80R6051 ATP-F

By: Shapleigh S.B. No. 879

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 351 to read as follows: CHAPTER 351. TAX REFUND ANTICIPATION LOANS SUBCHAPTER A. GENERAL PROVISIONS

Sec. 351.001. 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. 351.002. 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 processes, receives, or accepts for delivery an application for a refund anticipation loan, delivers a check in payment of refund anticipation loan proceeds, or in any other manner acts to allow the making of a refund anticipation loan. "Facilitator" does not include:

(A) a bank, thrift, savings association, industrial bank, or credit union operating under the laws of the United States or this state, when not engaging in tax return preparation; or

(B) any person who acts solely as an intermediary and does not interact directly with a taxpayer in the making of the refund anticipation loan.

(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. 351.003. 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. 351.004. RULES. The commissioner may adopt rules as necessary to accomplish the purposes of this chapter and assist facilitators in interpreting this chapter. [Sections 351.005-351.050 reserved for expansion] SUBCHAPTER B. REGISTRATION

Sec. 351.051. 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. 351.052. 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. 351.053. BOND. (a) Except as provided by Subsections (d) and (g), an applicant shall file with the application a bond in the amount of $50,000 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.

(d) An applicant may apply to the commissioner for a waiver of the bond requirement by demonstrating that obtaining a bond is a hardship for the applicant and that the applicant has and will maintain net assets of at least $25,000, indexed to inflation as provided by Subsection (e), for each office at which the applicant intends to act as a facilitator of refund anticipation loans or checks. In this subsection, "net assets" means the difference between total assets and total liabilities, as determined by generally accepted accounting principles.

(e) As often as determined necessary by the commissioner, the commissioner shall adopt an adjustment for inflation of the amount of net assets required by Subsection (d). In adopting the adjustment, the commissioner may consider any index of inflation the commissioner considers appropriate.

(f) The assets of an applicant's parent company may be considered in determining whether an applicant has sufficient net assets under Subsection (d) if the parent company guarantees the performance and financial responsibility of the applicant.

(g) A parent company may file a bond in an amount determined by the commissioner, not to exceed $500,000, that is effective for all of the parent company's franchise locations. An applicant whose parent company files a bond under this subsection is not required to file a bond with the application.

Sec. 351.054. REGISTRATION; CERTIFICATE. (a) The commissioner shall register an applicant and shall issue a certificate attesting to the registration if the commissioner finds that:

(1) the applicant is authorized to provide electronic tax filing services by the Internal Revenue Service; and

(2) the responsibility and general fitness of the 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.

(d) The commissioner may adopt rules to:

(1) provide for an expedited procedure to register additional offices of a registrant; and

(2) enable a registrant to change its registered address.

Sec. 351.055. EXPIRATION OF REGISTRATION; RENEWAL. (a) Registration as a facilitator expires on the first April 30 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).

Sec. 351.056. HEARING ON DENIAL OF REGISTRATION. (a) An applicant is entitled to a hearing on written request made to the commissioner not later than the 30th day after the date the applicant receives notice of the commissioner's denial of an application for registration. The hearing must be held not later than the 60th day after the date the request is made.

(b) If the commissioner determines after the hearing that the applicant is an electronic return originator authorized by the Internal Revenue Service as an e-file provider and the responsibility and general fitness of the 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, the commissioner shall register the applicant. If the commissioner does not make the findings required by this subsection, the commissioner may not register the applicant. [Sections 351.057-351.100 reserved for expansion] SUBCHAPTER C. INTEREST AND FEES

Sec. 351.101. 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. 351.102. REFUND ANTICIPATION LOAN RATE. A facilitator shall disclose the refund anticipation loan rate in terms of the annual percentage rate for the borrower's refund anticipation loan, using the guidelines established under the Truth in Lending Act (15 U.S.C. Section 1601 et seq.). At the same time the facilitator discloses the refund anticipation loan rate, the facilitator shall disclose the total amount of all fees associated with the loan that are not included in the computation of the refund anticipation loan rate.

Sec. 351.103. CERTAIN CHARGES PROHIBITED. 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; or

(3) collection costs. [Sections 351.104-351.150 reserved for expansion] SUBCHAPTER D. REQUIRED POSTINGS AND DISCLOSURES

Sec. 351.151. 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. 351.152. 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 rates and examples of the rates 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 boldfaced 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 _______________(average time, as published by the Internal Revenue Service) 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 rate actually charged is the same as the rate displayed on the schedule as required by Subsection (c)(1).

Sec. 351.153. APPLICATION DISCLOSURES. (a) A facilitator has an affirmative duty to:

(1) explain to the consumer that the consumer has a choice of methods for receiving a tax refund;

(2) disclose the availability and timing of receiving a refund directly from the Internal Revenue Service without incurring the cost of using a bank product, before describing any available bank product; and

(3) provide clear, complete, and accurate information about each available option, including receiving a refund directly from the Internal Revenue Service.

(b) Before or at the same time the facilitator first mentions or offers a bank product to the consumer, the facilitator shall disclose to the consumer on a form separate from a refund anticipation loan or check application:

(1) the fee for a refund anticipation loan or check;

(2) the fee for electronically filing a tax return;

(3) the time in which the proceeds of a 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 boldfaced capital letters and 18-point type: "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 __________ (average time, as published by the Internal Revenue Service) 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 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 boldfaced capital letters and 18-point type: "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 __________ (average time, as published by the Internal Revenue Service) 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."

(c) If a facilitator charges the consumer a fee for cashing a check, the facilitator shall inform the consumer that if the consumer has a bank account, the consumer's bank may cash the check without charging a fee.

(d) A disclosure under this section must be written:

(1) in 14-point type unless otherwise noted; and

(2) in English, Spanish, and any other language in which the refund anticipation loan or check is negotiated.

(e) A facilitator must disclose fees under this section based on the best available information from the creditor. If the terms of a loan change after the disclosure, the facilitator shall notify the consumer, and the consumer is entitled to refuse the loan.

Sec. 351.154. ALTERNATIVE APPLICATION DISCLOSURE. (a) A facilitator may use disclosure language other than the language prescribed by Section 351.153 only if the facilitator submits the disclosure language to the commissioner. The commissioner shall issue an order disapproving the disclosure if the commissioner determines that the disclosure does not substantially comply with Section 351.153 or rules adopted under this chapter.

(b) A facilitator may begin using the alternative disclosure language on the date the facilitator submits the disclosure to the commissioner for review. If the commissioner issues an order disapproving the disclosure, the facilitator may not use the disclosure after the order takes effect.

(c) A facilitator may not represent that the commissioner's failure to disapprove a disclosure constitutes an approval of the disclosure by the commissioner, the Office of the Consumer Credit Commissioner, or the finance commission.

Sec. 351.155. 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:

(1) advertise or promote a refund anticipation loan unless the advertisement prominently features the word "loan" or a translation of "loan" if the advertisement is not in English;

(2) advertise or promote a refund anticipation loan without distinguishing a refund anticipation loan from non-loan products and from refund expediting services offered by the Internal Revenue Service for which the Internal Revenue Service does not charge a fee, such as direct deposit or electronic filing;

(3) state or suggest in an advertisement that direct deposit or electronic filing delivers a refund to the taxpayer without any waiting time or in three days or less;

(4) advertise that the time during which a tax refund may be expected to be received from the Internal Revenue Service is longer than the time during which a tax refund may be expected to be received according to the Internal Revenue Service statistics available on the Internet website of the Internal Revenue Service or at a local Internal Revenue Service office; or

(5) advertise a refund anticipation loan without including a statement that the taxpayer may file a tax return electronically without obtaining a loan.

(c) For a print advertisement, any word or disclosure required by Subsection (b) must be in type size that is one-half as large as the largest type size in the advertisement.

Sec. 351.156. MODIFICATION OF REFUND RECEIPT ESTIMATE. The commissioner may by rule revise the disclosures required by this subchapter to conform to the Internal Revenue Service's published average time for receiving a refund. [Sections 351.157-351.200 reserved for expansion] SUBCHAPTER E. ADDITIONAL DUTIES OF AND RESTRICTIONS ON FACILITATORS

Sec. 351.201. 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. 351.202. 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. 351.203. 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. 351.204. 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. 351.205. 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. 351.206. 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. 351.207. ANNUAL REPORTS. (a) 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 May 1 of the preceding year and ending April 30 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 creditor's best estimate of the average number of days for which refund anticipation loans facilitated by the facilitator were outstanding before being repaid with the consumer's tax refund;

(4) the name and address of any creditor or other person for whom the facilitator facilitates a refund anticipation loan or check; and

(5) the number of loans that are not paid in full from the consumer's tax refund.

(c) The commissioner shall establish procedures for filing a report under this section.

(d) Each year, the commissioner shall prepare and publish a consolidated analysis and recapitulation of reports filed under this section. [Sections 351.208-351.250 reserved for expansion] SUBCHAPTER F. ENFORCEMENT

Sec. 351.251. INVESTIGATION AND HEARING. (a) If the commissioner has reasonable cause to believe 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, and may require the facilitator to furnish information regarding a specific loan or business practice to which the violation relates. If the facilitator fails to furnish the information requested by the commissioner, the commissioner may conduct an investigation to determine whether a violation exists.

(b) The commissioner or the commissioner's representative may investigate the records, including the books, accounts, papers, and correspondence, of any facilitator who the commissioner has reasonable cause to believe is violating this chapter, regardless of whether the facilitator claims that the facilitator is not subject to this chapter.

(c) A hearing under this section shall be open to the public and conducted in accordance with Chapter 2001, Government Code.

Sec. 351.252. ENFORCEMENT ORDERS; APPEAL OF ORDER. (a) If the commissioner has reasonable cause to believe that a person is violating this chapter, the commissioner may do one or more of the following:

(1) issue an order to cease and desist from the violation;

(2) issue an order to take affirmative action; or

(3) take any other action authorized by law.

(b) A person may appeal an order to the finance commission or to district court in accordance with Chapter 2001, Government Code.

(c) If a person against whom an order is made requests a hearing, the commissioner shall set a hearing before a hearings officer and give notice of the hearing. The hearing shall be governed by Chapter 2001, Government Code. The commissioner by order may determine whether a violation of this chapter has occurred, based on the findings of fact, conclusions of law, and recommendations of the hearings officer.

(d) If a person does not request a hearing under Subsection (c) on or before the 30th day after the date the order is issued, the order is considered final and enforceable. The commissioner, after giving notice, may impose an administrative penalty against a person who violates an order to cease and desist or an order to take affirmative action in an amount not to exceed $1,000 for each day a violation occurs. In addition to any other remedy provided by law, the commissioner may bring a suit in district court for injunctive relief and to collect an administrative penalty. A bond is not required of the commissioner with respect to injunctive relief granted under this section.

Sec. 351.253. REVOCATION OR SUSPENSION OF REGISTRATION. (a) The commissioner may revoke or suspend the registration of a registrant if the commissioner finds, after an administrative hearing under Section 351.251, 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 the commissioner's cease and desist order or order to take affirmative action.

(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. 351.254. 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 nonregistrant 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 are confidential and may not be disclosed to the public.

Sec. 351.255. DECEPTIVE TRADE PRACTICES. A violation of this chapter is a deceptive trade practice under Subchapter E, Chapter 17, Business & Commerce Code.

Sec. 351.256. 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 351.207, Finance Code, as added by this Act, not later than July 1, 2009.

SECTION 3. This Act takes effect January 1, 2008.