1-1     By:  Carona                                           S.B. No. 1339
 1-2           (In the Senate - Filed March 11, 1999; March 15, 1999, read
 1-3     first time and referred to Committee on Economic Development;
 1-4     April 6, 1999, reported favorably by the following vote:  Yeas 5,
 1-5     Nays 1; April 6, 1999, sent to printer.)
 1-6                            A BILL TO BE ENTITLED
 1-7                                   AN ACT
 1-8     relating to the regulation of deferred presentment transactions.
 1-9           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10           SECTION 1.  Chapter 342, Finance Code, is amended by adding
1-11     Subchapter M to read as follows:
1-12              SUBCHAPTER M.  DEFERRED PRESENTMENT TRANSACTIONS
1-13           Sec. 342.701.  DEFINITIONS.  In this subchapter:
1-14                 (1)  "Check" has the meaning assigned by Section 3.104,
1-15     Business & Commerce Code.
1-16                 (2)  "Deferred presentment transaction" means a loan
1-17     agreement under which the borrower delivers to the lender a check
1-18     and agrees with the lender that the lender will defer presentment
1-19     or negotiation of the check for a period not to exceed 31 days.
1-20                 (3)  "Fee" means, except in reference to a license fee,
1-21     an amount charged by a lender under Section 342.706.
1-22                 (4)  "Renewal" means the termination of an existing
1-23     deferred presentment transaction solely for the payment of fees
1-24     then due the lender and substitution of a new check drawn by the
1-25     borrower pursuant to a new deferred presentment transaction.
1-26           Sec. 342.702.  RULES.  The commissioner may adopt reasonable
1-27     rules to enforce this subchapter.
1-28           Sec. 342.703.  LICENSE REQUIRED.  (a)  A person may not
1-29     engage in a deferred presentment transaction as the lender unless
1-30     the person holds a license issued under this chapter.
1-31           (b)  Notwithstanding any other provision of this chapter, the
1-32     annual license fee for a license issued under this chapter to a
1-33     person who engages in a deferred presentment transaction is $200.
1-34           Sec. 342.704.  WRITTEN AGREEMENT REQUIRED.  The agreement for
1-35     a deferred presentment transaction must be in writing and signed by
1-36     the borrower.
1-37           Sec. 342.705.  DISCLOSURE.  (a)  Before consummation of the
1-38     agreement for a deferred presentment transaction, the lender shall
1-39     provide the borrower a written disclosure, in clear, understandable
1-40     language, itemizing all fees to be charged in relation to the
1-41     transaction and the date on which presentment or negotiation of the
1-42     check will be made.
1-43           (b)  The commissioner shall adopt rules establishing a
1-44     standardized disclosure form and procedure for execution of the
1-45     form that must be used under Subsection (a).  The form and
1-46     procedure for execution must be designed to conform to federal
1-47     truth-in-lending laws and to ensure that the borrower, before
1-48     entering the transaction, receives and acknowledges notice of all
1-49     fees that could be charged in relation to the transaction.
1-50           (c)  The commissioner may adopt rules establishing additional
1-51     requirements to ensure complete and accurate disclosure.
1-52           Sec. 342.706.  LOAN AMOUNT, NUMBER, AND FEE LIMIT.  (a)  The
1-53     principal amount of the loan under a deferred presentment
1-54     transaction may not exceed $500.
1-55           (b)  A lender may not be a party to more than one deferred
1-56     presentment transaction with the same borrower at one time.  A
1-57     deferred presentment transaction may not be renewed more than
1-58     twice.
1-59           (c)  On a deferred presentment transaction the lender may
1-60     charge a fee not to exceed:
1-61                 (1)  $15 for the first $100 of the loan;
1-62                 (2)  $14 for the second $100 of the loan;
1-63                 (3)  $13 for the third $100 of the loan;
1-64                 (4)  $12 for the fourth $100 of the loan;
 2-1                 (5)  $11 for the fifth $100 of the loan; and
 2-2                 (6)  for each increment of less than $100, a prorated
 2-3     amount based on the schedule established by Subdivisions (1)-(5),
 2-4     as determined by the commissioner.
 2-5           (d)  Nothing in this chapter prohibits a lender from being a
 2-6     party, with the same borrower at the same time, to a deferred
 2-7     presentment transaction and a loan authorized by this chapter other
 2-8     than a deferred presentment transaction.
 2-9           Sec. 342.707.  PRESENTMENT, NEGOTIATION, REDEMPTION.  (a)  A
2-10     lender may not make presentment or negotiation of a check received
2-11     in a deferred payment transaction unless the lender endorses the
2-12     check with the name under which the lender does business.
2-13           (b)  The borrower is entitled to redeem the check before the
2-14     date of presentment or negotiation stated in the agreement on
2-15     payment to the lender of the amount of the check in cash or its
2-16     equivalent.
2-17           (c)  Except as provided by Section 342.710, on dishonor of
2-18     the check because of insufficient  funds, a closed account, or a
2-19     stop payment order, the lender may use all means available under
2-20     law to collect the amount of the check and is entitled to recover
2-21     any amounts charged the lender by a financial institution related
2-22     to dishonor of the check.
2-23           Sec. 342.708.  LENDER CONDUCT.  In relation to a deferred
2-24     presentment transaction, a lender:
2-25                 (1)  shall comply with all state and federal laws
2-26     regarding cash transactions and reporting of cash transactions;
2-27                 (2)  may not alter or delete the date on any check or
2-28     accept a check that is undated or dated with a date other than the
2-29     date the lender received the check; and
2-30                 (3)  may not require a borrower to provide security or
2-31     obtain a guaranty for the deferred presentment transaction.
2-32           Sec. 342.709.  RECORDS.  A license holder shall keep, and use
2-33     in its business, books and other records the commissioner requires
2-34     to carry out this subchapter and rules adopted under this
2-35     subchapter.  The license holder shall preserve its books and other
2-36     records for at least four years.
2-37           Sec. 342.710.  LIMITATION ON ACTION AGAINST BORROWER.  (a)  A
2-38     borrower may not be prosecuted under Section 31.03, 31.04, or
2-39     32.41, Penal Code, for nonpayment of a check drawn as part of a
2-40     deferred presentment transaction.
2-41           (b)  A statement of the provisions of Subsection (a) must be
2-42     included in bold-faced print in English and Spanish in the
2-43     disclosure required under Section 342.705.
2-44           SECTION 2.  This Act takes effect September 1, 1999.
2-45           SECTION 3.  The importance of this legislation and the
2-46     crowded condition of the calendars in both houses create an
2-47     emergency and an imperative public necessity that the
2-48     constitutional rule requiring bills to be read on three several
2-49     days in each house be suspended, and this rule is hereby suspended.
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