SB512

Regular Session

Relating to prohibiting the imposition of a monetary fine or penalty for a violation of a money services business's terms of service agreement; providing a civil penalty.

CriticalImmediate action required

Low Cost

Effective:2025-09-01

Enforcing Agencies

Office of the Attorney General

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: September 1, 2025
Compliance Deadline: September 1, 2025
*Note:* While agreements signed before this date are technically grandfathered, any update to your Terms of Service requiring user acceptance after September 1 triggers immediate compliance for those users.
Agency Rulemaking: No specific rulemaking mandate is included in the bill. Enforcement will be driven by the Attorney General based on the statutory text, meaning you will not get further clarification before the effective date.

Immediate Action Plan

Audit Terms of Service: Immediately identify and excise all penalty/liquidated damages clauses from user agreements before the September 1 cutoff.
Disable Automated Seizures: Reconfigure fraud management software to stop automatic balance deductions for ToS flags on Texas accounts.
Establish Refund Channels: Implement a workflow to push funds to linked bank accounts immediately upon account closure to satisfy the "readily available" requirement.
Unified Compliance Strategy: Decide whether to maintain legacy terms for pre-September users or force a global update. We recommend a clean cut-over to the new terms to avoid the operational risk of tracking dual compliance regimes.

Operational Changes Required

Contracts

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.

Hiring/Training

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.

Reporting & Record-Keeping

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.

Fees & Costs

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.

Strategic Ambiguities & Considerations

"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.

*Guidance:* Prioritize electronic transfer methods (ACH/RTP) to mitigate consumer complaints that trigger AG investigations.

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).

*Guidance:* Ensure your legal team distinguishes clearly between seizing criminal proceeds (governed by federal/state forfeiture laws) and penalizing a user for a non-criminal policy breach (e.g., using a personal account for business).

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Information 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.

Legislative Timeline

This bill's path through the Texas Legislature

TopicsBusiness & Commerce Business & Commerce--general Civil Remedies & Liabilities Financial Financial--general

Official Analysis

View HRO Analysis View All Bill Documents

BILL ANALYSIS

Senate Research Center	S.B. 512
89R2996 MLH-F	By: Kolkhorst
	Business & Commerce
	4/8/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

In 2022, PayPal announced a plan to charge consumers a $2,500 fine for users found to have spread misinformation. The policy was set to go into effect on November 3, 2022. However PayPal decided to retract the plan after widespread criticism. The event brought attention to potential actions of money service businesses that could be used to control the broader activities of users.

S.B. 512 makes clear that a user cannot be fined for a violation of terms of services. This means that a user will not have to forfeit funds in their account. However, the legislation does not impact the ability of a private enterprise to pick and chose their customers.

Key Provisions

Prohibits money transmission license holders from imposing a fine on consumers as a result of a violation of terms of service by the customer.
Clarifies that a money transmission license holder retains the right to close a customer account as a result of a violation of terms of service by the customer.
A money transmission license holder who imposes a fine on a customer is liable to the state for a civil penalty for an amount three times the fee imposed on the consumer.

As proposed, S.B. 512 amends current law relating to prohibiting the imposition of a monetary fine or penalty for a violation of a money services business's terms of service agreement and provides a civil penalty.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends the heading to Subchapter G, Chapter 152, Finance Code, to read as follows:

SUBCHAPTER G. GENERAL DUTIES AND RESTRICTIONS FOR MONEY TRANSMISSION LICENSEE

SECTION 2. Amends Subchapter G, Chapter 152, Finance Code, by adding Section 152.305, as follows:

Sec. 152.305. PROHIBITION ON IMPOSITION OF FINE OR PENALTY FOR TERMS OF SERVICE VIOLATION. (a) Prohibits a money transmission licensee from including in the licensee's terms of service agreement a provision allowing or providing for a monetary fine or penalty for violating any provision of the terms of service agreement.

(b) Prohibits this section from being construed to prevent a money transmission licensee from closing a customer account as a result of a customer's violation of the licensee's terms of service agreement.

(c) Provides that, in addition to any other relief provided for a violation of this chapter, a money transmission licensee that violates this section is liable to this state for a civil penalty in an amount equal to three times the amount of the fine or penalty imposed by the licensee.

(d) Authorizes the attorney general to bring an action in the name of the state to recover the civil penalty under Subsection (c). Authorizes the attorney general to recover attorney's fees and costs incurred in bringing an action under Subsection (c).

SECTION 3. Provides that this Act applies only to a terms of service agreement entered into after the effective date of this Act. Provides that a terms of service agreement entered into before the effective date of this Act is governed by the law as it existed immediately before the effective date of this Act, and the former law is continued in effect for that purpose.

SECTION 4. Effective date: September 1, 2025.

Senate Authors

Sen. Lois KolkhorstRepublican · Primary Author

House Sponsor

Rep. Mike SchofieldRepublican · Primary Sponsor

Bill Text(with markup)

S.B. No. 512

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to prohibiting the imposition of a monetary fine or
	penalty for a violation of a money services business's terms of
	service agreement; providing a civil penalty.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. The heading to Subchapter G, Chapter 152,
	Finance Code, is amended to read as follows:
	SUBCHAPTER G. GENERAL DUTIES AND RESTRICTIONS FOR [~~TIMELY~~
	~~TRANSMISSION, REFUNDS, AND DISCLOSURES BY~~] MONEY TRANSMISSION
	LICENSEE
	SECTION 2. Subchapter G, Chapter 152, Finance Code, is
	amended by adding Section 152.305 to read as follows:
	Sec. 152.305. PROHIBITION ON IMPOSITION OF FINE OR PENALTY
	FOR TERMS OF SERVICE VIOLATION. (a) A money transmission
	licensee may not include in the licensee's terms of service
	agreement a provision allowing or providing for a monetary fine or
	penalty for violating any provision of the terms of service
	agreement.
	(b) This section may not be construed to prevent a money
	transmission licensee from closing a customer account as a result
	of a customer's violation of the licensee's terms of service
	agreement, provided that the money transmission licensee refunds
	the balance of the account to the customer in a manner that makes
	the funds readily available to the customer.
	(c) In addition to any other relief provided for a violation
	of this chapter, a money transmission licensee that violates this
	section is liable to this state for a civil penalty in an amount
	equal to three times the amount of the fine or penalty imposed by
	the licensee.
	(d) The attorney general may bring an action in the name of
	the state to recover the civil penalty under Subsection (c). The
	attorney general may recover attorney's fees and costs incurred in
	bringing an action under Subsection (c).
	SECTION 3. This Act applies only to a terms of service
	agreement entered into after the effective date of this Act. A
	terms of service agreement entered into before the effective date
	of this Act is governed by the law as it existed immediately before
	the effective date of this Act, and the former law is continued in
	effect for that purpose.
	SECTION 4. This Act takes effect September 1, 2025.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


April 9, 2025

TO:	Honorable Charles Schwertner, Chair, Senate Committee on Business & Commerce

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	SB512 by Kolkhorst (Relating to prohibiting the imposition of a monetary fine or penalty for a violation of a money services business's terms of service agreement; providing a civil penalty.), As Introduced

No significant fiscal implication to the State is anticipated.

The bill would prohibit money transmission licensees from establishing a monetary penalty for violating their terms of service. The bill would authorize the Office of the Attorney General to collect a civil penalty for violations of this provision.

It is assumed that any costs associated with the bill could be absorbed using existing resources.

It is also assumed any revenues collected as a result of civil penalties would have no significant fiscal implication to the state.

Local Government Impact

No significant fiscal implication to units of local government is anticipated.

Source Agencies:

212 Office of Court Administration, Texas Judicial Council, 302 Office of the Attorney General, 304 Comptroller of Public Accounts

LBB Staff:

JMc, RStu, LCO, JKe

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Frequently Asked Questions

Common questions about SB512

What does Texas SB512 do?

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. Implementation Timeline Effective Date: September 1, 2025 Compliance Deadline: September 1, 2025 Note: While agreements signed before this date are technically grandfathered, any update to your Terms of Service requiring user acceptance after September 1 triggers immediate compliance for those users.

Who authored SB512?

SB512 was authored by Texas Senator Lois Kolkhorst during the Regular Session.

When was SB512 signed into law?

SB512 was signed into law by Governor Greg Abbott on June 20, 2025.

Which agencies enforce SB512?

SB512 is enforced by Office of the Attorney General.

How urgent is compliance with SB512?

The compliance urgency for SB512 is rated as "critical". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of SB512?

The cost impact of SB512 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does SB512 address?

SB512 addresses topics including business & commerce, business & commerce--general, civil remedies & liabilities, financial and financial--general.

Legislative data provided by LegiScanLast updated: November 25, 2025

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