82R9783 DAK-F
By: Hernandez Luna H.B. No. 3226
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of, including fee and installment plan
assistance, certain small loans made to consumers.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 342, Finance Code, is amended by adding
Subchapter N to read as follows:
SUBCHAPTER N. SMALL LOANS
Sec. 342.651. DEFINITION. In this subchapter, "small loan"
means a loan subject to this chapter the maximum principal amount of
which is not greater than the lesser of:
(1) $700; or
(2) 30 percent of the borrower's gross monthly income.
Sec. 342.652. REGULATION OF SMALL LOANS. (a) A license
holder engaging in the business of making, transacting, or
negotiating a small loan shall make, transact, or negotiate the
small loan as provided by this subchapter.
(b) To the extent of any conflict between this subchapter
and other provisions of this chapter, this subchapter controls.
(c) A license holder may not:
(1) make a small loan to a borrower if, as a result of
making that loan, the sum of the maximum principal amount of the
small loan and the outstanding principal balances of all other
small loans made by all license holders to the borrower is an amount
that exceeds the lesser of:
(A) $700; or
(B) 30 percent of the borrower's gross monthly
income;
(2) make a small loan to a borrower who is in default
on another small loan until the earlier of:
(A) the date the other loan is paid in full; or
(B) the second anniversary of the origination
date of the loan;
(3) make a small loan to a borrower who is under
contract with any license holder to pay off a small loan through an
installment plan until the earlier of:
(A) the date the installment plan is paid in
full; or
(B) the second anniversary of the origination
date of the installment plan; or
(4) make a small loan to a borrower if making the small
loan would result in the borrower receiving more than eight small
loans from all license holders during any consecutive 12-month
period.
Sec. 342.653. INSTALLMENT PLAN. (a) If a borrower notifies
a license holder that the borrower will be or is unable to repay a
small loan when the loan is due, the license holder shall inform the
borrower that the borrower may convert the small loan to a loan to
be paid under an installment plan.
(b) The license holder must convert the small loan to a loan
to be paid under an installment plan at the borrower's request.
(c) The installment plan must be in writing and signed by
both the borrower and the license holder.
(d) The license holder may not assess a fee, an interest
charge, or other charges on the borrower as a result of converting
the small loan to a loan to be paid under an installment plan as
provided by this section.
(e) The installment plan for a small loan must provide for
the payment of all installments due on the loan over a period not
less than:
(1) 90 days for a loan amount equal to or less than
$400; or
(2) 180 days for a loan amount greater than $400.
(f) The borrower may pay the total of installments due on
the small loan at any time. The license holder may not charge any
penalty, fee, or other charge to the borrower for prepayment of the
installment plan by the borrower.
(g) The license holder must include a conspicuous provision
in a small loan agreement or small loan note that the borrower has
access to an installment plan.
(h) The license holder shall return any postdated checks
that the borrower gave to the license holder for the original small
loan at the initiation of the installment plan.
(i) A license holder may take postdated checks for
installment plan payments at the time the installment plan is
originated. If any check accepted as payment under the installment
plan is dishonored, the license holder may not charge the borrower
any fee for the dishonored check.
(j) If a borrower defaults on the installment plan, the
license holder may charge the borrower a one-time installment plan
default fee of $25.
(k) If the license holder enters into an installment plan
contract or agreement with the borrower through a third party that
is representing the borrower, this section applies to the
installment plan contract or agreement as if it had originated with
the license holder.
Sec. 342.654. DISCLOSURE. In addition to any other
disclosures required by law, an application for a small loan must
include a statement on the front page of the loan application in at
least 12-point type that is substantially similar to the following:
"AT THE TIME YOU REPAY THIS LOAN, YOU SHOULD HAVE SUFFICIENT FUNDS
TO MEET YOUR OTHER FINANCIAL OBLIGATIONS. IF YOU CANNOT PAY OTHER
BILLS BECAUSE YOU ARE PAYING OFF THIS DEBT, YOU SHOULD ENTER INTO
THE INSTALLMENT PLAN OFFERED IN CONNECTION WITH THIS LOAN."
Sec. 342.655. SMALL LOAN INFORMATION SYSTEM. (a) The
commissioner shall, by contract with a vendor or service provider
or otherwise, develop and implement a small loan information system
that allows a license holder to determine:
(1) whether a borrower has any outstanding small
loans;
(2) the number of small loans the borrower has
outstanding;
(3) whether the borrower is eligible for a small loan
under this subchapter;
(4) whether the borrower is paying off a small loan
under an installment plan; and
(5) any other information necessary for a license
holder to comply with this subchapter.
(b) The small loan information system must provide that the
information entered into or stored by the system is:
(1) accessible to and usable by a license holder and
the commissioner from any location in this state; and
(2) secure against public disclosure, tampering,
theft, or unauthorized acquisition or use.
(c) A license holder that makes a small loan shall enter or
update the information required under Subsection (a) into the small
loan information system at the time the license holder makes the
small loan. A license holder shall enter and update all required
information for every outstanding small loan.
(d) The commissioner may charge license holders who make
small loans a fee, in an amount determined by finance commission
rule, to be used for the operation and administration of the small
loan information system.
(e) The finance commission shall adopt rules establishing
standards and procedures for the retention, archiving, and deletion
of information entered into or stored by the small loan information
system.
(f) Notwithstanding Chapter 552, Government Code, or any
other law, information in the small loan information system may not
be inspected by or disclosed to the public.
SECTION 2. Subchapter N, Chapter 342, Finance Code, as
added by this Act, applies only to a loan entered into on or after
the effective date of this Act. A loan entered into before the
effective date of this Act is governed by the law in effect on the
date the loan was entered into, and the former law is continued in
effect for that purpose.
SECTION 3. This Act takes effect September 1, 2011.