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79R2426 ATP-F
By: Villarreal H.B. No. 398
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of tax refund anticipation loans;
imposing an administrative penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle B, Title 4, Finance Code, is amended by
adding Chapter 350 to read as follows:
CHAPTER 350. TAX REFUND ANTICIPATION LOANS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 350.001. PURPOSE; CONSTRUCTION. (a) The purposes of
this chapter are:
(1) to protect consumers who enter into refund
anticipation loans or refund anticipation check transactions from
abuses; and
(2) to ensure that consumers are fully informed of the
costs and consequences of refund anticipation loans and checks.
(b) This chapter shall be liberally construed to accomplish
its purposes.
Sec. 350.002. DEFINITIONS. In this chapter:
(1) "Applicant" means a person who applies for
registration as a facilitator.
(2) "Consumer" means an individual who singly or
jointly with another consumer is solicited for, applies for, or
receives the proceeds of a refund anticipation loan or check.
(3) "Creditor" means a person who makes a refund
anticipation loan or who takes an assignment of a refund
anticipation loan.
(4) "Facilitator" means a person who individually or
in cooperation with another person:
(A) solicits the execution of or processes,
receives, or accepts an application or agreement for a refund
anticipation loan or check; or
(B) in any other manner facilitates the making of
a refund anticipation loan or the issuing of a refund anticipation
check.
(5) "Refund anticipation check" means a check or other
payment mechanism:
(A) that represents the proceeds of a consumer's
tax refund;
(B) that is issued by a depository institution or
other person who receives a direct deposit of the consumer's tax
refund or tax credits; and
(C) for which the consumer pays a fee or other
consideration.
(6) "Refund anticipation loan" means a loan that is
secured by the proceeds of a consumer's income tax refund or tax
credits or that the creditor arranges to be repaid directly or
indirectly from the proceeds of a consumer's income tax refund or
tax credits. A refund anticipation loan includes the sale,
assignment, or purchase of a consumer's tax refund at a discount or
for a fee, whether or not the consumer is required to repay the
purchaser or assignee if the Internal Revenue Service denies or
reduces the consumer's tax refund.
(7) "Registrant" means a person registered as a
facilitator under this chapter or an officer, agent, employee, or
representative of a person registered as a facilitator under this
chapter.
Sec. 350.003. RESTRICTION ON FACILITATING REFUND
ANTICIPATION LOANS OR CHECKS. (a) A person may not, individually
or in cooperation with another person, solicit the execution of or
process, receive, or accept an application or agreement for a
refund anticipation loan or check or in any other manner facilitate
the making of a refund anticipation loan or check, unless the person
has complied with this chapter.
(b) A person may not use any device, subterfuge, or pretense
to evade the application of this chapter.
Sec. 350.004. RULES. The commissioner may adopt rules as
necessary to accomplish the purposes of this chapter and assist
facilitators in interpreting this chapter.
[Sections 350.005-350.050 reserved for expansion]
SUBCHAPTER B. REGISTRATION
Sec. 350.051. REGISTRATION REQUIRED; EXCEPTIONS. (a) A
facilitator shall register as provided by this subchapter.
(b) The commissioner shall maintain a list of registrants
that is available to interested persons and the public.
(c) A bank, credit union, or savings and loan association is
not required to register under this subchapter.
Sec. 350.052. APPLICATION FOR REGISTRATION. (a) An
applicant for registration as a facilitator must file a written
application with the commissioner accompanied by an application fee
in an amount determined by the commissioner. An applicant shall pay
a separate fee for each office at which the applicant intends to act
as a facilitator of a refund anticipation loan or check.
(b) An application must:
(1) be made under oath on a form prescribed by the
commissioner;
(2) contain all information required by the
commissioner; and
(3) identify each office at which the applicant
intends to act as a facilitator of a refund anticipation loan or
check.
Sec. 350.053. BOND. (a) An applicant shall file with the
application a bond in the amount of $100,000 for each office at
which the applicant intends to act as a facilitator of refund
anticipation loans or checks.
(b) The bond must be in favor of this state for the use of a
consumer who has a cause of action under this chapter against the
facilitator. The bond must remain in effect for five years after
the facilitator ceases operation in this state.
(c) The bond must be conditioned on:
(1) the facilitator's faithful performance under this
chapter and rules adopted under this chapter; and
(2) the payment of all amounts that become due to a
consumer under this chapter.
Sec. 350.054. CERTIFICATE OF REGISTRATION. (a) The
commissioner shall register an applicant and shall issue a
certificate attesting to the registration if the commissioner finds
that the responsibility and general fitness of an applicant
commands the confidence of the community and warrants belief that
the business of facilitating refund anticipation loans or checks
will be operated according to the purposes of this chapter.
(b) If the commissioner does not make the findings required
by Subsection (a), the commissioner may not register the applicant
and shall notify the applicant, stating the reason for the denial.
(c) On receiving a certificate of registration, the
applicant may act as a facilitator at each office identified on the
application for registration.
Sec. 350.055. EXPIRATION OF REGISTRATION; RENEWAL. (a)
Registration as a facilitator expires on the first December 31
following the date the certificate of registration was issued.
(b) A registrant may renew a registration before the
registration expires by filing with the commissioner an application
for renewal in the form prescribed by the commissioner. An
application to renew a registration must contain all information
required by the commissioner and be accompanied by a fee in an
amount determined by the commissioner. A registrant shall pay a
separate renewal fee for each office at which the registrant
intends to facilitate a refund anticipation loan or check during
the succeeding year.
(c) The commissioner shall renew a registration on
receiving an application for renewal that complies with Subsection
(b) unless the commissioner finds that the registrant has violated
this chapter or that the fitness of the registrant or the operations
of the registrant would not support registration as a facilitator
under Section 350.054. If the commissioner denies an application
for renewal, the commissioner shall notify the registrant, stating
the reason for the denial.
Sec. 350.056. HEARING ON DENIAL OF REGISTRATION OR RENEWAL.
(a) An applicant or registrant is entitled to a hearing on written
request made to the commissioner not later than the fifth day after
the date the applicant or registrant receives notice of the
commissioner's denial of an application for registration or
renewal.
(b) The commissioner shall hold an informal hearing
promptly after the commissioner receives the request.
(c) If the commissioner determines after the hearing that
the responsibility and general fitness of an applicant or
registrant commands the confidence of the community and warrants
belief that the business of facilitating refund anticipation loans
or checks will be operated according to the purposes of this chapter
or that the registrant has not violated this chapter, the
commissioner shall register the applicant or renew the registrant's
registration. If the commissioner does not make the findings
required by this subsection, the commissioner may not register the
applicant or renew the registrant's registration.
[Sections 350.057-350.100 reserved for expansion]
SUBCHAPTER C. INTEREST AND FEES
Sec. 350.101. REFUND ANTICIPATION LOAN FEE. (a) Except as
provided by Subsection (b) or (c), a fee or other consideration
charged by a creditor or facilitator in connection with making a
refund anticipation loan is considered a refund anticipation loan
fee.
(b) A fee or other consideration charged for a deposit
account used wholly or partly for receiving a consumer's tax refund
to repay the amount owed on the refund anticipation loan is
considered a refund anticipation loan fee.
(c) A fee or other consideration charged by a facilitator in
the ordinary course of business, including a fee for preparing or
electronically filing a tax return, is not a refund anticipation
loan fee if the facilitator charges the same fee in the same amount
to a customer who does not receive a refund anticipation loan or
check.
Sec. 350.102. COMPUTATION OF INTEREST. (a) The refund
anticipation loan interest rate is the rate, expressed as a
percentage, computed according to the following formula:
RAL RATE = (F x 365) / ((L - F) x T)
where:
"RAL RATE" is the refund anticipation loan interest rate;
"F" is the total amount of refund anticipation loan fees;
"L" is the total amount of the refund anticipation loan; and
"T" is the number of days in the refund anticipation loan.
(b) If a deposit account is established or maintained wholly
or partly for the purpose of receiving a consumer's tax refund to
repay the amount owed on a refund anticipation loan, the loan
matures for purposes of determining the refund anticipation loan
interest rate on the estimated date the tax refund will be deposited
in the deposit account. If a deposit account is not established or
maintained for the repayment of the loan, the loan matures for
purposes of determining the interest rate on the estimated date the
tax refund will be received by the creditor.
Sec. 350.103. MAXIMUM INTEREST RATE. (a) A refund
anticipation loan may not provide for interest that exceeds the
lesser of:
(1) 36 percent a year; or
(2) the applicable alternative rate ceiling under
Chapter 303.
(b) A refund anticipation loan that provides for an interest
rate in violation of this section is void.
Sec. 350.104. CERTAIN CHARGES PROHIBITED. (a) A
facilitator may directly or indirectly charge or arrange for the
charging of interest, a fee, or another charge related to a refund
anticipation loan or check only if the charge is specifically
authorized by this chapter.
(b) A facilitator may not, in connection with making a
refund anticipation loan or issuing a refund anticipation check,
directly or indirectly charge or arrange for the charging of:
(1) fees for insurance;
(2) attorney's fees;
(3) collection costs; or
(4) fees for cashing a check.
[Sections 350.105-350.150 reserved for expansion]
SUBCHAPTER D. REQUIRED POSTINGS AND DISCLOSURES
Sec. 350.151. DISPLAY OF CERTIFICATE. A registrant shall
prominently display a certificate issued under this chapter in each
place of business in this state where the registrant facilitates
refund anticipation loans or checks.
Sec. 350.152. FEE SCHEDULE POSTING. (a) A facilitator
shall display schedules showing the fees for:
(1) a refund anticipation loan or check, currently
charged by the facilitator at that place of business; and
(2) electronically filing a taxpayer's tax return.
(b) A schedule required by Subsection (a) must be:
(1) displayed in a prominent location in each place of
business in this state where the facilitator facilitates refund
anticipation loans or checks; and
(2) written in not less than 28-point type on a
document measuring not less than 16 inches by 20 inches.
(c) A schedule of the fees charged for refund anticipation
loans displayed under Subsection (a)(1) shall include:
(1) the refund anticipation loan interest rates and
examples of the interest charged for refund anticipation loans of
$200, $500, $1,000, $1,500, $2,000, and $5,000;
(2) the following title centered on the page in
bold-faced capital letters at least one inch tall: "NOTICE
CONCERNING REFUND ANTICIPATION LOANS"; and
(3) the following statement: "When you take out a
refund anticipation loan, you are borrowing against your tax
refund. If your tax refund is less than expected you must still
repay the entire amount of the loan. If your refund is delayed, you
may have to pay additional costs. YOU CAN GET YOUR REFUND IN ABOUT
10 DAYS WITHOUT GETTING A LOAN OR PAYING ADDITIONAL FEES. You can
have your tax return filed electronically and directly deposited
into your own bank account without obtaining a loan or paying fees
for an extra product."
(d) A facilitator may facilitate a refund anticipation loan
or check only if:
(1) the facilitator displays the schedules as required
by this section;
(2) the fee actually charged for the refund
anticipation loan or check is the same as the fee displayed on the
schedule; and
(3) the interest rate actually charged is the same as
the rate displayed on the schedule as required by Subsection
(c)(1).
Sec. 350.153. APPLICATION DISCLOSURES. (a) At the time a
consumer applies for a refund anticipation loan or check, the
facilitator shall disclose to the consumer on a form separate from
the application:
(1) the fee for the refund anticipation loan or check;
(2) the fee for electronically filing a tax return;
(3) the time in which the proceeds of the refund
anticipation loan or check will be paid to the consumer if the loan
or check is approved;
(4) for refund anticipation loans:
(A) the following title centered on the page in
bold-faced capital letters and 18-point font: "NOTICE";
(B) the following statement: "This is a loan.
This loan is borrowing money against your tax refund. If your tax
refund is less than expected, you must still repay the entire amount
of the loan. If your refund is delayed, you may have to pay
additional costs. YOU CAN GET YOUR REFUND IN ABOUT 10 DAYS WITHOUT
GETTING THIS LOAN. You can have your tax return filed
electronically and your refund directly deposited into your own
bank account without obtaining a loan or other paid product.";
(C) disclosure of the refund anticipation loan
interest rate computed as set forth in Section 350.102; and
(D) the estimated total cost to the borrower for
the loan; and
(5) for refund anticipation checks:
(A) the following title centered on the page in
bold-faced capital letters and 18-point font: "NOTICE"; and
(B) the following statement: "You are paying
[amount of refund anticipation check fee] to get your refund
through [name of issuer of refund anticipation check]. YOU CAN
AVOID THIS FEE AND STILL RECEIVE YOUR REFUND IN ABOUT 10 DAYS BY
HAVING THE INTERNAL REVENUE SERVICE DIRECTLY DEPOSIT YOUR REFUND
INTO YOUR OWN BANK ACCOUNT. You can also wait for the IRS to mail you
a check. If you do not have a bank account, you may wish to consider
getting one.".
(b) A disclosure under this section must be written:
(1) in 14-point type unless otherwise noted; and
(2) in English and in any other language in which the
refund anticipation loan or check is negotiated.
Sec. 350.154. ADVERTISING DISCLOSURES. (a) In this
section, "advertise" means to produce, distribute, broadcast, or
otherwise display or have displayed written or visual materials or
oral statements describing a facilitator's products and services.
(b) A facilitator may not advertise a refund anticipation
loan without including the following statements:
"[Name of refund anticipation loan product] is a loan. You
can get your refund in about 10 days without a loan or extra fees if
you use electronic filing and direct deposit."
"The [name of refund anticipation loan product] costs [refund
anticipation loan fee]. You can get your refund in about 10 days
without this fee if you use electronic filing and direct deposit."
(c) For a print advertisement, the disclosure required by
Subsection (b) must be in type size that is one-half as large as the
largest type size in the advertisement. For a radio or television
advertisement, the disclosure required by Subsection (b) must
receive at least seven seconds of broadcast time.
Sec. 350.155. MODIFICATION OF REFUND RECEIPT ESTIMATE. The
commissioner may by rule revise the disclosures required by this
subchapter to the extent that the 10-day estimate for receiving a
refund from the Internal Revenue Service is no longer appropriate.
[Sections 350.156-350.200 reserved for expansion]
SUBCHAPTER E. ADDITIONAL DUTIES OF AND RESTRICTIONS ON
FACILITATORS
Sec. 350.201. DECEPTIVE PRACTICES PROHIBITED. A
facilitator or an officer, agent, employee, or other representative
of a facilitator may not:
(1) engage in unfair, deceptive, or fraudulent
practices in facilitating a refund anticipation loan or check,
including misrepresenting a factor or condition of the loan or
check or making an oral statement contradicting information
required to be disclosed under Subchapter D;
(2) misrepresent a material fact in obtaining or
attempting to obtain a registration as a facilitator;
(3) engage in conduct that violates Subchapter E,
Chapter 17, Business & Commerce Code; or
(4) threaten to take an action prohibited by this
chapter or that the person does not intend to take.
Sec. 350.202. DUTY TO ARRANGE TRANSACTION OR NOTIFY OF
REJECTION. Promptly after a consumer applies for a refund
anticipation loan or check, a facilitator or an officer, agent,
employee, or other representative of a facilitator shall arrange
for the loan or check or notify the consumer that the application is
rejected.
Sec. 350.203. COPIES OF APPLICATION AND AGREEMENT. At the
time a refund anticipation loan is closed or a refund anticipation
check transaction is completed, a facilitator or an officer, agent,
employee, or other representative of a facilitator shall give the
consumer copies, in a form that can be kept by the consumer, of:
(1) the complete loan or check application and
agreement; and
(2) the disclosures that a creditor is required to
make under the Truth in Lending Act (15 U.S.C. Section 1601 et
seq.), if the transaction is a refund anticipation loan.
Sec. 350.204. PROHIBITED PROVISIONS. (a) A facilitator or
an officer, agent, employee, or other representative of a
facilitator may not include in a document provided in connection
with a refund anticipation loan or check:
(1) a hold harmless clause;
(2) a confession of judgment clause;
(3) a waiver of the right to a jury trial in an action
brought by or against a consumer;
(4) an assignment of or order for payment of wages or
other compensation for services;
(5) a provision in which the consumer agrees not to
assert a claim or defense arising out of the contract;
(6) a waiver of any provision of this chapter,
including the right to injunctive, declaratory, or other equitable
relief or relief on a class-wide basis; or
(7) a provision requiring that any provision of a
dispute resolution between the parties to a refund anticipation
loan or check agreement be kept confidential.
(b) A waiver of any provision of this chapter is void.
(c) Subsection (a)(7) does not affect the rights of the
parties to a refund anticipation loan or check agreement to agree
that certain specified information is a trade secret or otherwise
confidential or to agree after a dispute arises to keep the dispute
resolution confidential.
Sec. 350.205. ADDITIONAL SECURITY INTEREST PROHIBITED. A
facilitator or an officer, agent, employee, or other representative
of a facilitator may not take or arrange for a creditor to take a
security interest in a consumer's property other than the proceeds
of the consumer's tax refund to secure payment of a refund
anticipation loan.
Sec. 350.206. CERTAIN ACTIONS WITH RESPECT TO OUTSTANDING
OR DELINQUENT REFUND ANTICIPATION LOANS PROHIBITED. A facilitator
or an officer, agent, employee, or other representative of a
facilitator may not:
(1) directly or indirectly, individually or in
cooperation with another person, engage in the collection of an
outstanding or delinquent refund anticipation loan for another
creditor; or
(2) act as facilitator for a refund anticipation loan
or check that contains a provision permitting the creditor to repay
from the proceeds of the consumer's tax refund, by offset or other
means, another outstanding or delinquent refund anticipation loan.
Sec. 350.207. ASSOCIATION WITH CHECK CASHING ENTERPRISE
PROHIBITED. A facilitator or an officer, agent, employee, or other
representative of a facilitator may not:
(1) refer a consumer to or solicit a consumer on behalf
of a third party who cashes a check for a fee; or
(2) permit a third party to cash a check for a fee in a
place of business identified in the facilitator's application for
registration.
Sec. 350.208. VIOLATION OF RULES. A facilitator or an
officer, agent, employee, or other representative of a facilitator
may not violate a rule adopted by the commissioner under this
chapter.
Sec. 350.209. ANNUAL REPORTS. (a) On or before July 1 of
each year, a facilitator shall file a report with the commissioner
according to procedures established by the commissioner.
(b) A report filed under this section must include the
following information for the period beginning April 15 of the
preceding year and ending April 14 of the year the report is filed:
(1) the total number and dollar amount of refund
anticipation loans facilitated by the facilitator;
(2) the total number and dollar amount of refund
anticipation checks facilitated by the facilitator;
(3) the average number of days for which refund
anticipation loans facilitated by the facilitator were outstanding
before being repaid;
(4) the name and address of any creditor or other
person for whom the facilitator facilitates a refund anticipation
loan or check; and
(5) any other information required by the
commissioner.
(c) The commissioner shall establish procedures for filing
a report under this section.
(d) Annually the commissioner shall prepare and publish a
consolidated analysis and recapitulation of reports filed under
this section.
[Sections 350.210-350.250 reserved for expansion]
SUBCHAPTER F. ENFORCEMENT
Sec. 350.251. HEARING. (a) If the commissioner believes or
has notice that an action of a facilitator may violate this chapter
or a rule adopted under this chapter, the commissioner shall give
the facilitator reasonable notice of the suspected violation and an
opportunity to be heard.
(b) The commissioner may make investigations, subpoena
witnesses, and require audits and reports in preparation for a
hearing under this section.
(c) A hearing under this section shall be open to the
public.
(d) After the hearing the commissioner shall make findings
of fact and conclusions of law.
Sec. 350.252. CEASE AND DESIST ORDER. (a) If the
commissioner finds under Section 350.251(d) that an action of a
facilitator violates this chapter or a rule adopted under this
chapter, the commissioner shall order the facilitator to cease and
desist from the action.
(b) If a facilitator continues to engage in an action in
violation of the commissioner's cease and desist order, the
commissioner may impose on the facilitator an administrative
penalty of $1,000 for each action of the facilitator that violates
the commissioner's order.
Sec. 350.253. REVOCATION OR SUSPENSION OF REGISTRATION.
(a) If the commissioner finds under Section 350.251(d) that a
registrant has engaged in a course of conduct that violates this
chapter or a rule adopted under this chapter or has continued to
engage in an action in violation of a cease and desist order of the
commissioner that has not been stayed on application of the
registrant, the commissioner may revoke or suspend the registration
of the registrant.
(b) The revocation, suspension, or surrender of a
facilitator's registration does not relieve a registrant from civil
or criminal liability for an action committed before the
revocation, suspension, or surrender.
Sec. 350.254. COMPLAINT PROCEDURE. (a) The commissioner
shall establish a complaint procedure that enables an aggrieved
consumer or a member of the public to file a complaint against a
registrant or non-registrant who violates a provision of this
chapter. The commissioner shall maintain a toll-free number that a
consumer may use to obtain information about registrants and
complaint forms.
(b) Except as provided by this subsection, a complaint is a
public record under Chapter 552, Government Code. A complainant's
name, address, and other personal identifying information may not
be disclosed to the public.
(c) On the request of a party to a complaint, the
commissioner shall hold a hearing as provided by Section 350.251.
After the hearing, the commissioner may issue a cease and desist
order under Section 350.252 or suspend or revoke a registration as
provided by Section 350.253.
Sec. 350.255. DECEPTIVE TRADE PRACTICES. A violation of
this chapter is a deceptive trade practice under Subchapter E,
Chapter 17, Business & Commerce Code.
Sec. 350.256. CIVIL ACTION. (a) A facilitator who engages
in an activity prohibited by this chapter is liable to the consumer
for:
(1) actual and consequential damages;
(2) the greater of:
(A) $2,000; or
(B) three times the amount of the refund
anticipation loan fee or other unauthorized charge; and
(3) reasonable attorney's fees and costs.
(b) Any person may sue for injunctive or other appropriate
equitable relief to enforce this chapter.
(c) A consumer may bring a class action suit to enforce this
chapter. In a class action suit brought under this subsection, a
facilitator who violates this chapter is liable for:
(1) actual and consequential damages for each class
member;
(2) damages provided by Subsection (a)(2) for each
class member; and
(3) reasonable attorney's fees and costs.
(d) The remedies provided in this section are cumulative and
are not intended to be the exclusive remedies available to a
consumer. A consumer is not required to exhaust any administrative
remedies provided by this chapter or other applicable law.
SECTION 2. A facilitator of refund anticipation loans or
checks shall file the first report with the consumer credit
commissioner as required by Section 350.209, Finance Code, as added
by this Act, not later than July 1, 2007.
SECTION 3. This Act takes effect September 1, 2005.