6. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2009.