- within Strategy and Insolvency/Bankruptcy/Re-Structuring topic(s)
On September 1, the Texas Department of Banking issued a consent order resolving allegations that an escrow service provider conducted money transmission activity in Texas without obtaining a license. The Department alleged that the conduct violated Chapter 152 of the Texas Finance Code, the Texas Money Services Modernization Act. The company agreed to the order without admitting any violation of state or federal law or regulation.
According to the order, the company provided escrow services involving the receipt of funds from purchasers and subsequent transmission of those funds to sellers. Under the order, the company must cease conducting money transmission in Texas unless it is properly licensed or otherwise exempt from licensure. The company also must pay at least $10,000 in administrative penalties through four quarterly installments. If it fails to make a required installment, the remaining balance of the full $20,716.22 penalty becomes due.
Putting It Into Practice: The action continues a broader trend of state regulators scrutinizing licensing and compliance obligations across consumer finance and money transmission (previously discussed here and here). Companies offering escrow, payment, or similar services should evaluate whether their transaction flows constitute money transmission under applicable state law, confirm that any claimed licensing exemptions apply to their specific activities, and update licensing and compliance procedures as necessary.
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