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A BILL TO BE ENTITLED
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AN ACT
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relating to the regulation of certain consumer lenders. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 341.001(6), Finance Code, is amended to |
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read as follows: |
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(6) "Deferred presentment transaction" has the |
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meaning assigned by Section 342.601 [means a transaction in which:
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[(A) a cash advance in whole or part is made in
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exchange for a personal check or authorization to debit a deposit
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account;
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[(B) the amount of the check or authorized debit
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equals the amount of the advance plus a fee; and
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[(C) the person making the advance agrees that
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the check will not be cashed or deposited or the authorized debit
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will not be made until a designated future date]. |
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SECTION 2. Section 342.104, Finance Code, is amended by |
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amending Subsection (a) and adding Subsection (e) to read as |
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follows: |
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(a) The commissioner shall approve the application and |
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issue to the applicant a license to make loans under this chapter if |
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the commissioner finds that: |
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(1) the financial responsibility, experience, |
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character, and general fitness of the applicant are sufficient to: |
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(A) command the confidence of the public; and |
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(B) warrant the belief that the business will be |
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operated lawfully and fairly, within the purposes of this chapter; |
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and |
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(2) the applicant has net assets of at least $25,000 |
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available for the operation of the business, except as provided by |
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Subsection (e). |
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(e) An applicant for a license for an office at which the |
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applicant will engage in deferred presentment transactions and who |
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engages or will engage in deferred presentment transactions at more |
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than one office is not required to have total net assets of more |
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than $2.5 million available for the operation of all of those |
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offices. |
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SECTION 3. Section 342.153, Finance Code, is amended by |
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amending Subsection (a) and adding Subsection (e) to read as |
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follows: |
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(a) Except as provided by Subsection (b), [or] (c), or (e), |
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a license holder shall maintain for each office for which a license |
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is held net assets of at least $25,000 that are used or readily |
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available for use in conducting the business of that office. |
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(e) A license holder is not required to have total net |
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assets of more than $2.5 million that are used or readily available |
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for use in conducting the business of all offices at which the |
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applicant engages in deferred presentment transactions. |
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SECTION 4. Subchapter M, Chapter 342, Finance Code, is |
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amended to read as follows: |
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SUBCHAPTER M. DEFERRED PRESENTMENT TRANSACTIONS |
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Sec. 342.601. DEFINITIONS. In this subchapter: |
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(1) "Deferred presentment transaction" means a |
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transaction in which: |
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(A) a lender pays a cash advance to a borrower in |
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return for a postdated check and agrees to hold the check for |
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negotiation, deposit, or presentment at least until the date |
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written on the check; or |
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(B) a lender pays a cash advance to a borrower in |
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return for an Automated Clearing House (ACH) authorization to debit |
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a borrower's checking account on a subsequent date. |
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(2) "Instrument" means a personal check or |
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authorization to transfer or withdraw funds from an account of a |
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borrower made payable to a person subject to this subchapter. |
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(3) "Lender" means a person who holds a license under |
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this chapter. |
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Sec. 342.602. WRITTEN AGREEMENT REQUIREMENTS. (a) Each |
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deferred presentment transaction shall be documented by a written |
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agreement signed by the borrower and the lender. A legible copy of |
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the agreement shall be provided to the borrower. The written |
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agreement must: |
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(1) state: |
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(A) the name and address of the borrower; |
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(B) the transaction date; |
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(C) the amount of the instrument; and |
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(D) the total amount of finance charges, |
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expressed both as a dollar amount and as an annual percentage rate |
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pursuant to the Truth in Lending Act (15 U.S.C. Section 1601 et |
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seq.), 12 C.F.R. Part 226 (Regulation Z) adopted under that Act, and |
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the Federal Reserve Board Official Commentary; |
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(2) set a date, not earlier than the seventh or later |
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than the 45th day after the transaction date, on which the |
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instrument may be deposited, negotiated, or presented for payment, |
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or the date of the ACH debit authorization, as applicable; |
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(3) include the name, local street address, and |
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telephone number of the lender; |
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(4) include a clear description of the borrower's |
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payment obligations under the deferred presentment transaction; |
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and |
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(5) include the following statement, in at least |
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12-point type that is boldfaced, capitalized, and underlined: |
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"YOU CANNOT BE PROSECUTED IN CRIMINAL COURT TO COLLECT |
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ON THIS TRANSACTION, UNLESS YOU COMMITTED FRAUD |
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AGAINST THE LENDER." |
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(b) The written agreement may not contain any of the |
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following provisions: |
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(1) a hold harmless clause; |
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(2) a confession of judgment clause; |
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(3) a mandatory arbitration clause that does not |
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comply with the standards set forth in the statement of principles |
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of the National Consumer Dispute Advisory Committee of the American |
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Arbitration Association in effect on September 1, 2007; |
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(4) any provision in which the borrower agrees not to |
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assert a claim or defense arising out of the contract; |
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(5) any assignment or order for payment of wages or |
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other compensation for services; |
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(6) any waiver by the borrower of any provision of this |
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subchapter; or |
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(7) the sale of insurance of any kind in connection |
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with the making or collecting of a deferred presentment |
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transaction. |
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Sec. 342.603. ADDITIONAL NOTICE TO CONSUMERS. The written |
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agreement must include or be accompanied by a separate document |
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that contains the following notice in at least 12-point type that is |
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boldfaced, capitalized, and underlined: |
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"A DEFERRED PRESENTMENT TRANSACTION IS NOT INTENDED TO |
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MEET LONG-TERM FINANCIAL NEEDS. THIS MONEY SHOULD BE |
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USED ONLY TO MEET SHORT-TERM CASH NEEDS. YOU HAVE THE |
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RIGHT TO RESCIND THIS TRANSACTION, AT NO COST, BEFORE |
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THE CLOSE OF BUSINESS ON THE NEXT BUSINESS DAY |
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IMMEDIATELY FOLLOWING THE TRANSACTION DATE SHOWN ON |
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YOUR AGREEMENT. TO RESCIND, YOU MUST RETURN ALL OF THE |
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CASH PROCEEDS TO THE LENDER. IN RETURN, THE LENDER |
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WILL CANCEL ALL THE FEES FOR THIS TRANSACTION." |
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Sec. 342.604. AUTHORIZED FINANCE CHARGE. (a) A lender may |
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charge for each deferred presentment transaction a finance charge |
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not to exceed: |
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(1) $15 for every $100 advanced up to and including the |
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amount computed under Subchapter C, Chapter 341, using the |
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reference base amount of $70; and |
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(2) $13.50 for every additional $100 advanced up to |
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and including the amount computed under Subchapter C, Chapter 341, |
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using the reference base amount of $125. |
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(b) A lender may also charge a pro rata finance charge for |
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any incremental amount advanced in excess of a multiple of $100. |
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(c) The charge is considered fully earned as of the date of |
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the transaction. The lender may charge only charges expressly |
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authorized by this subchapter in connection with a deferred |
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presentment transaction. |
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Sec. 342.605. MAXIMUM CASH ADVANCE; RIGHT TO RESCIND. (a) |
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A lender may not advance to a borrower an amount greater than the |
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lesser of: |
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(1) the amount computed under Subchapter C, Chapter |
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341, using the reference base amount of $125; or |
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(2) 25 percent of the borrower's monthly gross income. |
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(b) A borrower has the right to rescind the deferred |
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presentment transaction not later than the close of business on the |
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next business day immediately following the transaction date. To |
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rescind a transaction, a borrower must: |
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(1) inform the lender that the borrower wants to |
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rescind the transaction; and |
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(2) return the cash advance to the lender. |
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Sec. 342.606. MINIMUM AND MAXIMUM TERM. A lender may not |
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engage in a deferred presentment transaction with a term of less |
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than seven or more than 45 days. |
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Sec. 342.607. FORM OF ADVANCE. A lender may pay the advance |
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from a deferred presentment transaction to the borrower in the form |
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of a business instrument, a money order, or cash. The lender may |
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not charge an additional finance charge or fee for cashing the |
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lender's business instrument. |
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Sec. 342.608. ENDORSEMENT OF INSTRUMENT. A lender may not |
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negotiate or present an instrument for payment unless the |
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instrument is endorsed with the actual business name of the lender. |
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Sec. 342.609. PARTIAL PAYMENTS. A borrower may make |
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partial payments in any amount on the outstanding balance at any |
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time before the due date of the transaction. After each payment is |
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made, whether the payment is in part or in full, the lender shall |
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give a signed and dated receipt to the borrower making a payment |
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showing the amount paid and the balance due. |
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Sec. 342.610. REDEMPTION OF INSTRUMENT. Before the lender |
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negotiates or presents the instrument, the borrower has the right |
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to redeem any instrument held by the lender as a result of a |
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deferred presentment transaction if the borrower pays the full |
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amount of the instrument to the lender. |
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Sec. 342.611. AUTHORIZED DISHONORED INSTRUMENT CHARGE. If |
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an instrument held by a lender as a result of a deferred presentment |
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transaction is returned to the lender from a payor financial |
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institution due to insufficient funds, a closed account, or a |
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stop-payment order, the lender has the right to exercise all civil |
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means authorized by law to collect the face value of the instrument. |
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In addition, the lender may contract for and collect fees |
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authorized by Section 342.502. The lender may not collect any other |
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fees as a result of default. |
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Sec. 342.612. POSTING OF CHARGES. A lender offering a |
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deferred presentment transaction shall post at any place of |
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business where a deferred presentment transaction is made a |
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schedule of all interest and fees to be charged on the transaction |
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with an example of the amount that would be charged on transactions |
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between $100 and the amount computed under Subchapter C, Chapter |
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341, using the reference base amount of $125, payable on the minimum |
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term and the maximum term offered by the lender, including the |
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corresponding annual percentage rate. |
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Sec. 342.613. CONSUMER INFORMATION. The finance commission |
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by rule may require a lender to provide materials approved by the |
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commissioner that are designed to: |
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(1) inform a borrower of the duties, rights, and |
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responsibilities of parties to a deferred presentment transaction; |
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and |
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(2) educate a borrower about matters of financial |
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literacy. |
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Sec. 342.614. NOTICE ON ASSIGNMENT OR SALE OF INSTRUMENTS. |
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Before the sale or assignment of instruments held by a lender as a |
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result of a deferred presentment transaction, the lender shall |
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place the following notice on the instrument in at least 10-point |
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type that is boldfaced, capitalized, and underlined: |
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"THIS IS A DEFERRED PRESENTMENT TRANSACTION |
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INSTRUMENT." |
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Sec. 342.615. DEFERRED PRESENTMENT TRANSACTIONS LIMITED; |
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ADDITIONAL LENDER DUTIES. (a) A lender may have only one deferred |
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presentment transaction outstanding at a time to any borrower. |
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(b) After a deferred presentment transaction has been paid |
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in full by the borrower or on successful completion of a payment |
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plan, the lender may not, except as permitted under Section |
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342.617, enter into a new deferred presentment transaction with |
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that borrower until after 8 a.m. on the second business day after |
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the date of the payment or completion of the payment plan. |
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(c) Any deferred presentment transaction, and the |
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accompanying instrument or ACH debit authorization, the making or |
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collecting of which violates this subchapter or a rule adopted |
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under this subchapter, is void, and the lender or any other party |
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acting by or through the lender has no right to collect, receive, or |
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retain any principal or charges with respect to the transaction. A |
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borrower prevailing in an action to enforce this subsection is |
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entitled to recover the borrower's costs including reasonable |
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attorney's fees. |
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(d) A lender may not use or threaten to use the criminal |
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process to collect a dishonored instrument, unless the borrower |
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commits fraud against the lender. |
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(e) A lender shall comply with the disclosure requirements |
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of 12 C.F.R. Part 226 (Regulation Z) adopted under the Truth in |
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Lending Act (15 U.S.C. Section 1601 et seq.). |
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(f) Each lender shall report loan data to an approved third |
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party database that is accessible by the commissioner for audit, |
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study, and reporting purposes. |
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Sec. 342.616. PROHIBITED PRACTICES. In addition to the |
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prohibited practices under Section 342.615, the following are |
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prohibited regarding deferred presentment transactions: |
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(1) engaging in unfair, deceptive, or fraudulent |
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practices in the making or collecting of a deferred presentment |
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transaction; |
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(2) taking or attempting to take any security other |
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than the borrower's instrument or ACH debit authorization; |
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(3) holding or attempting to hold more than a single |
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instrument or single ACH debit authorization from the borrower in |
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connection with a deferred presentment transaction, except |
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pursuant to a payment plan under Section 342.617; |
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(4) selling, offering, or soliciting any application |
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for credit insurance in connection with a deferred presentment |
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transaction; |
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(5) conditioning the deferred presentment transaction |
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on any other transaction, offer, or obligation of the borrower, |
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other than as expressly allowed in this subchapter; |
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(6) failing to respond to the commissioner's request |
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for assistance in resolving a complaint; |
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(7) using or threatening to use the criminal process |
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to collect a dishonored check or ACH debit authorization, unless |
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borrower fraud is involved; |
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(8) engaging in any device or subterfuge to evade the |
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requirements of this subchapter, including making cash advances |
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disguised as personal property sales and leaseback transactions or |
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disguising deferred presentment transaction proceeds as cash |
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rebates for a pretextual installment sale of goods or services; or |
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(9) at the same office at which the lender is engaging |
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in deferred presentment transactions, providing or representing |
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services in connection with an extension of consumer credit made by |
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a different lender. |
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Sec. 342.617. PAYMENT PLAN. (a) A lender shall provide a |
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borrower written notice, in a form prescribed or approved by the |
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commissioner, of the borrower's right to request a repayment plan |
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according to Subsection (b). The notice shall be set forth |
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conspicuously at the point of sale and in each deferred presentment |
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transaction services agreement. |
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(b) If a borrower is unable to pay on the due date the full |
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amount owing under a deferred presentment transaction with a |
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lender, the borrower has the right to request a mandatory repayment |
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plan. The borrower must request the repayment plan in writing on or |
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before the due date of the transaction. A borrower who has |
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requested a repayment plan may repay the amount owed according to |
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the following terms: |
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(1) the borrower shall agree not to enter into any |
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additional deferred presentment transactions with any other lender |
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during or for seven days following the payment plan term; |
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(2) the borrower shall be allowed to repay the |
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transaction in not more than four substantially equal installments |
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with one installment due on each of the borrower's next four pay |
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dates; and |
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(3) the lender may not charge a borrower any |
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additional fee for using the mandatory repayment plan. |
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Sec. 342.618. PRACTICES CONCERNING MEMBERS OF THE MILITARY |
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AND THEIR DEPENDENTS. A lender may not enter into a deferred |
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presentment transaction with any active duty member of the military |
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or a dependent of an active duty member of the military. |
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Sec. 342.619. RECORDS AND ANNUAL REPORTS. A lender shall |
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maintain records and file an annual report in accordance with |
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Sections 342.558 and 342.559. |
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Sec. 342.620. AUTHORITY TO CONDUCT DEFERRED PRESENTMENT |
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TRANSACTION BUSINESS. Only a lender may lawfully engage in the |
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deferred presentment transaction business. A lender shall obtain |
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and maintain a separate license for each location where deferred |
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presentment transaction business is conducted. |
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Sec. 342.621. EXAMINATION AND INVESTIGATION. A lender may |
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be examined and investigated in accordance with Section 342.552. |
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Sec. 342.622. DECEPTIVE TRADE PRACTICE. A deferred |
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presentment transaction made by a person other than a lender is a |
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deceptive trade practice actionable under Subchapter E, Chapter 17, |
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Business & Commerce Code. |
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["Lender" means a lender licensed under this chapter.
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[(2)"Member of the United States military" means:
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[(A) a member of the armed forces of the United
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States; or
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[(B) a member of the Texas National Guard who is
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called to federal active duty.
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[Sec. 342.602. DISCLOSURES TO MILITARY BORROWERS. Before
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engaging in a deferred presentment transaction, a lender shall
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provide to a customer who is a member of the United States military
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or the member's spouse a written statement that clearly and
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conspicuously states that:
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[(1)the lender is prohibited by law from:
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[(A) garnishing the wages of any borrower,
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including a borrower who is a member of the United States military;
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[(B) conducting any collection activity against
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a borrower who is:
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[(i) a member of the armed forces of the
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United States who is deployed to combat or a combat support posting,
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for the duration of the posting;
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[(ii) a member of the Texas National Guard
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who is called to federal active duty, for the duration of the duty;
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[(iii) the spouse of a person described by
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Paragraph (i), for the duration of the posting; or
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[(iv) the spouse of a person described by
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Paragraph (ii), for the duration of the duty; or
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[(C) from contacting the employer of a member of
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the United States military about a deferred presentment debt of the
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member or the member's spouse;
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[(2) the lender shall honor the terms of a repayment
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agreement entered into with a member of the United States military
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or the member's spouse, including a repayment agreement negotiated
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through military counselors or third-party credit counselors; and
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[(3) the lender shall honor any statement made by a
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commanding officer of a member of the United States military
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declaring any location where deferred presentment transaction
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business is to be conducted by the lender to be a place at which a
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member of the United States military or the member's spouse is
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prohibited from transacting business.
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[Sec. 342.603. PROHIBITED PRACTICES. A lender may not
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contact the employer of a member of the United States military about
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a deferred presentment debt of the member or the member's spouse.
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[Sec. 342.604. MILITARY BORROWER. (a) A lender may not
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engage in collection activity against a borrower who is:
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[(1) a member of the armed forces of the United States
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who is deployed to combat or a combat support posting, for the
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duration of the posting;
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[(2) a member of the Texas National Guard who is called
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to federal active duty, for the duration of the duty;
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[(3) the spouse of a person described by Subdivision
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(1), for the duration of the posting; or
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[(4) the spouse of a person described by Subdivision
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(2), for the duration of the duty.
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[(b) A lender may not garnish the wages of a borrower who is
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a member of the United States military or the member's spouse.
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[Sec. 342.605. REPAYMENT AGREEMENT. With respect to a
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deferred presentment transaction, a lender shall honor a repayment
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agreement entered into with a borrower who is a member of the United
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States military or the member's spouse, including a repayment
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agreement negotiated through a military counselor or a third-party
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credit counselor.] |
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SECTION 5. The consumer credit commissioner shall study |
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data on product use, volume of activity, frequency, and other |
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information related to deferred presentment transactions. The |
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commissioner shall report findings on the use of deferred |
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presentment transactions to the legislature not later than December |
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1, 2008. |
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SECTION 6. This Act takes effect September 1, 2007. |