The Office of the Secretary of State (hereinafter referred to as "the Office") adopts the repeal of current of Chapter 87, relating to notaries public, which includes §§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. The Office also concurrently adopts new Chapter 87, relating to notaries public, which includes §§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, and 87.71. The repeal of current Chapter 87 and new §§87.2 - 87.4, 87.10 - 87.15, 87.20 - 87.22, 87.30 - 87.35, 87.40 - 87.42, 87.44, 87.50 - 87.54, 87.60 - 87.63, 87.70, and 87.71 are adopted without changes to the proposed text as published in the June 29, 2018, issue of the Texas Register (43 TexReg 4271) and will not be republished. New §87.1 and §87.43 are adopted with changes to the proposed text as published in the June 29, 2018, issue of the Texas Register (43 TexReg 4271) and will be republished.

The repeal and replacement of Chapter 87 is adopted to reorganize the chapter, update outdated language, and to conform to the statutory revisions to the Government Code enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July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"). The adopted rules provide guidance to the public regarding the process and requirements for being commissioned as an online notary public and for performing online notarizations.

Three sets of comments were received, relating to the adoption of Chapter 87.

Kal Tabbara, President of American Association of Notaries, had one comment regarding the proposed rules. Mr. Tabbara expressed concern that §406.110(b) of the Texas Government Code conflicted with §87.41(g) of the proposed rules, and that §406.110(g) of the Texas Government Code requires the notary and principal to see and hear each other during the identity verification process. Section 406.110(b) of the Texas Government Code requires an online notary public to "verify the identity of a person creating an electronic signature at the time that the signature is taken by using two-way video and audio conference technology..." It further provides that: identity "may be verified by: (1) the online notary public's personal knowledge of the person creating the electronic signature; or (2) each of the following: (A) remote presentation by the person creating the electronic signature of a government-issued identification credential, including a passport or driver's license, that contains the signature and a photograph of the person; (B) credential analysis of the credential described by Paragraph (A); and (C) identity proofing of the person described by Paragraph (A)." Tex. Gov't Code §406.110(b)(1) - (2).

Section 87.41(g), on the other hand, specifies what must be included in the record of the online notarial act. At minimum it is required that the recording include: "(1) confirmation by the notary public that the principal has successfully completed identity proofing and credential analysis; (2) visual confirmation of the identity of the principal through visual inspection of the credential used during credential analysis; and (3) the actual notarial act performed." 1 Texas Administrative Code (TAC) §87.41(g)(1) - (3).

It is the position of the Office that these two provisions are not in conflict and therefore no changes to the administrative rules, as proposed, are necessary. The identity proofing and credential analysis are to be performed by reputable third parties, not by the notary. For the notary to be a part of the identity proofing and credential analysis process may open up the notary to exposure to highly confidential information of the principal. The notary, in accordance with §406.110(b), should, as part of the notarial transaction, verify the identity of the principal by taking the steps specified in 1 TAC §87.41(g) and confirm that the principal has successfully completed identity proofing and credential analysis, visually confirm the identity of the principal through visual inspection of the credential used during credential analysis, and then perform the notarial act.

Michael Chodos, Senior Vice President and General Counsel for Notarize.com, submitted two comments.

The first comment relates to the definition of "credential" in §87.1(1). The comment offers the concern that the current definition could be read to limit the acceptable forms of identification for a real property transaction to foreign passports rather than providing that as an option in addition to the other accepted credentials. The definition was not intended to limit the credential options. Section 87.1(1) has been modified to provide clarification.

The second comment relates to the requirement in §87.70(b)(6) that a principal who has failed his or her first identity proofing quiz retake the quiz with a minimum of 60% of the questions replaced. Mr. Chodos urges that a minimum of 40% of the questions be replaced and indicates that this is consistent with the MISMO standards and the approach taken by the Federal Bridge Certification Authority. As of the drafting of this adoption, it is the understanding of this office that the MISMO standards are not yet finalized and, in a draft provided to the Office, it appears that there is still some discussion, relating to whether the number of questions replaced should be 40%, 60% or 100%. In addition, our Office received additional comments suggesting that 100% of the questions be replaced due to fraud concerns. Finally, NIST Knowledge-Based Verification Requirements, found in NIST Special Publication 800-63-A, indicate that the same questions should not be asked in subsequent attempts. Based on the concerns about preventing fraud in the online notarization process and the lack of consensus among authorities and stakeholders, the Office has decided to keep the requirement that a minimum of 60% of the questions be replaced in the subsequent identity proofing quiz.

Phillip J. Sholar, Director of Underwriting for First American Title, submitted the following comments:

The first comment requests that the Office promulgate "safe harbor" notarial certificates, which comply with the requirements of Chapter 406 of the Government Code and Chapter 121 of the Civil Practice and Remedies Code. The Office is already required to provide sample forms for authorized notarial acts under §406.008 of the Government Code and sends out sample forms with each traditional and online commission. The sample forms are also available on the Office's website at http://www.sos.state.tx.us/statdoc/online-np-educational.shtml#sample. As a result, it is the position of this Office that it is not necessary to add sample notarial certificates to the rules because they are already made available to each notary public and to the general public.

The second comment relates to the requirement in §87.70(b)(6) that a principal who has failed his or her first identity proofing quiz retake the quiz with a minimum of 60% of the questions replaced. Mr. Sholar suggests that the principal be required to answer an entirely new set of questions if the first identity proofing quiz is failed. For the reasons stated above the Office has decided to keep the requirement that a minimum of 60% of the questions be replaced in the subsequent identity proofing quiz.

The third comment relates to clarifying §87.43 regarding when a notary is authorized to refuse to perform a notarization. As currently drafted, this rule provides discretionary authority for a notary to refuse to perform an online notarization under certain circumstances, including the inability of the notary to properly identify the principal. Mr. Sholar suggests that the rule be clarified to include a provision that the online notary is still required to verify the identity of the principal prior to performing an online notarization. Upon further review, each of the circumstances listed in §87.43 set forth a situation, which a notary not only has the authority to refuse to perform a notarization but must refuse to perform a notarization. Accordingly, the text of the rule is changed to make this clear.

The final comment relates to preventing a notary from performing a notarization if the notary knows that the principal has failed two identity proofing quizzes with a different notary within the last 24 hours. While the administrative rules prohibit a principal from trying more than two times with the same online notary to pass an identify proofing test, an online notary public should not be responsible for managing the activities between a principal and another online notary public. However, online notary providers should make it a best practice to set limits on the ability of a principal to use their system within the same 24 hour period with any online notary when a principal has failed an identity proofing test twice.

STATUTORY AUTHORITY

The concurrent adoption of new §§87.40 - 87.44 is adopted 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, as enacted by the 85th Legislature, Regular Session, in House Bill 1217, effective July 1, 2018, 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.