![]() H.B. 334 was introduced in the House by Rep. Joseph Gullett (R), Dallas and was assigned to the Judiciary committee. We discussed a prior draft of H.B. 334 in our prior blog post and have been involved in multiple discussions regarding this bill. H.B. 334 is the result of years of effort among key stakeholders who have worked to craft legislation preserving our traditional notions of “Notaries Public,” while also expanding the concept of “Notarial Acts” into the digital age. As drafted, H.B. 334 creates a new type of Notary Public, a “Remote Online Notary Public,” and enables these specific Notaries to perform “Remote Online Notarizations” whereby the Notary serves as an official witness by “attending” a signing through communication technology (i.e. compliant video conference). H.B. 334 also permits Remote Online Notaries to perform “Electronic In-Person Notarizations,” where the Notary serves as official witness to signatures on documents that are executed in the physical presence of the Notary, but that are executed via digital signature of the parties. In each case these Notarial Acts allow documents to be executed in digital format and, in the case of the Remote Online Notarization, without the traditionally required “physical presence” of the parties. The importance of this legislation continues to be highlighted as our state and country navigate the effects of the COVID-19 pandemic. Because of this, the CBA supports H.B. 334. This is not to say that there are not some provisions in the bill that should be cause for some concern. Namely, H.B. 334 contains a multitude of highly-technical requirements related to Remote Online Notarization and Electronic In-Person Notarization and places the obligation to comply with such requirements squarely on the individual Notary. On paper, it makes a great deal of sense to impose these requirements and for the burden of complying with such requirements to be on the Notaries themselves. Practically speaking, however, we are concerned that the true cost of failing to comply with the requirements imposed upon the Notaries will fall upon the persons seeking to enforce documents executed through Remote Online Notarization. As drafted, H.B. 334 could be read to invalidate Notarial Acts that are not performed in accordance with standards set forth therein which, in turn, could have cascading effects on a financial institution’s ability to enforce their rights under such documents. Because of these risks, we believe a financial institution’s relationship with Notaries Public, specifically Remote Online Notaries Public, will become more formalized, and financial institutions will be required to underwrite the risk of new vendor relationships to ensure that the Remote Online Notary can comply with applicable standards and has assets sufficient to make the financial institution whole in the event that the Notary falls short of their duties. For better or for worse, we believe that this process will necessarily reduce the number of available Remote Online Notaries Public or, at least, aggregate such Notaries under the umbrella of a relative few third-party service providers. The end result, we believe is that it will be very difficult for community banks to get comfortable utilizing “in-house” Remote Online Notaries Public to close loans via electronic means and, instead, will need to add yet another vendor to their vendor risk management program. Avoiding this result would require substantial changes to H.B. 334 that we believe are very unlikely to be approved by the interested parties. Either, the technical requirements preserving the integrity of Notarial Acts would need to be substantially reduced or the burden for complying with such requirements would need to shift to a regulatory body or the third-party service providers facilitating the engagement of Notaries Public. The CBA has discussed this matter with many key stakeholders and there are compelling arguments against both of the above solutions and, accordingly, the CBA finds itself in favor of H.B. 334 despite the unintended consequences it is likely to have.
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Lori Godfrey
EVP, Chief of Staff, Government & Regulatory Relations Update Archives
April 2022
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