Adopted Rules Title 43

TITLE 43. TRANSPORTATION

PART 10. TEXAS DEPARTMENT OF MOTOR VEHICLES

CHAPTER 223. COMPLIANCE AND INVESTIGATIONS

INTRODUCTION. The Texas Department of Motor Vehicles (department) adopts amendments to 43 Texas Administrative Code (TAC) Chapter 223, Subchapter A, Fraud, Waste, or Abuse, §§223.1, 223.2, and 223.3. In conjunction with these amendments, the department adopts the repeal of Subchapter B, Risk-Based Monitoring and Preventing Fraudulent Activity, §223.101. In addition, the department adopts new §223.5, External Risk-Based Monitoring System.

The department adopts amendments to the title of Chapter 223, §223.1, §223.2, and repeal of §223.101 without changes to the proposed text as published in the April 26, 2024, issue of the Texas Register (49 TexReg 2690) and will not be republished. The department adopts the following with changes to the proposed text as published in the April 26, 2024, issue of the Texas Register (49 TexReg 2690) and will be republished: amendments to §223.3, and new §223.5. The department did not receive any public comments on the amendments, new section and repeal.

REASONED JUSTIFICATION.

An adopted amendment changes the title to Chapter 223 to "Compliance and Investigations" by deleting the word "Division." In August of 2021, the department's Compliance and Investigations Division disbanded and became a part of the department's Enforcement Division.

Subchapter A. Fraud, Waste, or Abuse

The adopted amendments to §223.1 clarify the purpose and scope of Chapter 223 and expand the scope of Subchapter A to include new §223.5 to replace §223.101, which is adopted for repeal. Section 223.3 authorizes county tax assessor-collectors and deputies to report to the department any suspected fraud, waste or abuse relating to vehicle registration or titling; however, the deputies report suspected fraud, waste or abuse to the county tax assessor-collector, who then reports it to the department. An adopted amendment to §223.1 also deletes subsection (b) because amended subsection (a) includes the necessary language regarding the purpose and scope of Subchapter A.

The department adopts amendments to §223.2(b) to remove the definitions of "CID" and "Director" because both refer to the Compliance and Investigations Division, which has been disbanded and reorganized within the department's Enforcement Division. An adopted amendment to the definition of "county tax assessor-collector" in §223.2(b) clarifies the definition by referring to the person who serves as the assessor-collector of taxes for a Texas county under Article VIII, §14, of the Texas Constitution. An adopted amendment to the definition of "deputy" in §223.2(b) clarifies that Chapter 217 is in Title 43. The adopted amendment to the definition of "RTS" in §223.2(b) replaces the words "Texas Department of Motor Vehicle's" with the word "department's" because the word "department" is defined in Transportation Code, Chapter 501. Section 223.2(a) says the words and terms defined in Transportation Code, Chapter 501 have the same meaning when used in Chapter 223, with certain exceptions. Adopted amendments to §223.2(b) also renumber the paragraphs due to deletions.

Adopted amendments to §223.3(a) and (c) delete the words "motor vehicle" from the term "motor vehicle dealer" because the word "dealer" is defined in Transportation Code, Chapter 501, but the term "motor vehicle dealer" is not defined in Chapter 501. The department adopts amendments to §223.3 to replace the acronym "CID" with the word "department" to reflect the reorganization within the department. The department adopts amendments to §223.3(a) - (c) to remove the words "and possible investigation" as being unnecessary. In addition to improving readability, adopted amendments to §223.3(b) clarify and specify the information that must be included in the detailed narrative that a county tax assessor-collector must submit as part of a request to the department to review suspected fraud, waste, or abuse. The department adopts §223.3(b)(2)(B)(iv) with a change at adoption to add the word "and" to clarify that a detailed narrative must include the information in clauses (i) through (v) at a minimum. The department adopts an amendment to §223.3(c) to add the word "possible" to be consistent with subsection (a), which includes the word "possible" when referring to suspected fraud, waste, or abuse. An adopted amendment to §223.3(c) also deletes an unnecessary comma. Adopted amendments to §223.3(d) improve readability by using consistent terminology and removing unnecessary language.

Simultaneously with the adopted repeal of Subchapter B, §223.101, the department adopts new §223.5, which rewrites, reorganizes, clarifies and specifies the department's external risk-based monitoring system required by Transportation Code, §520.004(4). Adopted new §223.5 subjects all Texas county tax assessor-collectors, their contractors' staff, and their deputies, which are external RTS users, to periodic examination to determine whether to assign the RTS user a classification of priority or non-priority. Based on the examination, the department will classify each county tax assessor-collector, each of their contractors' staff, and each deputy as priority or non-priority for the purposes of prioritizing reviews to determine whether there is evidence of fraud by a county tax assessor-collector, their contractors' staff, or a deputy. This classification system will allow the department to determine how to use its limited resources most efficiently to investigate and prevent fraud. The department adopts new §223.5 with changes at adoption to change the word "contractor's" to "contractors'" because a county tax assessor-collector may have more than one contractor.

Adopted new §223.5(a) sets out the factors the department considers in classifying a county tax assessor-collector, their contractors' staff, or deputy as a priority or non-priority. These adopted factors reflect the department's current practices in assessing whether to investigate a particular county tax assessor-collector, their contractors' staff, or deputy.

Adopted new §223.5(b) documents the department's goal that each county tax assessor-collector, each of their contractors' staff, or each deputy who is classified as a priority will be reviewed at least once per year; and if classified as a non-priority, a county tax assessor-collector, their contractors' staff person, or deputy will be reviewed at least once every two years. This goal creates predictability for the department, county tax assessor-collectors, their contractors' staff, and deputies; ensures that all county tax assessor-collectors, their contractors' staff, and deputies are reviewed regularly; and allows the department to prioritize its limited resources toward higher-priority reviews.

The department adopts new §223.5(c) with changes at adoption to substitute semicolons for some of the commas for clarity, and to modify language in the last clause to indicate that examinations could be a combination of the options, which could be more than two options. Adopted new §223.5(c) specifies that the examinations under this section may be virtual, on premises at the county tax assessor-collector's, their contractors' staff person's, or deputy's location, or a combination of these options. Allowing virtual examinations will save the department resources and will be more convenient for county tax assessor-collectors.

Adopted new §223.5(d) provides that the department may notify the county tax assessor-collector of possible fraudulent activity in the county tax assessor-collector's office when the department is authorized by law enforcement. This language clarifies the limitations on the department's ability to update a county tax assessor-collector about a department investigation of their office.

Subchapter B. Risk-Based Monitoring and Preventing Fraudulent Activity

The department adopts the repeal of Subchapter B, including §223.101 because the risk-based system of monitoring and preventing fraudulent activity relating to vehicle registration and titling falls within the scope of Subchapter A, which is titled "Fraud, Waste, or Abuse." Also, the definitions in §223.2 apply to the entire Chapter 223, even though Section 223.2 is contained in Subchapter A. Simultaneously with the repeal of Subchapter B and §223.101, the department adopts new §223.5, which rewrites, reorganizes, clarifies and specifies the department's external risk-based system of monitoring and preventing fraudulent activity relating to vehicle registration and titling.

SUMMARY OF COMMENTS.

The department received no comments.

SUBCHAPTER A. FRAUD, WASTE, OR ABUSE

43 TAC §§223.1 - 223.3, 223.5

STATUTORY AUTHORITY. The amendments and new section are adopted under Transportation Code, §520.004, which requires the department by rule to establish a risk-based system of monitoring and preventing fraudulent activity related to vehicle registration and titling in order to efficiently allocate resources and personnel; Transportation Code, §520.010, which authorizes the department to perform an audit and investigation related to registration and titling services; and Transportation Code, §1002.001, which provides the board of the Texas Department of Motor Vehicles with the authority to adopt rules that are necessary and appropriate to implement the powers and the duties of the department.

CROSS REFERENCE TO STATUTE. The adopted amendments and new section would implement Transportation Code, §§520.004, 520.010 and 1002.001.

§223.3.Submission of Request.

(a) A county tax assessor-collector who suspects possible fraud, waste, or abuse by an employee, dealer, deputy, or any person transacting motor vehicle-related business for or with the county may submit a request to the department for review. The department may forward a submission to an appropriate law enforcement entity.

(b) To submit a request to the department for review, the county tax assessor-collector must:

(1) request a rejection of the suspected transaction through a department regional service center; and

(2) mail or e-mail the following documents and information, as applicable, to the department in an envelope or e-mail message marked "Red Flag":

(A) the original transaction;

(B) a detailed narrative, including:

(i) the name of a contact person with the county tax assessor-collector, including email address and phone number;

(ii) the name of the employee submitting the request;

(iii) a statement as to why the transaction is suspect;

(iv) information about the employee or deputy suspected of committing fraud, waste, or abuse; and

(v) any statements made by the customer submitting the suspect transaction;

(D) any other relevant evidence or information pertaining to the transaction.

(c) If a deputy suspects possible fraud, waste, or abuse by an employee, dealer, or any person transacting motor vehicle-related business for or with the deputy, the deputy must report the suspected fraud, waste, or abuse to the county tax assessor-collector. The county tax assessor-collector may then submit a request to the department for review in accordance with subsection (b) of this section.

(d) If the department determines it will not open an investigation after reviewing a submitted request, the department will notify the submitting county tax assessor-collector.

§223.5.External Risk-Based Monitoring System.

(a) All county tax assessor-collectors, their contractors' staff, and the deputies who use RTS are subject to periodic examination by the department. As a result of the examination, the department will classify each county tax assessor-collector, each of their contractors' staff, and each deputy as priority or non-priority for the purposes of prioritizing reviews to determine whether there is evidence of fraud by the county tax assessor-collector, their contractors' staff, or a deputy. In classifying a county tax assessor-collector, their contractors' staff, or a deputy, the department may consider factors, including, but not limited to:

(1) referrals or complaints received from partner state agencies;

(2) referrals or complaints received from public safety agencies;

(3) the retirement, resignation, or impeachment of the county tax assessor-collector;

(4) a contingency that disrupted county motor vehicle title and registration operations, such as a natural disaster or the theft or the burglary of a county tax assessor-collector's premises;

(5) previous compliance review designations;

(6) previous instances of non-compliance; and

(7) a complaint filed through an internal reporting mechanism, such as a Red Flag referral, telephone call, or an email received by the department's Consumer Relations Division (CRD), or any other means of communication with the department.

(b) It is the department's goal to review each county tax assessor-collector, each of their contractors' staff, and each deputy as follows:

(1) if the county tax assessor-collector, their contractors' staff person, or deputy is classified as a priority, they will be reviewed at least once per year; or

(2) if the county tax assessor-collector, their contractors' staff person, or deputy is classified as a non-priority, they will be reviewed at least once every two years.

(c) Examinations under this section may be virtual; on premises at the county tax assessor-collector's, their contractors' staff person's, or deputy's location; or some combination of these options.

(d) The department may notify the county tax assessor-collector of possible fraudulent activity in the county tax assessor-collector's office when the department is authorized by law enforcement.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 9, 2024.

TRD-202403649

Laura Moriaty

General Counsel

Texas Department of Motor Vehicles

Effective date: August 29, 2024

Proposal publication date: April 26, 2024

For further information, please call: (512) 465-4160

SUBCHAPTER B. RISK-BASED MONITORING AND PREVENTING FRAUDULENT ACTIVITY

43 TAC §223.101

STATUTORY AUTHORITY. The repeal is adopted under Transportation Code, §520.004, which requires the department by rule to establish a risk-based system of monitoring and preventing fraudulent activity related to vehicle registration and titling in order to efficiently allocate resources and personnel; Transportation Code, §520.010, which authorizes the department to perform an audit and investigation related to registration and titling services; and Transportation Code, §1002.001, which provides the board of the Texas Department of Motor Vehicles with the authority to adopt rules that are necessary and appropriate to implement the powers and the duties of the department.

CROSS REFERENCE TO STATUTE. The adopted repeal would implement Transportation Code, §§520.004, 520.010 and 1002.001.