By: Thompson of Harris H.B. No. 3812
A BILL TO BE ENTITLED
AN ACT
relating to extensions of consumer credit in the form of a
motor vehicle title loan that a credit access business obtains for a
consumer or assists a consumer in obtaining; providing a civil
penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 393.601, Finance Code, is amended by
amending Subdivision (5) and adding Subdivisions (5-a) and (7) to
read as follows:
(5) "Motor vehicle title loan" means a single-payment
or multiple-payment loan in which an unencumbered motor vehicle is
given as the only security for the loan, except as provided by
Section 393.702. The term does not include a retail installment
transaction under Chapter 348 or another loan made to finance the
purchase of a motor vehicle.
(5-a) "Multiple-payment motor vehicle title loan"
means a motor vehicle title loan that is not a single-payment motor
vehicle title loan.
(7) "Single-payment motor vehicle title loan" means a
motor vehicle title loan for which the entire principal, interest,
and fees are required under the terms of the loan to be payable in a
single payment.
SECTION 2. Chapter 393, Finance Code, is amended by adding
Subchapter G-1 to read as follows:
SUBCHAPTER G-1. REGULATIONS IN CONNECTION WITH MOTOR
VEHICLE TITLE LOANS
Sec. 393.701. DEFINITIONS. In this subchapter:
(1) "Finance commission" means the Finance Commission
of Texas.
(2) "Military borrower" includes a "covered member" or
a "dependent" with respect to a covered member, as those terms are
defined by 10 U.S.C. Section 987 or a successor statute.
(3) "Motor vehicle title loan" has the meaning
assigned by Section 393.601.
(4) "Multiple-payment motor vehicle title loan" has
the meaning assigned by Section 393.601.
(5) "Refinance" means a rollover, renewal, or other
type of transaction in which all or a portion of the principal,
fees, or interest due under an outstanding motor vehicle title loan
becomes due on a later date. The term does not include an extended
payment plan described by Section 393.709. The term includes a new
extension of consumer credit that:
(A) consists of debt arising from principal,
fees, or interest that was not paid in full under an outstanding or
previous extension of consumer credit; or
(B) is made on or before the fifth day after the
date a previous extension of consumer credit that a credit access
business obtained for a consumer or assisted a consumer in
obtaining was paid in full.
(6) "Single-payment motor vehicle title loan" has the
meaning assigned by Section 393.601.
Sec. 393.702. PAYMENT METHOD. (a) A credit access business
shall accept a payment made in cash or by electronic transfer,
cashier's check, teller's check, or money order offered by the
consumer or another party, to retire or otherwise pay down debt
incurred under an extension of consumer credit in the form of a
single-payment motor vehicle title loan or a multiple-payment motor
vehicle title loan that a credit access business obtained for a
consumer or assisted a consumer in obtaining under this chapter.
(b) For a single-payment or multiple-payment motor vehicle
title loan, a consumer may also grant a security interest in an
authorized debit of a bank account.
Sec. 393.703. TERM OF LOAN FOR MILITARY BORROWERS. The term
of an extension of consumer credit in the form of a motor vehicle
title loan, including all 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
180 days.
Sec. 393.704. LIMITATION ON OUTSTANDING DEBT. (a) At any
one time, a consumer may have only one outstanding debt from a motor
vehicle title loan that a credit access business obtained for the
consumer or assisted the consumer in obtaining.
(b) A credit access business that violates this section is
subject to a civil penalty in an amount not to exceed $1,000 for
each violation.
Sec. 393.705. LIMITATIONS RELATING TO MOTOR VEHICLE
SECURING DEBT. (a) The proceeds of the sale of a repossessed motor
vehicle that secured a motor vehicle title loan shall satisfy all
outstanding and unpaid indebtedness under that extension of
consumer credit, and the consumer is not liable for any deficiency
resulting from the sale unless the consumer has committed fraud or
has committed a wilful act of misconduct that damages or impairs the
value of the motor vehicle.
(b) Any fee charged to a consumer for the repossession of a
motor vehicle given as security for a motor vehicle title loan must
be reasonable and may not exceed the amount actually paid by the
credit access business or the lender to a third party for the
repossession.
(c) A repossession under this chapter must comply with
Chapter 9, Business & Commerce Code, except as otherwise provided
by this section.
Sec. 393.706. ESTABLISHMENT OF CONSUMER'S INCOME OR VEHICLE
VALUE; REFERENCE AMOUNT. (a) A credit access business must require
documentation to establish a consumer's income for purposes of this
subchapter. Acceptable forms of documentation include paper,
facsimile, or electronic copies of:
(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 at the
time the single-payment motor vehicle title loan or
multiple-payment motor vehicle title loan is sought;
(8) an executed certification on a form adopted by
finance commission rule that attests to the consumer's monthly or
annual income; or
(9) any other 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 and any applicable rule or regulation establishing
a record retention period.
(c) A credit access business that relies in good faith on a
document presented by the consumer under Subsection (a) to
establish a consumer's income has complied with this section to the
extent the income established under that document meets the
applicable requirements under this subchapter.
(d) A credit access business that obtains for a consumer or
assists a consumer in obtaining an extension of consumer credit in
the form of a single-payment motor vehicle title loan or a
multiple-payment motor vehicle title loan through the Internet or
other electronic means may rely on nationally or regionally
recognized database reporting systems and may maintain a record of
the database reporting system results used to comply with
Subsections (a) and (b).
(e) 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 agree in good faith with the consumer to
the vehicle's retail value; and
(2) record the recognized or agreed-on value.
(f) For purposes of this subchapter, $28,000 is the initial
reference amount with respect to a consumer's income, and the
consumer credit commissioner shall adjust this amount annually in
accordance with the Consumer Price Index.
Sec. 393.707. SINGLE-PAYMENT MOTOR VEHICLE TITLE LOAN. (a)
The amount advanced to a consumer 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, excluding fees, may not exceed the lesser
of:
(1) six percent of the consumer's gross annual income,
if the consumer's gross annual income is less than the reference
amount;
(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 or longer than
60 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 who has not entered into an extended
payment plan with the credit access business in the preceding 12
months refinances a single-payment motor vehicle title loan for the
sixth time:
(1) the credit access business must offer at least one
extended payment plan to the consumer before initiating any
activities to repossess the vehicle securing the debt;
(2) the consumer may request, before the offer
required by Subdivision (1) is made, 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 fifth day after
the date on which the sixth refinance must be repaid in full;
(3) to comply with the requirement of Subdivision (1),
the credit access business shall send a written notice to the
consumer disclosing the following:
(A) the amount due under the current terms of the
extension of consumer credit if the consumer declines an extended
payment plan;
(B) the amounts due on each of the installment
dates of an extended payment plan; and
(C) the date by which the consumer must accept
the extended payment plan in writing, which date shall be at least
five days after the date of such notice;
(4) the credit access business may not repossess the
vehicle securing the debt unless:
(A) the consumer fails to accept the extended
payment plan in writing on or before the deadline contained in the
notice required by Subdivision (3);
(B) the consumer declines the extended payment
plan; or
(C) the consumer fails to make a payment required
by an extended payment plan that the consumer accepted; and
(5) if the consumer declines an extended payment plan
that a credit access business is required to offer under
Subdivision (1), the consumer must sign an extended payment plan
waiver on a form prescribed by the finance commission.
(e) An extended payment plan required to be offered under
Subsection (d) must comply with Section 393.709.
(f) A credit access business may offer a consumer an
extended payment plan that provides the consumer with additional
time to repay the debts obtained through a single-payment motor
vehicle title loan, either before or after the consumer refinances
the single-payment motor vehicle title loan for the sixth time,
more than once in a 12-month period so long as the credit access
business does not assess additional fees under the extended payment
plan and the credit access business fully describes the terms of the
extended payment plan, including all due dates and the amount due on
each due date, to the consumer before the consumer enters into the
extended payment plan. An extended payment plan offered under this
subsection is not required to comply with Section 393.709.
Sec. 393.708. MULTIPLE-PAYMENT MOTOR VEHICLE TITLE LOAN.
(a) The amount advanced to a consumer 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, excluding fees, may not exceed 70 percent of
the retail value of the motor vehicle securing the debt.
(b) The sum of all fees, principal, interest, and other
amounts due under any scheduled payment 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 exceed:
(1) 20 percent of the consumer's gross monthly income,
if the consumer's gross annual income is less than the reference
amount; or
(2) 30 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. If a credit access
business precomputes its fees under a multiple-payment motor
vehicle title loan and a consumer prepays the loan in full, the
credit access business shall refund any unearned fees to the
consumer.
(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 12 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 28th 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 not be refinanced and the loan term may not exceed 365 days,
except as provided by Subsection (g).
(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 at least one extended payment plan. An extended payment
plan may cause the extension of consumer credit to extend beyond 365
days so long as the extended payment plan complies with Section
393.709 and the credit access business fully describes the terms of
the extended payment plan, including all due dates and the amount
due on each due date, to the consumer before the consumer enters
into the extended payment plan.
(h) If the credit access business is required to offer a
consumer an extended payment plan under Subsection (g), the credit
access business shall send a written notice to the consumer
disclosing the following:
(1) the amount due under the current terms of the
extension of consumer credit if the consumer declines an extended
payment plan;
(2) the amounts due on each of the installment dates of
an extended payment plan; and
(3) the date by which the consumer must accept the
extended payment plan in writing, which date shall be at least five
days after the date of such notice.
(i) The credit access business may not repossess the vehicle
securing the debt unless:
(1) the consumer fails to accept the extended payment
plan in writing on or before the deadline contained in the notice
required by Subsection (h)(3);
(2) the consumer declines the extended payment plan;
or
(3) the consumer fails to make a payment required by an
extended payment plan that the consumer accepted.
(j) If the consumer declines the extended payment plan, the
consumer must sign an extended payment plan waiver on a form
prescribed by the finance commission.
Sec. 393.709. EXTENDED PAYMENT PLAN REQUIREMENTS. (a) This
section applies to extended payment plans required to be offered
under Sections 393.707(d) and 393.708.
(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 motor vehicle title loan; or
(2) two substantially equal installments added to the
original and refinanced term of the extension of consumer credit,
after which the outstanding balance, including only the fees 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 30 days, with respect to a
single-payment motor vehicle title loan or a 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 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.
(h) A person may not use a device, subterfuge, or pretense
to evade the extended payment plan requirements and limitations
imposed on a credit access business under this subchapter.
Sec. 393.710. REFINANCES. (a) Any refinance of an extension
of consumer credit in the form of a single-payment motor vehicle
title loan or multiple-payment motor vehicle title loan that a
credit access business obtains for a consumer or assists a consumer
in obtaining:
(1) must be authorized under this subchapter;
(2) must be in the same form as the original extension
of consumer credit; and
(3) must meet all the requirements applicable to the
original extension of consumer credit, including the duration,
transaction, and extended payment plan requirements under this
subchapter, including the applicable income-based or vehicle
value-based limitations under Section 393.707(a) or 393.708(b),
except as otherwise provided by this chapter.
(b) The terms of a refinanced extension of consumer credit
may be the same as or different from the terms of the original
extension of consumer credit.
(c) A person may not use a device, subterfuge, or pretense
to evade the refinance requirements and limitations imposed on a
credit access business with respect to a single-payment motor
vehicle title loan or multiple-payment motor vehicle title loan
under this subchapter.
Sec. 393.711. RULES. The finance commission shall adopt any
rules necessary to implement this subchapter.
SECTION 3. 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 of an extension of consumer credit is
considered made on the date the extension of consumer credit being
refinanced was made.
SECTION 4. This Act takes effect September 1, 2015.