Texas 2019 - 86th Regular

Texas House Bill HB242 Compare Versions

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1	1	By: Bernal H.B. No. 242
2	2
3	3
4	4	A BILL TO BE ENTITLED
5	5	AN ACT
6	6	relating to credit services organizations and extensions of
7	7	consumer credit facilitated by credit services organizations;
8	8	increasing a criminal penalty.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Section 393.001, Finance Code, is amended by
11	11	amending Subdivision (3) and adding Subdivisions (2-a), (3-a), (5),
12	12	(6), (7), (8), (9), and (10) to read as follows:
13	13	(2-a) "Credit access business" means a credit services
14	14	organization that obtains for a consumer or assists a consumer in
15	15	obtaining an extension of consumer credit.
16	16	(3) "Credit services organization" means a person who
17	17	provides, or represents that the person can or will provide, for the
18	18	payment of valuable consideration any of the following services
19	19	with respect to the extension of consumer credit by others:
20	20	(A) improving a consumer's credit history or
21	21	rating;
22	22	(B) obtaining an extension of consumer credit for
23	23	a consumer in the form of a single-payment deferred presentment
24	24	transaction, a multiple-payment deferred presentment transaction,
25	25	a single-payment motor vehicle title loan, or a multiple-payment
26	26	motor vehicle title loan; or
27	27	(C) providing advice or assistance to a consumer
28	28	with regard to Paragraph (A) or (B).
29	29	(3-a) "Deferred presentment transaction" means a
30	30	single-payment or multiple-payment transaction defined as a
31	31	deferred presentment transaction by Section 341.001 in connection
32	32	with which the consumer is not required to provide real or personal
33	33	property as security.
34	34	(5) "Motor vehicle title loan" means a single-payment
35	35	or multiple-payment loan in which an unencumbered motor vehicle is
36	36	given as the only security for the loan. The term does not include a
37	37	retail installment transaction under Chapter 348 or another loan
38	38	made to finance the purchase of a motor vehicle.
39	39	(6) "Multiple-payment deferred presentment
40	40	transaction" means a deferred presentment transaction that is not a
41	41	single-payment deferred presentment transaction.
42	42	(7) "Multiple-payment motor vehicle title loan" means
43	43	a motor vehicle title loan that is not a single-payment motor
44	44	vehicle title loan.
45	45	(8) "Refinance" means a rollover, renewal, or other
46	46	type of transaction in which all or a portion of the principal,
47	47	fees, or interest due under an outstanding extension of consumer
48	48	credit becomes due on a later date. The term includes a new
49	49	extension of consumer credit that:
50	50	(A) consists of debt arising from principal,
51	51	fees, or interest that was not paid in full under an outstanding or
52	52	previous extension of consumer credit; or
53	53	(B) is made on or before the seventh day after the
54	54	date a previous extension of consumer credit that a credit access
55	55	business obtained for a consumer or assisted a consumer in
56	56	obtaining was paid in full.
57	57	(9) "Single-payment deferred presentment transaction"
58	58	means a deferred presentment transaction for which the entire cash
59	59	advance, interest, and fees are required under the terms of the
60	60	transaction to be payable in a single payment.
61	61	(10) "Single-payment motor vehicle title loan" means a
62	62	motor vehicle title loan for which the entire principal, interest,
63	63	and fees are required under the terms of the loan to be payable in a
64	64	single payment.
65	65	SECTION 2. Subchapter A, Chapter 393, Finance Code, is
66	66	amended by adding Section 393.004 to read as follows:
67	67	Sec. 393.004. EFFECT ON MUNICIPAL ORDINANCES. (a) This
68	68	chapter does not preempt a municipal ordinance regulating a credit
69	69	access business or any form of an extension of consumer credit that
70	70	a credit access business is authorized to obtain for a consumer or
71	71	assist a consumer in obtaining as provided by Section 393.308.
72	72	(b) If a municipal ordinance described by Subsection (a)
73	73	conflicts with a provision of this chapter regulating a credit
74	74	access business or an extension of consumer credit described by
75	75	Subsection (a), the more stringent regulation controls to the
76	76	extent of the conflict.
77	77	SECTION 3. Section 393.201(c), Finance Code, is amended to
78	78	read as follows:
79	79	(c) A contract with a credit access business[, as defined by
80	80	Section 393.601,] for the performance of services described by
81	81	Section 393.602(a) must, in addition to the requirements of
82	82	Subsection (b) and Section 393.302:
83	83	(1) contain a statement that there is no prepayment
84	84	penalty;
85	85	(2) contain a statement that a credit access business
86	86	must comply with Chapter 392 and the federal Fair Debt Collection
87	87	Practices Act (15 U.S.C. Section 1692 et seq.) with respect to an
88	88	extension of consumer credit [described by Section 393.602(a)];
89	89	(3) contain a statement that a person may not threaten
90	90	or pursue criminal charges against a consumer related to a check or
91	91	other debit authorization provided by the consumer as security for
92	92	a transaction in the absence of forgery, fraud, theft, or other
93	93	criminal conduct;
94	94	(4) contain a statement that a credit access business
95	95	must comply, to the extent applicable, with 10 U.S.C. Section 987
96	96	and any regulations adopted under that law with respect to an
97	97	extension of consumer credit [described by Section 393.602(a)];
98	98	(5) disclose to the consumer:
99	99	(A) the lender from whom the extension of
100	100	consumer credit is obtained;
101	101	(B) the interest paid or to be paid to the lender;
102	102	and
103	103	(C) the specific fees that will be paid to the
104	104	credit access business for the business's services; and
105	105	(6) contain the name and address of the Office of
106	106	Consumer Credit Commissioner and the telephone number of the
107	107	office's consumer helpline.
108	108	SECTION 4. Section 393.203, Finance Code, is amended to
109	109	read as follows:
110	110	Sec. 393.203. ISSUANCE OF CONTRACT AND OTHER DOCUMENTS.
111	111	(a) A credit services organization shall give to the consumer, when
112	112	the document is signed, a copy of the completed contract and any
113	113	other document the organization requires the consumer to sign.
114	114	(b) The contract and other documents provided by a credit
115	115	access business to a consumer under this section in relation to an
116	116	extension of consumer credit must be:
117	117	(1) provided before signing wholly written:
118	118	(A) in English; and
119	119	(B) if the contract negotiations are not
120	120	conducted in English, in the language in which the contract is
121	121	negotiated; and
122	122	(2) before signing, read in their entirety in the
123	123	language in which the contract is negotiated to any consumer who
124	124	cannot read.
125	125	SECTION 5. Section 393.223, Finance Code, is amended by
126	126	amending Subsection (a) and adding Subsection (b-1) to read as
127	127	follows:
128	128	(a) Before performing services described by Section
129	129	393.602(a) [393.221(1)], a credit access business must provide to a
130	130	consumer a written disclosure adopted by rule of the Finance
131	131	Commission of Texas [that discloses the following] in a form
132	132	prescribed by the commission that:
133	133	(1) discloses the interest, fees, and annual
134	134	percentage rates, as applicable, to be charged on a deferred
135	135	presentment transaction or on a motor vehicle title loan, as
136	136	applicable, in comparison to interest, fees, and annual percentage
137	137	rates to be charged on other alternative forms of consumer debt;
138	138	(2) discloses the amount of accumulated fees a
139	139	consumer would incur by renewing or refinancing a deferred
140	140	presentment transaction or motor vehicle title loan that remains
141	141	outstanding for a period of two weeks, one month, two months, and
142	142	three months; [and]
143	143	(3) provides information regarding the typical
144	144	pattern of repayment of deferred presentment transactions and motor
145	145	vehicle title loans; and
146	146	(4) references nonprofit agencies that provide
147	147	financial education and training or cash assistance to borrowers.
148	148	(b-1) The disclosure and notice required by this section
149	149	must be:
150	150	(1) available in English and Spanish at each location
151	151	at which the credit access business performs services described by
152	152	Section 393.602(a); and
153	153	(2) provided to a consumer wholly written, and read in
154	154	their entirety at the time provided to any consumer who cannot read,
155	155	in the language in which the contract is negotiated.
156	156	SECTION 6. Subchapter D, Chapter 393, Finance Code, is
157	157	amended by adding Section 393.308 to read as follows:
158	158	Sec. 393.308. PROHIBITION ON OBTAINING CERTAIN EXTENSIONS
159	159	OF CONSUMER CREDIT. A credit services organization may not obtain
160	160	for a consumer or assist a consumer in obtaining an extension of
161	161	consumer credit in any form other than in the form of a
162	162	single-payment deferred presentment transaction, a
163	163	multiple-payment deferred presentment transaction, a
164	164	single-payment motor vehicle title loan, or a multiple-payment
165	165	motor vehicle title loan.
166	166	SECTION 7. Section 393.501, Finance Code, is amended by
167	167	adding Subsection (c) to read as follows:
168	168	(c) Each day of a continuing violation of a provision of
169	169	Subchapter C-1 or G constitutes a separate offense.
170	170	SECTION 8. Section 393.602(a), Finance Code, is amended to
171	171	read as follows:
172	172	(a) This subchapter applies only to a credit services
173	173	organization that obtains for a consumer or assists a consumer in
174	174	obtaining an extension of consumer credit [in the form of:
175	175	[(1) a deferred presentment transaction; or
176	176	[(2) a motor vehicle title loan].
177	177	SECTION 9. Section 393.604(a), Finance Code, is amended to
178	178	read as follows:
179	179	(a) An application for a license under this subchapter must:
180	180	(1) be under oath;
181	181	(2) contain the applicant's name and the street
182	182	address, mailing address, facsimile number, and telephone number of
183	183	the applicant at the location for which the license is sought;
184	184	(3) give the approximate location from which the
185	185	business is to be conducted;
186	186	(4) [(3)] identify the business's principal parties in
187	187	interest;
188	188	(5) [(4)] contain the name, physical address, and
189	189	telephone number of all third-party lender organizations:
190	190	(A) with which the business contracts to provide
191	191	services described by Section 393.602(a);
192	192	or
193	193	(B) from which the business arranges extensions
194	194	of consumer credit [described by Section 393.602(a)]; and
195	195	(6) [(5)] contain other relevant information that the
196	196	commissioner requires for the findings required under Section
197	197	393.607.
198	198	SECTION 10. Section 393.620, Finance Code, is amended to
199	199	read as follows:
200	200	Sec. 393.620. TRANSFER OR ASSIGNMENT OF LICENSE PROHIBITED.
201	201	A license may not be transferred or assigned [only with the approval
202	202	of the commissioner].
203	203	SECTION 11. Sections 393.622(a) and (b), Finance Code, are
204	204	amended to read as follows:
205	205	(a) The finance commission may:
206	206	(1) adopt rules necessary to enforce and administer
207	207	this subchapter;
208	208	(2) adopt rules with respect to the quarterly
209	209	reporting by a credit access business licensed under this
210	210	subchapter of summary business information relating to extensions
211	211	of consumer credit the business obtained for a consumer or assisted
212	212	a consumer in obtaining [described by Section 393.602(a)]; and
213	213	(3) adopt rules with respect to periodic examination
214	214	by the office relating to extensions of consumer credit the
215	215	business obtained for a consumer or assisted a consumer in
216	216	obtaining [described by Section 393.602(a)], including rules
217	217	related to charges for defraying the reasonable cost of conducting
218	218	the examinations.
219	219	(b) The finance commission may adopt rules under this
220	220	section to allow the commissioner to review, as part of a periodic
221	221	examination, any relevant contracts between the credit access
222	222	business and the third-party lender organizations with which the
223	223	credit access business contracts to provide services described by
224	224	Section 393.602(a) or from which the business arranges extensions
225	225	of consumer credit [described by Section 393.602(a)]. A contract or
226	226	information obtained by the commissioner under this section is
227	227	considered proprietary and confidential to the respective parties
228	228	to the contract, and is not subject to disclosure under Chapter 552,
229	229	Government Code.
230	230	SECTION 12. Sections 393.625, 393.626, and 393.627, Finance
231	231	Code, are amended to read as follows:
232	232	Sec. 393.625. MILITARY BORROWERS. An extension of consumer
233	233	credit [described by Section 393.602(a)] that is obtained by a
234	234	credit access business for a member of the United States military or
235	235	a dependent of a member of the United States military or that the
236	236	business assisted that person in obtaining must comply with 10
237	237	U.S.C. Section 987 and any regulations adopted under that law, to
238	238	the extent applicable.
239	239	Sec. 393.626. DEBT COLLECTION PRACTICES. A violation of
240	240	Chapter 392 by a credit access business [with respect to an
241	241	extension of consumer credit described by Section 393.602(a)]
242	242	constitutes a violation of this subchapter.
243	243	Sec. 393.627. QUARTERLY REPORT TO COMMISSIONER. A credit
244	244	access business shall file a quarterly report with the commissioner
245	245	on a form prescribed by the commissioner that provides the
246	246	following information relating to extensions of consumer credit
247	247	[described by Section 393.602(a)] during the preceding quarter:
248	248	(1) the number of consumers for whom the business
249	249	obtained or assisted in obtaining those extensions of consumer
250	250	credit;
251	251	(2) the number of those extensions of consumer credit
252	252	obtained by the business or that the business assisted consumers in
253	253	obtaining;
254	254	(3) the number of refinancing transactions of the
255	255	extensions of consumer credit described by Subdivision (2);
256	256	(4) the number of consumers refinancing the extensions
257	257	of consumer credit described by Subdivision (2);
258	258	(5) the number of consumers refinancing more than once
259	259	the extensions of consumer credit described by Subdivision (2);
260	260	(6) the average amount of the extensions of consumer
261	261	credit described by Subdivision (2);
262	262	(7) the total amount of fees charged by the business
263	263	for the activities described by Subdivision (1);
264	264	(8) the number of vehicles surrendered or repossessed
265	265	under the terms of an extension of consumer credit in the form of a
266	266	motor vehicle title loan obtained by the business or that the
267	267	business assisted a consumer in obtaining;
268	268	(9) the mean, median, and mode of the number of
269	269	extensions of consumer credit obtained by consumers as a result of
270	270	entering into the extensions of consumer credit described by
271	271	Subdivision (2); and
272	272	(10) any related information the commissioner
273	273	determines necessary.
274	274	SECTION 13. Subchapter G, Chapter 393, Finance Code, is
275	275	amended by adding Sections 393.629 through 393.637 to read as
276	276	follows:
277	277	Sec. 393.629. GENERAL LIMITATIONS ON EXTENSIONS OF CONSUMER
278	278	CREDIT; PAYMENT METHOD. (a) The provisions of this chapter
279	279	applicable to a credit access business apply to any consumer
280	280	physically located in this state at the time the extension of
281	281	consumer credit is made, regardless of whether the extension of
282	282	consumer credit was made in person in this state.
283	283	(b) A credit access business shall accept a payment made in
284	284	cash or by electronic transfer, cashier's check, teller's check, or
285	285	money order offered by the consumer or another party, to retire or
286	286	otherwise pay down debt incurred under an extension of consumer
287	287	credit that a credit access business obtained for a consumer or
288	288	assisted a consumer in obtaining under this chapter.
289	289	Sec. 393.630. ESTABLISHMENT OF INCOME. A credit access
290	290	business must require documentation to establish a consumer's
291	291	income for purposes of this subchapter. The only acceptable forms
292	292	of documentation are paper, facsimile, or electronic copies of:
293	293	(1) a payroll document;
294	294	(2) a paycheck;
295	295	(3) a bank, credit union, debit card, or other account
296	296	statement;
297	297	(4) a report from a nationally or regionally
298	298	recognized credit and data reporting company;
299	299	(5) Internal Revenue Service Form W-2 from the
300	300	preceding year;
301	301	(6) the income tax return from the preceding tax year;
302	302	or
303	303	(7) a signed letter from the consumer's employer at the
304	304	time the extension of consumer credit is sought.
305	305	Sec. 393.631. SINGLE-PAYMENT DEFERRED PRESENTMENT
306	306	TRANSACTION. (a) The sum of all fees, principal, interest, and
307	307	other amounts due under an extension of consumer credit in the form
308	308	of a single-payment deferred presentment transaction that a credit
309	309	access business obtains for a consumer or assists a consumer in
310	310	obtaining may not exceed 20 percent of the consumer's gross monthly
311	311	income.
312	312	(b) An extension of consumer credit in the form of a
313	313	single-payment deferred presentment transaction that a credit
314	314	access business obtains for a consumer or assists a consumer in
315	315	obtaining may not be refinanced more than three times. An amount
316	316	from each payment of a refinanced deferred presentment transaction
317	317	described by this subsection must be used to repay at least 25
318	318	percent of the principal amount of the original debt.
319	319	Sec. 393.632. MULTIPLE-PAYMENT DEFERRED PRESENTMENT
320	320	TRANSACTION. (a) The sum of all fees, principal, interest, and
321	321	other amounts due under all scheduled payments of an extension of
322	322	consumer credit in the form of a multiple-payment deferred
323	323	presentment transaction that a credit access business obtains for a
324	324	consumer or assists a consumer in obtaining may not exceed 20
325	325	percent of the consumer's gross monthly income.
326	326	(b) An extension of consumer credit in the form of a
327	327	multiple-payment deferred presentment transaction that a credit
328	328	access business obtains for a consumer or assists a consumer in
329	329	obtaining and all fees associated with the debt may not be payable
330	330	by the consumer in more than four installments. An amount from each
331	331	payment must be used to repay at least 25 percent of the principal
332	332	amount of the debt.
333	333	(c) An extension of consumer credit in the form of a
334	334	multiple-payment deferred presentment transaction that a credit
335	335	access business obtains for a consumer or assists a consumer in
336	336	obtaining may not be refinanced.
337	337	Sec. 393.633. SINGLE-PAYMENT MOTOR VEHICLE TITLE LOAN. (a)
338	338	The sum of all fees, principal, interest, and other amounts due
339	339	under an extension of consumer credit in the form of a
340	340	single-payment motor vehicle title loan that a credit access
341	341	business obtains for a consumer or assists a consumer in obtaining
342	342	may not exceed the lesser of:
343	343	(1) three percent of the consumer's gross annual
344	344	income; or
345	345	(2) 70 percent of the retail value of the motor vehicle
346	346	securing the debt.
347	347	(b) An extension of consumer credit in the form of a
348	348	single-payment motor vehicle title loan that a credit access
349	349	business obtains for a consumer or assists a consumer in obtaining
350	350	may not be refinanced more than three times. An amount from each
351	351	payment of a refinanced motor vehicle title loan described by this
352	352	subsection must be used to repay at least 25 percent of the
353	353	principal amount of the original debt.
354	354	Sec. 393.634. MULTIPLE-PAYMENT MOTOR VEHICLE TITLE LOAN.
355	355	(a) The sum of all fees, principal, interest, and other amounts due
356	356	under all scheduled payments of an extension of consumer credit in
357	357	the form of a multiple-payment motor vehicle title loan that a
358	358	credit access business obtains for a consumer or assists a consumer
359	359	in obtaining may not exceed the lesser of:
360	360	(1) three percent of the consumer's gross annual
361	361	income; or
362	362	(2) 70 percent of the retail value of the motor vehicle
363	363	securing the debt.
364	364	(b) An extension of consumer credit in the form of a
365	365	multiple-payment motor vehicle title loan that a credit access
366	366	business obtains for a consumer or assists a consumer in obtaining
367	367	and all fees associated with the debt may not be payable by the
368	368	consumer in more than four installments. An amount from each
369	369	payment must be used to repay at least 25 percent of the principal
370	370	amount of the debt.
371	371	(c) An extension of consumer credit in the form of a
372	372	multiple-payment motor vehicle title loan that a credit access
373	373	business obtains for a consumer or assists a consumer in obtaining
374	374	may not be refinanced.
375	375	Sec. 393.635. REFINANCES. (a) Any refinance of an
376	376	extension of consumer credit that a credit access business obtains
377	377	for a consumer or assists a consumer in obtaining:
378	378	(1) must be authorized under this subchapter;
379	379	(2) must be in the same form as the original extension
380	380	of consumer credit; and
381	381	(3) must meet all the requirements applicable to the
382	382	original extension of consumer credit, including the duration,
383	383	transaction, and applicable income-based or vehicle value-based
384	384	limitations under Section 393.631(a) or 393.633(a).
385	385	(b) For purposes of this section, a single-payment deferred
386	386	presentment transaction, a multiple-payment deferred presentment
387	387	transaction, a single-payment motor vehicle title loan, and a
388	388	multiple-payment motor vehicle title loan are the different forms
389	389	of extensions of consumer credit that a credit access business may
390	390	obtain for a consumer or assist a consumer in obtaining.
391	391	(c) A person may not use a device, subterfuge, or pretense
392	392	to evade the refinance requirements and limitations imposed on a
393	393	credit access business under this subchapter.
394	394	Sec. 393.636. MAINTENANCE OF RECORDS. (a) A credit access
395	395	business shall maintain a complete set of records of all extensions
396	396	of consumer credit obtained for consumers by the business or that
397	397	the business assisted consumers in obtaining. The record
398	398	pertaining to each extension of consumer credit must be retained
399	399	until the third anniversary of the date the extension of consumer
400	400	credit was obtained and must include:
401	401	(1) the name and address of the consumer;
402	402	(2) the principal amount of the cash advance or loan;
403	403	(3) the length of the original term of the extension of
404	404	consumer credit, the number of installments or refinances, if
405	405	applicable, and the length of the term of any refinance;
406	406	(4) the fees charged by the credit access business for
407	407	obtaining for a consumer or assisting the consumer in obtaining the
408	408	extension of consumer credit; and
409	409	(5) the documentation used to establish a consumer's
410	410	income under Section 393.630.
411	411	(b) A credit access business shall retain a copy of each
412	412	written agreement between the business and a consumer pertaining to
413	413	an extension of consumer credit, including any agreement regarding
414	414	refinancing an extension of consumer credit, until the third
415	415	anniversary of the date on which the agreement was entered into.
416	416	(c) A credit access business shall retain a copy of each
417	417	report filed under Section 393.627 until the third anniversary of
418	418	the date on which the report was filed.
419	419	(d) A record described by this section must be available for
420	420	inspection on request by the office during the normal business
421	421	hours of the credit access business.
422	422	Sec. 393.637. RULES. The finance commission shall adopt any
423	423	rules necessary to implement Sections 393.629-393.636.
424	424	SECTION 14. The following laws are repealed:
425	425	(1) Section 393.221, Finance Code; and
426	426	(2) Sections 393.601(2), (3), and (5), Finance Code.
427	427	SECTION 15. The changes in law made by this Act apply only
428	428	to an extension of consumer credit made on or after the effective
429	429	date of this Act. An extension of consumer credit made before the
430	430	effective date of this Act is governed by the law in effect on the
431	431	date the extension of consumer credit was made, and the former law
432	432	is continued in effect for that purpose. For purposes of this
433	433	section, a refinance of an extension of consumer credit is
434	434	considered made on the date the extension of consumer credit being
435	435	refinanced was made.
436	436	SECTION 16. (a) The change in law made by this Act to
437	437	Section 393.223, Finance Code, applies only to a disclosure or
438	438	notice provided by a credit access business on or after January 1,
439	439	2018. A disclosure or notice provided by a credit access business
440	440	before January 1, 2020, is governed by Section 393.223, Finance
441	441	Code, as that section existed immediately before the effective date
442	442	of this Act, and that law is continued in effect for that purpose.
443	443	(b) The Finance Commission of Texas shall adopt rules
444	444	prescribing forms under Section 393.223(a), Finance Code, as
445	445	amended by this Act, not later than November 1, 2019.
446	446	SECTION 17. Section 393.636, Finance Code, as added by this
447	447	Act, applies only to a record created on or after the effective date
448	448	of this Act. A record created before the effective date of this Act
449	449	is governed by the law in effect when the record was created, and
450	450	the former law is continued in effect for that purpose.
451	451	SECTION 18. This Act takes effect September 1, 2019.