Menéndez Bill Lets Local Prosecutors Demand Bank Records Without Notice

The text as introduced · 2,460 words

By: Menéndez
S.B. No. 3027

A BILL TO BE ENTITLED

AN ACT

relating to the jurisdiction of district and county attorneys to

prosecute certain consumer protection violations.

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

SECTION 1. Section 17.48, Business & Commerce Code, is

amended by adding the following:

(a) An act to which this section applies is subject to

action by a district or county attorney under Sections 17.58,

17.60, 17.61, and 17.62 to the same extent as the act is subject to

action by the consumer protection division under those sections.

(b) If a district or county attorney, under the authority of

this section, accepts assurance of voluntary compliance under

Section 17.58, the district or county attorney must file the

assurance of voluntary compliance in the district court in the

county in which the alleged violator resides or does business.

(c) If a district or county attorney, under the authority of

this section, executes and serves a civil investigative demand and

files a petition described in Section 17.61(g), the petition must

be filed in the district court in the county where the parties

reside.

(d) It is the duty of the district and county attorneys to

lend to the consumer protection division any assistance requested

in the commencement and prosecutions of actions under this

subchapter.

(e) A district or county attorney, with prior written notice

to the consumer protection division, may institute and prosecute

actions under Section 17.47 to the same extent and in the same

manner as the consumer protection division so long as the consumer

protection division does not intend to institute or prosecute an

action with respect to that matter. A district or county attorney

may institute a suit described by this section on or after the 90th

day after the date the consumer protection division receives

written notice unless before the 90th day after the date the notice

is received the attorney general responds that it is actively

investigating or litigating at least one of the alleged violations

set forth in the notice. The consumer protection division shall

notify the district or county attorney it no longer intends to

actively investigate or litigate an alleged violation within a

reasonable time of such determination. On request, the consumer

protection division shall assist the district or county attorney in

any action taken under this subchapter. If an action is prosecuted

by a district or county attorney alone, he shall make a full report

to the consumer protection division including the final disposition

of the matter. No district or county attorney may bring an action

under this section against any licensed insurer or licensed

insurance agent transacting business under the authority and

jurisdiction of the State Board of Insurance unless first requested

in writing to do so by the State Board of Insurance, the

commissioner of insurance, or the consumer protection division

pursuant to a request by the State Board of Insurance or

commissioner of insurance.

(f) In an action prosecuted by a district or county attorney

under this subchapter for a violation of Section 17.46(b)(28),

three-fourths of any civil penalty awarded by a court must be paid

to the county where the court is located.

(g) A district or county attorney is not required to obtain

the permission of the consumer protection division to prosecute an

action under this subchapter for a violation of Section

17.46(b)(28), if the district or county attorney provides prior

written notice to the division.

SECTION 2. Section 17.61, Business & Commerce Code is

amended to read as follows.

(a) Whenever the consumer protection division believes that

any person may be in possession, custody, or control of the original

copy of any documentary material relevant to the subject matter of

an investigation of a possible violation of this subchapter, an

authorized agent of the division may execute in writing and serve on

the person a civil investigative demand requiring the person to

produce the documentary material and permit inspection and copying.

(b) Each demand shall:

(1) state the statute and section under which the

alleged violation is being investigated, and the general subject

matter of the investigation;

(2) describe the class or classes of documentary

material to be produced with reasonable specificity so as to fairly

indicate the material demanded;

(3) prescribe a return date within which the

documentary material is to be produced; and

(4) identify the persons authorized by the consumer

protection division to whom the documentary material is to be made

available for inspection and copying.

(c) A civil investigative demand may contain a requirement

or disclosure of documentary material which would be discoverable

under the Texas Rules of Civil Procedure.

(d) Service of any demand may be made by:

(1) delivering a duly executed copy of the demand to

the person to be served or to a partner or to any officer or agent

authorized by appointment or by law to receive service of process on

behalf of that person;

(2) delivering a duly executed copy of the demand to

the principal place of business in the state of the person to be

served;

(3) mailing by registered mail or certified mail a

duly executed copy of the demand addressed to the person to be

served at the principal place of business in this state, or if the

person has no place of business in this state, to his principal

office or place of business.

(e) Documentary material demanded pursuant to this section

shall be produced for inspection and copying during normal business

hours at the principal office or place of business of the person

served, or at other times and places as may be agreed on by the

person served and the consumer protection division.

(f) No documentary material produced pursuant to a demand

under this section, unless otherwise ordered by a court for good

cause shown, shall be produced for inspection or copying by, nor

shall its contents be disclosed to any person other than the

authorized employee of the office of the attorney general or

district or county attorney without the consent of the person who

produced the material. The office of the attorney general or

district or county attorney shall prescribe reasonable terms and

conditions allowing the documentary material to be available for

inspection and copying by the person who produced the material or

any duly authorized representative of that person. The office of

the attorney general or district or county attorney may use the

documentary material or copies of it as it determines necessary in

the enforcement of this subchapter, including presentation before

any court. Any material which contains trade secrets shall not be

presented except with the approval of the court in which the action

is pending after adequate notice to the person furnishing the

material.

(g) At any time before the return date specified in the

demand, or within 20 days after the demand has been served,

whichever period is shorter, a petition to extend the return date

for, or to modify or set aside the demand, stating good cause, may

be filed in the district court in the county where the parties

reside, or a district court of Travis County.

(h) A person on whom a demand is served under this section

shall comply with the terms of the demand unless otherwise provided

by a court order.

(i) Personal service of a similar investigative demand

under this section may be made on any person outside of this state

if the person has engaged in conduct in violation of this

subchapter. Such persons shall be deemed to have submitted

themselves to the jurisdiction of this state within the meaning of

this section.

SECTION 3 Section 59.006 of the Texas Finance Code is amended

to read as follows:

(a) This section provides the exclusive method for

compelled discovery of a record of a financial institution relating

to one or more customers but does not create a right of privacy in a

record. This section does not apply to and does not require or

authorize a financial institution to give a customer notice of:

(1) a demand or inquiry from a state or federal

government agency authorized by law to conduct an examination of

the financial institution;

(2) a record request from a state or federal

government agency or instrumentality under statutory or

administrative authority that provides for, or is accompanied by, a

specific mechanism for discovery and protection of a customer

record of a financial institution, including a record request from

a federal agency subject to the Right to Financial Privacy Act of

1978 (12 U.S.C. Section 3401 et seq.), as amended, or from the

Internal Revenue Service under Section 1205, Internal Revenue Code

of 1986;

(3) a record request from or report to a government

agency arising out of:

(A) the investigation or prosecution of a

criminal offense;

(B) the investigation of alleged abuse, neglect,

or exploitation of an elderly or disabled person in accordance with

Chapter 48, Human Resources Code; or

(C) the assessment for or provision of

guardianship services under Subchapter E, Chapter 161, Human

Resources Code;

(4) a record request in connection with a garnishment

proceeding in which the financial institution is garnishee and the

customer is debtor;

(5) a record request by a duly appointed receiver for

the customer;

(6) an investigative demand or inquiry from a state

legislative investigating committee;

(7) an investigative demand or inquiry from the

attorney general of this state or a district or county attorney as

authorized by law other than the procedural law governing discovery

in civil cases;

(8) the voluntary use or disclosure of a record by a

financial institution subject to other applicable state or federal

law; or

(9) a record request in connection with an

investigation conducted under Section 1054.151, 1054.152, or

1102.001, Estates Code.

(b) A financial institution shall produce a record in

response to a record request only if:

(1) it is served with the record request not later than

the 24th day before the date that compliance with the record request

is required;

(2) before the financial institution complies with the

record request the requesting party pays the financial

institution's reasonable costs of complying with the record

request, including costs of reproduction, postage, research,

delivery, and attorney's fees, or posts a cost bond in an amount

estimated by the financial institution to cover those costs; and

(3) if the customer is not a party to the proceeding in

which the request was issued, the requesting party complies with

Subsections (c) and (d) and:

(A) the financial institution receives the

customer's written consent to release the record after a request

under Subsection (c)(3); or

(B) the tribunal takes further action based on

action initiated by the requesting party under Subsection (d).

(b-1) If the requesting party has not paid a financial

institution's costs or posted a cost bond as required by Subsection

(b)(2), a court may not:

(1) order the financial institution to produce a

record in response to the record request; or

(2) find the financial institution to be in contempt

of court for failing to produce the record.

(c) If the affected customer is not a party to the

proceeding in which the record request was issued, in addition to

serving the financial institution with a record request, the

requesting party shall:

(1) give notice stating the rights of the customer

under Subsection (e) and a copy of the request to each affected

customer in the manner and within the time provided by Rule 21a,

Texas Rules of Civil Procedure;

(2) file a certificate of service indicating that the

customer has been mailed or served with the notice and a copy of the

record request as required by this subsection with the tribunal and

the financial institution; and

(3) request the customer's written consent authorizing

the financial institution to comply with the request.

(d) If the customer that is not a party to the proceeding

does not execute the written consent requested under Subsection

(c)(3) on or before the date that compliance with the request is

required, the requesting party may by written motion seek an in

camera inspection of the requested record as its sole means of

obtaining access to the requested record. In response to a motion

for in camera inspection, the tribunal may inspect the requested

record to determine its relevance to the matter before the

tribunal. The tribunal may order redaction of portions of the

records that the tribunal determines should not be produced and

shall enter a protective order preventing the record that it orders

produced from being:

(1) disclosed to a person who is not a party to the

proceeding before the tribunal; and

(2) used by a person for any purpose other than

resolving the dispute before the tribunal.

(e) A customer that is a party to the proceeding bears the

burden of preventing or limiting the financial institution's

compliance with a record request subject to this section by seeking

an appropriate remedy, including filing a motion to quash the

record request or a motion for a protective order. Any motion filed

shall be served on the financial institution and the requesting

party before the date that compliance with the request is required.

A financial institution is not liable to its customer or another

person for disclosure of a record in compliance with this section.

(f) A financial institution may not be required to produce a

record under this section before the later of:

(1) the 24th day after the date of receipt of the

record request as provided by Subsection (b)(1);

(2) the 15th day after the date of receipt of a

customer consent to disclose a record as provided by Subsection

(b)(3); or

(3) the 15th day after the date a court orders

production of a record after an in camera inspection of a requested

record as provided by Subsection (d).

(g) An order to quash or for protection or other remedy

entered or denied by the tribunal under Subsection (d) or (e) is not

a final order and an interlocutory appeal may not be taken.

SECTION 4. The changes in law made by this Act apply only to

a cause of action that accrues on or after the effective date of

this Act. A cause of action that accrues before the effective date

of this Act is governed by the law as it existed immediately before

the effective date of this Act, and that law is continued in effect

for that purpose.

SECTION 5. This Act takes effect immediately if it receives

a vote of two-thirds of all members eleted 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, 2025.