By: Flynn H.B. No. 2166
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. Subchapter C, Chapter 393, Section 201, Finance
Code, is amended by adding Subsections (d) and (e) to read as
follows:
(d) A deferred presentment transaction, as defined by
Section 393.601, for the performance of services described by
Section 393.602(a)(1) must comply with the following terms.
(1) The proceeds given to a consumer in connection
with a deferred presentment transaction extended to the consumer
may not exceed:
(A) 35 percent of the consumer's gross monthly
income for a single payment transaction; and
(B) 25 percent of the consumer’s gross monthly
income for a scheduled payment on a multiple payment transaction.
The term of a single payment transaction may not exceed 30 days. In
determining a consumer’s gross monthly income, a credit access
business may utilize payroll documents, checks, bank statements and
reports from nationally or regionally recognized credit and data
reporting companies, and may rely on the representations of a
consumer to form a reasonable belief about the consumer’s gross
monthly income.
(2) A consumer who is unable to fully repay the fourth
refinance of an initial single payment deferred presentment
transaction may elect to repay the loan by means of an extended
payment plan provided the consumer is not otherwise in default of
such loan. For the purposes of this subsection, a “refinance” means
any transaction a credit access business assists a consumer in
obtaining that extends the repayment period of a then-outstanding
deferred presentment transaction beyond its original term. A
refinance shall include both a traditional refinance that is
evidenced by new written loan documents with new disclosures that
satisfy and replace the prior loan documents, as well as a renewal
of a single-payment transaction in which the term of the
transaction is extended for an additional identical period. A
refinance shall not include a workout agreement. "Refinance"
includes the terms "renewal" and "rollover."
(A) At every licensed location, a credit access
business must notify a consumer of the consumer’s right to an
extended payment plan by posting the following notice in a
conspicuous location visible to the general public: "If you are
unable to repay your transaction when due, you may be eligible for
an extended payment plan. You are eligible for an extended payment
plan if you have refinanced your initial transaction four times.
You are eligible for an extended payment plan at least once in any
12 month period. If you meet the requirements for an extended
payment plan, we will offer you a plan before the due date of your
existing transaction. To accept our offer of an extended payment
plan, you must sign a written agreement that describes the terms of
the plan before the due date of your exiting transaction." The
notice shall also be included, in at least 12-point bold type, on
the first page of a contract with a credit access business.
(B) An extended payment shall comply with the
following:
(i) A credit access business must offer to
assist an eligible consumer, as described in (d)(2) of this
subsection, in obtaining an extended payment plan at least once
every 12 months. The 12 month period is measured from the date of
such extended payment plan.
(ii) A credit access business must offer a
consumer an extended payment plan before the due date of the fourth
refinance of the outstanding transaction.
(iii) A credit access business may not
charge the consumer additional fees during an extended payment
plan.
(iv) A consumer must sign a written
agreement that describes the terms of the extended payment plan.
(v) An extended payment plan must allow a
consumer to repay all outstanding amounts owing at the time such
extended payment plan is offered in at least four substantially
equal payments.
(vi) A consumer may prepay an extended
payment plan in full at any time without penalty.
(C) If a consumer continues to make timely
payments pursuant to an extended payment plan, a credit access
business is prohibited from:
(i) engaging in collection activities with
respect to such deferred presentment transaction; and
(ii) obtaining, or assisting the consumer
in obtaining, additional deferred presentment transactions.
(3) A multiple payment deferred presentment
transaction shall be payable on a fully-amortizing, declining
principal balance basis with substantially equal payments as agreed
upon by the parties. Fees may be pre-computed or charged on a daily
accrual method. If fees are pre-computed, a credit access business
shall refund unearned fees calculated on an actuarial basis upon
the prepayment in full of a deferred presentment transaction. A
multiple payment deferred presentment transaction may not exceed
180 days.
(e) A motor vehicle title loan, as defined by Section
393.601, for the performance of services described by Section
393.602(a)(2), must comply with the following terms.
(1) The proceeds given to a consumer in connection
with a a motor vehicle title loan given to the consumer may not
exceed the lesser of:
(A) 7 percent of the consumer’s gross monthly
income for a single payment loan;
(B) 30 percent of the consumer’s gross monthly
income for a scheduled payment on a multiple payment loan; or
(C) 70 percent of the retail value of the motor
vehicle as determined pursuant to this subsection.
The term of a single payment loan may not exceed 30 days and the term
of a multiple-payment loan shall not exceed 365 days. The retail
value of a motor vehicle shall be based upon nationally or
regionally recognized motor-vehicle appraisal guides if the
vehicle is listed in such guides. If a value for the motor vehicle
is not listed in such guides, then the credit access business and
the consumer shall agree in good faith on an appropriate retail
value for the vehicle using generally available information
relating to such motor vehicle. In determining a consumer's gross
monthly income, a credit access business may utilize payroll
documents, checks, bank statements and reports from nationally or
regionally recognized credit and data reporting companies, and may
rely on the representations of a consumer to form a reasonable
belief about the consumer’s gross monthly income.
(2) A consumer who is unable to fully repay the eighth
refinance of an initial single payment motor vehicle title loan may
elect to repay the loan by means of an extended payment plan
provided the consumer is not otherwise in default of such loan. For
the purposes of this subsection, a "refinance" means any
transaction a credit access business assists a consumer in
obtaining that extends the repayment period of a then-outstanding
motor vehicle title loan beyond its original term. A refinance
shall include both a traditional refinance that is evidenced by new
written loan documents with new disclosures that satisfy and
replace the prior loan documents, as well as a renewal of a
single-payment loan in which the term of the loan is extended for an
additional identical period. A refinance shall not include a
workout agreement. "Refinance" includes the terms "renewal" and
"rollover."
(A) At every licensed location, a credit access
business must notify a consumer of the consumer’s right to an
extended payment plan by posting the following notice in a
conspicuous location visible to the general public: "If you are
unable to repay your loan when due, you may be eligible for an
extended payment plan. You are eligible for an extended payment
plan if you have refinanced your initial loan eight times. You are
eligible for an extended payment plan at least once in any 12 month
period. If you meet the requirements for an extended payment plan,
we will offer you a plan before the due date of your existing loan.
To accept our offer of an extended payment plan, you must sign a
written agreement that describes the terms of the plan before the
due date of your exiting loan." The notice shall also be included,
in at least 12-point bold type, on the first page of a contract with
a credit access business.
(B) An extended payment shall comply with the
following:
(i) A credit access business must offer to
assist an eligible consumer, as described in (e)(2) of this
subsection, in obtaining an extended payment plan at least once
every 12 months. The 12 month period is measured from the date of
such extended payment plan.
(ii) A credit access business must offer a
consumer an extended payment plan before the due date of the eighth
refinance of the outstanding loan.
(iii) A credit access business may not
charge the consumer additional fees during an extended payment
plan.
(iv) A consumer must sign a written
agreement that describes the terms of the extended payment plan.
(v) An extended payment plan must allow a
consumer to repay all outstanding amounts owing in at least four
substantially equal payments.
(vi) A consumer may prepay an extended
payment plan in full at any time without penalty.
(C) If a consumer continues to make timely
payments pursuant to an extended payment plan, a credit access
business is prohibited from:
(i) engaging in collection activities with
respect to such motor vehicle title loan; and
(ii) obtaining, or assisting the consumer
in obtaining, additional motor vehicle title loans.
(3) A multiple payment motor vehicle title loan shall
be payable on a fully-amortizing, declining principal balance basis
with substantially equal payments as agreed upon by the parties.
Fees may be pre-computed or charged on a daily accrual method. If
fees are pre-computed, a credit access business shall refund
unearned fees calculated on an actuarial basis upon the prepayment
in full of a motor vehicle title loan.
(4) Notwithstanding other law to the contrary, a motor
vehicle title loan must provide that, except for fraud or other
misconduct, including without limitation creating or not
disclosing additional liens, or intentionally concealing or
damaging the motor vehicle, the consumer shall have no personal
liability with respect to the amount owed pursuant to either the
motor vehicle title loan agreement or credit access agreement or
any deficiency resulting from foreclosure against the motor vehicle
pledged by the consumer.