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79R2476 ATP-D
By: Flynn H.B. No. 846
A BILL TO BE ENTITLED
AN ACT
relating to 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 $25,000
available for the operation of the business, except as provided by
Subsection (e).
(e) An applicant for a license for an office at which the
applicant will engage in deferred presentment transactions and who
engages or will engage in deferred presentment transactions at more
than one office is not required to have total net assets of more
than $250,000 available for operation of all of those offices.
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 $25,000 that are used or readily
available for use in conducting the business of that office.
(e) A license holder who engages in deferred presentment
transactions at more than one office is not required to maintain
total net assets of more than $250,000 that are used or readily
available for use in conducting the business of all of those
offices.
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) "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.
(2) "Lender" means an authorized lender.
(3) "Renewal" means a transaction in which a borrower
pays in cash the finance charge payable under a deferred
presentment transaction and refinances all or part of the advance
of the deferred presentment transaction with a new deferred
presentment transaction.
(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 and renewal 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) include all disclosures required by Section
342.603; and
(3) 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. NOTICE TO CONSUMERS. A lender shall provide
the following notice in a prominent place on each deferred
presentment transaction agreement in at least 10-point type that is
bold-faced, 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 the transaction rather
than paying the debt in full when due will incur additional
finance charges."
Sec. 342.604. AUTHORIZED FINANCE CHARGE. A lender may
charge for each deferred presentment transaction a finance charge
not to exceed $16.50 for every $100 advanced. A lender may also
charge 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
charge only charges expressly authorized by this subchapter in
connection with a deferred presentment transaction.
Sec. 342.605. 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. 342.606. 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. 342.607. MAXIMUM OUTSTANDING TRANSACTIONS NOTICE. A
lender shall provide the following notice in a prominent place on
each deferred presentment transaction agreement in at least
10-point type that is bold-faced, 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. 342.608. RENEWAL. (a) A deferred presentment
transaction agreement must require that, before renewal, the
borrower must have paid all finance charges accrued to the time of
the renewal. In the case of any subsequent renewal after the first
renewal, the borrower must also pay an amount equal to at least five
percent of the principal amount of the loan being renewed. A
deferred presentment transaction may not be renewed more than three
consecutive times. After the last renewal, the borrower shall pay
the debt in cash or its equivalent. If the borrower does not pay the
debt, the lender may deposit, negotiate, or otherwise present for
payment the borrower's instrument.
(b) On renewal, the lender may assess additional finance
charges not to exceed the amount authorized under Section 342.604.
A lender may also charge a pro rata finance charge for any
incremental amount advanced in excess of a multiple of $100.
(c) A transaction is completed when 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 when the borrower redeems the instrument by paying
the full amount of the instrument to the holder.
(d) At the time of the second renewal of a loan, 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.
(e) A lender may refinance a deferred presentment
transaction without limitation as to the number of refinancings as
authorized by Subchapter F.
Sec. 342.609. 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. 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. 342.610. 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. 342.611. 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. 342.612. 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 contract for and collect fees
authorized by Section 342.502. The lender may not collect any other
fees as a result of default.
Sec. 342.613. 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 imposed for a deferred presentment transaction.
Sec. 342.614. 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 10-point
type that is bold-faced, capitalized, underlined, or otherwise
conspicuously set out from the surrounding written material to
read:
"This is a deferred presentment transaction instrument."
Sec. 342.615. RECORDS AND ANNUAL REPORTS. A lender shall
maintain records and file an annual report in accordance with
Sections 342.558 and 342.559.
Sec. 342.616. AUTHORITY TO CONDUCT DEFERRED DEPOSIT LOAN
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. 342.617. 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 342.613 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 provisions of this chapter.
Sec. 342.618. EXAMINATION AND INVESTIGATION. (a) A
licensed lender may be examined and investigated in accordance with
Section 342.552.
(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. 342.619. APPLICABILITY TO LENDER. Except as
preempted by federal law, all other applicable provisions of this
subchapter apply to a deferred presentment transaction and a
lender.
Sec. 342.620. 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. 342.621. 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. 342.622. 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.
SECTION 4. This Act takes effect September 1, 2005.