Debanking Limits Skip Any Bank With One Out-Of-State Borrower

The text as introduced · 578 words

89R10918 EAS-F

By: Paxton
S.B. No. 2906

A BILL TO BE ENTITLED

AN ACT

relating to limitations on the termination of banking services by

certain financial institutions.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Title 12, Business & Commerce Code, is amended by

adding Chapter 601A to read as follows:

CHAPTER 601A. LIMITATION ON TERMINATION OF BANKING SERVICES BY

FINANCIAL INSTITUTIONS

Sec. 601A.001. DEFINITIONS. In this chapter:

(1) "Department" means the Texas Department of

Banking.

(2) "Financial institution" means:

(A) a bank chartered under state law, including

Chapter 32, Finance Code;

(B) a savings and loan association chartered

under Chapter 62, Finance Code;

(C) a state savings bank chartered under Chapter

92, Finance Code;

(D) a credit union chartered under Chapter 122,

Finance Code; or

(E) a trust company chartered under the laws of

this state.

Sec. 601A.002. APPLICABILITY. This chapter applies only to

a financial institution or other lender that:

(1) is formed or chartered under the laws of this

state; and

(2) makes loans or other extensions of credit only to

customers:

(A) who are residents of this state; or

(B) that are businesses organized under the laws

of this state.

Sec. 601A.003. NOTICE REQUIRED TO TERMINATE SERVICES. (a)

A financial institution may not terminate a bank account, line of

credit, or other banking instrument of a customer without:

(1) providing notice to the customer and a reason for

the termination; and

(2) subject to Subsection (c), allowing a reasonable

period of at least 30 days after the date of the notice required by

Subdivision (1), for a customer to voluntarily transfer accounts.

(b) A financial institution may not terminate a bank

account, line of credit, or other banking instrument if a customer

has filed a timely appeal as described by Section 601A.004(b).

(c) Subsection (a)(2) does not apply if:

(1) the bank account, line of credit, or other banking

instrument is dormant or has a zero balance;

(2) the bank account has had persistent overdrafts or

is habitually delinquent in payments; or

(3) the financial institution has reason to believe

that the customer is engaged in criminal activity.

Sec. 601A.004. REMEDIES. (a) A customer who receives a

notification that the customer's bank account, line of credit, or

other banking instrument will be terminated may file an appeal with

the department.

(b) An appeal is considered timely if filed not later than

the 10th business day after the date of notice for termination of

services described by Section 601A.003(a)(1).

(c) The department shall review all termination of service

appeals for compliance. The department shall direct a financial

institution to reverse the termination if the department determines

that the termination is not authorized.

(d) A customer may bring an action under this section

against a financial institution only after a determination by the

department.

(e) If the customer proves that a financial institution

violated this chapter, the customer is entitled to recover:

(1) declaratory relief under Chapter 37, Civil

Practice and Remedies Code, including costs and reasonable

attorney's fees under Section 37.009, Civil Practice and Remedies

Code; and

(2) injunctive relief.

Sec. 601A.005. RULEMAKING AUTHORITY. The Finance

Commission of Texas shall adopt rules to enforce this chapter.

Sec. 601A.006. LIMITATION ON EFFECT OF CHAPTER. This

chapter does not subject a financial institution to damages or

other legal remedies to the extent the financial institution is

protected from those remedies under federal law.

SECTION 2. This Act takes effect September 1, 2025.