Bill Text: TX HB4146 | 2019-2020 | 86th Legislature | Introduced
Bill Title: Relating to the regulation of certain short-term consumer loans; imposing an assessment and fees; requiring an occupational license; authorizing fees.
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2019-03-25 - Referred to Pensions, Investments & Financial Services [HB4146 Detail]
Download: Texas-2019-HB4146-Introduced.html
86R17328 TYPED | ||
By: Capriglione | H.B. No. 4146 |
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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. |