BILL ANALYSIS Senate Research Center S.B. 243 81R1031 DWS-F By: Shapleigh; Davis, Wendy Business & Commerce 5/1/2009 As Filed AUTHOR'S / SPONSOR'S STATEMENT OF INTENT Chapter 393 (Credit Services Organizations), Finance Code, provides guidance for credit services organizations (CSO), that offer debt repair or counseling services to Texans. Due to broad definitions in that statute, however, most major payday lenders have registered as CSOs, and in so doing are no longer subject to Texas' small loan law or regulation by the Office of Consumer Credit Commissioner (office). The breadth of current law allows payday lenders to use the CSO model to charge the consumer with a fee based on the amount borrowed, then to compute 10 percent interest on the loan based on extension of credit made by a third party lender who has an established relationship with the payday lender storefront or Internet-based service. As proposed, S.B. 243 prohibits CSOs from extending credit when the CSO has a relationship with the lender, collects fees on behalf of the lender, or receives an economic interest in the loan revenue, among other prohibitions. 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 Subchapter D, Chapter 393, Finance Code, by adding Section 393.308, as follows: Sec. 393.008. ACTING AS OR ASSOCIATING WITH LENDER. (a) Prohibits a credit services organization (organization) from facilitating or assisting in obtaining credit for a consumer if the organization is the lender; the organization or an officer, director, or employee of the organization is in any way related to the lender or an officer, director, or employee of the lender; the lender or the organization is an affiliate of the other, or the lender and the organization are owned or controlled by the same holding company; the organization retains or receives an economic interest in the loan revenue; the organization services or collects the loan on behalf of the lender; or the organization provides compensation to or shares resources with the lender. (b) Prohibits an organization from using a scheme, device, or contrivance to evade the application of this section. SECTION 2. Effective date: September 1, 2009.
BILL ANALYSIS
Senate Research Center S.B. 243
81R1031 DWS-F By: Shapleigh; Davis, Wendy
Business & Commerce
5/1/2009
As Filed
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Chapter 393 (Credit Services Organizations), Finance Code, provides guidance for credit services organizations (CSO), that offer debt repair or counseling services to Texans. Due to broad definitions in that statute, however, most major payday lenders have registered as CSOs, and in so doing are no longer subject to Texas' small loan law or regulation by the Office of Consumer Credit Commissioner (office). The breadth of current law allows payday lenders to use the CSO model to charge the consumer with a fee based on the amount borrowed, then to compute 10 percent interest on the loan based on extension of credit made by a third party lender who has an established relationship with the payday lender storefront or Internet-based service.
As proposed, S.B. 243 prohibits CSOs from extending credit when the CSO has a relationship with the lender, collects fees on behalf of the lender, or receives an economic interest in the loan revenue, among other prohibitions.
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 Subchapter D, Chapter 393, Finance Code, by adding Section 393.308, as follows:
Sec. 393.008. ACTING AS OR ASSOCIATING WITH LENDER. (a) Prohibits a credit services organization (organization) from facilitating or assisting in obtaining credit for a consumer if the organization is the lender; the organization or an officer, director, or employee of the organization is in any way related to the lender or an officer, director, or employee of the lender; the lender or the organization is an affiliate of the other, or the lender and the organization are owned or controlled by the same holding company; the organization retains or receives an economic interest in the loan revenue; the organization services or collects the loan on behalf of the lender; or the organization provides compensation to or shares resources with the lender.
(b) Prohibits an organization from using a scheme, device, or contrivance to evade the application of this section.
SECTION 2. Effective date: September 1, 2009.