By Tillery H.B. No. 3622 76R9165 DWS-F A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the regulation of deferred presentment transactions. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Chapter 342, Finance Code, is amended by adding 1-5 Subchapter M to read as follows: 1-6 SUBCHAPTER M. DEFERRED PRESENTMENT TRANSACTIONS 1-7 Sec. 342.701. DEFINITIONS. In this subchapter: 1-8 (1) "Check" has the meaning assigned by Section 3.104, 1-9 Business & Commerce Code. 1-10 (2) "Deferred presentment transaction" means a loan 1-11 agreement under which the borrower delivers to the lender a check 1-12 and agrees with the lender that the lender will defer presentment 1-13 or negotiation of the check for a period not to exceed 31 days. 1-14 (3) "Fee" means, except in reference to a license fee, 1-15 an amount charged by a lender under Section 342.706. 1-16 (4) "Renewal" means the termination of an existing 1-17 deferred presentment transaction solely for the payment of fees 1-18 then due the lender and substitution of a new check drawn by the 1-19 borrower pursuant to a new deferred presentment transaction. 1-20 Sec. 342.702. RULES. The commissioner may adopt reasonable 1-21 rules to enforce this subchapter. 1-22 Sec. 342.703. LICENSE REQUIRED. (a) A person may not 1-23 engage in a deferred presentment transaction as the lender unless 1-24 the person holds a license issued under this chapter. 2-1 (b) Notwithstanding any other provision of this chapter, the 2-2 annual license fee for a license issued under this chapter to a 2-3 person who engages in a deferred presentment transaction is $200. 2-4 Sec. 342.704. WRITTEN AGREEMENT REQUIRED. The agreement for 2-5 a deferred presentment transaction must be in writing and signed by 2-6 the borrower. 2-7 Sec. 342.705. DISCLOSURE. (a) Before consummation of the 2-8 agreement for a deferred presentment transaction, the lender shall 2-9 provide the borrower a written disclosure, in clear, understandable 2-10 language, itemizing all fees to be charged in relation to the 2-11 transaction and the date on which presentment or negotiation of the 2-12 check will be made. 2-13 (b) The commissioner shall adopt rules establishing a 2-14 standardized disclosure form and procedure for execution of the 2-15 form that must be used under Subsection (a). The form and 2-16 procedure for execution must be designed to conform to federal 2-17 truth-in-lending laws and to ensure that the borrower, before 2-18 entering the transaction, receives and acknowledges notice of all 2-19 fees that could be charged in relation to the transaction. 2-20 (c) The commissioner may adopt rules establishing additional 2-21 requirements to ensure complete and accurate disclosure. 2-22 Sec. 342.706. LOAN AMOUNT, NUMBER, AND FEE LIMIT. (a) The 2-23 principal amount of the loan under a deferred presentment 2-24 transaction may not exceed $500. 2-25 (b) A lender may not be a party to more than one deferred 2-26 presentment transaction with the same borrower at one time. A 2-27 deferred presentment transaction may not be renewed more than 3-1 twice. 3-2 (c) On a deferred presentment transaction the lender may 3-3 charge a fee not to exceed: 3-4 (1) $15 for the first $100 of the loan; 3-5 (2) $14 for the second $100 of the loan; 3-6 (3) $13 for the third $100 of the loan; 3-7 (4) $12 for the fourth $100 of the loan; 3-8 (5) $11 for the fifth $100 of the loan; and 3-9 (6) for each increment of less than $100, a prorated 3-10 amount based on the schedule established by Subdivisions (1)-(5), 3-11 as determined by the commissioner. 3-12 (d) Nothing in this chapter prohibits a lender from being a 3-13 party, with the same borrower at the same time, to a deferred 3-14 presentment transaction and a loan authorized by this chapter other 3-15 than a deferred presentment transaction. 3-16 Sec. 342.707. PRESENTMENT, NEGOTIATION, REDEMPTION. (a) A 3-17 lender may not make presentment or negotiation of a check received 3-18 in a deferred payment transaction unless the lender endorses the 3-19 check with the name under which the lender does business. 3-20 (b) The borrower is entitled to redeem the check before the 3-21 date of presentment or negotiation stated in the agreement on 3-22 payment to the lender of the amount of the check in cash or its 3-23 equivalent. 3-24 (c) Except as provided by Section 342.710, on dishonor of 3-25 the check because of insufficient funds, a closed account, or a 3-26 stop payment order, the lender may use all means available under 3-27 law to collect the amount of the check and is entitled to recover 4-1 any amounts charged the lender by a financial institution related 4-2 to dishonor of the check. 4-3 Sec. 342.708. LENDER CONDUCT. In relation to a deferred 4-4 presentment transaction, a lender: 4-5 (1) shall comply with all state and federal laws 4-6 regarding cash transactions and reporting of cash transactions; 4-7 (2) may not alter or delete the date on any check or 4-8 accept a check that is undated or dated with a date other than the 4-9 date the lender received the check; and 4-10 (3) may not require a borrower to provide security or 4-11 obtain a guaranty for the deferred presentment transaction. 4-12 Sec. 342.709. RECORDS. A license holder shall keep, and use 4-13 in its business, books and other records the commissioner requires 4-14 to carry out this subchapter and rules adopted under this 4-15 subchapter. The license holder shall preserve its books and other 4-16 records for at least four years. 4-17 Sec. 342.710. LIMITATION ON ACTION AGAINST BORROWER. (a) A 4-18 borrower may not be prosecuted under Section 31.03, 31.04, or 4-19 32.41, Penal Code, for nonpayment of a check drawn as part of a 4-20 deferred presentment transaction. 4-21 (b) A statement of the provisions of Subsection (a) must be 4-22 included in bold-faced print in English and Spanish in the 4-23 disclosure required under Section 342.705. 4-24 SECTION 2. This Act takes effect September 1, 1999. 4-25 SECTION 3. The importance of this legislation and the 4-26 crowded condition of the calendars in both houses create an 4-27 emergency and an imperative public necessity that the 5-1 constitutional rule requiring bills to be read on three several 5-2 days in each house be suspended, and this rule is hereby suspended.