Texas 2019 - 86th Regular

Texas House Bill HB4146 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	86R17328 TYPED
2	2	By: Capriglione H.B. No. 4146
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the regulation of certain short-term consumer loans;
8	8	imposing an assessment and fees; requiring an occupational license;
9	9	authorizing fees.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Chapter 393, Finance Code, is amended by adding
12	12	Subchapter H to read as follows:
13	13	Subchapter H. Regulation of Certain Credit Access Business
14	14	Transactions
15	15	Sec. 393.701. DEFINITIONS. In this Subchapter:
16	16	(1) "Regular transaction" means a loan:
17	17	(A) that is payable in installments that are
18	18	consecutive, monthly or biweekly, and substantially equal in
19	19	amount; and
20	20	(B) the first scheduled installment of which is
21	21	due within one month and 15 days after the date of the loan.
22	22	(2) "Motor vehicle title loan" means a loan in which an
23	23	unencumbered motor vehicle is given as security for the loan in
24	24	which the lender accepts multiple installments. The term does not
25	25	include a retail installment transaction under Chapter 348 or
26	26	another loan made to finance the purchase of a motor vehicle.
27	27	Sec. 393.702. INTEREST COMPUTATION METHODS. (a) The
28	28	scheduled installment earnings method is a method to compute an
29	29	interest charge by applying a daily rate to the unpaid balance of
30	30	the principal amount as if each payment will be made on its
31	31	scheduled installment date. A payment received before or after the
32	32	due date does not affect the amount of the scheduled principal
33	33	reduction.
34	34	(b) For the purposes of Subsection (a), the daily rate is
35	35	1/365th of the equivalent contract rate.
36	36	(c) Interest under the scheduled installment earnings
37	37	method may not be compounded.
38	38	(d) Loans under this chapter must use the scheduled
39	39	installment earnings method to compute interest.
40	40	(e) A loan may include a late charge in compliance with
41	41	Section 302.001(d).
42	42	Sec. 393.703. APPLICABILITY OF SUBCHAPTER. (a) A loan will
43	43	be exclusively subject to this subchapter if a credit access
44	44	business obtains or assists in obtaining a loan that:
45	45	(1) provides for an effective rate of interest 10% per
46	46	annum, or less;
47	47	(2) is extended primarily for personal, family, or
48	48	household use;
49	49	(3) is made by a person engaged in the business of
50	50	making, arranging, or negotiating those types of loans;
51	51	(4) is either:
52	52	(A) a multi-installment non-recourse term loan
53	53	secured by a first lien on a motor vehicle that includes an
54	54	administrative fee; or
55	55	(B) a multi-installment unsecured term loan that
56	56	includes an administrative fee.
57	57	(b) The loan must also comply with any rule promulgated by
58	58	the Consumer Financial Protection Bureau that regulates payday
59	59	installment loans either secured by motor vehicle or unsecured.
60	60	(c) A loan under this chapter may provide for an
61	61	administrative charge in an amount to be negotiated by the parties.
62	62	(d) A loan may not contract or provide for a single payment
63	63	under this subchapter.
64	64	Sec. 393.704. ADMINISTRATIVE FEE. (a) A Credit Access
65	65	Business may charge an administrative fee for services provided to
66	66	obtain or assist in obtaining a loan subject to this subchapter. A
67	67	loan contract under this subchapter may include the administrative
68	68	fee. The administrative fee may compensate the Credit Access
69	69	Business to defray the ordinary costs of administering a loan,
70	70	including, costs associated with:
71	71	(1) maintaining loan information;
72	72	(2) offering electronic and telephone access to loan
73	73	records;
74	74	(3) processing payments;
75	75	(4) responding to customer inquiries;
76	76	(5) providing periodic billing statements;
77	77	(6) inspection and verification of the collateral and
78	78	establishment, perfection, and release of the security interest;
79	79	and
80	80	(7) verification of insurance, registration and
81	81	annual vehicle inspection requirements of the collateral
82	82	(b) the administrative fee shall not be deemed interest for
83	83	any purpose of law and shall be agreed upon by the parties.
84	84	(c) The total amount of the administrative fee will be
85	85	disclosed in the loan agreement and in the Credit Access Agreement.
86	86	(d) The administrative fee is not interest.
87	87	(e) The administrative fee will be considered earned when
88	88	the loan is closed and may be included in the principal balance of
89	89	the loan. If the loan is prepaid in full, the borrower will be
90	90	entitled to a refund from the credit access business based on a
91	91	straight-line amortization of the administrative fee.
92	92	Sec. 393.705. ATTEMPT TO EVADE LAW. A person who is a party
93	93	to a loan subject to this subchapter or the Credit Access Business
94	94	who obtained the loan or assisted in obtaining the loan, may not
95	95	evade the application of this subtitle or a rule adopted under this
96	96	subchapter by use of any device, subterfuge, or pretense. The
97	97	Commissioner alone shall regulate any activity conducted under this
98	98	subchapter.
99	99	Sec. 393.706. LICENSE REQUIRED. (a) A person must hold a
100	100	Credit Access Business license issued under this chapter to engage
101	101	in the business of obtaining or assisting in obtaining an extension
102	102	of consumer credit that is subject to this subchapter.
103	103	(b) A person may not use any device, subterfuge, or pretense
104	104	to evade the application of this section.
105	105	Sec. 393.707. SECURED LOAN. (a) A credit access business
106	106	may only obtain or assist in obtaining a secured loan contract under
107	107	this subchapter that is a regular transaction and secured by a first
108	108	lien on a motor vehicle.
109	109	(b) The credit access business must only obtain or assist in
110	110	obtaining a loan that complies with Subtitle A of Title 4, Texas
111	111	Finance Code.
112	112	(c) The term of the secured loan under this subchapter may
113	113	not be greater than 180 days.
114	114	(d) A loan contract under this subchapter may provide for
115	115	automatic debits to the borrower's bank account in compliance with
116	116	state and federal law, including the Electronic Fund Transfer Act
117	117	(15 U.S.C. § 1693) and Regulation E (12 C.F.R. Part 1005).
118	118	Sec. 393.708. UNSECURED LOAN. (a) A credit access business
119	119	may only obtain or assist in obtaining an unsecured loan contract
120	120	under this subchapter that is a regular transaction.
121	121	(b) The credit access business must only obtain or assist in
122	122	obtaining a loan that complies with Subtitle A of Title 4, Texas
123	123	Finance Code.
124	124	(c) The term of the unsecured loan under this subchapter may
125	125	not be greater than 180 days.
126	126	(d) A loan contract under this subchapter may provide for
127	127	automatic debits to the borrower's bank account and complies with
128	128	state and federal law, including the Electronic Fund Transfer Act
129	129	(15 U.S.C. § 1693) and Regulation E (12 C.F.R. Part 1005).
130	130	Sec. 393.709. REFUND. (a) If the loan under this
131	131	subchapter is prepaid in full, including payment in cash or by a new
132	132	loan or renewal of the loan, the lender earns interest for the
133	133	period beginning on the date of the loan and ending on the date of
134	134	the prepayment or demand for payment in full.
135	135	(b) If prepayment in full or demand for payment in full
136	136	occurs during an installment period, the lender may retain, in
137	137	addition to interest that accrued during any elapsed installment
138	138	periods, an amount computed by:
139	139	(1) multiplying the simple annual interest rate under
140	140	the contract by the unpaid principal balance of the loan determined
141	141	according to the schedule of payments to be outstanding on the
142	142	preceding installment due date;
143	143	(2) dividing 365 into the product under Subdivision
144	144	(1); and
145	145	(3) multiplying the number of days in the period
146	146	beginning on the day after the installment due date and ending on
147	147	the date of the prepayment or demand, as appropriate, by the result
148	148	obtained under Subdivision (2).
149	149	(c) A loan may not earn interest on any addition to
150	150	principal added to the loan after the date of the loan contract.
151	151	(d) A loan may not use any other refunding method.
152	152	Sec. 393.710. REQUIRED PROPERTY INSURANCE. (a) A loan
153	153	secured by a motor vehicle that is subject to this subchapter, may
154	154	require a borrower to insure the motor vehicle offered as security
155	155	for the loan.
156	156	(b) The insurance coverage and the premiums or charges for
157	157	the coverage must bear a reasonable relationship to:
158	158	(1) the amount, term, and conditions of the loan;
159	159	(2) the value of the collateral; and
160	160	(3) the existing hazards or risk of loss, damage, or
161	161	destruction.
162	162	(c) The insurance may not:
163	163	(1) cover unusual or exceptional risks; or
164	164	(2) provide coverage not ordinarily included in
165	165	policies issued to the general public.
166	166	(d) A lender may not require the purchase of duplicate
167	167	property insurance if the creditor has knowledge that the borrower:
168	168	(1) has valid and collectible insurance covering the
169	169	property; and
170	170	(2) has provided a loss payable endorsement sufficient
171	171	to protect the creditor.
172	172	Sec. 393.711. DECLINATION OF EQUAL INSURANCE COVERAGE
173	173	PROHIBITED. A lender may not decline at any time existing insurance
174	174	coverage providing substantially equal benefits that comply with
175	175	this subchapter.
176	176	Sec. 393.712. NONFILING INSURANCE. A loan may not contract
177	177	for a charge for a non-filing insurance premium.
178	178	Sec. 393.713. DELIVERY OF INFORMATION TO BORROWER. (a) A
179	179	borrower must receive a copy of each document signed by the
180	180	borrower. If the names and addresses of the borrower, lender, and
181	181	Credit Access Business are not in the loan agreement, then the
182	182	borrower must receive a written statement in English that contains
183	183	the names and addresses of the borrower, lender, and credit access
184	184	business.
185	185	Sec. 393.714. RECEIPT FOR CASH PAYMENT. A lender or the
186	186	credit access business shall give a receipt to a person who makes a
187	187	cash payment on a loan.
188	188	Sec. 393.715. ACCEPTANCE OF PREPAYMENT. At any time during
189	189	regular business hours, the lender or credit access business shall
190	190	accept partial prepayment or prepayment of a loan in full. A lender
191	191	shall accept any amount from a borrower in partial prepayment of an
192	192	installment or loan subject to this chapter. Monies received will
193	193	first be applied to reducing interest and then to principal.
194	194	Sec. 393.716. AMOUNT AUTHORIZED. (a) A loan subject to
195	195	this subchapter may not directly or indirectly charge or contract
196	196	for an amount that is not authorized under this subchapter in
197	197	connection with a loan to which this chapter applies, including any
198	198	fee, compensation, bonus, commission, brokerage, discount,
199	199	expense, and any other charge of any nature.
200	200	(b) A loan subject to this subchapter, may only contract for
201	201	an amount incurred by the lender for:
202	202	(1) court costs and attorney's fees assessed by a court
203	203	only if the borrower is found to have committed forgery, fraud, or
204	204	theft in connection with the loan;
205	205	(2) a fee authorized by law for filing, recording, or
206	206	releasing in a public office a security for a loan; or
207	207	(3) a fee for recording a lien on or transferring a
208	208	certificate of title to a motor vehicle offered as security for a
209	209	loan made under this chapter; or
210	210	(4) reasonable costs actually incurred by the lender
211	211	for repossession and sale of the security.
212	212	(c) On a loan subject to this chapter a lender may assess and
213	213	collect a fee that does not exceed the amount prescribed by Section
214	214	3.506, Business & Commerce Code, for the return by a depository
215	215	institution of a dishonored check, negotiable order of withdrawal,
216	216	or share draft offered in full or partial payment of a loan.
217	217	Sec. 393.717. SECURITY FOR LOAN. (a) A borrower may not
218	218	grant as security for a loan made under this subchapter an
219	219	assignment of wages.
220	220	(b) A lender may not take as security for a loan a lien on
221	221	real property other than a lien created by law on the recording of
222	222	an abstract of judgment.
223	223	Sec. 393.718. CONFESSION OF JUDGMENT; POWER OF ATTORNEY. A
224	224	loan may not contract for a confession of judgment or a power of
225	225	attorney authorizing the lender or a third person to confess
226	226	judgment or to appear for a borrower in a judicial proceeding. A
227	227	credit access business may not require or request a confession of
228	228	judgment or a power of attorney authorizing the credit access
229	229	business to appear for the borrower in a judicial proceeding.
230	230	Sec. 393.719. DISCLOSURE OF AMOUNT FINANCED AND SCHEDULE OF
231	231	PAYMENTS. A borrower may not sign a promise to pay or loan
232	232	obligation that does not disclose the amount financed and the
233	233	schedule of payments.
234	234	Sec. 393.720. INSTRUMENT WITH BLANK PROHIBITED. A borrower
235	235	may not sign an instrument in which a blank is left to be filled in
236	236	after the loan is made.
237	237	Sec. 393.721. WAIVER OF BORROWER'S RIGHT PROHIBITED. A
238	238	borrower may not waive any right accruing under this chapter.
239	239	Sec. 393.722. MOTOR VEHICLE LOANS NON-RECOURSE. Unless the
240	240	borrower is proven in court to have committed fraud, forgery, or
241	241	theft in connection with the loan, a borrower shall not be
242	242	personally liable for any deficiency where the sale of the security
243	243	for the loan does not satisfy the indebtedness.
244	244	Sec. 393.723. COMPLIANCE WITH UNIFORM COMMERICAL CODE. A
245	245	lender must comply with Chapter 9, Uniform Commercial Code in the
246	246	repossession and redemption of a motor vehicle. If the borrower
247	247	fails to redeem a motor vehicle legally repossessed by a lender, the
248	248	lender may accept the motor vehicle in full satisfaction of the debt
249	249	or the lender may depose of the motor vehicle in compliance with
250	250	Chapter 9, Uniform Commercial Code.
251	251	Sec. 393.724. PROHIBITION AGAINST PREPAYMENT PENALTY. A
252	252	borrower may not pay a prepayment penalty in connection with a loan
253	253	subject to this chapter.
254	254	Sec. 393.725. ANCILLARY PRODUCTS. A borrower may not
255	255	purchase any product or service not specifically authorized by this
256	256	chapter. A credit access business may not obtain or assist in
257	257	obtaining financing for the purchase of any ancillary product or
258	258	service not specifically authorized by this subchapter.
259	259	Sec. 393.726. PROHIBITION AGAINST CRIMINAL PROSECUTION. A
260	260	person may not threaten or pursue criminal charges against a person
261	261	who seeks a benefit from a credit access business for an extension
262	262	of consumer credit subject to this chapter in the absence of
263	263	forgery, fraud, theft, or other criminal conduct.
264	264	Sec. 393.727. FAIR DEBT COLLECTION. A credit access
265	265	business must comply with Chapter 392 and the federal Fair Debt
266	266	Collection Practices Act (15 U.S.C. Section 1692 et seq.).
267	267	Sec. 393.728. ARBITRATION. A credit access business may
268	268	not obtain an extension of credit that includes in a loan agreement
269	269	a mandatory arbitration clause that is oppressive, unfair,
270	270	unconscionable, or substantially in derogation of the rights of
271	271	consumers. Any agreement to arbitrate disputes must be conspicuous,
272	272	in type that is boldfaced, capitalized, underlined, or otherwise
273	273	distinguished from surrounding written material, if any, provided
274	274	to the borrower. The time and location of any potential hearing must
275	275	reasonable for the borrower to attend. The method of selecting the
276	276	arbitrator or arbitrators, and the rules to be used by the
277	277	arbitrators must be identified in the agreement. The cost of
278	278	filing, picking the arbitrator and the first full day of the
279	279	arbitration will be paid by the lender or the credit access
280	280	business. Additional arbitration expenses after the first day will
281	281	be split between the parties, with the borrower's total liability
282	282	for the arbitrator's expense being capped at $200.
283	283	Sec. 393.729. COMPLIANCE WITH CHAPTER. A Credit Access
284	284	Business must comply with Chapter 393 unless this subchapter
285	285	conflicts with the provision.
286	286	SECTION 2. This Act takes effect September 1, 2019.