Texas Commission of Licensing & Regulation Commission Meeting Update - January 19, 2021

TEXAS COMMISSION OF LICENSING AND REGULATION

COMMISSION MEETING UPDATE – January 19, 2021

By: Brian Edward Walters

The Walters Firm PLLC

1101 Navasota St., Suite 1

Austin, TX 78702

(512) 236-1114

            As many in the industry are aware, the Texas Commission of Licensing and Regulation (“Commission”), the governing body of the Texas Department of Licensing and Regulation (“TDLR”), held its January meeting today. This article provides a review of the topics pertinent to Towing and Storage law under Texas Sunset Advisory Commission (“Sunset Commission”) review and the Commission’s plans for the current legislative session.

            TDLR recently underwent review by the Texas Sunset Advisory Commission. This review produced certain recommendations that affect the Towing and Storage industry and, in particular, the Department’s ability to take actions against licensees, require new disclosures, and order licensees to take actions. A list of certain Sunset Commission recommendations and the topics covered in this article may be found below:

1. 1.Removal of Subjective Licensure Provisions;
2. 2.Disclosure of Financial and Controlling Information; and
3. 3.Ordering Refunds.

Recommendation 7.1 - Removal of Subjective Licensure Provisions.

            The Sunset Commission adopted recommendation 7.1, which provides for the removal of the subjective licensing requirements. This recommendation found that qualifications for licensure should be clear, objective, and not unreasonably restrict entry into practice. The recommended changes would remove the outdated provision allowing TDLR to determine license eligibility based on an applicant’s perceived lack of “honesty, trustworthiness, and integrity.” It would allow TDLR to instead rely on an applicant’s criminal history under Chapter 53 of the Texas Occupations Code.

Many licensees will be familiar with these so-called “subjective” requirements from the statutory language requiring licensees to have and practice with “honesty, trustworthiness, and integrity” and that they have “good moral character.” While it is clear that TDLR wishes for its licensees to have these characteristics, the problem with these terms is that they are, by nature, subjective, vague, and subject to differing interpretations.

For years, TDLR has brought administrative cases against licensees and sought license revocations for what a prosecutor interpreted as dishonest conduct. Rather citing a standard of behavior or clear language of a law prohibiting certain conduct, prosecutors were free to interpret licensee behavior as dishonest, thereby sweeping in broad range of offenses that were not codified into law. This created a situation wherein a licensee would have to abide by a “what would TDLR do?” standard that the Sunset Commission found unacceptable. In other words, and to quote the Sunset Commission’s report directly, “this statutory language is inappropriately subjective and vague, and could create inconsistent barriers to licensure for otherwise qualified applicants.”

Brian’s Take: This is a welcome and necessary change. While it sounds odd to advocate for the removal of honesty, trustworthiness, integrity, and good moral character from a licensing statute, the Sunset Commission’s findings were correct and in line with current law. Standards for licensure need to be explicitly spelled out so that any licensee can understand and abide by those standards. Additionally, if certain conduct is to be deemed a bar to licensure (or grounds for revocation or suspension of a license), that conduct needs to be identifiable to every licensee and applicant. This conforms with basic concepts of fair notice and fair play. This proposed change will not eliminate prosecutorial discretion, but it will prevent at least one area of potential overreach by TDLR and its staff.

Recommendation 7.2 – Disclosure of Financial or Controlling Information.

            The Sunset Commission also adopted recommendation 7.2, which would allow TDLR to adopt rules requiring certain license applicants to disclose (i) the name of the business; (ii) as well as each person who has any form of financial investment in the business; (iii) the percentage of the investment in the business; and (iv) other financial interest information. Examples of individuals that this requirement would cover include:

1. i.Officers;
2. ii.Directors;
3. iii.Partners;
4. iv.“Managing employees;”
5. v.Owners; and
6. vi.Other persons with a right to control the owner.

These additional disclosure requirements far exceed the current disclosures necessary for a license application.

Brian’s Take: This proposed change requires no reading between the lines. These changes are targeted at “bad actors,” including other TDLR licensees who have had their licenses revoked, and seeks to keep them from re-entering a licensed industry by (i) obtaining a license through an associated person; or (ii) obtaining a license through a new business entity (such as forming a new limited liability company, corporation, or other entity).

One potential problem is that this language, as written above, contains terms that are not defined by the Texas Business Organizations Code. Specifically, the “managing employees” term, which is likely a mistaken reference to a manager of a limited liability company, is vague. Additionally, “other persons with a right to control the owner” is similarly vague. While I do not object to these additional disclosures per se, exactly who needs to be disclosed in a license application should be very clear in order to avoid an inadvertent failure to disclose charge being brought by the Department.

Recommendation 7.5 – Ordering Refunds.

            The Sunset Commission also adopted recommendation 7.5, which would give TDLR the authority to require a licensee to issue a refund to a consumer. The amount of the refund would be limited to the amount paid by a consumer to the licensee, without inclusion of any additional consideration of damages. Any requirement to issue a refund could be in lieu of or in addition to other sanctions ordered against a licensee.  

Brian’s Take: This proposal would allow TDLR to “take more effective action when a consumer harm can be quantified and offer relief to consumers without the need for separate civil court action to recover this amount.” However, this is a massive expansion of TDLR’s power and applies, based on the language as written, to every licensing program – including tow operators, towing companies, and vehicle storage facilities.

For purposes of towing and storage, this would allow TDLR to pursue three remedies (i) administrative penalties; (ii) sanctions (such as revocation or suspension); and (iii) ordering refunds of amounts paid by a consumer. This change would create a dual remedy, one civil and one administrative, wherein a consumer could both file for a tow hearing in justice court (or a lawsuit under §2308.404) as well as complain to TDLR and seek a refund. This presents a very real situation where a towing company or vehicle storage facility would have to defend a case three times: once in a tow hearing, once in a civil lawsuit, and finally again before TDLR or at the State Office of Administrative Hearings.

Importantly, the ability for TDLR to order a refund based on a violation of Texas law (or an administrative rule) is far broader than a probable cause / tow hearing in justice court. Additionally, and unlike a tow hearing, a consumer would not be required to pay a filing fee, present its claims, and prevail in civil court in order to seek his or her refund. A complainant could simply file a complaint with TDLR and let TDLR foot the bill for prosecution. Finally, as many licensees are aware, a proceeding before TDLR can take far more time than a tow hearing and such proceedings are not limited to a tow hearing’s swift filing deadline and swift hearing date. TDLR proceedings can drag on for months or years.

In my view this change is unnecessary and creates additional needless litigation. Here, TDLR is creating an unnecessary remedy because the ability to seek a refund is already provided twice in the Texas Occupations Code. First, a vehicle owner has the right to a tow hearing under Section 2308.452 of the Texas Towing and Booting Act (“TTBA”). Second, a vehicle owner may also file a suit to recover towing fees, damages, and, potentially, treble damages and a $1,000 penalty under Section 2308.404 of the TTBA. Given these two existing remedies, there is no need for TDLR to provide a third solution.

Second, this change creates additional needless litigation. Each tow already has two chances to be brought in civil court in Texas (under 2308.452 – subject to jurisdiction issues - and 2308.404). Additionally, violation of the law or administrative regulations can already be prosecuted by TDLR’s Enforcement Division. These systems are more than adequate to provide for a civil remedy for an aggrieved consumer and allow administrative enforcement of existing laws and rules by TDLR.

By granting TDLR the ability to order a refund, the legislature would also massively incentivize consumer complaints. A consumer could file a complaint, even if groundless or brought for harassment purposes, simply for the opportunity to obtain a free review of the case by TDLR and to see if TDLR could get the consumer paid. Additionally, and unlike a proceeding in civil court, there are extremely limited remedies for a licensee that is the subject of the complaint to recover its costs and expenses. This creates a situation where there is not a fair fight – the licensee would be forced to deal with the complaint, potentially being required to retain a lawyer to do so, all while the complainant’s legal expenses are paid for by Texas taxpayers.

CONCLUSION

            While some Sunset Commission recommendations are helpful and clarify the law, others incentivize consumer complaints and create needless and redundant remedies. Additionally, the new disclosure requirements, if enacted, would bar any person from the towing and storage industry that TDLR considers a bad actor or a person related to a bad actor. The Sunset Commission’s recommendations, and the bills based thereon, need to be thoroughly reviewed. Additionally, industry advocates like Southwest Tow Operators and its members need to be ready to participate and help legislators find the right language for these bills. Without this participation and advocacy, bad language will become bad laws that affect the entire industry.

Staying Ahead

Legislative Update October 29, 2020

Legislative Update
October 29, 2020

TDLR Opens Rules For Review

TEXAS DEPARTMENT OF LICENSING & REGULATION

The Texas Department of Licensing and Regulation (Department) is reviewing the Tow Trucks, Operators, and Vehicle Storage Facilities program rules located at Title 16, Texas Administrative Code, Chapters 85 and 86, for re-adoption, revision, or repeal. This rule review is required every four years.

The Notice of Intent to Review was published in the Texas Register on October 9, 2020 (45 TexReg 7281), as part of a combined notice for several other programs undergoing simultaneous review.

The Department will determine whether the reasons for adopting or readopting these rules continue to exist by answering the following questions for each rule:

Is it obsolete?

Does it reflect current legal and policy considerations?

Is it in alignment with the current procedures of the Department?

The Department encourages anyone interested in the Tow Trucks, Operators, and Vehicle Storage Facilities program to review the Notice of Intent to Review and the current program rules for Towing and Vehicle Storage Facility posted on the Department’s website.

Comments may be submitted electronically on the Department’s website at https://ga.tdlr.texas.gov:1443/form/gcerules (select the appropriate chapter name for your comment).

Deadline to submit comments—November 9, 2020TEXAS DEPARTMENT OF LICENSING & REGULATION

The Texas Department of Licensing and Regulation (Department) is reviewing the Tow Trucks, Operators, and Vehicle Storage Facilities program rules located at Title 16, Texas Administrative Code, Chapters 85 and 86, for re-adoption, revision, or repeal. This rule review is required every four years.

The Notice of Intent to Review was published in the Texas Register on October 9, 2020 (45 TexReg 7281), as part of a combined notice for several other programs undergoing simultaneous review.

The Department will determine whether the reasons for adopting or readopting these rules continue to exist by answering the following questions for each rule:

Is it obsolete?

Does it reflect current legal and policy considerations?

Is it in alignment with the current procedures of the Department?

The Department encourages anyone interested in the Tow Trucks, Operators, and Vehicle Storage Facilities program to review the Notice of Intent to Review and the current program rules for Towing and Vehicle Storage Facility posted on the Department’s website.

Comments may be submitted electronically on the Department’s website at https://ga.tdlr.texas.gov:1443/form/gcerules (select the appropriate chapter name for your comment).

Deadline to submit comments—November 9, 2020

STO legislative update - September 2020