The Texas Department of Banking recently imposed a $75,000 administrative penalty against an out-of-state payroll services provider for conducting money transmission in Texas without a license. According to the consent order, the company received funds from its clients to deliver employee payroll and make payroll tax payments to the appropriate taxing authorities. The company had reportedly provided these services in Texas since 2012.
The enforcement action is significant because it focuses on the company’s receipt and transmission of client funds, rather than the mere provision of payroll-related services. The Department concluded that the company’s activities were covered by both former Chapter 151 and current Chapter 152 of the Texas Finance Code. Under Chapter 152, payroll processing services include certain arrangements in which a provider receives money under a contract to deliver wages, pay payroll taxes, make employee benefit payments, or distribute other authorized payroll deductions.
The company had applied for a Texas money transmission license before the consent order was entered, and its application remained pending. The Department nevertheless assessed the penalty after considering the length of time the company had operated without a license and the volume of transactions involved. The company agreed to the order without admitting or denying the Department’s findings.
The company must continue making a good-faith effort to complete the licensing process. If its application is withdrawn or denied, it will be required to notify its Texas customers, cease the covered activities, return any Texas customer funds in its possession, and confirm its compliance to the Department.