By: Bernal H.B. No. 206
A BILL TO BE ENTITLED
AN ACT
relating to credit services organizations and extensions of
consumer credit facilitated by credit services organizations;
increasing a criminal penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 393.001, Finance Code, is amended by
amending Subdivision (3) and adding Subdivisions (2-a), (3-a), (5),
(6), (7), (8), (9), and (10) to read as follows:
(2-a) "Credit access business" means a credit services
organization that obtains for a consumer or assists a consumer in
obtaining an extension of consumer credit.
(3) "Credit services organization" means a person who
provides, or represents that the person can or will provide, for the
payment of valuable consideration any of the following services
with respect to the extension of consumer credit by others:
(A) improving a consumer's credit history or
rating;
(B) obtaining an extension of consumer credit for
a consumer in the form of a single-payment deferred presentment
transaction, a multiple-payment deferred presentment transaction,
a single-payment motor vehicle title loan, or a multiple-payment
motor vehicle title loan; or
(C) providing advice or assistance to a consumer
with regard to Paragraph (A) or (B).
(3-a) "Deferred presentment transaction" means a
single-payment or multiple-payment transaction defined as a
deferred presentment transaction by Section 341.001 in connection
with which the consumer is not required to provide real or personal
property as security.
(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. The term does not include a
retail installment transaction under Chapter 348 or another loan
made to finance the purchase of a motor vehicle.
(6) "Multiple-payment deferred presentment
transaction" means a deferred presentment transaction that is not a
single-payment deferred presentment transaction.
(7) "Multiple-payment motor vehicle title loan" means
a motor vehicle title loan that is not a single-payment motor
vehicle title loan.
(8) "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 extension of consumer
credit becomes due on a later date. 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 seventh 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.
(9) "Single-payment deferred presentment transaction"
means a deferred presentment transaction for which the entire cash
advance, interest, and fees are required under the terms of the
transaction to be payable in a single payment.
(10) "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. Subchapter A, Chapter 393, Finance Code, is
amended by adding Section 393.004 to read as follows:
Sec. 393.004. EFFECT ON MUNICIPAL ORDINANCES. (a) This
chapter does not preempt a municipal ordinance regulating a credit
access business or any form of an extension of consumer credit that
a credit access business is authorized to obtain for a consumer or
assist a consumer in obtaining as provided by Section 393.308.
(b) If a municipal ordinance described by Subsection (a)
conflicts with a provision of this chapter regulating a credit
access business or an extension of consumer credit described by
Subsection (a), the more stringent regulation controls to the
extent of the conflict.
SECTION 3. Section 393.201(c), Finance Code, is amended to
read as follows:
(c) A contract with a credit access business[, as defined by
Section 393.601,] for the performance of services described by
Section 393.602(a) must, in addition to the requirements of
Subsection (b) and Section 393.302:
(1) contain a statement that there is no prepayment
penalty;
(2) contain a statement that 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.) with respect to an
extension of consumer credit [described by Section 393.602(a)];
(3) contain a statement that a person may not threaten
or pursue criminal charges against a consumer related to a check or
other debit authorization provided by the consumer as security for
a transaction in the absence of forgery, fraud, theft, or other
criminal conduct;
(4) contain a statement that a credit access business
must comply, to the extent applicable, with 10 U.S.C. Section 987
and any regulations adopted under that law with respect to an
extension of consumer credit [described by Section 393.602(a)];
(5) disclose to the consumer:
(A) the lender from whom the extension of
consumer credit is obtained;
(B) the interest paid or to be paid to the lender;
and
(C) the specific fees that will be paid to the
credit access business for the business's services; and
(6) contain the name and address of the Office of
Consumer Credit Commissioner and the telephone number of the
office's consumer helpline.
SECTION 4. Section 393.203, Finance Code, is amended to
read as follows:
Sec. 393.203. ISSUANCE OF CONTRACT AND OTHER DOCUMENTS.
(a) A credit services organization shall give to the consumer, when
the document is signed, a copy of the completed contract and any
other document the organization requires the consumer to sign.
(b) The contract and other documents provided by a credit
access business to a consumer under this section in relation to an
extension of consumer credit must be:
(1) provided before signing wholly written:
(A) in English; and
(B) if the contract negotiations are not
conducted in English, in the language in which the contract is
negotiated; and
(2) before signing, read in their entirety in the
language in which the contract is negotiated to any consumer who
cannot read.
SECTION 5. Section 393.223, Finance Code, is amended by
amending Subsection (a) and adding Subsection (b-1) to read as
follows:
(a) Before performing services described by Section
393.602(a) [393.221(1)], a credit access business must provide to a
consumer a written disclosure adopted by rule of the Finance
Commission of Texas [that discloses the following] in a form
prescribed by the commission that:
(1) discloses the interest, fees, and annual
percentage rates, as applicable, to be charged on a deferred
presentment transaction or on a motor vehicle title loan, as
applicable, in comparison to interest, fees, and annual percentage
rates to be charged on other alternative forms of consumer debt;
(2) discloses the amount of accumulated fees a
consumer would incur by renewing or refinancing a deferred
presentment transaction or motor vehicle title loan that remains
outstanding for a period of two weeks, one month, two months, and
three months; [and]
(3) provides information regarding the typical
pattern of repayment of deferred presentment transactions and motor
vehicle title loans; and
(4) references nonprofit agencies that provide
financial education and training or cash assistance to borrowers.
(b-1) The disclosure and notice required by this section
must be:
(1) available in English and Spanish at each location
at which the credit access business performs services described by
Section 393.602(a); and
(2) provided to a consumer wholly written, and read in
their entirety at the time provided to any consumer who cannot read,
in the language in which the contract is negotiated.
SECTION 6. Subchapter D, Chapter 393, Finance Code, is
amended by adding Section 393.308 to read as follows:
Sec. 393.308. PROHIBITION ON OBTAINING CERTAIN EXTENSIONS
OF CONSUMER CREDIT. A credit services organization may not obtain
for a consumer or assist a consumer in obtaining an extension of
consumer credit in any form other than in the form of a
single-payment deferred presentment transaction, a
multiple-payment deferred presentment transaction, a
single-payment motor vehicle title loan, or a multiple-payment
motor vehicle title loan.
SECTION 7. Section 393.501, Finance Code, is amended by
adding Subsection (c) to read as follows:
(c) Each day of a continuing violation of a provision of
Subchapter C-1 or G constitutes a separate offense.
SECTION 8. Section 393.602(a), Finance Code, is amended to
read as follows:
(a) This subchapter applies only to a credit services
organization that obtains for a consumer or assists a consumer in
obtaining an extension of consumer credit [in the form of:
[(1) a deferred presentment transaction; or
[(2) a motor vehicle title loan].
SECTION 9. Section 393.604(a), Finance Code, is amended to
read as follows:
(a) An application for a license under this subchapter must:
(1) be under oath;
(2) contain the applicant's name and the street
address, mailing address, facsimile number, and telephone number of
the applicant at the location for which the license is sought;
(3) give the approximate location from which the
business is to be conducted;
(4) [(3)] identify the business's principal parties in
interest;
(5) [(4)] contain the name, physical address, and
telephone number of all third-party lender organizations:
(A) with which the business contracts to provide
services described by Section 393.602(a); or
(B) from which the business arranges extensions
of consumer credit [described by Section 393.602(a)]; and
(6) [(5)] contain other relevant information that the
commissioner requires for the findings required under Section
393.607.
SECTION 10. Section 393.620, Finance Code, is amended to
read as follows:
Sec. 393.620. TRANSFER OR ASSIGNMENT OF LICENSE PROHIBITED.
A license may not be transferred or assigned [only with theapproval
of the commissioner].
SECTION 11. Sections 393.622(a) and (b), Finance Code, are
amended to read as follows:
(a) The finance commission may:
(1) adopt rules necessary to enforce and administer
this subchapter;
(2) adopt rules with respect to the quarterly
reporting by a credit access business licensed under this
subchapter of summary business information relating to extensions
of consumer credit the business obtained for a consumer or assisted
a consumer in obtaining [described by Section 393.602(a)]; and
(3) adopt rules with respect to periodic examination
by the office relating to extensions of consumer credit the
business obtained for a consumer or assisted a consumer in
obtaining [described by Section 393.602(a)], including rules
related to charges for defraying the reasonable cost of conducting
the examinations.
(b) The finance commission may adopt rules under this
section to allow the commissioner to review, as part of a periodic
examination, any relevant contracts between the credit access
business and the third-party lender organizations with which the
credit access business contracts to provide services described by
Section 393.602(a) or from which the business arranges extensions
of consumer credit [described by Section 393.602(a)]. A contract
or information obtained by the commissioner under this section is
considered proprietary and confidential to the respective parties
to the contract, and is not subject to disclosure under Chapter 552,
Government Code.
SECTION 12. Sections 393.625, 393.626, and 393.627, Finance
Code, are amended to read as follows:
Sec. 393.625. MILITARY BORROWERS. An extension of consumer
credit [described by Section 393.602(a)] that is obtained by a
credit access business for a member of the United States military or
a dependent of a member of the United States military or that the
business assisted that person in obtaining must comply with 10
U.S.C. Section 987 and any regulations adopted under that law, to
the extent applicable.
Sec. 393.626. DEBT COLLECTION PRACTICES. A violation of
Chapter 392 by a credit access business [with respect to an
extension of consumer credit described by Section 393.602(a)]
constitutes a violation of this subchapter.
Sec. 393.627. QUARTERLY REPORT TO COMMISSIONER. A credit
access business shall file a quarterly report with the commissioner
on a form prescribed by the commissioner that provides the
following information relating to extensions of consumer credit
[described by Section 393.602(a)] during the preceding quarter:
(1) the number of consumers for whom the business
obtained or assisted in obtaining those extensions of consumer
credit;
(2) the number of those extensions of consumer credit
obtained by the business or that the business assisted consumers in
obtaining;
(3) the number of refinancing transactions of the
extensions of consumer credit described by Subdivision (2);
(4) the number of consumers refinancing the extensions
of consumer credit described by Subdivision (2);
(5) the number of consumers refinancing more than once
the extensions of consumer credit described by Subdivision (2);
(6) the average amount of the extensions of consumer
credit described by Subdivision (2);
(7) the total amount of fees charged by the business
for the activities described by Subdivision (1);
(8) the number of vehicles surrendered or repossessed
under the terms of an extension of consumer credit in the form of a
motor vehicle title loan obtained by the business or that the
business assisted a consumer in obtaining;
(9) the mean, median, and mode of the number of
extensions of consumer credit obtained by consumers as a result of
entering into the extensions of consumer credit described by
Subdivision (2); and
(10) any related information the commissioner
determines necessary.
SECTION 13. Subchapter G, Chapter 393, Finance Code, is
amended by adding Sections 393.629 through 393.637 to read as
follows:
Sec. 393.629. GENERAL LIMITATIONS ON EXTENSIONS OF CONSUMER
CREDIT; PAYMENT METHOD. (a) The provisions of this chapter
applicable to a credit access business apply to any consumer
physically located in this state at the time the extension of
consumer credit is made, regardless of whether the extension of
consumer credit was made in person in this state.
(b) 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 that a credit access business obtained for a consumer or
assisted a consumer in obtaining under this chapter.
Sec. 393.630. ESTABLISHMENT OF INCOME. A credit access
business must require documentation to establish a consumer's
income for purposes of this subchapter. The only acceptable forms
of documentation are paper, facsimile, or electronic copies of:
(1) a payroll document;
(2) a paycheck;
(3) a bank, credit union, debit card, or other account
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;
or
(7) a signed letter from the consumer's employer at the
time the extension of consumer credit is sought.
Sec. 393.631. SINGLE-PAYMENT DEFERRED PRESENTMENT
TRANSACTION. (a) The sum of all fees, principal, interest, and
other amounts due under an extension of consumer credit in the form
of a single-payment deferred presentment transaction that a credit
access business obtains for a consumer or assists a consumer in
obtaining may not exceed 20 percent of the consumer's gross monthly
income.
(b) An extension of consumer credit in the form of a
single-payment deferred presentment transaction that a credit
access business obtains for a consumer or assists a consumer in
obtaining may not be refinanced more than three times. An amount
from each payment of a refinanced deferred presentment transaction
described by this subsection must be used to repay at least 25
percent of the principal amount of the original debt.
Sec. 393.632. MULTIPLE-PAYMENT DEFERRED PRESENTMENT
TRANSACTION. (a) The sum of all fees, principal, interest, and
other amounts due under all scheduled payments of an extension of
consumer credit in the form of a multiple-payment deferred
presentment transaction that a credit access business obtains for a
consumer or assists a consumer in obtaining may not exceed 20
percent of the consumer's gross monthly income.
(b) An extension of consumer credit in the form of a
multiple-payment deferred presentment transaction that a credit
access business obtains for a consumer or assists a consumer in
obtaining and all fees associated with the debt may not be payable
by the consumer in more than four installments. An amount from each
payment must be used to repay at least 25 percent of the principal
amount of the debt.
(c) An extension of consumer credit in the form of a
multiple-payment deferred presentment transaction that a credit
access business obtains for a consumer or assists a consumer in
obtaining may not be refinanced.
Sec. 393.633. SINGLE-PAYMENT MOTOR VEHICLE TITLE LOAN. (a)
The sum of all fees, principal, interest, and other amounts due
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
may not exceed the lesser of:
(1) three percent of the consumer's gross annual
income; or
(2) 70 percent of the retail value of the motor vehicle
securing the debt.
(b) 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 three times. An amount from each
payment of a refinanced motor vehicle title loan described by this
subsection must be used to repay at least 25 percent of the
principal amount of the original debt.
Sec. 393.634. MULTIPLE-PAYMENT MOTOR VEHICLE TITLE LOAN.
(a) The sum of all fees, principal, interest, and other amounts due
under all scheduled payments 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 the lesser of:
(1) three percent of the consumer's gross annual
income; or
(2) 70 percent of the retail value of the motor vehicle
securing the debt.
(b) 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
and all fees associated with the debt may not be payable by the
consumer in more than four installments. An amount from each
payment must be used to repay at least 25 percent of the principal
amount of the debt.
(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
may not be refinanced.
Sec. 393.635. REFINANCES. (a) Any refinance of an
extension of consumer credit 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 applicable income-based or vehicle value-based
limitations under Section 393.631(a) or 393.633(a).
(b) For purposes of this section, a single-payment deferred
presentment transaction, a multiple-payment deferred presentment
transaction, a single-payment motor vehicle title loan, and a
multiple-payment motor vehicle title loan are the different forms
of extensions of consumer credit that a credit access business may
obtain for a consumer or assist a consumer in obtaining.
(c) A person may not use a device, subterfuge, or pretense
to evade the refinance requirements and limitations imposed on a
credit access business under this subchapter.
Sec. 393.636. MAINTENANCE OF RECORDS. (a) A credit access
business shall maintain a complete set of records of all extensions
of consumer credit obtained for consumers by the business or that
the business assisted consumers in obtaining. The record
pertaining to each extension of consumer credit must be retained
until the third anniversary of the date the extension of consumer
credit was obtained and must include:
(1) the name and address of the consumer;
(2) the principal amount of the cash advance or loan;
(3) the length of the original term of the extension of
consumer credit, the number of installments or refinances, if
applicable, and the length of the term of any refinance;
(4) the fees charged by the credit access business for
obtaining for a consumer or assisting the consumer in obtaining the
extension of consumer credit; and
(5) the documentation used to establish a consumer's
income under Section 393.630.
(b) A credit access business shall retain a copy of each
written agreement between the business and a consumer pertaining to
an extension of consumer credit, including any agreement regarding
refinancing an extension of consumer credit, until the third
anniversary of the date on which the agreement was entered into.
(c) A credit access business shall retain a copy of each
report filed under Section 393.627 until the third anniversary of
the date on which the report was filed.
(d) A record described by this section must be available for
inspection on request by the office during the normal business
hours of the credit access business.
Sec. 393.637. RULES. The finance commission shall adopt
any rules necessary to implement Sections 393.629-393.636.
SECTION 14. The following laws are repealed:
(1) Section 393.221, Finance Code; and
(2) Sections 393.601(2), (3), and (5), Finance Code.
SECTION 15. 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 16. (a) The change in law made by this Act to
Section 393.223, Finance Code, applies only to a disclosure or
notice provided by a credit access business on or after January 1,
2018. A disclosure or notice provided by a credit access business
before January 1, 2022, is governed by Section 393.223, Finance
Code, as that section existed immediately before the effective date
of this Act, and that law is continued in effect for that purpose.
(b) The Finance Commission of Texas shall adopt rules
prescribing forms under Section 393.223(a), Finance Code, as
amended by this Act, not later than November 1, 2021.
SECTION 17. Section 393.636, Finance Code, as added by this
Act, applies only to a record created on or after the effective date
of this Act. A record created before the effective date of this Act
is governed by the law in effect when the record was created, and
the former law is continued in effect for that purpose.
SECTION 18. This Act takes effect September 1, 2021.