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HB3805

Regular Session

Relating to certain enforcement powers of the banking commissioner regarding the regulation of money services businesses.

Critical
Low Cost
Effective:2025-06-20
Enforcing Agencies

Texas Department of Banking

HB3805
Relating to certain enforcement powers of the banking commissioner regarding the regulation of money services businesses.
Critical Urgency
Unanimous Passage
House Vote135 - 0
YEA
100% in favor135 voting
Senate Vote31 - 0
YEA
100% in favor31 voting
Cost Impact
Low
Effective
2025-06-20
Enforcing Agencies
Texas Department of Banking
Primary Author: Rep. Stan Lambert
89th Texas Legislature
jdkey.com
01

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: June 20, 2025 (Law is currently active; passed with supermajority).
  • Compliance Deadline: Immediate. You must account for these disqualification standards in current hiring and retention practices today.
  • Agency Rulemaking: The Commissioner must determine the fee amount for "Applications for Release" (reinstatement). Expect agency guidance or administrative rules to clarify the specific definition of "participating in the affairs" of a licensee regarding third-party consultants.

Immediate Action Plan

  • Audit Key Personnel: Immediately screen all "Key Individuals" and "Control Persons" against public regulatory order databases.
  • Update Background Checks: Revise hiring criteria to disqualify candidates with deferred adjudication for felonies involving dishonesty, as they are now statutorily barred.
  • Revise Executive Contracts: Insert notification clauses requiring executives to disclose receipt of any *proposed* removal order or notice of investigation within 24 hours.
  • Check Fidelity Bonds: Confirm that the issuance of a Removal Order triggers the termination clause of your fidelity bond regarding the specific employee to prevent coverage gaps.

Operational Changes Required

Contracts

  • Employment Agreements: Update "Termination for Cause" clauses for all staff to explicitly include "issuance of a Removal or Prohibition Order by a state or federal regulatory agency."
  • Vendor/Partner Agreements: Amend contracts with third-party agents or partners who act as "control persons." Include a clause permitting immediate contract termination if a principal of the vendor becomes subject to a regulatory prohibition order.

Hiring/Training

  • Enhanced Screening: Update background check protocols to flag "deferred adjudication." Under Sec. 152.412(a), deferred adjudication for a felony involving dishonesty or breach of trust is legally treated as a conviction.
  • Termination Protocols: Establish a specific HR workflow to immediately revoke physical and digital access if the Department of Banking serves a Removal Order. Delaying removal after service exposes the entity to further penalties.

Reporting & Record-Keeping

  • Confidential Filing: If served with a Removal Order regarding an employee, retain the document in a confidential compliance file separate from the standard personnel file to demonstrate immediate adherence to the prohibition.
  • Whistleblower Workflows: Align internal fraud reporting with legal counsel; internal findings of "false entries" can now trigger state-level industry bans for the accused employee.

Fees & Costs

  • Reinstatement Fees: A new fee will be assessed for any individual applying for relief from a ban (amount TBD by Commissioner).
  • Insurance Impact: Review D&O and E&O policies. Defense costs for regulatory actions based on "personal dishonesty" or "willful disregard" are frequently excluded from standard coverage.

Strategic Ambiguities & Considerations

  • "Participating in the Affairs": The statute prohibits a banned person from "participating in the affairs" of a licensee but does not define the scope. It is unclear if this bans a former executive from serving as an independent IT consultant or marketing vendor. Assume a broad interpretation until the Department issues guidance.
  • "Credible Evidence" Threshold: The Commissioner may issue orders based on "examination or other credible evidence." The standard for what constitutes "credible evidence" outside of a formal examination report is undefined and grants the agency significant discretion that may be tested in administrative hearings.

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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

02

Legislative Timeline

This bill's path through the Texas Legislature

Filed
Mar 5, 2025
Passed House
Apr 30, 2025
Passed Senate
May 19, 2025
Signed
Jun 20, 2025
TopicsBusiness & CommerceBusiness & Commerce--generalFinancialFinancial--generalBanking Commissioner of TexasCrimesCrimes--miscellaneousOccupational RegulationOccupational Regulation--other Trades & Professions
03

House Authors

Rep. Stan LambertRepublican · Primary Author

Senate Sponsors

Sen. Nathan JohnsonDemocrat · Primary Sponsor
Cosponsors (1)

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

Related Legislation

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More from Rep. Stan Lambert

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Related by Topic

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Quick Reference

Frequently Asked Questions

Common questions about HB3805

Q

What does Texas HB3805 do?

HB3805 grants the Texas Banking Commissioner immediate, expanded authority to issue Removal and Prohibition Orders (industry bans) against any Money Services Business (MSB) employee, control person, or key individual for fraud, dishonesty, or intentional regulatory violations. This law effectively allows the state to blacklist individuals from the entire Texas state-chartered financial system based on "credible evidence" or deferred adjudication for felonies, without waiting for a criminal conviction. Implementation Timeline Effective Date: June 20, 2025 (Law is currently active; passed with supermajority).

Q

Who authored HB3805?

HB3805 was authored by Texas Representative Stan Lambert during the Regular Session.

Q

When was HB3805 signed into law?

HB3805 was signed into law by Governor Greg Abbott on June 20, 2025.

Q

Which agencies enforce HB3805?

HB3805 is enforced by Texas Department of Banking.

Q

How urgent is compliance with HB3805?

The compliance urgency for HB3805 is rated as "critical". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

Q

What is the cost impact of HB3805?

The cost impact of HB3805 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does HB3805 address?

HB3805 addresses topics including business & commerce, business & commerce--general, financial, financial--general and banking commissioner of texas.

Legislative data provided by LegiScanLast updated: November 25, 2025

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