Relating to the extension of consumer credit to certain members of the Texas National Guard and armed forces of the United States and their dependents; providing a penalty.
The bill introduces significant amendments to the Texas Finance Code, creating Chapter 353 that outlines the responsibilities of creditors when dealing with servicemembers. Creditors are required to give clear disclosures regarding the terms of the credit and cannot impose any interest amount that was not agreed upon in advance. Notably, this legislation also includes stipulations regarding the renewal, refinancing, or consolidation of credit, establishing that such actions require new documentation signed by the servicemember or dependent, thereby enhancing consumer protection for military families.
Senate Bill 189 addresses the extension of consumer credit specifically targeted at members of the Texas National Guard and the armed forces of the United States, along with their dependents. The bill sets forth a framework that limits the maximum annual percentage rate that creditors can impose, capping it at 36 percent for these servicemembers and their families. This provision aims to safeguard them from excessive interest rates that could lead to financial hardship, particularly in light of the unique challenges faced by military personnel during their service periods.
While SB189 presents various protective measures for servicemembers, the bill does not extend its provisions to insured depository institutions and credit unions, which has spurred some debate. Critics argue that leaving these entities out of the regulation could create loopholes, potentially undermining the overarching intent of the bill. Additionally, there are concerns regarding enforcement measures, including what penalties may be applied should creditors fail to comply with the provisions. As a Class A misdemeanor is designated for violations, questions surrounding the deterrent effect of this penalty on creditor behavior have emerged.
The bill, set to take effect on September 1, 2009, applies to consumer credit extensions made on or after its effective date. This ensures that existing agreements made prior to the effective date are not retroactively impacted by the new laws. Overall, SB189 represents a legislative effort to address equity in consumer lending practices for those who serve in the military and their families, highlighting the importance of financial security in the context of military service.