Regular Session
Government Affairs & Regulatory Compliance Analysis
Effective September 1, 2025, Texas Money Transmission Licensees are strictly prohibited from imposing monetary fines or penalties on customers for violating Terms of Service (ToS). While you retain the right to terminate accounts for policy violations, you must refund all user balances immediately or face aggressive civil penalties enforced by the Attorney General.
Sen. Lois Kolkhorst·Senate Bill·Regular Session
This legislation has regulatory implications for the following Texas businesses and organizations:
Significant regulatory changes (effective 2025-09-01). Review with your legal and compliance teams to understand implications.
Affected business types:
Affected business types:
lowMinimal cost impact anticipated.
JD Key Consulting provides government affairs and regulatory strategy services. We help businesses navigate Texas agencies, understand legislative impacts, and advocate for their interests.
JD Key Consulting provides strategic guidance on Texas regulatory compliance and legislative impact for your business.
Key implementation requirements and action items for compliance with this legislation
You must redraft all customer-facing Terms of Service (ToS) to remove any clauses stipulating monetary fines, penalties, or "liquidated damages" for policy violations. Clauses allowing recovery of *actual* third-party costs (e.g., pass-through chargeback fees) may remain but must be clearly distinguished from punitive fines.
Fraud and Risk teams must be retrained immediately. Staff can no longer use balance seizure as a remediation tool for policy violations; they must transition to account termination and refund protocols. Automated systems that deduct penalties must be disabled.
Establish a specific audit trail for account closures that documents the calculation of the final refund. In the event of an AG inquiry, you must be able to prove that 100% of the user's balance was made "readily available" upon termination.
Budget for the loss of revenue previously generated from penalty enforcement. Additionally, the civil penalty for non-compliance is treble damages (300% of the fine imposed) plus the state's attorney fees, creating a high-liability environment for non-compliance.
"Readily Available" Funds
The statute mandates refunds be made "readily available" but fails to define the timeframe or method. Relying on slow paper checks for digital wallet users creates high regulatory risk.
Fines vs. Administrative Fees
The law prohibits "fines." It does not explicitly ban administrative fees. However, rebranding a punitive fine as a flat "investigation fee" is a high-risk strategy likely to be challenged by the AG as a circumvention of the statute.
Criminal Proceeds vs. Policy Violations
The law applies to *Terms of Service violations*. It is silent on seizing funds derived from clear criminal activity (e.g., money laundering).
JD Key Consulting specializes in Texas regulatory compliance strategy. Work directly with James Dickey—former Chairman of the Republican Party of Texas—to understand this bill's impact on your operations and develop an actionable compliance plan.
Schedule a ConsultationInformation presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.
This bill's path through the Texas Legislature
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Common questions about SB512
Effective September 1, 2025, Texas Money Transmission Licensees are strictly prohibited from imposing monetary fines or penalties on customers for violating Terms of Service (ToS). While you retain the right to terminate accounts for policy violations, you must refund all user balances immediately or face aggressive civil penalties enforced by the Attorney General.
SB512 was authored by Texas Senator Lois Kolkhorst during the Regular Session.
SB512 was signed into law by Governor Greg Abbott on June 20, 2025.
SB512 is enforced by Office of the Attorney General.
The regulatory priority for SB512 is rated as "critical". Businesses and organizations should review the legislation to understand potential impacts.
The cost impact of SB512 is estimated as "low". This may vary based on industry and implementation requirements.
SB512 addresses topics including business & commerce, business & commerce--general, civil remedies & liabilities, financial and financial--general.
Key dates for SB512: Effective date is 2025-09-01. Consult with legal counsel regarding applicability.
SB512 establishes the following penalties: civil penalty of Three times (300%) the amount of the fine or penalty improperly imposed by the licensee, plus attorney's fees and costs incurred by the state. for A money transmission licensee imposing a monetary fine or penalty on a customer for violating the terms of service agreement.. Consult with legal counsel for specific applicability to your situation.
SB512 primarily affects Texas businesses and commercial enterprises. These businesses should review the legislation with their legal and compliance teams to understand potential impacts.
JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.
