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. 2-50 * * * * *