The Office of the Secretary of State (hereinafter referred to as "the Office") proposes to reorganize Chapter 87, relating to notaries public, by proposing the repeal of 1 TAC §§87.1 - 87.7, 87.10, 87.11, 87.20 - 87.26, 87.30, 87.40 - 87.44, 87.50, 87.60 - 87.62, and 87.70 and the concurrent proposal of new §§87.1 - 87.4, 87.10 - 87.15, 87.20 - 87.22, 87.30 - 87.35, 87.40 - 87.44, 87.50 - 87.54, 87.60 - 87.63, 87.70, 87.71. The repeal and replacement of Chapter 87 is proposed to reorganize the chapter, update outdated language, and to conform to the statutory revisions to the Government Code enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July 1, 2018, (hereinafter referred to as "HB 1217").

In addition to the general changes noted above, the following specific changes are proposed:

Section 87.1 of the proposed rules sets forth definitions of key terms used throughout the amended subchapter.

Section 87.2 of the proposed rules sets forth requirements for an applicant to be commissioned as a traditional notary public.

Section 87.3 of the proposed rules sets forth the process for electronic submission of a traditional notary public application.

Section 87.4 of the proposed rules sets forth the requirements for an applicant to be commissioned as an online notary public.

Section 87.10 of the proposed rules provides the eligibility requirements for a notary public.

Section 87.11 of the proposed rules provides the eligibility requirements specific to an online notary public.

Section 87.12 of the proposed rules sets forth the requirements for the commissioning of an escrow officer who resides in an adjacent state.

Section 87.13 of the proposed rules sets forth the process by which a traditional notary public commission is issued by the secretary of state.

Section 87.14 of the proposed rules sets forth the process by which an online notary public commission is issued by the secretary of state.

Section 87.15 of the proposed rules sets forth the process for renewal of commission.

Section 87.20 of the proposed rules sets forth the process by which an employee of a state agency can be commissioned as a notary without bond.

Section 87.21 of the proposed rules sets forth the requirements for notaries without bond who change their employment status.

Section 87.22 of the proposed rules sets forth the requirements for notaries without bond.

Section 87.30 of the proposed rules sets forth the procedures for rejection of an application and for revocation of a notary public commission.

Section 87.31 of the proposed rules sets forth the violations which constitute good cause for the office to take disciplinary action against a notary public.

Section 87.32 of the proposed rules specifies the process for submitting a complaint against a notary.

Section 87.33 of the proposed rules sets forth the procedures followed by the office when a complaint is submitted.

Section 87.34 of the proposed rules sets forth the procedures for and range of disciplinary actions by the office taken against a notary in response to a complaint.

Section 87.35 of the proposed rules sets forth specifies when the office can take disciplinary action against a notary public.

Section 87.40 of the proposed rules sets forth the procedures to be followed when performing a traditional notarization.

Section 87.41 of the proposed rules sets forth the procedures to be followed when performing an online notarization.

Section 87.42 of the proposed rules sets forth the circumstances under which a notary may refuse a request for notarial services.

Section 87.43 of the proposed rules sets forth the circumstances under which an online notary public may refuse a request for notarial services.

Section 87.44 of the proposed rules sets forth the requirements for a notary seal.

Section 87.50 of the proposed rules sets forth the restrictions to be followed when determining which personal information can be recorded in the notary record book.

Section 87.51 of the proposed rules sets forth the requirements for a notary record book.

Section 87.52 of the proposed rules sets forth the requirements of a notary public to respond to requests for copies of their record book.

Section 87.53 of the proposed rules sets forth the consequences for failure to respond to a request for public information.

Section 87.54 of the proposed rules sets forth the requirements for retaining the notary record book.

Section 87.60 of the proposed rules sets forth the requirements for and process to change a notary’s official address with the office.

Section 87.61 of the proposed rules sets forth the process by which a notary can update the name under which the notary is commissioned.

Section 87.62 of the proposed rules sets forth the process by which a notary obtains a new commission.

Section 87.63 of the proposed rules sets forth the process for an online notary public to update the notary’s electronic signature and seal.

Section 87.70 of the proposed rules sets forth the requirements to be followed by an online notary public to perform identity proofing and credential analysis.

Section 87.71 of the proposed rules sets forth the requirements for the online notarization system used by an online notary public.

FISCAL NOTE

Briana Godbey, Legal Manager of the Business and Public Filings Division, has determined that for each year of the first five years that the sections are in effect, the expected fiscal impact on state government is estimated income of approximately $5,000 per year for the first four years and $5,000 - 10,000 in subsequent years, depending on the number of online notaries, as a result of enforcing or administering the rules as proposed. There are no expected fiscal implications for local government as a result of enforcing or administering the proposed rules and no anticipated effect on local employment or the local economy.

PUBLIC BENEFIT

Ms. Godbey has also determined that for each year of the first five years the sections are in effect the public benefit anticipated as a result of enforcing or administering the sections as proposed will be to implement the statutory provisions HB 1217 and to clarify the online notarization process. Additionally, the rules reorganize and clarify provisions related to all notaries public which will have the effect of providing clearer guidance to the over 425,000 notaries public commissioned in Texas.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES.

As required by Government Code §2006.002(c), the agency has determined that the proposed chapter may have an adverse economic effect on approximately 100 notaries per year, most of which may work as part of a small or micro business. Notaries fall within the legal industry on the NAICS chart. There are approximately 12,921 businesses in that industry in Texas and approximately 12,480 are small businesses. There will be a $50 application fee associated with the cost of compliance which will not vary between large businesses and small or micro businesses.

The application fee of $50 is associated with the application for appointment as an online notary. The fee is set to defray the costs associated with the development and maintenance of the new online commissioning system, website and educational changes, and staff to answer questions. While there is a cost associated with applying to be commissioned as an online notary public, the choice to become an online notary public is optional and there are not expected to be a high percentage of notaries who will seek to be commissioned as an online notary because of the technological requirements associated with these types of notarizations. Virginia was the first state in the nation to have online notaries and during the first six years after implementation, only .14% of the total notaries opted to also be commissioned as an online notary public. If the same trend follows in Texas, it is expected that by the end of six years, we will have approximately 600 online notaries, which equates to about 100 new online notaries being commissioned each year.

In accord with Government Code §2006.002(c-1), the agency has considered other methods to implement HB 1217 that will also minimize any adverse impact on small and micro businesses. The other methods considered by the agency to minimize any adverse impact on small and micro businesses include: (i) establishing separate commissioning requirements for small businesses and (ii) exempting small and micro businesses from the commissioning requirements.

For the following reasons, both alternate methods have been rejected. HB 1217 requires that all individuals seeking to be commissioned as an online notary public apply through the secretary of state. It would be contrary to HB 1217 to make exceptions or exemptions to the application requirement for individuals who work for small or micro businesses. Additionally, as almost all notary businesses under the legal industry are small businesses, it would negate the collection of any fee to waive or reduce the fee for small or micro businesses and HB 1217 makes no such distinction, nor does it provide for a tiered fee schedule.

The agency, after considering the purpose of the authorizing statute, does not believe it is legal or feasible to waive or modify the statutorily mandated requirements of the proposed chapter for small and micro businesses. There is no anticipated fiscal impact on rural communities.

Government Growth Impact Statement

Finally, Ms. Godbey has determined that for each year of the first five years the sections are in effect, the rules will have the following effect on government growth. The proposed changes will not create or eliminate any government programs and will not create or eliminate any employee positions. Additionally, the proposed changes will not have an effect on appropriations to the agency. The new rules do set an application fee of $50 which will be paid to the agency and deposited in General Revenue. The proposed changes do include new rules; therefore, by definition, the proposed changes create new regulations. The new regulations provide for implementation of the online notary public application and notarization process. The proposed changes do not expand, limit, or repeal any existing regulations, though the rules are renumbered and modernized. Additionally, the proposed changes neither increase nor decrease the number of individuals subject to the applicability of the rules. The rules implement the online notarization process and require all individuals who want to provide online notarizations to apply for a separate online commission. However, in order to be an online notary one must already be a commissioned notary public and therefore the proposed rules are not expanding or limiting the individuals subject to the rules. The proposed rules are not anticipated to have a significant effect on the state’s economy.

COMMENTS

Comments on the proposed repeal and replacement of Chapter 87 may be submitted in writing to: Briana Godbey, Office of the Secretary of State, Business and Public Filings Division, P.O. Box 13697, Austin, Texas 78711-3697 or bgodbey@sos.texas.gov. Comments must be received not later than 12:00 noon, Friday, June 1, 2018.

STATUTORY AUTHORITY

The repeal of 1 TAC §§87.40 - 87.44 is proposed under the authority of §406.023 of the Government Code which authorizes the secretary of state to adopt rules to administer and enforce Subchapter A, Chapter 406 of the Government Code and §406.103 of the Government Code, which authorizes the secretary of state to adopt rules necessary to implement Subchapter C, Chapter 406 of the Government Code, including rules to facilitate online notarizations.

Cross reference:

Subchapter A, Chapter 406, Government Code

Subchapter C, Chapter 406, Government Code