Bernal bill capping payday and car-title loans

The text as introduced · 3,835 words

By: Bernal
H.B. No. 768

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:

(i) a single-payment deferred presentment

transaction;

(ii) a multiple-payment deferred

presentment transaction;

(iii) a single-payment motor vehicle title

loan; or

(iv) 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:

(1) a credit access business; or

(2) 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, 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:

(1) a single-payment deferred presentment

transaction;

(2) a multiple-payment deferred presentment

transaction;

(3) a single-payment motor vehicle title loan; or

(4) 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 [ , with respect to a consumer who is located in

this state at the time of the transaction, ] 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

be under oath and contain :

(1) 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 [ be under

oath ];

(2) [ give ] the approximate location from which the

business is to be conducted;

(3) the identities of [ identify ] the business's

principal parties in interest;

(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

(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 the approval

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 federal 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,

2024. A disclosure or notice provided by a credit access business

before January 1, 2026, 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, 2025.

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, 2025.