86R17328 TYPED
By: Capriglione H.B. No. 4146
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of certain short-term consumer loans;
imposing an assessment and fees; requiring an occupational license;
authorizing fees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 393, Finance Code, is amended by adding
Subchapter H to read as follows:
Subchapter H. Regulation of Certain Credit Access Business
Transactions
Sec. 393.701. DEFINITIONS. In this Subchapter:
(1) "Regular transaction" means a loan:
(A) that is payable in installments that are
consecutive, monthly or biweekly, and substantially equal in
amount; and
(B) the first scheduled installment of which is
due within one month and 15 days after the date of the loan.
(2) "Motor vehicle title loan" means a loan in which an
unencumbered motor vehicle is given as security for the loan in
which the lender accepts multiple installments. The term does not
include a retail installment transaction under Chapter 348 or
another loan made to finance the purchase of a motor vehicle.
Sec. 393.702. INTEREST COMPUTATION METHODS. (a) The
scheduled installment earnings method is a method to compute an
interest charge by applying a daily rate to the unpaid balance of
the principal amount as if each payment will be made on its
scheduled installment date. A payment received before or after the
due date does not affect the amount of the scheduled principal
reduction.
(b) For the purposes of Subsection (a), the daily rate is
1/365th of the equivalent contract rate.
(c) Interest under the scheduled installment earnings
method may not be compounded.
(d) Loans under this chapter must use the scheduled
installment earnings method to compute interest.
(e) A loan may include a late charge in compliance with
Section 302.001(d).
Sec. 393.703. APPLICABILITY OF SUBCHAPTER. (a) A loan will
be exclusively subject to this subchapter if a credit access
business obtains or assists in obtaining a loan that:
(1) provides for an effective rate of interest 10% per
annum, or less;
(2) is extended primarily for personal, family, or
household use;
(3) is made by a person engaged in the business of
making, arranging, or negotiating those types of loans;
(4) is either:
(A) a multi-installment non-recourse term loan
secured by a first lien on a motor vehicle that includes an
administrative fee; or
(B) a multi-installment unsecured term loan that
includes an administrative fee.
(b) The loan must also comply with any rule promulgated by
the Consumer Financial Protection Bureau that regulates payday
installment loans either secured by motor vehicle or unsecured.
(c) A loan under this chapter may provide for an
administrative charge in an amount to be negotiated by the parties.
(d) A loan may not contract or provide for a single payment
under this subchapter.
Sec. 393.704. ADMINISTRATIVE FEE. (a) A Credit Access
Business may charge an administrative fee for services provided to
obtain or assist in obtaining a loan subject to this subchapter. A
loan contract under this subchapter may include the administrative
fee. The administrative fee may compensate the Credit Access
Business to defray the ordinary costs of administering a loan,
including, costs associated with:
(1) maintaining loan information;
(2) offering electronic and telephone access to loan
records;
(3) processing payments;
(4) responding to customer inquiries;
(5) providing periodic billing statements;
(6) inspection and verification of the collateral and
establishment, perfection, and release of the security interest;
and
(7) verification of insurance, registration and
annual vehicle inspection requirements of the collateral
(b) the administrative fee shall not be deemed interest for
any purpose of law and shall be agreed upon by the parties.
(c) The total amount of the administrative fee will be
disclosed in the loan agreement and in the Credit Access Agreement.
(d) The administrative fee is not interest.
(e) The administrative fee will be considered earned when
the loan is closed and may be included in the principal balance of
the loan. If the loan is prepaid in full, the borrower will be
entitled to a refund from the credit access business based on a
straight-line amortization of the administrative fee.
Sec. 393.705. ATTEMPT TO EVADE LAW. A person who is a party
to a loan subject to this subchapter or the Credit Access Business
who obtained the loan or assisted in obtaining the loan, may not
evade the application of this subtitle or a rule adopted under this
subchapter by use of any device, subterfuge, or pretense. The
Commissioner alone shall regulate any activity conducted under this
subchapter.
Sec. 393.706. LICENSE REQUIRED. (a) A person must hold a
Credit Access Business license issued under this chapter to engage
in the business of obtaining or assisting in obtaining an extension
of consumer credit that is subject to this subchapter.
(b) A person may not use any device, subterfuge, or pretense
to evade the application of this section.
Sec. 393.707. SECURED LOAN. (a) A credit access business
may only obtain or assist in obtaining a secured loan contract under
this subchapter that is a regular transaction and secured by a first
lien on a motor vehicle.
(b) The credit access business must only obtain or assist in
obtaining a loan that complies with Subtitle A of Title 4, Texas
Finance Code.
(c) The term of the secured loan under this subchapter may
not be greater than 180 days.
(d) A loan contract under this subchapter may provide for
automatic debits to the borrower's bank account in compliance with
state and federal law, including the Electronic Fund Transfer Act
(15 U.S.C. § 1693) and Regulation E (12 C.F.R. Part 1005).
Sec. 393.708. UNSECURED LOAN. (a) A credit access business
may only obtain or assist in obtaining an unsecured loan contract
under this subchapter that is a regular transaction.
(b) The credit access business must only obtain or assist in
obtaining a loan that complies with Subtitle A of Title 4, Texas
Finance Code.
(c) The term of the unsecured loan under this subchapter may
not be greater than 180 days.
(d) A loan contract under this subchapter may provide for
automatic debits to the borrower's bank account and complies with
state and federal law, including the Electronic Fund Transfer Act
(15 U.S.C. § 1693) and Regulation E (12 C.F.R. Part 1005).
Sec. 393.709. REFUND. (a) If the loan under this
subchapter is prepaid in full, including payment in cash or by a new
loan or renewal of the loan, the lender earns interest for the
period beginning on the date of the loan and ending on the date of
the prepayment or demand for payment in full.
(b) If prepayment in full or demand for payment in full
occurs during an installment period, the lender may retain, in
addition to interest that accrued during any elapsed installment
periods, an amount computed by:
(1) multiplying the simple annual interest rate under
the contract by the unpaid principal balance of the loan determined
according to the schedule of payments to be outstanding on the
preceding installment due date;
(2) dividing 365 into the product under Subdivision
(1); and
(3) multiplying the number of days in the period
beginning on the day after the installment due date and ending on
the date of the prepayment or demand, as appropriate, by the result
obtained under Subdivision (2).
(c) A loan may not earn interest on any addition to
principal added to the loan after the date of the loan contract.
(d) A loan may not use any other refunding method.
Sec. 393.710. REQUIRED PROPERTY INSURANCE. (a) A loan
secured by a motor vehicle that is subject to this subchapter, may
require a borrower to insure the motor vehicle offered as security
for the loan.
(b) The insurance coverage and the premiums or charges for
the coverage must bear a reasonable relationship to:
(1) the amount, term, and conditions of the loan;
(2) the value of the collateral; and
(3) the existing hazards or risk of loss, damage, or
destruction.
(c) The insurance may not:
(1) cover unusual or exceptional risks; or
(2) provide coverage not ordinarily included in
policies issued to the general public.
(d) A lender may not require the purchase of duplicate
property insurance if the creditor has knowledge that the borrower:
(1) has valid and collectible insurance covering the
property; and
(2) has provided a loss payable endorsement sufficient
to protect the creditor.
Sec. 393.711. DECLINATION OF EQUAL INSURANCE COVERAGE
PROHIBITED. A lender may not decline at any time existing insurance
coverage providing substantially equal benefits that comply with
this subchapter.
Sec. 393.712. NONFILING INSURANCE. A loan may not contract
for a charge for a non-filing insurance premium.
Sec. 393.713. DELIVERY OF INFORMATION TO BORROWER. (a) A
borrower must receive a copy of each document signed by the
borrower. If the names and addresses of the borrower, lender, and
Credit Access Business are not in the loan agreement, then the
borrower must receive a written statement in English that contains
the names and addresses of the borrower, lender, and credit access
business.
Sec. 393.714. RECEIPT FOR CASH PAYMENT. A lender or the
credit access business shall give a receipt to a person who makes a
cash payment on a loan.
Sec. 393.715. ACCEPTANCE OF PREPAYMENT. At any time during
regular business hours, the lender or credit access business shall
accept partial prepayment or prepayment of a loan in full. A lender
shall accept any amount from a borrower in partial prepayment of an
installment or loan subject to this chapter. Monies received will
first be applied to reducing interest and then to principal.
Sec. 393.716. AMOUNT AUTHORIZED. (a) A loan subject to
this subchapter may not directly or indirectly charge or contract
for an amount that is not authorized under this subchapter in
connection with a loan to which this chapter applies, including any
fee, compensation, bonus, commission, brokerage, discount,
expense, and any other charge of any nature.
(b) A loan subject to this subchapter, may only contract for
an amount incurred by the lender for:
(1) court costs and attorney's fees assessed by a court
only if the borrower is found to have committed forgery, fraud, or
theft in connection with the loan;
(2) a fee authorized by law for filing, recording, or
releasing in a public office a security for a loan; or
(3) a fee for recording a lien on or transferring a
certificate of title to a motor vehicle offered as security for a
loan made under this chapter; or
(4) reasonable costs actually incurred by the lender
for repossession and sale of the security.
(c) On a loan subject to this chapter a lender may assess and
collect a fee that does not exceed the amount prescribed by Section
3.506, Business & Commerce Code, for the return by a depository
institution of a dishonored check, negotiable order of withdrawal,
or share draft offered in full or partial payment of a loan.
Sec. 393.717. SECURITY FOR LOAN. (a) A borrower may not
grant as security for a loan made under this subchapter an
assignment of wages.
(b) A lender may not take as security for a loan a lien on
real property other than a lien created by law on the recording of
an abstract of judgment.
Sec. 393.718. CONFESSION OF JUDGMENT; POWER OF ATTORNEY. A
loan may not contract for a confession of judgment or a power of
attorney authorizing the lender or a third person to confess
judgment or to appear for a borrower in a judicial proceeding. A
credit access business may not require or request a confession of
judgment or a power of attorney authorizing the credit access
business to appear for the borrower in a judicial proceeding.
Sec. 393.719. DISCLOSURE OF AMOUNT FINANCED AND SCHEDULE OF
PAYMENTS. A borrower may not sign a promise to pay or loan
obligation that does not disclose the amount financed and the
schedule of payments.
Sec. 393.720. INSTRUMENT WITH BLANK PROHIBITED. A borrower
may not sign an instrument in which a blank is left to be filled in
after the loan is made.
Sec. 393.721. WAIVER OF BORROWER'S RIGHT PROHIBITED. A
borrower may not waive any right accruing under this chapter.
Sec. 393.722. MOTOR VEHICLE LOANS NON-RECOURSE. Unless the
borrower is proven in court to have committed fraud, forgery, or
theft in connection with the loan, a borrower shall not be
personally liable for any deficiency where the sale of the security
for the loan does not satisfy the indebtedness.
Sec. 393.723. COMPLIANCE WITH UNIFORM COMMERICAL CODE. A
lender must comply with Chapter 9, Uniform Commercial Code in the
repossession and redemption of a motor vehicle. If the borrower
fails to redeem a motor vehicle legally repossessed by a lender, the
lender may accept the motor vehicle in full satisfaction of the debt
or the lender may depose of the motor vehicle in compliance with
Chapter 9, Uniform Commercial Code.
Sec. 393.724. PROHIBITION AGAINST PREPAYMENT PENALTY. A
borrower may not pay a prepayment penalty in connection with a loan
subject to this chapter.
Sec. 393.725. ANCILLARY PRODUCTS. A borrower may not
purchase any product or service not specifically authorized by this
chapter. A credit access business may not obtain or assist in
obtaining financing for the purchase of any ancillary product or
service not specifically authorized by this subchapter.
Sec. 393.726. PROHIBITION AGAINST CRIMINAL PROSECUTION. A
person may not threaten or pursue criminal charges against a person
who seeks a benefit from a credit access business for an extension
of consumer credit subject to this chapter in the absence of
forgery, fraud, theft, or other criminal conduct.
Sec. 393.727. FAIR DEBT COLLECTION. A credit access
business must comply with Chapter 392 and the federal Fair Debt
Collection Practices Act (15 U.S.C. Section 1692 et seq.).
Sec. 393.728. ARBITRATION. A credit access business may
not obtain an extension of credit that includes in a loan agreement
a mandatory arbitration clause that is oppressive, unfair,
unconscionable, or substantially in derogation of the rights of
consumers. Any agreement to arbitrate disputes must be conspicuous,
in type that is boldfaced, capitalized, underlined, or otherwise
distinguished from surrounding written material, if any, provided
to the borrower. The time and location of any potential hearing must
reasonable for the borrower to attend. The method of selecting the
arbitrator or arbitrators, and the rules to be used by the
arbitrators must be identified in the agreement. The cost of
filing, picking the arbitrator and the first full day of the
arbitration will be paid by the lender or the credit access
business. Additional arbitration expenses after the first day will
be split between the parties, with the borrower's total liability
for the arbitrator's expense being capped at $200.
Sec. 393.729. COMPLIANCE WITH CHAPTER. A Credit Access
Business must comply with Chapter 393 unless this subchapter
conflicts with the provision.
SECTION 2. This Act takes effect September 1, 2019.