83R6096 ATP-D
By: Villarreal H.B. No. 2706
A BILL TO BE ENTITLED
AN ACT
relating to certain extensions of consumer credit facilitated by
credit access businesses; providing a civil penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 392.301(a), Finance Code, is amended to
read as follows:
(a) In debt collection, a debt collector may not use
threats, coercion, or attempts to coerce that employ any of the
following practices:
(1) using or threatening to use violence or other
criminal means to cause harm to a person or property of a person;
(2) accusing falsely or threatening to accuse falsely
a person of fraud or any other crime;
(3) representing or threatening to represent to any
person other than the consumer that a consumer is wilfully refusing
to pay a nondisputed consumer debt when the debt is in dispute and
the consumer has notified in writing the debt collector of the
dispute;
(4) threatening to sell or assign to another the
obligation of the consumer and falsely representing that the result
of the sale or assignment would be that the consumer would lose a
defense to the consumer debt or would be subject to illegal
collection attempts;
(5) threatening that the debtor will be arrested for
nonpayment of a consumer debt without proper court proceedings;
(6) threatening to file a charge, complaint, or
criminal action against a debtor when the debtor has not violated a
criminal law;
(7) threatening that nonpayment of a consumer debt
will result in the seizure, repossession, or sale of the person's
property without proper court proceedings;
(8) referencing a certification signed by the consumer
as required by Section 393.630 or the penalties associated with a
violation of that section; or
(9) [(8)] threatening to take an action prohibited by
law.
SECTION 2. Subchapter A, Chapter 393, Finance Code, is
amended by adding Section 393.004 to read as follows:
Sec. 393.004. LIMITATION ON EXTENSIONS OF CONSUMER CREDIT
AND REFINANCING. (a) A credit services organization may not obtain
for a consumer or assist a consumer in obtaining an extension of
consumer credit in any form other than in the form of a deferred
presentment transaction that meets the requirements of Section
393.634 or 393.635, or a motor vehicle title loan that meets the
requirements of Section 393.636 or 393.637.
(b) Any refinance of an extension of consumer credit in the
form of a deferred presentment transaction or motor vehicle title
loan that a credit services organization obtains for a consumer or
assists a consumer in obtaining:
(1) must be authorized under Subchapter G;
(2) may not advance additional cash to the consumer;
and
(3) must meet all the requirements under Subchapter G
applicable to the original extension of consumer credit, except as
specifically provided otherwise by an applicable provision of
Subchapter G.
SECTION 3. Section 393.222, Finance Code, is amended by
adding Subsection (a-1) to read as follows:
(a-1) A credit access business shall post, in the same
manner as a notice required under Subsection (a), and provide as a
separate document to a consumer, a notice prescribed by the Finance
Commission of Texas regarding the availability of extended payment
plans that describes the parameters of the plans.
SECTION 4. Section 393.223(a), Finance Code, is amended to
read as follows:
(a) Before performing services described by Section
393.221(1), a credit access business must provide to a consumer a
disclosure adopted by rule of the Finance Commission of Texas that
discloses the following in a form prescribed by the commission:
(1) the interest, fees, and annual percentage rates,
as applicable, to be charged on a deferred presentment transaction
or on a motor vehicle title loan, as applicable, in comparison to
interest, fees, and annual percentage rates to be charged on other
alternative forms of consumer debt;
(2) the amount of accumulated fees a consumer would
incur by renewing or refinancing a deferred presentment transaction
or motor vehicle title loan that remains outstanding for a period of
two weeks, one month, two months, and three months; [and]
(3) information regarding the typical pattern of
repayment of deferred presentment transactions and motor vehicle
title loans; and
(4) the name of the credit access business and any
unique number assigned to the license issued to the business under
Subchapter G.
SECTION 5. Section 393.625, Finance Code, is amended to
read as follows:
Sec. 393.625. MILITARY BORROWERS. (a) In this section,
"military borrower" includes a "covered member" or a "dependent" of
a covered member, as those terms are defined by 10 U.S.C. Section
987 or a successor statute.
(b) An extension of consumer credit described by Section
393.602(a) that is obtained by a credit access business for a
military borrower [member of the United States military or a
dependent of a member of the United States military] or that the
business assisted a military borrower [that person] in obtaining
must comply with 10 U.S.C. Section 987 and any regulations adopted
under that law, to the extent applicable.
(c) The term of an extension of consumer credit described by
Section 393.602(a), including all renewals and refinances,
obtained for a military borrower by a credit access business or that
a credit access business assists a military borrower in obtaining
may not exceed:
(1) 90 days, if the debt is a deferred presentment
transaction; or
(2) 180 days, if the debt is a motor vehicle title
loan.
SECTION 6. Subchapter G, Chapter 393, Finance Code, is
amended by adding Sections 393.629 through 393.639 to read as
follows:
Sec. 393.629. GENERAL LIMITATIONS ON EXTENSIONS OF CONSUMER
CREDIT. (a) The provisions of this chapter applicable to a credit
access business apply to any consumer physically located in this
state at the time the extension of consumer credit is made,
regardless of whether the extension of consumer credit was made in
person in this state.
(b) For purposes of this chapter, an extension of consumer
credit obtained for a consumer by a credit access business or that a
credit access business assists a consumer in obtaining on or before
the fifth day after the date the consumer pays the debt on a
previous extension of consumer credit in full is considered a
refinance of the previous debt.
(c) The term of an extension of consumer credit obtained for
a consumer by a credit access business or that a credit access
business assists a consumer in obtaining may not exceed 180 days.
(d) A credit access business that obtains for a consumer or
assists a consumer in obtaining an extension of consumer credit
shall provide to the consumer a copy of the agreement between the
business and the consumer, and all notices required to be given to
the consumer under this chapter, in Spanish if the consumer
requests that the documents be provided in Spanish or if the
agreement is negotiated in Spanish. The executed agreement between
the credit access business and the consumer must be written in
English.
(e) With a consumer's written consent, a debt incurred under
an extension of consumer credit that a credit access business
obtained for the consumer or assisted the consumer in obtaining may
be sold to another credit access business licensed under this
subchapter. All transaction limits applicable to the debt before
the sale apply to the debt after the debt is sold, except that the
term of the extension of consumer credit may not exceed 180 days,
beginning on the date the debt is sold. The sale of a debt under
this subsection is considered to be a refinance of the debt for
purposes of the applicable transaction limits.
(f) Before obtaining for a consumer or assisting a consumer
in obtaining an extension of consumer credit, a credit access
business shall consider the ability of the consumer to repay the
debt within the term provided by law for the original extension of
credit and any authorized renewal or refinance.
Sec. 393.630. LIMITATION ON OUTSTANDING DEBT. (a) A
consumer may have only one outstanding debt from an extension of
consumer credit that a credit access business obtained for the
consumer or assisted the consumer in obtaining.
(b) To obtain an extension of consumer credit facilitated
through the services of a credit access business, a consumer must
sign a written certification stating that the consumer:
(1) at that time has no other outstanding debt from an
extension of consumer credit that any credit access business
obtained for the consumer or assisted the consumer in obtaining;
(2) has not owed a debt subject to an extended payment
plan that a credit access business obtained for the consumer or
assisted the consumer in obtaining during the preceding 14 days;
and
(3) has not gone into default on a debt that a credit
access business obtained for the consumer or assisted the consumer
in obtaining during the preceding 30 days.
(c) For purposes of Subsection (b)(3), a consumer is not
considered in default if the consumer made a payment on a debt on or
before the 10th day after the date the payment was due.
(d) A credit access business shall in good faith verify that
a consumer is not falsifying the certification required by
Subsection (b), to the best knowledge and ability of the person
acting on behalf of the credit access business for that
transaction.
(e) A person acting on behalf of a credit access business
has satisfied the requirement of Subsection (d) if the person
considers all information that the consumer shares with the person
in negotiating the transaction and if the person makes a reasonable
effort to verify the consumer's representations with any records
that the credit access business typically consults in the normal
course of its business.
(f) A consumer who falsifies statements contained in the
certification violates this section.
(g) A credit access business or a consumer who violates this
section is subject to a civil penalty in an amount not to exceed
$1,000 for each violation.
(h) The finance commission shall adopt rules to implement
this section.
Sec. 393.631. LIMITATIONS RELATING TO MOTOR VEHICLE
SECURING DEBT. (a) Notwithstanding any other provision of law, the
proceeds of the sale of a repossessed motor vehicle that secured an
extension of consumer credit shall satisfy all outstanding and
unpaid indebtedness under that extension of credit, and the
consumer is not liable for any deficiency resulting from the sale
unless the consumer has committed fraud in obtaining the extension
of consumer credit.
(b) Any fee charged to a consumer for the repossession of a
motor vehicle given as security for an extension of consumer credit
must be reasonable.
Sec. 393.632. ESTABLISHMENT OF INCOME OR VALUE. (a) A
credit access business must require documentation to establish a
consumer's income for purposes of this subchapter. Acceptable
forms of documentation include:
(1) a payroll document;
(2) a paycheck;
(3) a bank statement;
(4) a report from a nationally or regionally
recognized credit and data reporting company;
(5) Internal Revenue Service Form W-2 from the
preceding year;
(6) the income tax return from the preceding tax year;
(7) a signed letter from the consumer's employer; or
(8) another document approved by finance commission
rule.
(b) A credit access business shall retain a copy of the
documentation used to establish a consumer's income under
Subsection (a) according to the business's standard records
retention policy.
(c) To establish the retail value of a motor vehicle for
purposes of this subchapter, a credit access business must:
(1) rely on a nationally or regionally recognized
vehicle appraisal guide; or
(2) agree in good faith with the consumer to the
vehicle's retail value.
Sec. 393.633. LOCAL ORDINANCES PREEMPTED. An ordinance
adopted by a municipality or other political subdivision regulating
a credit access business or an extension of consumer credit that a
credit access business obtains for a consumer or assists a consumer
in obtaining is preempted to the extent that the ordinance is not
within the political subdivision's standard zoning or police
powers.
Sec. 393.634. SINGLE-PAYMENT DEFERRED PRESENTMENT
TRANSACTION. (a) The principal amount of a cash advance made under
an extension of consumer credit in the form of a single-payment
deferred presentment transaction that a credit access business
obtains for a consumer or assists a consumer in obtaining may not
exceed:
(1) 25 percent of the consumer's gross monthly income,
if the consumer's annual income is not more than 125 percent of the
federal poverty level for a family of four; or
(2) 35 percent of the consumer's gross monthly income,
if the consumer is not described by Subdivision (1) and is not a
military borrower to whom a different limit applies under federal
law.
(b) The term of an original or refinanced extension of
consumer credit in the form of a single-payment deferred
presentment transaction that a credit access business obtains for a
consumer or assists a consumer in obtaining may not be less than 10
days.
(c) An extension of consumer credit in the form of a
single-payment deferred presentment transaction that a credit
access business obtains for a consumer or assists a consumer in
obtaining may not be refinanced more than four times.
(d) If a consumer has refinanced a single-payment deferred
presentment transaction described by Subsection (c) four times:
(1) the credit access business shall offer an extended
payment plan to the consumer, unless the consumer has entered into
two or more extended payment plans in the preceding 12 months; and
(2) the consumer may request an extended payment plan
at any time on or after the date the consumer refinances the
single-payment deferred presentment transaction for the fourth
time and on or before the date the deferred presentment transaction
must be repaid in full.
(e) An extended payment plan authorized by Subsection (d)
must comply with Section 393.638.
Sec. 393.635. MULTIPLE-PAYMENT DEFERRED PRESENTMENT
TRANSACTION. (a) The sum of all scheduled payments due in a single
month under an extension of consumer credit in the form of a
multiple-payment deferred presentment transaction that a credit
access business obtains for a consumer or assists a consumer in
obtaining may not exceed:
(1) 15 percent of the consumer's gross monthly income,
if the consumer's annual income is not more than 125 percent of the
federal poverty level for a family of four; or
(2) 20 percent of the consumer's gross monthly income,
if the consumer is not described by Subdivision (1) and is not a
military borrower to whom a different limit applies under federal
law.
(b) An extension of consumer credit in the form of a
multiple-payment deferred presentment transaction that a credit
access business obtains for a consumer or assists a consumer in
obtaining may not be payable by the consumer in more than 12
installments, and the loan agreement must specify the number, date,
and total amount due with regard to each installment.
(c) An extension of consumer credit in the form of a
multiple-payment deferred presentment transaction that a credit
access business obtains for a consumer or assists a consumer in
obtaining must be payable on a fully amortizing, declining
principal balance basis with substantially equal payments.
(d) The first installment of an extension of consumer credit
in the form of a multiple-payment deferred presentment transaction
that a credit access business obtains for a consumer or assists a
consumer in obtaining may not be due before the 10th day after the
date the consumer enters into the loan agreement. An installment
may not be due before the 14th day or after the 31st day after the
date a previous installment is due.
(e) An extension of consumer credit in the form of a
multiple-payment deferred presentment transaction that a credit
access business obtains for a consumer or assists a consumer in
obtaining may be refinanced only one time, and the combined terms of
the original extension of consumer credit and the refinanced
extension of consumer credit may not exceed 270 days. A credit
access business is not required to offer an extended payment plan
for an extension of consumer credit in the form of a
multiple-payment deferred presentment transaction.
Sec. 393.636. SINGLE-PAYMENT MOTOR VEHICLE TITLE LOAN. (a)
The principal amount of a cash advance made under an extension of
consumer credit in the form of a single-payment motor vehicle title
loan that a credit access business obtains for a consumer or assists
a consumer in obtaining may not exceed the lesser of:
(1) six percent of the consumer's gross annual income,
if the consumer's annual income is not more than 125 percent of the
federal poverty level for a family of four;
(2) eight percent of the consumer's gross annual
income, if the consumer is not described by Subdivision (1) and is
not a military borrower to whom a different limit applies under
federal law; or
(3) 70 percent of the retail value of the motor vehicle
securing the debt.
(b) The term of an original or refinanced extension of
consumer credit in the form of a single-payment motor vehicle title
loan that a credit access business obtains for a consumer or assists
a consumer in obtaining may not be less than 30 days.
(c) An extension of consumer credit in the form of a
single-payment motor vehicle title loan that a credit access
business obtains for a consumer or assists a consumer in obtaining
may not be refinanced more than six times.
(d) If a consumer has refinanced a single-payment motor
vehicle title loan described by Subsection (c) six times:
(1) the credit access business must offer an extended
payment plan to the consumer before initiating any activities to
repossess the vehicle securing the debt; and
(2) the consumer may request an extended payment plan
at any time on or after the date the consumer refinances the motor
vehicle title loan for the sixth time and on or before the date the
motor vehicle title loan must be repaid in full.
(e) An extended payment plan authorized by Subsection (d)
must comply with Section 393.638.
Sec. 393.637. MULTIPLE-PAYMENT MOTOR VEHICLE TITLE LOAN.
(a) The principal amount of a cash advance made under an extension
of consumer credit in the form of a multiple-payment motor vehicle
title loan that a credit access business obtains for a consumer or
assists a consumer in obtaining may not exceed 70 percent of the
retail value of the motor vehicle securing the debt.
(b) A scheduled payment under a contract for an extension of
consumer credit in the form of a multiple-payment motor vehicle
title loan that a credit access business obtains for a consumer or
assists a consumer in obtaining may not exceed:
(1) 15 percent of the consumer's gross monthly income,
if the consumer's annual income is not more than 125 percent of the
federal poverty level for a family of four; or
(2) 20 percent of the consumer's gross monthly income,
if the consumer is not described by Subdivision (1) and is not a
military borrower to whom a different limit applies under federal
law.
(c) An extension of consumer credit in the form of a
multiple-payment motor vehicle title loan that a credit access
business obtains for a consumer or assists a consumer in obtaining
must be payable on a fully amortizing, declining principal balance
basis with substantially equal payments.
(d) An extension of consumer credit in the form of a
multiple-payment motor vehicle title loan that a credit access
business obtains for a consumer or assists a consumer in obtaining
may not be payable by the consumer in more than six installments,
and the loan agreement must specify the number, date, and total
amount due with regard to each installment.
(e) The first installment of an extension of consumer credit
in the form of a multiple-payment motor vehicle title loan that a
credit access business obtains for a consumer or assists a consumer
in obtaining may not be due before the 10th day after the date the
consumer enters into the loan agreement. A subsequent installment
may not be due before the 30th day after the date the previous
installment of the loan is due.
(f) An extension of consumer credit in the form of a
multiple-payment motor vehicle title loan that a credit access
business obtains for a consumer or assists a consumer in obtaining
may be refinanced only one time, and the combined terms of the
original extension of consumer credit and the refinanced extension
of consumer credit may not exceed 270 days.
(g) A credit access business may not initiate any activities
to repossess the vehicle securing the debt under a multiple-payment
motor vehicle title loan that a credit access business obtains for a
consumer or assists a consumer in obtaining before offering the
consumer an extended payment plan. An extended payment plan
authorized by this subsection must comply with Section 393.638.
Sec. 393.638. EXTENDED PAYMENT PLAN REQUIREMENTS. (a)
This section applies to extended payment plans permitted under
Sections 393.634, 393.636, and 393.637.
(b) An extended payment plan must provide for payment in at
least:
(1) four substantially equal installments, after
which the outstanding balance will be paid in full, with respect to
a single-payment deferred presentment transaction or
single-payment motor vehicle title loan; or
(2) two additional substantially equal installments,
after which the outstanding balance, including only the fees and
interest that would have been due under the original extension of
consumer credit, will be paid in full, with respect to a
multiple-payment motor vehicle title loan.
(c) The period between installment payments on an extended
payment plan may not be shorter than:
(1) the term of the original extension of credit, with
respect to a single-payment deferred presentment transaction; or
(2) 30 days, with respect to a single-payment or
multiple-payment motor vehicle title loan.
(d) The first payment owed under an extended payment plan
may not be due before the 10th day after the date the consumer
requests an extended payment plan.
(e) A credit access business may not assess additional fees
or interest or assist a consumer in obtaining additional extensions
of consumer credit if the consumer is paying an extension of credit
under an extended payment plan.
(f) A consumer may pay in full a debt subject to an extended
payment plan at any time without prepayment penalties.
(g) A person may not engage in debt collection or vehicle
repossession activities for a debt subject to an extended payment
plan if the consumer is in compliance with the extended payment
plan.
Sec. 393.639. RULES. The finance commission may adopt any
rules necessary to implement Sections 393.629-393.638.
SECTION 7. The changes in law made by this Act apply only to
an extension of consumer credit made on or after the effective date
of this Act. An extension of consumer credit made before the
effective date of this Act is governed by the law in effect on the
date the extension of consumer credit was made, and the former law
is continued in effect for that purpose. For purposes of this
section, a refinance or renewal of an extension of consumer credit
is considered made on the date the extension of consumer credit
being refinanced or renewed was made.
SECTION 8. This Act takes effect September 1, 2013.