Part V.
Office of Consumer Credit Commissioner
Chapter 85.
Rules of Operation for Pawnshops
7 TAC §85.1, §85.2
The Office of Consumer Credit Commissioner (the agency) adopts
the repeal of §85.1, defining terms, and §85.2, concerning licensing
of pawnshops without changes to the text as published in the July 16, 1999,
issue of the
Texas Register
(24 TexReg 5288).
The subjects of these sections will be addressed in new replacement sections
that the agency is simultaneously adopting elsewhere in this issue of the
No comments were received regarding adoption of the repeals.
The repeals are adopted under Texas Finance Code, §371.006,
which authorizes the commissioner to adopt rules relating to the administration
and enforcement of the Texas Pawnshop Act.
The statutory provision affected by the repeals is Chapter 371 of the Finance
Code.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on August
16, 1999.
TRD-9905150
Leslie L. Pettijohn
Commissioner
Office of Consumer Credit Commissioner
Effective date: September 5, 1999
Proposal publication date: July 16, 1999
For further information, please call: (512) 936-7640
7 TAC §§85.21, 85.31, 85.41, 85.51, 85.61, 85.71, 85.81
The Office of Consumer Credit Commissioner (the agency) adopts
the repeal of §85.21 concerning business records, §85.31 relating
to crime victim assistance, §85.41 regarding security of persons and
pledged goods, §85.51 concerning lost or damaged pledged personal property,
§85.61 relating to advertising, §85.71 regarding examinations and
investigations, and §85.81 concerning miscellaneous operating provisions
without changes to the text as published in the July 16, 1999, issue of the
The repeals are necessary for administrative purposes in clarifying the
printed version of the Texas Administrative Code. The sections that are proposed
for repeal were challenged in district court. Upon appeal, the appeals court
ruled that a technical and procedural violation in the manner of adoption
invalidated the rule adoption.
No comments were received regarding adoption of the repeals.
The repeals are adopted under Texas Finance Code, §371.006,
which authorizes the commissioner to adopt rules relating to the administration
and enforcement of the Texas Pawnshop Act.
The statutory provision affected by the repeals is Chapter 371 of the Texas
Finance Code.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on August
16, 1999.
TRD-9905151
Leslie L. Pettijohn
Commissioner
Office of Consumer Credit Commissioner
Effective date: September 5, 1999
Proposal publication date: July 16, 1999
For further information, please call: (512) 936-7640
Subchapter A. General Provisions
7 TAC §§85.101-85.104
The Office of Consumer Credit Commissioner (the commissioner)
adopts new §§85.101-85.104 concerning general provisions with changes
to the text as published in the July 16, 1999, issue of the
Texas Register
(24 TexReg 5289). The rules interpret and provide guidance
to interested parties concerning the meaning and application of Subchapter
A of the Texas Pawnshop Act (Texas Finance Code, Chapter 371).
Simultaneously, the Office of Consumer Credit Commissioner is repealing
various rules and adopting these rules in their place. The rules being repealed
and those being adopted here were reviewed and evaluated. An assessment was
made that the reasons for (re)adopting the rules continue to exist. The process
of repeal of certain rules and the adoption of these rules benefits the public
and the industry by making the rules more accessible, readable, and providing
clarity and guidance in certain administrative and enforcement procedures.
The agency received one comment from William R. Pakis concerning the application
of §85.102 if implemented as proposed. The comment did not specify whether
the commenter was for or against the rule adoption, but rather offered technical
suggestions for modifying the rule as proposed.
Section 85.101 delineates the purpose and scope of this chapter of rules.
The purpose and scope more clearly define the applicability of the chapter.
This rule is necessary to ensure consistent application of the administrative
rules to all persons who are engaging in transactions that are tantamount
to pawn transactions even if they are not labeled as such.
Section 85.102 defines various terms that are used within the rules and
the Texas Pawnshop Act. Definition of the terms is necessary to advise persons
trying to comply with the rules on the meaning and effect of certain terms.
The definitions are also necessary to ensure consistent application of the
licensing and enforcement rules. For example, the definition of "principal
party" is important to determine which individuals affiliated with a new pawnshop
are required to submit personal affidavits, fingerprint investigation forms,
and other forms in the licensing of a pawnshop. The commenter suggested that
the definition of principal party should include both voting and non-voting
members of a limited liability company, as well as each manager, officer,
and agent of the limited liability company as these parties are required to
be stated on the application form as provided by proposed rule 7 TAC §85.202(a)(1)(A)(iii)(V).
The rule as proposed defines voting members (not non-voting members) of a
limited liability company as a "principal party." The significance of the
definition of "principal parties" is that it specifically identifies the individuals
or natural persons who must provide fingerprints under Texas Finance Code
§14.151 and 7 TAC §85.202(a)(1)(D). A principal party is an individual
who has a substantial relationship with the applicant. Texas Finance Code
§371.054(b)(2) requires that all owners, partners, or shareholders must
be named on an application for a pawnshop. Rule 7 TAC §85.202(a)(1)(A)(iii)
is consistent in applying these disclosure requirements. In some instances
one of these individuals named on the application may not necessarily have
a substantial relationship with the pawnshop. A non-voting member of a limited
liability company, a silent investor, is one example. The fact that the individual
is not permitted to vote regarding the affairs of the business suggests that
the individual does not have a substantial relationship with the entity. The
rule was drafted in an attempt to not be overly burdensome with regulatory
requirements upon individuals who do not have a substantial relationship with
the pawnshop. Furthermore, the definition of "principal party" states that
the definition "includes, but is not limited to," the parties enumerated in
the section. The commissioner may still require fingerprints, or "principal
party" status, of a non-voting member of a limited liability company if the
commissioner believes that the non-voting member has a substantial relationship
with the entity, as provided by Texas Finance Code §14.151(b). The agency
respectfully disagrees with the comment.
Section 85.103 addresses the applicability of the chapter. The rule is
necessary to clarify that any person who may attempt to disguise a transaction
that would otherwise fit the definition of a pawn transaction may not evade
the application of the chapter by employing a device or subterfuge.
Section 85.104 prescribes the dates for renewal and expiration of pawnshop
and pawnshop employee licenses. The rule is necessary to stagger the dates
of renewal from other licenses that the agency issues, so as to more evenly
distribute the workload throughout the year.
The new sections are adopted under Texas Finance Code, §371.006
which authorizes the commissioner to adopt rules to administer and enforce
the Texas Pawnshop Act. Additionally, these rules of procedure are proposed
pursuant to Texas Government Code, §2001.004, requiring an agency to
adopt rules of practice relating to the nature and requirements of administrative
procedures.
§85.101.Purpose and Scope.
(a)
Purpose. The purpose of this chapter is to assist in the
administration and enforcement of the Texas Finance Code, Chapter 371, which
may be cited as the Texas Pawnshop Act.
(b)
Scope. This chapter applies to a person engaged in the
business of:
(1)
lending money on the security of pledged goods; or
(2)
purchasing goods on condition that the goods may be
redeemed or repurchased by the seller for a fixed price within a fixed period.
§85.102.Definitions.
Words and terms used in this chapter that are defined in Texas Finance
Code, Chapter 371, have the same meanings as defined in that chapter unless
the context clearly indicates otherwise. The following words and terms, when
used in this chapter, shall have the following meanings unless the context
clearly indicates otherwise.
(1)
Bank deposits--Cash on deposit in banks or in other federally
insured depository institutions. The value of deposits shall be reduced by
any taxes or penalties that would be due and payable if the funds were withdrawn
on the date of valuation.
(2)
Book value--The dollar amount assigned to assets using
generally accepted accounting principles (GAAP). In evaluating merchandise
inventory, the lower of the cost or the market value of the asset method is
generally used when determining book value.
(3)
Commissioner--The Commissioner of the Office of Consumer
Credit Commissioner of the State of Texas as defined in Chapter 14 of the
Texas Finance Code.
(4)
Facility--The physical space used or proposed for
the use of the operation of a pawnshop.
(5)
Merchandise inventory--Tangible personal property
held by a pawnbroker or applicant for immediate sale in the pawnshop or proposed
pawnshop.
(6)
Operator--A person or entity who manages the daily
operations of a pawnshop. This term includes a party to a management agreement
for oversight and supervision of the operations of the pawnshop on behalf
of the owners of the pawnshop.
(7)
Pawnbroker--A person who has an ownership interest
in a pawnshop as shown in an application for a pawnshop license filed with
the commissioner. When general duties and prohibitions are described, pawnbroker
also includes a pawnshop employee unless the context indicates otherwise.
(8)
Pledged goods--Tangible personal property held by
a pawnbroker as collateral for a pawn loan and that has not become the property
of the pawnbroker by a taking into inventory due to non-payment of the loan.
(9)
Principal party--Each proprietor and adult individual
with a substantial relationship to the proposed business of the applicant.
An individual with a substantial relationship to the proposed business of
the applicant shall include but is not limited to:
(A)
a general partner;
(B)
a voting member of a limited liability corporation;
(C)
a corporate officer, including the Chief Executive Officer
or President, the Chief Financial Officer or Treasurer, and an officer with
substantial responsibility for operations or compliance with the Texas Pawnshop
Act;
(D)
a director of a corporation;
(E)
a shareholder owning 5% or more of the outstanding voting
stock;
(F)
a trustee; and
(G)
an operator.
§85.103.Attempted Evasion of Chapter.
A person may not use any device, subterfuge, or pretense to evade the
application of this chapter. A device, subterfuge, or pretense includes any
transaction that in form may appear on its face to be something other than
a pawn transaction, but in substance meets the definition of a pawn transaction
as defined in the Texas Pawnshop Act, §371.003(8).
§85.104.Renewal Dates of Licenses.
A pawnshop license and a pawnshop employee license shall expire on
June 30th of each year unless the annual fee for the following year has been
paid.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on August
16, 1999.
TRD-9905124
Leslie L. Pettijohn
Commissioner
Office of Consumer Credit Commissioner
Effective date: September 5, 1999
Proposal publication date: July 16, 1999
For further information, please call: (512) 936-7640
7 TAC §§85.201-85.212
The Office of Consumer Credit Commissioner (the commissioner)
adopts new §§85.201-85.212 concerning the licensing of pawnshops
with changes to the text as published in the July 16, 1999, issue of the
The rules pertain to Subchapter B of Chapter 371, Texas Finance Code. The
rules interpret and provide guidance to interested parties concerning the
meaning and application of Subchapter B of the Texas Pawnshop Act.
Comments on the proposed rules were received from: American Pawn, Garland;
Big-Tex Pawn, Midland; CJM Enterprises, Inc., Killeen; Cash America International,
Ft. Worth; and William R. Pakis, Waco. The comments received generally offer
technical suggestions for modifying certain rules as proposed. None of the
comments expressed support or opposition to the rules as a whole. The comments
will be summarized below.
Simultaneously, the Office of Consumer Credit Commissioner is repealing
various rules and adopting these rules in their place. These rules being repealed
were reviewed and those being adopted here were evaluated and an assessment
made that the reasons for (re)adopting the rule continues to exist. The process
of repeal of certain rule and the adoption of these rules benefit the public
and the industry by making the rules more accessible, readable, and providing
clarity and guidance in certain administrative and enforcement procedures.
Section 85.201 clarifies the requirement that any person who desires to
engage in the business of making pawn loans must obtain a license before being
authorized to make pawn loans. Additionally, the section requires that an
individual be appropriately authorized to make pawn loans before advertising
the operation of a pawnshop. This is consistent with the requirement of Texas
Finance Code, §341.404.
Section 85.202 prescribes the requirements for filing a new pawnshop application.
The rule states the specific forms and accompanying information that must
be filed with a new application. The rule is necessary to provide consistent
procedures for the filing of pawnshop license applications and to advise the
public and the industry of the filing requirements. Additionally, in subsection
(c) the rule implements the provisions of House Bill 1878 regarding the distance
requirement of a new pawnshop from existing pawnshops in counties with a population
of greater than 250,000. One comment was received pertaining to this section
regarding the filing requirements in subsection (a)(2)(B)(ii) for publicly
held corporations. The comment was not received from a representative of a
publicly held corporation. The proposed rule requires that the publicly held
corporation must submit the most recent quarterly and annual reports required
by §15(d) of the Securities and Exchange Act for the applicant or the
parent company who files the reports. The commenter suggests that the phrase
"or the parent company respectively" be stricken from the rule. The commenter
states that "by allowing a public corporation to create multiple layers of
business entities that use assets dedicated to the operation of business other
than Texas pawnshops circumvents the law in both letter and intent. This situation
places a heavier burden on small pawnshop owners than on the larger chains".
The rule as drafted only applies to a publicly held corporation or an applicant
held by a publicly held corporation. As such, it should not place a heavier
burden on small pawnshop owners since the rule does not apply to them. It
is not uncommon for publicly traded firms to create multiple levels of subsidiaries
or other business structures with a common parent holding company and the
Pawnshop Act nor the commissioner may preclude this. The applicant must meet
the financial requirements in its own right. On occasion the applicant corporation
may be indebted to the parent holding company in a way that might cause the
applicant to fail to meet the qualifications. It is imperative that the commissioner
be able to look behind the applicant subsidiary corporation or limited partnership
to the parent holding company in order to determine financial responsibility
and to ensure that the applicant meets the net asset requirement. The agency
respectfully disagrees with the comment. Another comment was received regarding
subsection (a)(2)(F) related to the requirement to provide a copy of a general
liability and fire insurance policy. The commenter states that the section
is vague and needs to be reworked. The commenter further questions how much
insurance does a new pawnshop need to buy. The agency has had protracted conversations
with the industry over the years regarding the appropriate amount of insurance
that should be required. The rule as proposed recognizes that pawnshops are
unique and that a pawnshop's loan volume may affect the required amount of
insurance. The rule purposefully does not specify an amount of required insurance
so that individual pawnshops may determine the amount that is satisfactory
for their needs. Should the agency disagree with the amount of insurance that
a pawnshop has procured, then the agency will address that issue, generally
through the examination function. The agency respectfully disagrees with the
comment and retains the rule as drafted as it represents the best solution
for the wide diversity of pawnshops that currently exist and provides a lower
level of regulatory burden.
Section 85.203 prescribes the requirements for relocating a pawnshop license.
The rule states the specific forms and accompanying information that must
be filed with the relocation application. The rule is necessary to provide
consistent procedures for the filing and processing of pawnshop license applications
and to advise the public and the industry of the filing requirements. One
commenter suggests that the definition of relocation in subsection (a)(1).
The agency agrees with the comment. The suggested language improves the clarity
of the section, yet is not substantively different from the proposed rule.
The subsection is amended accordingly.
Additionally, in subsection (f) the rule implements the provisions of House
Bill 1878 regarding the distance requirement of existing pawnshop licenses
from existing pawnshops in counties with a population of greater than 250,000.
Specifically, the rule is necessary to fairly interpret and consistently apply
the provisions of §371.059 of the Texas Pawnshop Act. During the legislative
enactment of House Bill 1878, the legislative history indicates that §371.059(b)(2)
was intended to apply to licenses that are not actively being used for the
operation of a pawnshop. The rule is drafted to apply the statute in that
fashion. Several comments were received regarding the rule as proposed implementing
the provisions of §371.059(b)(2). One commenter agreed with the section,
acknowledging its consistency with legislative intent. This commenter also
pointed out an error in the rule as drafted in subsection (f)(2)(D). The rule
states that if the licensee meets the conditions then "it may locate within
one mile from an operating pawnshop." The rule should have read that if the
licensee meets the conditions then "it may locate not less than one mile from
an operating pawnshop." The agency withdraws this portion of the rule. Several
comments were received that were against the adoption of the provisions of
subsection (f)(2) as proposed. These comments are summarized as follows:
(1) §85.203(f)(2)(A) makes extensive reference to September 1, 1999
as a guide in determining relocation criteria. There is no reference to or
basis for this criterion in existing law. The law states that a licensed pawnshop
can not be located within one mile of an existing pawnshop if it is relocating
to a facility that is not an already existing pawnshop;
(2) §85.302(f)(2)(A) and (D) should be modified to eliminate a distinction
based upon the date the license became inactive and should provide that an
inactive license may be activated at any facility which is not within one
mile of an existing operating pawnshop.
(3) §85.203(f)(2)(C) should read "if the pawnshop has been operating
continuously at its current location for at least three years, it may locate
not less than one mile from an operating pawnshop if it is relocating more
than one mile from its current location";
(4) §85.203(f)(2)(D) should be modified to remove the three year inactive
requirement. The commenter states that pursuant to §371.059(b)(2) an
inactive license may be located at any facility which is not within one mile
of an existing operating pawnshop;
(5) §85.203(f)(2)(D) refers to when licenses were assigned inactive
status. Current law does not differentiate between active and inactive status
of pawn licenses and will not support differentiation between licenses designated
inactive before or after any given date. In addition, there is only one situation
in which the law allows a pawnshop to move within one mile of an existing
pawnshop and that is when it has been at its current location for three years
and it is moving less than one mile from its location;
(6) §85.203(f)(2)(E) should be modified to provide that an active
license, regardless of the time that it has been in operation at its current
location, may be located at a facility which is not within one mile of an
existing operation pawnshop;
(7) §85.203(f)(2)(E) should be modified to read that the pawnshop
may locate not less than one mile from another operating pawnshop instead
of two miles;
(8) §85.203(f)(2)(B) (D) should be modified to read: if the inactive
license has been in existence at its current address for at least three years,
it may activate at any location within one mile of its current address regardless
of the distance from another operating pawnshop, or if activating in excess
of one mile from its current address, the location shall not be less than
one mile from an operating pawnshop;
(9) §85.203(f)(2)(B) (E) should be modified to read:
(A) If the pawnshop license has been in existence at its current address
for less than three years, it may locate at any location not less than one
mile from an operating pawnshop.
(B) If the pawn license has been in existence for at least three years,
it may relocate at any location within one mile of its current address regardless
of the distance from another operating pawnshop, or if activating in excess
of one mile from its current address, the location shall not be less than
one mile from an operating pawnshop.
RESPONSE: Two commenters assert that the proposed rules in 7 TAC §85.203(f)(2)(C)
and (D) improperly distinguish between relocation of active and inactive licenses
that have been at their current locations for at least three years. The commissioner
disagrees. The text of §371.059(b)(3) of the Pawnshop Act, as amended
in House Bill 1878, expressly refers to "relocation of a licensed pawnshop
if at the time the application is filed the pawnshop has been in operation
at its current location for at least three years." The commissioner cannot
properly presume that the words "in operation" are mere surplusage. As Texas
Supreme Court Chief Justice Thomas R. Phillips recently wrote in Rodriguez
v. Service Lloyds Ins. Co., 42 Tex. Sup. J. 900 (July 1, 1999) (concurring
opinion), "the proper presumption is that every word in a statute or rule
was deliberately chosen for a meaning and a purpose. A cardinal rule of statutory
construction is that each sentence, clause and word is to be given effect
if reasonable and possible." Jessen Assocs., Inc. v. Bullock, 531 S.W. 2d
593, 600 (Tex. 1975); Perkins v. State 367 S.W. 2d 140, 146 (Tex. 1963). Further,
even if the commissioner was to find ambiguity in the legislative language
(which she does not), a resort to legislative history supports proposed rule
§85.203(f)(2)(C) and (D) as currently worded. In this regard, a clear
explanation of legislative intent appears at www.senate.state.tx.us/75r/Senate/Live.htm-Economic
Development Committee Hearing 5/11/99 Part II. The agency further believes
that September 1, 1999 is extremely significant in implementation of this
rule as that is the effective date of the legislation and licenses in an inactive
status on that date are able to avail themselves of the statute and rule's
provisions. Nonetheless, the agency has removed references to the effective
date of the legislation. In subsection (f)(2)(C) and (E), the agency evaluated
these comments and agrees that in order to be consistent with §371.059(b)(3)
of the Pawnshop Act that a pawnshop in operation may relocate not less than
one mile from another pawnshop. The agency amends subsection (f)(2)(C) to
remove the three year requirement of operation and deletes subparagraph (E).
Comments regarding subparagraph (D) were addressed above and the agency has
deleted this section of the rule.
Section 85.204 addresses the requirement for active operation of approved
applications and provides authority for the approval of a temporary facility.
The rule discusses the appropriate time frames for both of these requirements.
The rule is necessary to provide consistent procedures, to prevent circumvention
of the distance requirements, and to prevent a person from monopolizing a
trade location and area without the intention of opening and operating a pawnshop.
Section 85.205 prescribes the requirements for filing an application for
the transfer of ownership of a pawnshop license. The rule states the specific
forms and accompanying information that must be filed with the application.
The rule is necessary to provide consistent procedures for the filing of pawnshop
license applications and to advise the public and the industry of the filing
requirements. One comment was received pertaining to subsection (a) suggesting
that the phrase "an existing owner relinquishes any interest in a licensee
or" be deleted. The effect of implementing this suggesting would be that if
an individual sold his entire interest in a pawnshop, then the agency would
not be informed of that fact. The Texas Pawnshop Act §371.069 requires
an application if a change in direct or beneficial ownership of a licensed
pawnshop occurs. Relinquishing an entire interest in a pawnshop is a direct
change in ownership. The agency needs to be informed of events such as this
in order to maintain appropriate ownership and legal responsibility records.
The agency respectfully disagrees with the comment. Another comment was received
regarding subsection (d) and the authority for a transferee to operate under
a transferor's license for a limited period of time. The commenter requested
that the rule be modified similarly to the current rule (§85.2(e) being
proposed for repeal), specifically that the transferee be permitted three
business days in which to file a request to operate under the transferor's
license. The agency agrees with the commenter and has modified the rule accordingly.
Section 85.206 discusses the procedures that will be used in processing
and evaluating license applications for pawnshops. The rule defines when an
application will be accepted, the order in which decisions on competing applications
will be made, and the procedures for protesting an application. One comment
was received suggesting complete modification of subsections (a) and (d).
For subsection (a) the commenter suggested that applications should be reviewed
in the order received. Administratively, this presents an unworkable solution
as applications arrive at the agency by mail, fax, and in person. An applicant
who delivers an application in person may receive an immediate initial review,
while an application that arrives in the mail may be reviewed some time later.
Additionally, it would slow down the initial review of applications if they
must be reviewed in strict chronological order. This would require even the
applications that may not be affected by the distance requirements of counties
with a population of 250,000 to be processed in a similar manner. The agency
believes that the method suggested by the commenter would decrease the level
of customer service that the agency may provide to certain applicants resulting
in inefficiencies and a lengthening of the time required to process a license.
Additionally, this commenter states that the proposed rule could lead to an
application being accepted without being complete. This is correct. In order
to be accepted an application must be substantially complete. The agency intends
to publish a checklist to advise applicants of the elements required to be
deemed substantially complete. There may be further items required to complete
the application, particularly after the investigation is conducted. If the
agency followed the commenter's suggestion it seems that new applicants who
have never been licensed by the agency would be unfairly disadvantaged over
applicants who are already licensed. The agency does not believe that it is
appropriate public policy to grant this competitive advantage to one business
over another. The agency believes that the methodology proposed provides the
fairest, most expeditious method for processing applications. Another commenter
suggests that subsection (c)(3) is "open-ended" and that a list of specific
items that may be required should be published. The agency understands the
commenter's concern that is difficult to know exactly what may be required
in a particular application. Generally, any additional information required
is information that supplements investigational findings regarding an applicant's
criminal history background or financial responsibility. The agency makes
very specific requests of these applicants, so the affected applicant is well
aware of the items required to complete the application. The agency neither
agrees nor disagrees, but retains the rule as proposed. Another commenter
points out that an error in subsection (f)(1)(A)(vi) where the word "assets"
should read "liabilities". The agency agrees with this comment and amends
the rule accordingly. The commenter additionally points out an inaccurate
section reference in section (f)(1)(B) that should read 7 TAC §85.203(f)(2).
The agency agrees with the comment and amends the rule accordingly. The commenter
also states that the phrase "providing that assets other than current assets
are sufficient to secure the debt" should be removed. The commenter explains
that subordinated debt by definition is not collectable until net assets exceed
the requirement and then only to the extent of the excess. The agency agrees
with the commenter that in theory subordinated debt is not to be paid by the
borrower unless the borrower is able to maintain the net assets requirement.
However, in practice, the agency believes that this is not always the case.
The agency believes that an entity does not have sufficient net assets to
operate the business if the agency's subordinated debt exceeds the entity's
assets leaving the entity insolvent. The agency believes that it is appropriate
to retain the rule as written and disagrees with the comment.
Section 85.207 states the process that will be followed if the commissioner
requires a bond of an applicant. One commenter stated that "as most jurisdictions
require a bond prior to opening a pawnshop, would the state also require one"?
The agency is unsure as to who "most jurisdictions" are. The rule is merely
permissive and does not suggest that the commissioner will require a bond,
but if the commissioner determines that it is in the public interest to require
one, then the rule provides the appropriate procedure for filing the bond.
The agency respectfully disagrees with the comment.
Section 85.208 discusses the notification and transfer requirements of
a pawnshop licensee if the licensee has a change in the organizational form
of business or a change in proportionate ownership of the licensee.
Section 85.209 requires an applicant to file supplemental information to
an application if any subsequent action or additional information would have
required a different response than that filed in the original application.
This rule is necessary to advise the commissioner of relevant facts to be
considered in determining whether to grant the application or to investigate
changed circumstances regarding a licensee's fitness to be or to remain licensed.
Section 85.210 provides the authority for a licensee to designate a license
from an active status to an inactive status. The rule also requires a licensee
who desires to activate an inactive license to comply with the requirements
for relocation of a license.
Section 85.211 encompasses the fee schedule for pawnshop licenses. The
fees stated in this section are consistent with the fees set by the statute
and the existing fee structure for administrative licensing activities. The
fees are required in order to allow the agency to recover the costs associated
with performing the licensing function.
Section 85.212 explains the treatment of license applications and associated
documents received by the agency as open records under the Texas Government
Code. The rule is necessary to advise applicants of the treatment and the
public nature of documents that are filed with the agency.
The new sections are adopted under Texas Finance Code, §371.006
which authorizes the commissioner to adopt rules to administer and enforce
the Texas Pawnshop Act. Additionally, these rules of procedure are proposed
pursuant to Texas Government Code, §2001.004, requiring an agency to
adopt rules of practice relating to the nature and requirements of administrative
procedures.
§85.201.Engaging in Business.
An application must be filed and approved before any person engages
in the business of making pawn loans. The application and approval is required
without regard to the rate of interest or pawn service charge contracted for,
charged, or received, if any. An applicant shall not advertise the opening
of a new pawnshop prior to approval.
§85.202.Filing of New Application.
(a)
An application for issuance of a new pawnshop license must
be submitted on forms prescribed by the commissioner at the date of filing.
The application shall include the following:
(1)
Required forms. All questions must be answered.
(A)
Application form (Form ADM-10/11).
(i)
A physical street address must be listed for the proposed
location for which the applicant can show proof of ownership or an executed
lease agreement. A post office box or a mail box location at a private mail-receiving
service may not be used except for a physical location that does not receive
general mail delivery. An application will not be accepted if the address
or the full legal property description has not yet been determined or the
application is for an inactive license.
(ii)
If the applicant is a corporation, then the officers and
directors' sections on the form (ADM-011) must be completed.
(iii)
The section inquiring about owners requires an answer
based upon the applicant's entity type. If an individual's interest in an
entity is community property, then a spouse with a community property interest
must also be listed. If the business interest is owned by a married individual
as separate property, documentation establishing or confirming that status
must be provided.
(I)
Sole proprietorship. The individual owning and operating
the business must be named.
(II)
General partnership. Each partner must be listed and the
percentage of ownership stated.
(III)
Corporation. Each shareholder holding voting stock must
be named if the corporation is privately held. If a parent corporation is
the sole or part owner of the proposed business, a narrative or diagram must
be attached that describes each level of ownership and management. This narrative
or diagram requires the listing of the names of all officers, directors, and
stockholders owning 5% or more stock at each level.
(IV)
Limited partnership. Each partner, general and limited,
must be listed and the percentage of ownership stated. If a partner is a business
entity and not an individual, a narrative or diagram must be attached that
describes each level of ownership. This narrative or diagram requires the
listing of the names of all officers, directors, and stockholders owning 5%
or more stock at each level.
(V)
Limited liability company. Each manager, officer, agent,
and member, as those terms are used by the Texas Limited Liability Company
Act, Texas Civil Statutes Art. 1528n, must be named. If a member is a business
entity and not an individual, a narrative or diagram must be attached that
describes each level of ownership. This narrative or diagram requires the
listing of the names of all officers, directors, and stockholders owning 5%
or more stock at each level.
(VI)
Trusts or estates. Each beneficiary, trustee, and executor
must be named.
(iv)
Manager. Each person who is responsible for the day-to-day
operation of one or more of applicant's proposed locations must be named.
The manager must be:
(I)
a principal party as defined above;
(II)
a licensed pawnshop employee identified by license number;
or
(III)
an applicant for a pawnshop employee license with the
date of application.
(v)
Supervisor. Each person who will be responsible for the
supervision of a licensed location must be named. The supervisor must be:
(I)
a principal party as defined above;
(II)
a licensed pawnshop employee identified by license number;
or
(III)
an applicant for a pawnshop employee license with the
date of application.
(vi)
Signature. On an application for a sole proprietorship
or a partnership, each proprietor and general partner must sign. On an application
for a corporate applicant, two officers must sign unless only one officer
of the corporation has been appointed. On an application for a limited liability
company, two authorized members must sign unless the company only has one
member. On an application for a trust or an estate, each trustee or executor
must sign.
(B)
Statutory agent disclosure (Form ADM-13). This form must
be completed by all applicants. The statutory agent is the person or entity
to whom any legal notice may be delivered. The agent must be a Texas resident
and list an address for legal service. If the statutory agent is an individual,
the address must be a residential address. On an application for a corporation,
the statutory agent listed on Form ADM-13 should be the registered agent listed
in the articles of incorporation. On an application for a limited liability
company, the statutory agent listed on Form ADM- 13 must be the registered
agent listed in the articles of organization. If the statutory agent is not
listed in the relevant organizational document, then the applicant must submit
certified minutes appointing the new agent.
(C)
Personal affidavit (Form ADM-15/16). Each individual listed
on the license application (ADM-10/11) as a principal party, except for a
pawnshop employee or an applicant for a pawnshop employee license, must complete
this form. The percentage of ownership stated on this form must correspond
to the individual's percentage listed on the license application Form ADM-10/11.
The record of business association must also include the individual's association
with the entity applying for the license.
(D)
Fingerprint cards. A complete set of legible fingerprints
shall be provided for each individual having a substantial relationship with
the applicant. An individual has a substantial relationship with an applicant
if it is a "principal party" as that term is defined in 7 TAC §85.102.
An individual who has previously been licensed by the commissioner or a principal
party of an entity currently licensed by the commissioner is not required
to provide fingerprints. The commissioner may require fingerprints of an employee
or another person with some relationship to the applicant if the commissioner
believes that the individual's involvement in the pawnshop operation is relevant
to the applicant's eligibility for a license. All fingerprints should be submitted
on the format provided by the agency and approved by the Department of Public
Safety and the Federal Bureau of Investigation. A request for fingerprint
cards may be made by submitting a completed Form ADM-030.
(E)
Financial statement (Form ADM-17/18/19).
(i)
General information. A financial statement must be dated
no earlier than sixty (60) days prior to the date of application. An applicant
may also submit an audited financial statement dated within one year prior
to the application date in order to expedite verification procedures. A financial
statement must be certified as true, correct, and complete by a principal
party. A financial statement should be prepared in accordance with generally
accepted accounting principles (GAAP). A financial statement must reflect
the net assets as defined in the Texas Pawnshop Act §371.003 of at least
the lesser of the following amounts:
(I)
The amount required in the Texas Pawnshop Act §371.072(a);
or
(II)
The amount required by the Texas Pawnshop Act §371.072(b)
as the license existed or should have existed under the law and rules in effect
on August 31, 1999. A change in net asset requirement occurs with respect
to any change of ownership or other event causing a change in the net asset
requirement that may have occurred prior to September 1, 1999. The change
in the net asset requirement is effective as of the date of change of ownership
or other event causing the change of the net asset requirement.
(ii)
Sole proprietorship. A sole proprietor must complete all
sections of Form ADM-17 and the attached schedules, Form ADM-18/19, or provide
a personal financial statement that contains all of the information requested
by Forms ADM-17/18/19.
(iii)
Partnership. A balance sheet for the partnership itself
must be submitted. In addition, each general partner must submit a balance
sheet. Each balance sheet for the partnership and the partners must be dated
the same day. The information requested in Schedules 1-6 (ADM-18/19) must
be submitted and attached to any balance sheet that is appended to the application.
(iv)
Corporation or limited liability company. A corporation
or a limited liability company must file a balance sheet. The information
requested in Schedules 1-6 (ADM-18/19) must be submitted and attached to any
balance sheet that is appended to the application. A financial statement is
generally not required of related parties, but may be required by the commissioner
if the commissioner believes the information is relevant.
(v)
Trusts or estates. A trust or an estate must file a balance
sheet. The information requested in Schedules 1-6 (ADM-18/19) must be submitted
and attached to any balance sheet that is appended to the application. A financial
statement is generally not required of related parties, but may be required
by the commissioner if the commissioner believes the information is relevant.
(F)
Assumed name certificate (Forms ADM-20 and ADM-21). For
an applicant that does business under an assumed name as that term is defined
in Tex. Bus. & Comm. Code, §36.02(7), an assumed name certificate
must be filed as provided in this subsection.
(i)
Corporation, limited partnership, or limited liability
company. An applicant using or planning to use an assumed name must file an
assumed name certificate (ADM-21 or its equivalent) in compliance with Tex.
Bus. & Comm. Code, §36.0011, as amended. Evidence of the filing bearing
the appropriate filing stamp must be submitted or, alternatively, a certified
copy.
(ii)
All other applicants. An applicant using or planning to
use an assumed name must file an assumed name certificate (ADM-20 or its equivalent)
with the county clerk of the county where the proposed business is located
in compliance with Tex. Bus. & Comm. Code, §36.0010, as amended.
An applicant must provide a copy of the assumed name certificate that shows
the filing stamp of the county clerk or, alternatively, a certified copy.
(2)
Other required filings.
(A)
Statement of experience. An applicant for a new license
should provide an attached statement setting forth the details of the applicant's
prior experience in the pawn or credit-granting business. If an individual
named on the application does not have significant experience in the pawnshop
business as planned for the prospective licensee, the applicant must provide
a written statement explaining the applicant's relevant experience and why
the commissioner should find that the applicant has the necessary experience.
(B)
Entity documents.
(i)
Partnership. A partnership applicant must submit a complete
copy of the partnership agreement. This copy must be signed and dated by each
partner. A limited partnership must submit a copy of the articles of partnership
filed with the secretary of state, any amendments, and a copy of the secretary
of state's acknowledgment.
(ii)
Corporation.
(I)
A corporate applicant, domestic or foreign, must provide
the following documents:
(-a-)
A copy of the articles of incorporation and any amendments;
(-b-)
A copy of the corporate by-laws;
(-c-)
Minutes of corporate meetings that record the election
of each current officer and director as listed on the license application
(Form ADM-10/11); and
(-d-)
A certificate of good standing from the comptroller
of public accounts.
(II)
A foreign corporate applicant must provide a certificate
of authority to do business in Texas; and
(III)
A publicly held corporation or an applicant owned by
a publicly held corporation must submit the most recent quarterly and annual
reports required by §15(d) of the Securities Exchange Act of 1934 (Form
10-K and Form 10-Q) for the applicant or for the parent company respectively.
(iii)
Trusts. A copy of the instrument that created the trust
and the trust agreement must be filed with the application.
(iv)
Estates. A copy of the instrument establishing the estate
must be filed with the application.
(C)
Map. A map must be provided of the area where the proposed
license will be situated graphically defining the site of the proposed pawnshop,
the location, including the name and address, of each pawnshop within three
miles of the location, and the scale at which the map was constructed. The
commissioner may require a survey to determine the distance from the proposed
pawnshop location to existing operating pawnshops.
(D)
Zoning. Each applicant shall file a certificate of occupancy
or other evidence that the operation of a pawnshop is permitted at the proposed
site.
(E)
Lease agreement or proof of ownership. Each applicant shall
file an executed lease agreement, deed, or other evidence that the entity
has control of the proposed site.
(F)
Proof of general liability and fire insurance. Each applicant
shall file a copy of a general liability and fire insurance policy in an amount
sufficient to protect pledged goods including jewelry. The policy must explicitly
cover loss of pledged goods.
(b)
Subsequent applications. If the applicant is currently
licensed and filing an application for a new location, the applicant must
provide the forms and other information that are unique to the new location
including the application form (ADM 10/11) and an updated financial statement
as provided in this section. Other information required by this section need
not be filed if the information on file with the agency is current and valid.
(c)
Distances shall be measured in a direct line despite travel
patterns and natural or manmade obstacles and shall be measured from front
door to front door. The commissioner may require a survey to determine distances
from the proposed pawnshop location to existing operating pawnshops. In examining
the distance requirements of a proposed pawnshop, the existence or location
of an inactive license will not be considered in the determination of the
distance requirements. An application for a new license may not be approved
unless the eligibility requirements are met and the proposed facility is within:
(1)
a county with a population of less than 250,000 according
to the most recent decennial census regardless of distance from another operating
pawnshop;
(2)
a county with a population of 250,000 or more according
to the most recent decennial census and the pawnshop is not less than two
miles from another operating pawnshop .
§85.203.Relocation.
(a)
Definition.
(1)
As used in this §371.059 of the Texas Pawnshop Act
and in this section, the "relocation of a licensed pawnshop" means either:
(A)
the act of moving an existing licensed operating pawnshop
from its existing location to a new location, or
(B)
the activation of an inactive license for purposes of establishing
and operating a pawnshop at a facility.
(2)
As used in §371.059 of the Texas Pawnshop
Act and in this section, "the relocation of a licensed pawnshop" means the
act of moving an existing pawnshop license from a location at which or premises
in which a pawnbroker holds a pawnshop license to a new location.
(b)
Approval of relocation. A pawnshop may not be relocated
without the prior approval of the commissioner. When a relocation is requested,
an application for relocation must be filed.
(c)
Filing requirements. An application for relocation must
be submitted on forms prescribed by the commissioner. The application for
relocation shall include the following:
(1)
Change of address application form (Form ADM-22).
(2)
Financial statement (ADM-17/18/19). If the license
requested for relocation includes the activation of a license that is inactive
at the date of the request for relocation, an updated financial statement
is required. The instructions in 7 TAC §85.202 are applicable to this
filing.
(3)
Other required filings.
(A)
Map. A map must be provided of the area where the proposed
license will be situated graphically defining the site of the proposed pawnshop,
the location, including the name and address, of each pawnshop within three
miles of the location, and the scale at which the map was constructed. The
commissioner may require a survey to determine the distance from the proposed
pawnshop location to existing operating pawnshops.
(B)
Zoning. Each applicant shall file a certificate of occupancy
or other evidence that the operation of a pawnshop is permitted at the proposed
site.
(C)
Lease agreement or proof of ownership. Each applicant shall
file an executed lease agreement, deed, or other evidence that the entity
has control of the proposed site.
(D)
Proof of general liability and fire insurance. If the license
requested for relocation includes the activation of a license that is inactive
at the date of the request for relocation, a copy of a general liability and
fire insurance policy in an amount sufficient to protect pledged goods including
jewelry must be filed. The policy shall explicitly cover loss of pledged goods.
(d)
Engaging in business. An applicant may not advertise the
opening of a relocated pawnshop prior to approval, except that a pawnbroker
who intends to relocate a pawnshop may, beginning 90 days or less prior to
the projected date of relocation, post a sign inside the existing shop and
give customers a written notice of the anticipated relocation pursuant to
the subsection below.
(e)
Notice to customer. A written notice of relocation must
be given to each pledger whose pledged goods will be moved. Five days prior
to relocation the pawnbroker must mail written notices to each pledger who
has not been given a written notice prior to that date. A notice must identify
the pawnshop, both the old and the new location, the telephone number of the
new location, and the date the relocation is effective. The commissioner may
modify the notification requirement if the relocation adversely affects pledgers.
The modification may require the pawnbroker to extend the maturity date of
pawn transactions or waive the collection of pawn service charges which may
accrue after relocation. No relocation may be made which will adversely affect
pledgers to the extent that redemption is unreasonable or impossible due to
the distance between the locations. The commissioner may approve notification
by signs in lieu of notification by mail if no pledgers will be adversely
affected.
(f)
Relocation distances. Distances shall be measured in a
direct line despite travel patterns and natural or manmade obstacles, and
shall be measured from front door to front door. The commissioner may require
a survey to determine distances from the proposed pawnshop location to existing
operating pawnshops. In examining the distance requirements of a proposed
pawnshop, the existence or location of an inactive license will not be considered
in the determination of the distance requirements. An application for relocation
may not be approved unless the eligibility requirements are met.
(1)
If the proposed facility is within a county with a population
of less than 250,000 according to the most recent decennial census, there
is no distance requirement from another operating pawnshop;
(2)
If the proposed facility is within a county with a
population of 250,000 or more according to the most recent decennial census
and:
(A)
if the pawnshop was licensed and was not operating, it
may locate not less than one mile from an operating pawnshop;
(B)
if the pawnshop has been operating continuously at its
current location for at least three years, it may locate within one mile of
its current location regardless of distance from another operating pawnshop;
(C)
if the pawnshop has been in operation, it may locate not
less than one mile from an operating pawnshop.
§85.204.Temporary and Permanent Operation of Facility.
(a)
The pawnshop must commence operation within a period of
six months after the date of approval unless an extension is granted, in writing,
by the commissioner. No more than one six- month extension will be approved
by the commissioner, unless good cause for the extension is shown. At the
end of any approved extension, if the pawnshop has not been opened, the authority
for approval of the pawnshop shall be forfeited.
(b)
The commissioner may approve opening and operating a temporary
facility for an approved application, provided that the facility is within
a one-half mile radius of the approved, permanent site. The operation of the
temporary facility will cease immediately upon the permanent facility being
completed for occupancy. The temporary facility shall not operate longer than
18 months unless extended in writing by the commissioner.
§85.205.Transfer of License.
(a)
Definition. As used in this section, a "transfer of ownership"
occurs whenever an existing owner relinquishes any interest in a licensee
or an entirely new person has obtained an ownership interest in the licensee.
This term also includes any purchase or acquisition of control over more than
5% of the outstanding voting stock of any licensed corporation or of any corporation
which is the parent or controlling stockholder of a licensed corporation.
This term also includes any acquisition of a license by gift, devise, or descent.
(b)
Approval of transfer. No pawnshop license may be sold,
transferred, or assigned without written approval of the commissioner.
(c)
Filing requirements. An application for transfer of a pawnshop
license must be submitted on forms prescribed by the commissioner. The application
for transfer must include the following:
(1)
Application form (Form ADM-10/11). The instructions in
7 TAC §85.202 are applicable to this filing.
(2)
Statutory agent disclosure (Form ADM-13). The instructions
in 7 TAC §85.202 are applicable to this filing.
(3)
Personal affidavit (Form ADM-15/16). Each individual
listed on the license application (ADM-10/11) who is a principal party, except
for a pawnshop employee or an applicant for a pawnshop employee license, of
the transferee must complete this form. The instructions set forth in 7 TAC
§85.202 are applicable to this filing.
(4)
Fingerprints. A complete set of legible fingerprints
shall be provided for each individual having a substantial relationship with
the applicant. An individual has a substantial relationship with an applicant
if it is a "principal party" as that term is defined in 7 TAC §85.102.
An individual who has previously been licensed by the commissioner or a principal
party of an entity currently licensed by the commissioner is not required
to provide fingerprints. The commissioner may require fingerprints of an employee
or another person with some relationship to the applicant if the commissioner
believes that the individual's background history is relevant to the applicant's
eligibility for a license. All fingerprints should be submitted on a format
provided by the agency and approved by the Department of Public Safety and
the Federal Bureau of Investigation. A request for acceptable fingerprint
cards may be made by submitting a completed Form ADM-030.
(5)
Evidence of the transfer of ownership. Documentation
evidencing the transfer of ownership must be filed with the application. This
must include one of the following:
(A)
a copy of the asset purchase agreement when the license
or other assets have been purchased, including a statement relating to the
sale of the license;
(B)
a copy of the stock purchase agreement or other evidence
of a stock transfer; or
(C)
a copy of any document that transferred ownership in a
licensee by gift, devise, or descent, such as a probated will or a court order.
(6)
Financial statement (ADM-17/18/19). The instructions
in 7 TAC §85.202 are applicable to this filing.
(7)
Other required filings. All filings required of new
license applicants pursuant to 7 TAC §85.202 must be filed and completed
by any applicant for transfer of a license. If the applicant is currently
licensed and acquiring another location, the applicant must provide the information
that is unique to the new location. Other information required by this subsection
need not be filed if the information on file with the agency is current and
valid.
(d)
Transferee operating under transferors license. The commissioner
may approve a written agreement whereby a transferor grants a transferee the
authority to operate under the transferor's license pending approval of the
transferee's license application. Within three business days after the date
of sale the written agreement between the transferor and transferee must be
submitted with a request to operate under the transferor's license. The agreement
must provide that the transferor accepts full responsibility to the commissioner
and any customer of the licensed business for any acts of the transferee in
connection with the operation of the business. The written agreement between
the transferor and the transferee must be submitted with a request to operate
under the transferor's license. The agreement may include a provision whereby
the transferee may operate using the transferee's name during the pendency
of the application if the transferee has an existing pawnshop license issued
under this chapter. The agreement shall be for a limited time as provided
in the agreement and in no case may such authority extend beyond 180 days.
The commissioner may deny a request for permission to operate during the pendency
of the application.
(e)
Application filing deadline. An application filed in connection
with a transfer of ownership may be filed in advance but must be filed no
later than ten (10) calendar days following the actual transfer.
§85.206.Processing of Application.
(a)
Initial review. A response to an application will ordinarily
be made within 10 working days of receipt stating that the application is
accepted for filing or stating that the application is incomplete and specifying
the information required for acceptance.
(b)
Application acceptance. An application will not be accepted
until it contains the appropriate fees and substantially all of the items
required in accordance with 7 TAC §§85.202, 85.203, or 85.205 as
appropriate.
(c)
Complete application. An application is complete when it:
(1)
conforms to the statutes, rules, and the commissioner's
published instructions;
(2)
all fees have been paid; and
(3)
all requests for additional information have been
satisfied.
(d)
Competing application. An application in a county with
a population of 250,000 or more will be acted upon based on the chronological
order in which the application was accepted pursuant to Subsection (b) of
this section. A competing application may not be granted until a final ruling
on any preceding competing application has been made.
(e)
Notice of application and protest procedures. A notice
of the application will be mailed to each pawnshop licensee in the county
of the proposed location. The notice will state a date and time, 10 working
days following the date of notice, by which any interested person may request
a hearing. Any pawnbroker who believes that the applicant's proposed pawnshop
will significantly affect that pawnbroker's current business may submit a
sworn petition to be admitted as a party in opposition to an application for
a new or relocated pawnshop. The petition must present the commissioner with
relevant facts designed to show how the protesting pawnshop licensee will
be affected by the approving of the proposed application and the basis for
the protest. Upon a showing that the pawnshop licensee would be significantly
affected by the granting of the license, the commissioner shall admit the
protesting pawnshop licensee as a party. Any person intending to appear, present
evidence, and be heard on a license application may do so only if written
notice of the intention is filed and received by the commissioner as required
in the notice of application. A copy of the written notice shall be delivered
to the applicant and certification of that delivery shall be made to the commissioner
at the time of filing.
(f)
Decision on application. The commissioner may approve or
deny an application.
(1)
Approval. The commissioner shall approve the application
upon payment of the appropriate fees and a finding of the eligibility and
statutory location requirements.
(A)
Eligibility requirements.
(i)
Good moral character. In evaluating an applicant's moral
character the commissioner will consider criminal history information described
in 7 TAC §85.601 and the applicant's conduct and activities as described
in 7 TAC §85.602.
(ii)
A belief that the pawnshop will be operated lawfully and
fairly. In evaluating this standard, the commissioner will consider an applicant's
background and history. If the commissioner questions the applicant's ability
to meet this standard, the commissioner may require further conditions, such
as probation, to favorably consider an applicant for a license.
(iii)
Financial responsibility. In evaluating the financial
responsibility of an applicant, the commissioner may investigate the history
of an applicant and the principal parties of the applicant as to the payment
of debts, taxes, and judgments, if any, and handling of financial affairs
generally.
(iv)
Experience. In evaluating experience, the commissioner
will consider the applicant's background and history as well as the personnel
that the applicant plans to use in the operation and management of the pawnshop.
(v)
General fitness to command the confidence of the public.
The applicant's overall background and history will be considered. Providing
misleading information on the application or failing to disclose information
to the agency may be grounds for denial.
(vi)
Net assets. Net assets are calculated by taking the sum
of current assets and subtracting all liabilities either secured by those
current assets or unsecured. Liabilities not included in the calculation are
those liabilities that are secured by assets other than current assets including
subordinated debt. Debt that is either unsecured or secured by current assets
may be subordinated to the net asset requirement pursuant to an agreement
of the parties providing that assets other than current assets are sufficient
to secure the debt.
(B)
Distance requirement. A pawnshop within a county with a
population of 250,000 or more must be not less than two miles from an existing
pawnshop or if the application is for a relocation it must meet the requirements
in 7 TAC §85.203(f)(2).
(2)
Denial.
(A)
If an application has not been completed within 30 days
after notice of deficiency has been sent to the applicant, the application
may be denied.
(B)
The commissioner may also deny an application when the
applicant fails to demonstrate the eligibility requirements or the applicant
fails to meet the distance requirements.
(g)
Hearing. When an application is denied, the applicant has
30 days from the date of the denial to request a hearing in writing to contest
the denial. Also, upon a proper and timely protest pursuant to subsection
(e), a hearing shall be set. This hearing shall be conducted within 60 days
of the date of the appeal or protest unless the parties agree to an extension
of time or the administrative law judge grants an extension of time pursuant
to the Administrative Procedure Act, Texas Government Code, Chapter 2001 and
7 TAC §9.01 et seq. The commissioner shall make a final decision approving
or denying the license.
(h)
Processing time. The commissioner shall ordinarily approve
or deny a license application within 60 days after the date the application
is complete. The commissioner may take more time if previous competing applications
are on file, the placement of a reinstated expired pawnshop license would
have an impact on the approval of an application, or where other good cause
exists as defined by Texas Government Code, §2005.004 for exceeding the
established time periods in this section.
§85.207.Bond.
The commissioner may require a bond under Texas Pawnshop Act §371.056,
when the commissioner finds that this would serve the public interest. When
a bond is required, the commissioner shall give written notice to the applicant.
Upon failure to submit a bond within 40 calendar days of the date of the commissioner's
notice, the pending application may be denied.
§85.208.Change in Form or Proportionate Ownership.
(a)
Organizational form. If a licensee desires to change the
organizational form of its business (e.g. from sole proprietorship to corporation),
the licensee must advise the commissioner in writing of the change within
ten (10) calendar days by filing the appropriate transfer documents as provided
in 7 TAC §85.205.
(b)
Merger. A merger of a corporate licensee is a change of
ownership and requires the filing of a transfer application pursuant to 7
TAC §85.205. A merger of the parent corporation of a licensee with another
corporation that results in the creation of a new corporate entity requires
a transfer application pursuant to 7 TAC §85.205. A merger of the parent
corporation of a licensee with another corporation that results in the situation
where the surviving corporation is not the existing parent corporation requires
a transfer application pursuant to 7 TAC §85.205. A merger of another
corporation with a beneficial interest beyond the parent corporation only
requires notification within 10 calendar days.
(c)
Proportionate ownership. A mere change in the proportion
of ownership among the current owners does not require the filing of a transfer
application. A change in the proportionate interests of two or more current
owners of pawnshop licenses must be reported in writing.
(d)
Notice deadline. A notice filed in connection with a change
in proportionate ownership may be filed in advance but must be filed no later
than ten (10) calendar days following the actual change.
§85.209.Amendments to Pending Applications.
Each applicant shall provide the commissioner with information supplemental
to that contained in the applicant's original application documents and attachments.
Any action, fact, or information that would require a materially different
answer than that given in the original license application and which relates
to the qualifications for license must be reported to the commissioner within
10 business days after the person has knowledge of the action, fact, or information.
§85.210.Designation of Active or Inactive Status.
(a)
Inactivation of an active license. A licensee may cease
operating a pawnshop and render the license inactive by giving notice of the
cessation of operations to the commissioner not less than 30 days prior to
the anticipated cessation date. Notification must be filed on the license
amendment form (ADM-22). The notice must include a valid mailing address,
the fee for amending the license, a certification that no loans will be made
or collected under this license until it is activated, a notice to pledgors
that pawn loans are being relocated, and a plan ensuring pledged goods are
made available for redemption. If an active license is not being used for
the active operation of a pawnshop, the commissioner may unilaterally place
the license in inactive status.
(b)
Activation of an inactive license. Activation of an inactive
license to a location other than that listed on the license must comply with
the relocation requirements set forth in 7 TAC §85.203.
§85.211.Fees.
(a)
New licenses. A $500 investigation fee is assessed each
time an application for a new license is filed and is non- refundable. In
addition, the applicant is initially required to pay an annual license fee
of $100 that is not prorated but is refundable if the license application
is denied.
(b)
Subsequent licenses. A $250 investigation fee is assessed
each time an application for a new license of an existing licensee is filed
or if the application involves substantially identical principals and owners
of a licensed pawnshop and is non-refundable. In addition, the applicant is
initially required to pay an annual license fee of $100 that is not prorated
but is refundable if the license application is denied.
(c)
License transfers. An investigation fee of $500 for the
first license transfer and $250 on each additional license transfer sought
simultaneously is required and is non-refundable. If the application involves
substantially identical principals and owners of a licensed pawnshop, then
the fee is $250 for the first license transfer.
(d)
Fingerprint checks. The fee to investigate each applicant's
fingerprint record is $40 per set and is non- refundable. This fee must be
paid for each set of fingerprints filed with applications for new licenses
or license transfers.
(e)
Annual Renewal Fee. A $125 annual renewal fee is required
by June 30 each year to keep a license from expiring.
(f)
License amendment. A fee of $25 must be paid each time
a licensee seeks to amend a license by rendering a license inactive, activating
an inactive license, changing the assumed name of the licensee, or relocating
an office. An activation or relocation in a county with a population of 250,000
or more shall require a $250 investigation fee and other fees as may be required
of a new license applicant.
(g)
License duplicate. The fee for a license duplicate is $10.
(h)
Each applicant for a new or relocated license shall pay
$1.00 to the commissioner for each notice of application that is required
to be mailed.
(i)
Costs of hearing. The commissioner or administrative law
judge may assess the costs of an administrative appeal hearing afforded under
7 TAC §85.206(g), including the cost of the administrative law judge,
the court reporter, and agency staff representing the agency at a hearing.
If it is determined that a protest is frivolous or without basis, then the
cost associated with the hearing may be assessed solely to the protesting
party.
(j)
Excess payment of fees. Any excess payment of fees received
by the commissioner may be held to offset anticipated fees that may be owed
by the licensee or applicant.
§85.212.Applications and Notices as Public Records.
Once a license application or notice is accepted by the commissioner,
it becomes a "state record" under Texas Government Code, §441.180(11),
and "public information" under Texas Government Code, §552.002. Certain
information, such as social security numbers, may be protected under the provisions
of the Texas Government Code. Under Texas Government Code, §§441.190,
441.191 and 552.004, the original applications and notices must be preserved
as "state records" and "public information" unless destroyed with the approval
of the director and librarian of the State Archives and Library Commission
under Texas Government Code, §441.187. Under Texas Government Code, §441.191,
the commissioner may not return any original documents associated with a license
application or notice to the applicant or licensee. An individual may request
copies of a state record under the authority of the Texas Government Code,
Chapter 552.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on August
16, 1999.
TRD-9905125
Leslie L. Pettijohn
Commissioner
Office of Consumer Credit Commissioner
Effective date: September 5, 1999
Proposal publication date: July 16, 1999
For further information, please call: (512) 936-7640
Chapter 85.
Rules of Operation for Pawnshops
Subchapter B. Pawnshop License
Subchapter C. Pawnshop Employee License