80R9178 DWS-F
 
  By: Carona S.B. No. 988
 
 
 
   
 
 
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of certain consumer lenders.
       BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
       SECTION 1.  Section 341.001(6), Finance Code, is amended to
read as follows:
             (6)  "Deferred presentment transaction" has the
meaning assigned by Section 342.601 [means a transaction in which:
                   [(A)  a cash advance in whole or part is made in
exchange for a personal check or authorization to debit a deposit
account;
                   [(B)  the amount of the check or authorized debit
equals the amount of the advance plus a fee; and
                   [(C)  the person making the advance agrees that
the check will not be cashed or deposited or the authorized debit
will not be made until a designated future date].
       SECTION 2.  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 $2.5 million available for the operation of all of those
offices.
       SECTION 3.  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 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 4.  Subchapter M, Chapter 342, Finance Code, is
amended to read as follows:
SUBCHAPTER M.  DEFERRED PRESENTMENT TRANSACTIONS
       Sec. 342.601.  DEFINITIONS.  In this subchapter:
             (1)  "Deferred presentment transaction" means a
transaction in which:
                   (A)  a lender pays a cash advance to a borrower in
return for a postdated check and agrees to hold the check for
negotiation, deposit, or presentment at least until the date
written on the check; or
                   (B)  a lender pays a cash advance to a borrower in
return for an Automated Clearing House (ACH) authorization to debit
a borrower's checking account on a subsequent date.
             (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 person who holds a license under
this chapter.
       Sec. 342.602.  WRITTEN AGREEMENT REQUIREMENTS.  (a)  Each
deferred presentment transaction shall be documented by a written
agreement signed by the borrower and the lender.  A legible copy of
the agreement shall be provided to the borrower. The written
agreement must:
             (1)  state:
                   (A)  the name and address of the borrower;
                   (B)  the transaction date;
                   (C)  the amount of the instrument; and
                   (D)  the total amount of finance charges,
expressed both as a dollar amount and as an annual percentage rate
pursuant to the Truth in Lending Act (15 U.S.C. Section 1601 et
seq.), 12 C.F.R. Part 226 (Regulation Z) adopted under that Act, and
the Federal Reserve Board Official Commentary;
             (2)  set a date, not earlier than the seventh or later
than the 45th day after the transaction date, on which the
instrument may be deposited, negotiated, or presented for payment,
or the date of the ACH debit authorization, as applicable;
             (3)  include the name, local street address, and
telephone number of the lender;
             (4)  include a clear description of the borrower's
payment obligations under the deferred presentment transaction;
and
             (5)  include the following statement, in at least
12-point type that is boldfaced, capitalized, and underlined:
"YOU CANNOT BE PROSECUTED IN CRIMINAL COURT TO COLLECT
ON THIS TRANSACTION, UNLESS YOU COMMITTED FRAUD
AGAINST THE LENDER."
       (b)  The written agreement may not contain any of the
following provisions:
             (1)  a hold harmless clause;
             (2)  a confession of judgment clause;
             (3)  a mandatory arbitration clause that does not
comply with the standards set forth in the statement of principles
of the National Consumer Dispute Advisory Committee of the American
Arbitration Association in effect on September 1, 2007;
             (4)  any provision in which the borrower agrees not to
assert a claim or defense arising out of the contract;
             (5)  any assignment or order for payment of wages or
other compensation for services;
             (6)  any waiver by the borrower of any provision of this
subchapter; or
             (7)  the sale of insurance of any kind in connection
with the making or collecting of a deferred presentment
transaction.
       Sec. 342.603.  ADDITIONAL NOTICE TO CONSUMERS. The written
agreement must include or be accompanied by a separate document
that contains the following notice in at least 12-point type that is
boldfaced, capitalized, and underlined:
"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. YOU HAVE THE
RIGHT TO RESCIND THIS TRANSACTION, AT NO COST, BEFORE
THE CLOSE OF BUSINESS ON THE NEXT BUSINESS DAY
IMMEDIATELY FOLLOWING THE TRANSACTION DATE SHOWN ON
YOUR AGREEMENT. TO RESCIND, YOU MUST RETURN ALL OF THE
CASH PROCEEDS TO THE LENDER.  IN RETURN, THE LENDER
WILL CANCEL ALL THE FEES FOR THIS TRANSACTION."
       Sec. 342.604.  AUTHORIZED FINANCE CHARGE. (a)  A lender may
charge for each deferred presentment transaction a finance charge
not to exceed:
             (1)  $15 for every $100 advanced up to and including the
amount computed under Subchapter C, Chapter 341, using the
reference base amount of $70; and
             (2)  $13.50 for every additional $100 advanced up to
and including the amount computed under Subchapter C, Chapter 341,
using the reference base amount of $125.
       (b)  A lender may also charge a pro rata finance charge for
any incremental amount advanced in excess of a multiple of $100.
       (c)  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 the
lesser of:
             (1)  the amount computed under Subchapter C, Chapter
341, using the reference base amount of $125; or
             (2)  25 percent of the borrower's monthly gross income.
       (b)  A borrower has the right to rescind the deferred
presentment transaction not later than the close of business on the
next business day immediately following the transaction date.  To
rescind a transaction, a borrower must:
             (1)  inform the lender that the borrower wants to
rescind the transaction; and
             (2)  return the cash advance to the lender.
       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.  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 may
not charge an additional finance charge or fee for cashing the
lender's business instrument.
       Sec. 342.608.  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. 342.609.  PARTIAL PAYMENTS. A borrower may make
partial payments in any amount on the outstanding balance at any
time before the due date of the transaction. After each payment is
made, whether the payment is in part or in full, the lender shall
give a signed and dated receipt to the borrower making a payment
showing the amount paid and the balance due.
       Sec. 342.610.  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. 342.611.  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. 342.612.  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
schedule of all interest and fees to be charged on the transaction
with an example of the amount that would be charged on transactions
between $100 and the amount computed under Subchapter C, Chapter
341, using the reference base amount of $125, payable on the minimum
term and the maximum term offered by the lender, including the
corresponding annual percentage rate.
       Sec. 342.613.  CONSUMER INFORMATION. The finance commission
by rule may require a lender to provide materials approved by the
commissioner that are designed to:
             (1)  inform a borrower of the duties, rights, and
responsibilities of parties to a deferred presentment transaction;
and
             (2)  educate a borrower about matters of financial
literacy.
       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 the following notice on the instrument in at least 10-point
type that is boldfaced, capitalized, and underlined:
"THIS IS A DEFERRED PRESENTMENT TRANSACTION
INSTRUMENT."
       Sec. 342.615.  DEFERRED PRESENTMENT TRANSACTIONS LIMITED;
ADDITIONAL LENDER DUTIES. (a) A lender may have only one deferred
presentment transaction outstanding at a time to any borrower.
       (b)  After a deferred presentment transaction has been paid
in full by the borrower or on successful completion of a payment
plan, the lender may not, except as permitted under Section
342.617, enter into a new deferred presentment transaction with
that borrower until after 8 a.m. on the second business day after
the date of the payment or completion of the payment plan.
       (c)  Any deferred presentment transaction, and the
accompanying instrument or ACH debit authorization, the making or
collecting of which violates this subchapter or a rule adopted
under this subchapter, is void, and the lender or any other party
acting by or through the lender has no right to collect, receive, or
retain any principal or charges with respect to the transaction.  A
borrower prevailing in an action to enforce this subsection is
entitled to recover the borrower's costs including reasonable
attorney's fees.
       (d)  A lender may not use or threaten to use the criminal
process to collect a dishonored instrument, unless the borrower
commits fraud against the lender.
       (e)  A lender shall comply with the disclosure requirements
of 12 C.F.R. Part 226 (Regulation Z) adopted under the Truth in
Lending Act (15 U.S.C. Section 1601 et seq.).
       (f)  Each lender shall report loan data to an approved third
party database that is accessible by the commissioner for audit,
study, and reporting purposes.
       Sec. 342.616.  PROHIBITED PRACTICES. In addition to the
prohibited practices under Section 342.615, the following are
prohibited regarding deferred presentment transactions:
             (1)  engaging in unfair, deceptive, or fraudulent
practices in the making or collecting of a deferred presentment
transaction;
             (2)  taking or attempting to take any security other
than the borrower's instrument or ACH debit authorization;
             (3)  holding or attempting to hold more than a single
instrument or single ACH debit authorization from the borrower in
connection with a deferred presentment transaction, except
pursuant to a payment plan under Section 342.617;
             (4)  selling, offering, or soliciting any application
for credit insurance in connection with a deferred presentment
transaction;
             (5)  conditioning the deferred presentment transaction
on any other transaction, offer, or obligation of the borrower,
other than as expressly allowed in this subchapter;
             (6)  failing to respond to the commissioner's request
for assistance in resolving a complaint;
             (7)  using or threatening to use the criminal process
to collect a dishonored check or ACH debit authorization, unless
borrower fraud is involved;
             (8)  engaging in any device or subterfuge to evade the
requirements of this subchapter, including making cash advances
disguised as personal property sales and leaseback transactions or
disguising deferred presentment transaction proceeds as cash
rebates for a pretextual installment sale of goods or services; or
             (9)  at the same office at which the lender is engaging
in deferred presentment transactions, providing or representing
services in connection with an extension of consumer credit made by
a different lender.
       Sec. 342.617.  PAYMENT PLAN. (a) A lender shall provide a
borrower written notice, in a form prescribed or approved by the
commissioner, of the borrower's right to request a repayment plan
according to Subsection (b). The notice shall be set forth
conspicuously at the point of sale and in each deferred presentment
transaction services agreement.
       (b)  If a borrower is unable to pay on the due date the full
amount owing under a deferred presentment transaction with a
lender, the borrower has the right to request a mandatory repayment
plan. The borrower must request the repayment plan in writing on or
before the due date of the transaction. A borrower who has
requested a repayment plan may repay the amount owed according to
the following terms:
             (1)  the borrower shall agree not to enter into any
additional deferred presentment transactions with any other lender
during or for seven days following the payment plan term;
             (2)  the borrower shall be allowed to repay the
transaction in not more than four substantially equal installments
with one installment due on each of the borrower's next four pay
dates; and
             (3)  the lender may not charge a borrower any
additional fee for using the mandatory repayment plan.
       Sec. 342.618.  PRACTICES CONCERNING MEMBERS OF THE MILITARY
AND THEIR DEPENDENTS. A lender may not enter into a deferred
presentment transaction with any active duty member of the military
or a dependent of an active duty member of the military.
       Sec. 342.619.  RECORDS AND ANNUAL REPORTS. A lender shall
maintain records and file an annual report in accordance with
Sections 342.558 and 342.559.
       Sec. 342.620.  AUTHORITY TO CONDUCT DEFERRED PRESENTMENT
TRANSACTION BUSINESS. Only a lender may lawfully engage in the
deferred presentment transaction business. A lender shall obtain
and maintain a separate license for each location where deferred
presentment transaction business is conducted.
       Sec. 342.621.  EXAMINATION AND INVESTIGATION. A lender may
be examined and investigated in accordance with Section 342.552.
       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.
             ["Lender" means a lender licensed under this chapter.
             [(2)"Member of the United States military" means:
                   [(A)  a member of the armed forces of the United
States; or
                   [(B)  a member of the Texas National Guard who is
called to federal active duty.
       [Sec. 342.602.  DISCLOSURES TO MILITARY BORROWERS.  Before
engaging in a deferred presentment transaction, a lender shall
provide to a customer who is a member of the United States military
or the member's spouse a written statement that clearly and
conspicuously states that:
             [(1)the lender is prohibited by law from:
                   [(A)  garnishing the wages of any borrower,
including a borrower who is a member of the United States military;
                   [(B)  conducting any collection activity against
a borrower who is:
                         [(i)  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;
                         [(ii)  a member of the Texas National Guard
who is called to federal active duty, for the duration of the duty;
                         [(iii)  the spouse of a person described by
Paragraph (i), for the duration of the posting; or
                         [(iv)  the spouse of a person described by
Paragraph (ii), for the duration of the duty; or
                   [(C)  from contacting the employer of a member of
the United States military about a deferred presentment debt of the
member or the member's spouse;
             [(2)  the lender shall honor the terms of a repayment
agreement entered into with a member of the United States military
or the member's spouse, including a repayment agreement negotiated
through military counselors or third-party credit counselors; and
             [(3)  the lender shall honor any statement made by a
commanding officer of a member of the United States military
declaring any location where deferred presentment transaction
business is to be conducted by the lender to be a place at which a
member of the United States military or the member's spouse is
prohibited from transacting business.
       [Sec. 342.603.  PROHIBITED PRACTICES.  A lender may not
contact the employer of a member of the United States military about
a deferred presentment debt of the member or the member's spouse.
       [Sec. 342.604.  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;
             [(2)  a member of the Texas National Guard who is called
to federal active duty, for the duration of the duty;
             [(3)  the spouse of a person described by Subdivision
(1), for the duration of the posting; or
             [(4)  the spouse of a person described by Subdivision
(2), for the duration of the duty.
       [(b)  A lender may not garnish the wages of a borrower who is
a member of the United States military or the member's spouse.
       [Sec. 342.605.  REPAYMENT AGREEMENT.  With respect to a
deferred presentment transaction, a lender shall honor a repayment
agreement entered into with a borrower who is a member of the United
States military or the member's spouse, including a repayment
agreement negotiated through a military counselor or a third-party
credit counselor.]
       SECTION 5.  The consumer credit commissioner shall study
data on product use, volume of activity, frequency, and other
information related to deferred presentment transactions. The
commissioner shall report findings on the use of deferred
presentment transactions to the legislature not later than December
1, 2008.
       SECTION 6.  This Act takes effect September 1, 2007.