SB512

Regular Session

Relating to prohibiting the imposition of a monetary fine or penalty for a violation of a money services business's terms of service agreement; providing a civil penalty.

CriticalImmediate action required

Low Cost

Effective:2025-09-01

Enforcing Agencies

Office of the Attorney General

SB512

Critical

Relating to prohibiting the imposition of a monetary fine or penalty for a violation of a money services business's terms of service agreement; provid...

Critical Compliance Urgency

Requires immediate attention

Cost Impact

Low

Effective

2025-09-01

Enforcing Agencies

Office of the Attorney General

Primary Author: Sen. Lois Kolkhorst

89th Texas Legislature

jdkey.com

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: September 1, 2025
Compliance Deadline: September 1, 2025
*Note:* While agreements signed before this date are technically grandfathered, any update to your Terms of Service requiring user acceptance after September 1 triggers immediate compliance for those users.
Agency Rulemaking: No specific rulemaking mandate is included in the bill. Enforcement will be driven by the Attorney General based on the statutory text, meaning you will not get further clarification before the effective date.

Immediate Action Plan

Audit Terms of Service: Immediately identify and excise all penalty/liquidated damages clauses from user agreements before the September 1 cutoff.
Disable Automated Seizures: Reconfigure fraud management software to stop automatic balance deductions for ToS flags on Texas accounts.
Establish Refund Channels: Implement a workflow to push funds to linked bank accounts immediately upon account closure to satisfy the "readily available" requirement.
Unified Compliance Strategy: Decide whether to maintain legacy terms for pre-September users or force a global update. We recommend a clean cut-over to the new terms to avoid the operational risk of tracking dual compliance regimes.

Operational Changes Required

Contracts

You must redraft all customer-facing Terms of Service (ToS) to remove any clauses stipulating monetary fines, penalties, or "liquidated damages" for policy violations. Clauses allowing recovery of *actual* third-party costs (e.g., pass-through chargeback fees) may remain but must be clearly distinguished from punitive fines.

Hiring/Training

Fraud and Risk teams must be retrained immediately. Staff can no longer use balance seizure as a remediation tool for policy violations; they must transition to account termination and refund protocols. Automated systems that deduct penalties must be disabled.

Reporting & Record-Keeping

Establish a specific audit trail for account closures that documents the calculation of the final refund. In the event of an AG inquiry, you must be able to prove that 100% of the user's balance was made "readily available" upon termination.

Fees & Costs

Budget for the loss of revenue previously generated from penalty enforcement. Additionally, the civil penalty for non-compliance is treble damages (300% of the fine imposed) plus the state's attorney fees, creating a high-liability environment for non-compliance.

Strategic Ambiguities & Considerations

"Readily Available" Funds

The statute mandates refunds be made "readily available" but fails to define the timeframe or method. Relying on slow paper checks for digital wallet users creates high regulatory risk.

*Guidance:* Prioritize electronic transfer methods (ACH/RTP) to mitigate consumer complaints that trigger AG investigations.

Fines vs. Administrative Fees

The law prohibits "fines." It does not explicitly ban administrative fees. However, rebranding a punitive fine as a flat "investigation fee" is a high-risk strategy likely to be challenged by the AG as a circumvention of the statute.

Criminal Proceeds vs. Policy Violations

The law applies to *Terms of Service violations*. It is silent on seizing funds derived from clear criminal activity (e.g., money laundering).

*Guidance:* Ensure your legal team distinguishes clearly between seizing criminal proceeds (governed by federal/state forfeiture laws) and penalizing a user for a non-criminal policy breach (e.g., using a personal account for business).

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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.

Legislative Timeline

This bill's path through the Texas Legislature

TopicsBusiness & Commerce Business & Commerce--general Civil Remedies & Liabilities Financial Financial--general

Official Analysis

View HRO Analysis View All Bill Documents

Senate Authors

Sen. Lois KolkhorstRepublican · Primary Author

House Sponsor

Rep. Mike SchofieldRepublican · Primary Sponsor

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 Sen. Lois Kolkhorst

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Frequently Asked Questions

Common questions about SB512

What does Texas SB512 do?

Effective September 1, 2025, Texas Money Transmission Licensees are strictly prohibited from imposing monetary fines or penalties on customers for violating Terms of Service (ToS). While you retain the right to terminate accounts for policy violations, you must refund all user balances immediately or face aggressive civil penalties enforced by the Attorney General. Implementation Timeline Effective Date: September 1, 2025 Compliance Deadline: September 1, 2025 Note: While agreements signed before this date are technically grandfathered, any update to your Terms of Service requiring user acceptance after September 1 triggers immediate compliance for those users.

Who authored SB512?

SB512 was authored by Texas Senator Lois Kolkhorst during the Regular Session.

When was SB512 signed into law?

SB512 was signed into law by Governor Greg Abbott on June 20, 2025.

Which agencies enforce SB512?

SB512 is enforced by Office of the Attorney General.

How urgent is compliance with SB512?

The compliance urgency for SB512 is rated as "critical". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of SB512?

The cost impact of SB512 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does SB512 address?

SB512 addresses topics including business & commerce, business & commerce--general, civil remedies & liabilities, financial and financial--general.

Legislative data provided by LegiScanLast updated: November 25, 2025

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