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House Committee on Business and Industry

House Committee on Business and Industry. House Bill 2002 - Implementation of Closed Account Notification System Texas Department of Banking April 22, 2008. Statutory Mandate. Business and Commerce Code § 35.595

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House Committee on Business and Industry

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  1. House Committeeon Business and Industry House Bill 2002 - Implementation of Closed Account Notification System Texas Department of Banking April 22, 2008

  2. Statutory Mandate • Business and Commerce Code §35.595 • Requires financial institutions to notify check verification companies of closed accounts if a customer gives proper notice and they are a victim of an offense under Penal Code §32.51. • Finance Code §11.309 • Authorizes Finance Commission to adopt rules to enable financial institutions or check verification entities to comply with requirements of Business and Commerce Code §35.595. • Authorizes Commissioner to charge check verification entities a fee not to exceed $100 to register with Texas Department of Banking. • Requires Commissioner to establish an electronic notification system.

  3. Texas Administrative Code Chapter 35 • Finance Commission adopted Chapter 35 of Texas Administrative Code on December 17, 2007. • Provides for the registration of check verification entities. • Establishes procedures for a customer to have their financial institution report a compromised account. • Details the information needed in a sworn statement and authorization form.

  4. -Closed Account Notification System - CANS • Developed to allow financial institutions to send information to Check Verification Entities (CVEs) when requested by a customer who is a victim of an offense under §32.51, Penal Code. • Participants include financial institutions. A financial institution includes a bank, savings association, savings bank, or credit union maintaining an office, branch, or agency office in the State of Texas. • The system uses a secure website to protect the information during transmission. • Daily data file is securely transferred to the check verification entities using FTPS or SFTP. • The Department’s database only maintains truncated information for financial institutions to have an audit trail.

  5. -Closed Account Notification System-CANS

  6. Department Initiatives • Article in Winter Edition of Texas Bank Report • Letters announcing program to state-chartered banks issued in February 2008 • Letters to federal and state regulators with financial institutions operating in Texas issued in February 2008 • Section of Department web site dedicated to CANS • Access to CANS • Sworn Statement and Authorization forms • Laws and rules • Frequently asked questions for banks and consumers

  7. CANS Publicity • Texas Credit Union Department • Link on their web site for CANS • Texas Savings and Mortgage Lending • Link on their web site for CANS • Contact made with financial institutions who had not enrolled • The trade associations for banks and credit unions have publicized the CANS system through various medias, including web site links, magazine and newsletter articles, and mass email notifications to members.

  8. Check Verification Entities • Five companies have registered • Data Payment Protection Services, Inc. (St. Petersburg, FL) • Certegy Check Services, Inc. (St. Petersburg, FL) • Network Collection Services, Inc. (Houston, TX) • TeleCheck Services, Inc. (Houston, TX) • Systems Techniques & Programming, Inc. (Abilene, TX) As of April 8, 2008

  9. Financial Institutions Enrolled CANS data as of April 11, 2008

  10. How is Information Used by CVEs • Check verification companies use the account number and routing number provided through CANS to decline checks. They do not decline based on a drivers license number. • If a merchant verifies a check by providing a drivers license number and account number, the check verification company will use both to search their database. • A check can be declined for many reasons, including the following: • An account reported through CANS • Debt associated with the driver’s license number presented • Risk • Predictive scoring • If a fraudulent check is presented with the name, driver's license number, and account number all from different persons – what submitted information triggers the check rejection at the merchant level? • A search of the CVEs databases using only the drivers license number and bank routing/account number provided by the merchant is conducted. If either item matches to a returned item, or raise flags in a CVEs risk system, the item may be declined.

  11. Compromised Accounts Reported CANS data for the period of March 1, 2008 to April 11, 2008

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