79R11417 ATP-F
By: Flynn, Madden, Eissler, et al. H.B. No. 846
Substitute the following for H.B. No. 846:
By: Flynn C.S.H.B. No. 846
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of deferred presentment transactions and
lenders for deferred presentment transactions.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 342.104, Finance Code, is amended by
amending Subsection (a) and adding Subsection (e) to read as
follows:
(a) The commissioner shall approve the application and
issue to the applicant a license to make loans under this chapter if
the commissioner finds that:
(1) the financial responsibility, experience,
character, and general fitness of the applicant are sufficient to:
(A) command the confidence of the public; and
(B) warrant the belief that the business will be
operated lawfully and fairly, within the purposes of this chapter;
and
(2) the applicant has net assets of at least $150,000
[$25,000] available for the operation of the business, except as
provided by Subsection (e).
(e) An applicant is not required to have total net assets of
more than $2.5 million available for the operation of all offices at
which the applicant engages in deferred presentment transactions.
SECTION 2. Section 342.153, Finance Code, is amended by
amending Subsection (a) and adding Subsection (e) to read as
follows:
(a) Except as provided by Subsection (b), [or] (c), or (e),
a license holder shall maintain for each office for which a license
is held net assets of at least $150,000 [$25,000] that are used or
readily available for use in conducting the business of that
office.
(e) A license holder is not required to have total net
assets of more than $2.5 million that are used or readily available
for use in conducting the business of all offices at which the
applicant engages in deferred presentment transactions.
SECTION 3. Chapter 342, Finance Code, is amended by adding
Subchapter M to read as follows:
SUBCHAPTER M. DEFERRED PRESENTMENT TRANSACTIONS
Sec. 342.601. DEFINITIONS. In this subchapter:
(1) "Consecutive transaction" means a transaction
between a borrower and a lender in which the borrower:
(A) pays in cash the finance charge payable under
a deferred presentment transaction with the lender and engages in a
new deferred presentment transaction with the lender before the end
of the same business day; or
(B) refinances all or part of the finance charges
and advance of the deferred presentment transaction with a new
deferred presentment transaction with the lender before the end of
the same business day.
(2) "Instrument" means a personal check or
authorization to transfer or withdraw funds from an account of a
borrower made payable to a person subject to this subchapter.
(3) "Lender" means a lender licensed under this
chapter.
(4) "Third-party provider" means a person who
transacts or negotiates a deferred presentment transaction by
providing services in cooperation with and for the benefit of a
lender.
Sec. 342.602. WRITTEN AGREEMENT REQUIREMENTS. Each
deferred presentment transaction shall be documented by a written
agreement. The written agreement must:
(1) state the name of the borrower, the transaction
date, the amount of the instrument, and the total amount of finance
charges, expressed both as a dollar amount and as an annual
percentage rate;
(2) specify the amount of the insufficient funds fee
that the lender may charge the borrower under Section 342.617 for a
returned instrument;
(3) include all disclosures required by Section
342.604; and
(4) set a date, not later than the 45th day after the
transaction date, on which the instrument may be deposited,
negotiated, or presented for payment.
Sec. 342.603. FILING OF FORM. A lender shall comply with
Section 341.502 regarding the form of the loan contract.
Sec. 342.604. NOTICE TO CONSUMERS. A lender shall provide
the following notice in a prominent place on each deferred
presentment transaction agreement in at least 12-point type that is
boldfaced, capitalized, underlined, or otherwise conspicuously set
out from the surrounding written material:
"A deferred presentment transaction is not intended to
meet long-term financial needs. This money should be
used only to meet short-term cash needs. Renewing or
refinancing the transaction rather than paying the
debt in full when due will incur additional finance
charges."
Sec. 342.605. AUTHORIZED FINANCE CHARGE. A deferred
presentment transaction may provide for a finance charge not to
exceed $15 for every $100 advanced. A deferred presentment
transaction may also provide for a pro rata finance charge for any
incremental amount advanced in excess of a multiple of $100. The
charge is considered fully earned as of the date of the transaction.
The lender may assess only charges expressly authorized by this
subchapter in connection with a deferred presentment transaction.
Sec. 342.606. MAXIMUM CASH ADVANCE--RIGHT TO RESCIND. (a)
A lender may not advance to a borrower an amount greater than
$1,000.
(b) A borrower has the right to rescind the deferred
presentment transaction not later than 5 p.m. on the next business
day after the transaction date.
(c) This chapter does not prohibit a lender from being a
party, with the same borrower at the same time, to a deferred
presentment transaction and a loan authorized by this chapter other
than a deferred presentment transaction.
Sec. 342.607. MINIMUM AND MAXIMUM TERM. A lender may not
engage in a deferred presentment transaction with a term of less
than seven or more than 45 days.
Sec. 342.608. MAXIMUM OUTSTANDING TRANSACTIONS NOTICE. A
lender shall provide the following notice in a prominent place on
each deferred presentment transaction agreement in at least
12-point type that is boldfaced, capitalized, underlined, or
otherwise conspicuously set out from the surrounding written
material:
"State law prohibits lenders from making deferred
presentment transactions exceeding $1,000 outstanding
to a debtor at any one time. Exceeding this amount may
create financial hardships for you and your family.
You have the right to rescind this deferred
presentment transaction not later than 5 p.m. the next
business day following this transaction."
Sec. 342.609. CONSECUTIVE TRANSACTIONS. A lender may not
enter into more than two consecutive transactions following an
initial deferred presentment transaction. Each consecutive
transaction requires a 10 percent reduction in the principal amount
of the debt.
Sec. 342.610. MULTIPLE DEFERRED PRESENTMENT TRANSACTIONS.
(a) On receiving an application for a deferred presentment
transaction, the lender shall determine if the applicant has any
outstanding deferred presentment transactions by:
(1) requiring the applicant to sign an affidavit
stating whether the applicant has any deferred presentment
transactions outstanding with the lender or another deferred
presentment lender and the status of each loan; and
(2) verifying the accuracy of the affidavit through
commercially reasonable means.
(b) If a lender determines that an applicant has one or more
outstanding deferred presentment transactions in which the amounts
advanced equal or exceed $1,000, the lender may not enter into the
deferred presentment transaction being applied for.
(c) A lender's method of verifying the accuracy of an
applicant's affidavit complies with Subsection (a) if the
verification method includes a manual investigation or an
electronic query of the lender's own records, including records
maintained at the location where the loan is being applied for and
records maintained at other locations that are owned and operated
by the lender or the lender's affiliates.
Sec. 342.611. COMPLETION OF DEFERRED PRESENTMENT
TRANSACTION. A deferred presentment transaction is completed when:
(1) the lender presents the instrument for payment or
initiates an Automated Clearing House (ACH) debit to the borrower's
bank account to collect on the instrument; or
(2) the borrower redeems the instrument by paying the
full amount of the instrument to the lender.
Sec. 342.612. REQUIRED INFORMATION ON SUBSEQUENT
TRANSACTIONS. (a) At the time a borrower enters into a second
consecutive deferred presentment transaction with a lender, the
lender shall furnish to the borrower:
(1) reference information on one or more consumer
credit counseling agencies or services; and
(2) any materials furnished to the lender by the
commissioner if the commissioner furnishes the lender with
educational materials on consumer credit counseling for the purpose
of making the materials available to borrowers.
(b) If a borrower enters into a second consecutive deferred
presentment transaction with a lender, the lender shall provide the
borrower an option to repay the loan under a written repayment plan.
The borrower must request the repayment plan in writing before the
date the borrower must repay the loan. The terms of the repayment
plan must be conspicuously disclosed to the borrower at the time of
the second consecutive transaction and shall require the borrower
to:
(1) repay the loan in a minimum of four equal
installments, with one installment due on each of the next
succeeding dates on which the borrower receives regular wages,
compensation, or other income;
(2) pay a processing fee for administration of the
payment plan of 10 percent of the amount of the advance for each
deferred presentment transaction, not to exceed $20; and
(3) agree to not enter into an additional deferred
presentment transaction during the repayment plan term.
Sec. 342.613. FORM OF ADVANCE. A lender may pay the advance
from a deferred presentment transaction to the borrower in the form
of a business instrument, a money order, or cash, or in another
available form chosen by the borrower. The lender or the lender's
third-party provider may not charge an additional finance charge or
fee for cashing the lender's business instrument.
Sec. 342.614. ENDORSEMENT OF INSTRUMENT. A lender may not
negotiate or present an instrument for payment unless the
instrument is endorsed with the actual business name of the lender.
Sec. 342.615. MULTIPLE INSTRUMENTS PROHIBITED. A lender
may not accept more than one personal check in exchange for the
advance under a deferred presentment transaction.
Sec. 342.616. REDEMPTION OF INSTRUMENT. Before the lender
negotiates or presents the instrument, the borrower has the right
to redeem any instrument held by the lender as a result of a
deferred presentment transaction if the borrower pays the full
amount of the instrument to the lender.
Sec. 342.617. AUTHORIZED DISHONORED INSTRUMENT CHARGE. If
an instrument held by a lender as a result of a deferred presentment
transaction is returned to the lender from a payor financial
institution due to insufficient funds, a closed account, or a
stop-payment order, the lender has the right to exercise all civil
means authorized by law to collect the face value of the instrument.
In addition, the lender may assess and collect an insufficient
funds fee not to exceed $20. The lender may not collect any other
fees as a result of default. A lender may charge only one
insufficient funds fee for each deferred presentment transaction in
which the presented instrument is returned unpaid.
Sec. 342.618. POSTING OF CHARGES. A lender offering a
deferred presentment transaction shall post at any place of
business where a deferred presentment transaction is made a notice
of the charges assessed for a deferred presentment transaction,
including an insufficient funds fee charged under Section 342.617.
Sec. 342.619. NOTICE ON ASSIGNMENT OR SALE OF INSTRUMENTS.
Before the sale or assignment of instruments held by a lender as a
result of a deferred presentment transaction, the lender shall
place a notice on the instrument in at least 12-point type that is
boldfaced, capitalized, underlined, or otherwise conspicuously set
out from the surrounding written material to read:
"This is a deferred presentment transaction
instrument."
Sec. 342.620. RECORDS. A lender shall maintain records in
accordance with Section 342.558.
Sec. 342.621. ANNUAL REPORT. (a) A lender shall file an
annual report with the commissioner on a form prescribed by the
commissioner that states for the preceding calendar year in detail
and under appropriate headings:
(1) the assets and liabilities of the lender at the
beginning and end of the year;
(2) the lender's income, expense, gain, and loss, a
reconciliation of surplus or net worth with the balance sheets, and
the ratios of the profits to the assets reported;
(3) the total number of deferred presentment
transactions made;
(4) the total number of outstanding deferred
presentment transactions;
(5) the minimum, maximum, and average dollar amount of
the instruments whose presentments were deferred;
(6) the average number of days the presentment of an
instrument was deferred;
(7) the total number and dollar amount of:
(A) returned checks and debit authorizations;
(B) transactions in which the face value of the
instrument was recovered by the lender; and
(C) instruments charged off on the accounting
records of the lender; and
(8) a statement that the lender has not used criminal
process or caused criminal process to be used to collect payment on
a deferred presentment transaction.
(b) The commissioner shall set a date by which the reports
must be filed.
(c) A lender shall file each report under this section under
oath.
(d) Annually the commissioner shall prepare a consolidated
analysis and recapitulation of reports filed under this section and
shall provide the consolidated analysis and recapitulation to the
legislature and the governor.
(e) The consolidated analysis and recapitulation of reports
are public information. The reports under this section are
confidential and privileged information of the lender and are not
subject to disclosure provisions under Chapter 552, Government
Code. The commissioner shall ensure that the consolidated analysis
and recapitulation of reports contain only aggregate data and not
data specific to a lender.
Sec. 342.622. AUTHORITY TO CONDUCT DEFERRED PRESENTMENT
TRANSACTION BUSINESS. Only an authorized lender may lawfully
engage in the deferred presentment transaction business. A
licensed lender shall obtain and maintain a separate license for
each location where deferred presentment transaction business is
conducted. A deferred presentment transaction is a loan subject to
this chapter for purposes of the application of Section 342.051.
Sec. 342.623. APPLICATION OF SUBCHAPTER TO THIRD-PARTY
PROVIDER. If a deferred presentment transaction is offered at the
place of business of a third-party provider:
(1) the third-party provider shall provide to the
commissioner a sample copy of the form of a written deferred
presentment transaction agreement if the third-party provider
participates in the preparation, execution, delivery, or custody of
the agreement, and each time the form is modified the third-party
provider shall provide to the commissioner a copy of the modified
form;
(2) the notice under Section 342.618 shall be posted
in the third-party provider's place of business;
(3) the third-party provider shall, through a
combination of the language in the written agreement required under
Section 342.602, the notice to be posted under Subdivision (2), or
other signs, notices, or information materials, make available to
transaction applicants the name, address, and telephone number of
the lender making the deferred presentment transaction; and
(4) the third-party provider shall comply with the
licensing, recordkeeping, and recording provisions of this
chapter.
Sec. 342.624. EXAMINATION AND INVESTIGATION. (a) A
licensed lender may be examined and investigated in accordance with
Sections 342.552 and 342.553.
(b) The commissioner or the commissioner's representative
may, at the times the commissioner considers necessary, examine and
investigate a third-party provider's place of business to determine
the provider's compliance with this subchapter. The third-party
provider shall give the commissioner or the commissioner's
representative free access to its place of business for that
purpose. During an examination, the commissioner or the
commissioner's representative may administer oaths and examine any
person under oath on any subject pertinent to a matter that the
commissioner is authorized to consider, investigate, or secure
information about under this subchapter. A third-party provider
shall pay to the commissioner an amount assessed by the
commissioner to cover the direct and indirect cost of an
examination of the provider under this section.
Sec. 342.625. APPLICABILITY TO CERTAIN LENDERS AND
TRANSACTIONS. (a) Except as preempted by federal law, all other
applicable provisions of this subchapter apply to a deferred
presentment transaction and a lender.
(b) This subchapter does not apply to a credit services
organization operating in compliance with Chapter 393 or the
services of a credit services organization in connection with a
loan having an interest rate of 10 percent a year or less.
Sec. 342.626. APPLICABILITY OF PROVISIONS OF CHAPTER 341
AND THIS CHAPTER. Chapter 341 and the other provisions of this
chapter apply to a lender unless those provisions are inconsistent
with this subchapter.
Sec. 342.627. CRIMINAL CULPABILITY. A borrower is not
subject to a criminal penalty for entering into a deferred
presentment transaction agreement or in the event the instrument is
dishonored, unless the borrower violated:
(1) Section 32.32, Penal Code; or
(2) Section 32.41, Penal Code, and is presumed to have
knowledge of insufficient funds under Section 32.41(b)(1), Penal
Code.
Sec. 342.628. DECEPTIVE TRADE PRACTICE. A deferred
presentment transaction made by a person other than a lender is a
deceptive trade practice actionable under Subchapter E, Chapter 17,
Business & Commerce Code.
Sec. 342.629. PROHIBITED PRACTICES. (a) A lender may not
contact a borrower's employer about a deferred presentment debt or
communicate facts about a borrower's indebtedness to an employer.
(b) A lender may not threaten criminal prosecution of a
borrower as a means of collecting an amount due under a deferred
presentment transaction agreement.
Sec. 342.630. MILITARY BORROWER. (a) A lender may not
engage in collection activity against a borrower who is:
(1) a member of the armed forces of the United States
who is deployed to combat or a combat support posting, for the
duration of the posting; or
(2) a reserve or national guard member who has been
called to active duty.
(b) A lender may not garnish the wages of a borrower who is a
member of the armed forces of the United States.
Sec. 342.631. REPAYMENT AGREEMENT. A lender shall honor a
repayment agreement entered into with a borrower, including a
repayment agreement negotiated through a military counselor or a
third-party credit counselor.
SECTION 4. This Act takes effect September 1, 2005.