Texas 2021 - 87th Regular

Texas House Bill HB206 Compare Versions

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1	1	By: Bernal H.B. No. 206
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); or
192	192	(B) from which the business arranges extensions
193	193	of consumer credit [described by Section 393.602(a)]; and
194	194	(6) [(5)] contain other relevant information that the
195	195	commissioner requires for the findings required under Section
196	196	393.607.
197	197	SECTION 10. Section 393.620, Finance Code, is amended to
198	198	read as follows:
199	199	Sec. 393.620. TRANSFER OR ASSIGNMENT OF LICENSE PROHIBITED.
200	200	A license may not be transferred or assigned [only with theapproval
201	201	of the commissioner].
202	202	SECTION 11. Sections 393.622(a) and (b), Finance Code, are
203	203	amended to read as follows:
204	204	(a) The finance commission may:
205	205	(1) adopt rules necessary to enforce and administer
206	206	this subchapter;
207	207	(2) adopt rules with respect to the quarterly
208	208	reporting by a credit access business licensed under this
209	209	subchapter of summary business information relating to extensions
210	210	of consumer credit the business obtained for a consumer or assisted
211	211	a consumer in obtaining [described by Section 393.602(a)]; and
212	212	(3) adopt rules with respect to periodic examination
213	213	by the office relating to extensions of consumer credit the
214	214	business obtained for a consumer or assisted a consumer in
215	215	obtaining [described by Section 393.602(a)], including rules
216	216	related to charges for defraying the reasonable cost of conducting
217	217	the examinations.
218	218	(b) The finance commission may adopt rules under this
219	219	section to allow the commissioner to review, as part of a periodic
220	220	examination, any relevant contracts between the credit access
221	221	business and the third-party lender organizations with which the
222	222	credit access business contracts to provide services described by
223	223	Section 393.602(a) or from which the business arranges extensions
224	224	of consumer credit [described by Section 393.602(a)]. A contract
225	225	or information obtained by the commissioner under this section is
226	226	considered proprietary and confidential to the respective parties
227	227	to the contract, and is not subject to disclosure under Chapter 552,
228	228	Government Code.
229	229	SECTION 12. Sections 393.625, 393.626, and 393.627, Finance
230	230	Code, are amended to read as follows:
231	231	Sec. 393.625. MILITARY BORROWERS. An extension of consumer
232	232	credit [described by Section 393.602(a)] that is obtained by a
233	233	credit access business for a member of the United States military or
234	234	a dependent of a member of the United States military or that the
235	235	business assisted that person in obtaining must comply with 10
236	236	U.S.C. Section 987 and any regulations adopted under that law, to
237	237	the extent applicable.
238	238	Sec. 393.626. DEBT COLLECTION PRACTICES. A violation of
239	239	Chapter 392 by a credit access business [with respect to an
240	240	extension of consumer credit described by Section 393.602(a)]
241	241	constitutes a violation of this subchapter.
242	242	Sec. 393.627. QUARTERLY REPORT TO COMMISSIONER. A credit
243	243	access business shall file a quarterly report with the commissioner
244	244	on a form prescribed by the commissioner that provides the
245	245	following information relating to extensions of consumer credit
246	246	[described by Section 393.602(a)] during the preceding quarter:
247	247	(1) the number of consumers for whom the business
248	248	obtained or assisted in obtaining those extensions of consumer
249	249	credit;
250	250	(2) the number of those extensions of consumer credit
251	251	obtained by the business or that the business assisted consumers in
252	252	obtaining;
253	253	(3) the number of refinancing transactions of the
254	254	extensions of consumer credit described by Subdivision (2);
255	255	(4) the number of consumers refinancing the extensions
256	256	of consumer credit described by Subdivision (2);
257	257	(5) the number of consumers refinancing more than once
258	258	the extensions of consumer credit described by Subdivision (2);
259	259	(6) the average amount of the extensions of consumer
260	260	credit described by Subdivision (2);
261	261	(7) the total amount of fees charged by the business
262	262	for the activities described by Subdivision (1);
263	263	(8) the number of vehicles surrendered or repossessed
264	264	under the terms of an extension of consumer credit in the form of a
265	265	motor vehicle title loan obtained by the business or that the
266	266	business assisted a consumer in obtaining;
267	267	(9) the mean, median, and mode of the number of
268	268	extensions of consumer credit obtained by consumers as a result of
269	269	entering into the extensions of consumer credit described by
270	270	Subdivision (2); and
271	271	(10) any related information the commissioner
272	272	determines necessary.
273	273	SECTION 13. Subchapter G, Chapter 393, Finance Code, is
274	274	amended by adding Sections 393.629 through 393.637 to read as
275	275	follows:
276	276	Sec. 393.629. GENERAL LIMITATIONS ON EXTENSIONS OF CONSUMER
277	277	CREDIT; PAYMENT METHOD. (a) The provisions of this chapter
278	278	applicable to a credit access business apply to any consumer
279	279	physically located in this state at the time the extension of
280	280	consumer credit is made, regardless of whether the extension of
281	281	consumer credit was made in person in this state.
282	282	(b) A credit access business shall accept a payment made in
283	283	cash or by electronic transfer, cashier's check, teller's check, or
284	284	money order offered by the consumer or another party, to retire or
285	285	otherwise pay down debt incurred under an extension of consumer
286	286	credit that a credit access business obtained for a consumer or
287	287	assisted a consumer in obtaining under this chapter.
288	288	Sec. 393.630. ESTABLISHMENT OF INCOME. A credit access
289	289	business must require documentation to establish a consumer's
290	290	income for purposes of this subchapter. The only acceptable forms
291	291	of documentation are paper, facsimile, or electronic copies of:
292	292	(1) a payroll document;
293	293	(2) a paycheck;
294	294	(3) a bank, credit union, debit card, or other account
295	295	statement;
296	296	(4) a report from a nationally or regionally
297	297	recognized credit and data reporting company;
298	298	(5) Internal Revenue Service Form W-2 from the
299	299	preceding year;
300	300	(6) the income tax return from the preceding tax year;
301	301	or
302	302	(7) a signed letter from the consumer's employer at the
303	303	time the extension of consumer credit is sought.
304	304	Sec. 393.631. SINGLE-PAYMENT DEFERRED PRESENTMENT
305	305	TRANSACTION. (a) The sum of all fees, principal, interest, and
306	306	other amounts due under an extension of consumer credit in the form
307	307	of a single-payment deferred presentment transaction that a credit
308	308	access business obtains for a consumer or assists a consumer in
309	309	obtaining may not exceed 20 percent of the consumer's gross monthly
310	310	income.
311	311	(b) An extension of consumer credit in the form of a
312	312	single-payment deferred presentment transaction that a credit
313	313	access business obtains for a consumer or assists a consumer in
314	314	obtaining may not be refinanced more than three times. An amount
315	315	from each payment of a refinanced deferred presentment transaction
316	316	described by this subsection must be used to repay at least 25
317	317	percent of the principal amount of the original debt.
318	318	Sec. 393.632. MULTIPLE-PAYMENT DEFERRED PRESENTMENT
319	319	TRANSACTION. (a) The sum of all fees, principal, interest, and
320	320	other amounts due under all scheduled payments of an extension of
321	321	consumer credit in the form of a multiple-payment deferred
322	322	presentment transaction that a credit access business obtains for a
323	323	consumer or assists a consumer in obtaining may not exceed 20
324	324	percent of the consumer's gross monthly income.
325	325	(b) An extension of consumer credit in the form of a
326	326	multiple-payment deferred presentment transaction that a credit
327	327	access business obtains for a consumer or assists a consumer in
328	328	obtaining and all fees associated with the debt may not be payable
329	329	by the consumer in more than four installments. An amount from each
330	330	payment must be used to repay at least 25 percent of the principal
331	331	amount of the debt.
332	332	(c) An extension of consumer credit in the form of a
333	333	multiple-payment deferred presentment transaction that a credit
334	334	access business obtains for a consumer or assists a consumer in
335	335	obtaining may not be refinanced.
336	336	Sec. 393.633. SINGLE-PAYMENT MOTOR VEHICLE TITLE LOAN. (a)
337	337	The sum of all fees, principal, interest, and other amounts due
338	338	under an extension of consumer credit in the form of a
339	339	single-payment motor vehicle title loan that a credit access
340	340	business obtains for a consumer or assists a consumer in obtaining
341	341	may not exceed the lesser of:
342	342	(1) three percent of the consumer's gross annual
343	343	income; or
344	344	(2) 70 percent of the retail value of the motor vehicle
345	345	securing the debt.
346	346	(b) An extension of consumer credit in the form of a
347	347	single-payment motor vehicle title loan that a credit access
348	348	business obtains for a consumer or assists a consumer in obtaining
349	349	may not be refinanced more than three times. An amount from each
350	350	payment of a refinanced motor vehicle title loan described by this
351	351	subsection must be used to repay at least 25 percent of the
352	352	principal amount of the original debt.
353	353	Sec. 393.634. MULTIPLE-PAYMENT MOTOR VEHICLE TITLE LOAN.
354	354	(a) The sum of all fees, principal, interest, and other amounts due
355	355	under all scheduled payments of an extension of consumer credit in
356	356	the form of a multiple-payment motor vehicle title loan that a
357	357	credit access business obtains for a consumer or assists a consumer
358	358	in obtaining may not exceed the lesser of:
359	359	(1) three percent of the consumer's gross annual
360	360	income; or
361	361	(2) 70 percent of the retail value of the motor vehicle
362	362	securing the debt.
363	363	(b) An extension of consumer credit in the form of a
364	364	multiple-payment motor vehicle title loan that a credit access
365	365	business obtains for a consumer or assists a consumer in obtaining
366	366	and all fees associated with the debt may not be payable by the
367	367	consumer in more than four installments. An amount from each
368	368	payment must be used to repay at least 25 percent of the principal
369	369	amount of the debt.
370	370	(c) An extension of consumer credit in the form of a
371	371	multiple-payment motor vehicle title loan that a credit access
372	372	business obtains for a consumer or assists a consumer in obtaining
373	373	may not be refinanced.
374	374	Sec. 393.635. REFINANCES. (a) Any refinance of an
375	375	extension of consumer credit that a credit access business obtains
376	376	for a consumer or assists a consumer in obtaining:
377	377	(1) must be authorized under this subchapter;
378	378	(2) must be in the same form as the original extension
379	379	of consumer credit; and
380	380	(3) must meet all the requirements applicable to the
381	381	original extension of consumer credit, including the duration,
382	382	transaction, and applicable income-based or vehicle value-based
383	383	limitations under Section 393.631(a) or 393.633(a).
384	384	(b) For purposes of this section, a single-payment deferred
385	385	presentment transaction, a multiple-payment deferred presentment
386	386	transaction, a single-payment motor vehicle title loan, and a
387	387	multiple-payment motor vehicle title loan are the different forms
388	388	of extensions of consumer credit that a credit access business may
389	389	obtain for a consumer or assist a consumer in obtaining.
390	390	(c) A person may not use a device, subterfuge, or pretense
391	391	to evade the refinance requirements and limitations imposed on a
392	392	credit access business under this subchapter.
393	393	Sec. 393.636. MAINTENANCE OF RECORDS. (a) A credit access
394	394	business shall maintain a complete set of records of all extensions
395	395	of consumer credit obtained for consumers by the business or that
396	396	the business assisted consumers in obtaining. The record
397	397	pertaining to each extension of consumer credit must be retained
398	398	until the third anniversary of the date the extension of consumer
399	399	credit was obtained and must include:
400	400	(1) the name and address of the consumer;
401	401	(2) the principal amount of the cash advance or loan;
402	402	(3) the length of the original term of the extension of
403	403	consumer credit, the number of installments or refinances, if
404	404	applicable, and the length of the term of any refinance;
405	405	(4) the fees charged by the credit access business for
406	406	obtaining for a consumer or assisting the consumer in obtaining the
407	407	extension of consumer credit; and
408	408	(5) the documentation used to establish a consumer's
409	409	income under Section 393.630.
410	410	(b) A credit access business shall retain a copy of each
411	411	written agreement between the business and a consumer pertaining to
412	412	an extension of consumer credit, including any agreement regarding
413	413	refinancing an extension of consumer credit, until the third
414	414	anniversary of the date on which the agreement was entered into.
415	415	(c) A credit access business shall retain a copy of each
416	416	report filed under Section 393.627 until the third anniversary of
417	417	the date on which the report was filed.
418	418	(d) A record described by this section must be available for
419	419	inspection on request by the office during the normal business
420	420	hours of the credit access business.
421	421	Sec. 393.637. RULES. The finance commission shall adopt
422	422	any rules necessary to implement Sections 393.629-393.636.
423	423	SECTION 14. The following laws are repealed:
424	424	(1) Section 393.221, Finance Code; and
425	425	(2) Sections 393.601(2), (3), and (5), Finance Code.
426	426	SECTION 15. The changes in law made by this Act apply only
427	427	to an extension of consumer credit made on or after the effective
428	428	date of this Act. An extension of consumer credit made before the
429	429	effective date of this Act is governed by the law in effect on the
430	430	date the extension of consumer credit was made, and the former law
431	431	is continued in effect for that purpose. For purposes of this
432	432	section, a refinance of an extension of consumer credit is
433	433	considered made on the date the extension of consumer credit being
434	434	refinanced was made.
435	435	SECTION 16. (a) The change in law made by this Act to
436	436	Section 393.223, Finance Code, applies only to a disclosure or
437	437	notice provided by a credit access business on or after January 1,
438	438	2018. A disclosure or notice provided by a credit access business
439	439	before January 1, 2022, is governed by Section 393.223, Finance
440	440	Code, as that section existed immediately before the effective date
441	441	of this Act, and that law is continued in effect for that purpose.
442	442	(b) The Finance Commission of Texas shall adopt rules
443	443	prescribing forms under Section 393.223(a), Finance Code, as
444	444	amended by this Act, not later than November 1, 2021.
445	445	SECTION 17. Section 393.636, Finance Code, as added by this
446	446	Act, applies only to a record created on or after the effective date
447	447	of this Act. A record created before the effective date of this Act
448	448	is governed by the law in effect when the record was created, and
449	449	the former law is continued in effect for that purpose.
450	450	SECTION 18. This Act takes effect September 1, 2021.