81R5547 CLG-F

By: Shapleigh S.B. No. 1518

A BILL TO BE ENTITLED

AN ACT

relating to the regulation of tax refund anticipation loans.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 351.001, Finance Code, as added by Chapter 135 (H.B. 1344), Acts of the 80th Legislature, Regular Session, 2007, is amended by amending Subdivisions (1), (2), and (5) and adding Subdivision (4-a) to read as follows:

(1) "Borrower" means an individual who receives the proceeds of a refund anticipation loan or check.

(2) "Facilitator" means a person who processes, receives, or accepts for delivery an application for a refund anticipation loan or refund anticipation check, 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 or the issuing of a refund anticipation check.

(4-a) "Refund anticipation check" means a check, stored value card, or other payment mechanism:

(A) that represents the proceeds of a borrower's tax refund;

(B) that was issued by a depository institution or other person who receives a direct deposit of the borrower's tax refund or tax credits; and

(C) for which the borrower pays a fee or other consideration.

(5) "Refund anticipation loan fee" means a fee, charge, [imposed] or other consideration charged or imposed directly or indirectly [required] by [the facilitator or] the lender for the making of, or in connection with, a refund anticipation loan. The term includes any charge, fee, or other consideration for a deposit account, if the deposit account is used for receipt of the consumer's tax refund to repay the amount owed on the loan. [The term does not include a fee usually imposed or other consideration usually required by the facilitator in the ordinary course of business for services not related to the making of loans, including a fee imposed for tax return preparation or for the electronic filing of a tax return.]

SECTION 2. Chapter 351, Finance Code, as added by Chapter 135 (H.B. 1344), Acts of the 80th Legislature, Regular Session, 2007, is amended by adding Section 351.0015 to read as follows:

Sec. 351.0015. RULES. The Finance Commission of Texas may adopt rules as necessary to accomplish the purposes of this chapter and assist facilitators in interpreting this chapter.

SECTION 3. Section 351.002(a), Finance Code, as added by Chapter 135 (H.B. 1344), Acts of the 80th Legislature, Regular Session, 2007, is amended to read as follows:

(a) A person may not, individually or in conjunction or cooperation with another person, act as a facilitator unless the person is:

(1) engaged in the business of preparing tax returns, or employed by a person engaged in the business of preparing tax returns;

(2) primarily involved in [financial services or] tax preparations;

(3) authorized by the Internal Revenue Service as an e-file provider; and

(4) registered with the commissioner as a facilitator under Section 351.003.

SECTION 4. Chapter 351, Finance Code, as added by Chapter 135 (H.B. 1344), Acts of the 80th Legislature, Regular Session, 2007, is amended by adding Section 351.0025 to read as follows:

Sec. 351.0025. RESTRICTION ON LOCATION. A refund anticipation loan may be made only at:

(1) a business location that primarily provides tax preparation services; or

(2) a bank, thrift, savings association, industrial bank, or credit union operating under the laws of the United States or this state.

SECTION 5. Section 351.003, Finance Code, as added by Chapter 135 (H.B. 1344), Acts of the 80th Legislature, Regular Session, 2007, is amended to read as follows:

Sec. 351.003. REGISTRATION OF FACILITATORS. (a) A facilitator shall register as provided by this chapter.

(a-1) To register as a facilitator, a person must file a written application with the commissioner accompanied by an application fee in an amount determined by [provide to] the commissioner[,on or before December 31 preceding each calendar year in which the person seeks to act as a facilitator:

[(1) a list of each location in this state at which e-file providers authorized by the Internal Revenue Service file tax returns on behalf of borrowers for whom the facilitator acts to allow the making of a refund anticipation loan; and

[(2) a processing fee for each location included on the list furnished under Subdivision (1)].

(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 [The commissioner shall prescribe the processing fee in an amount necessary to cover the costs of administering this section].

(c) [After the December 31 deadline, a facilitator may amend the registration required under Subsection (a) to reflect any change in the information provided by the registration.

[(d)] The commissioner shall make available to the public a list of facilitators registered under this section.

[(e) The commissioner may prescribe the registration form.]

SECTION 6. Chapter 351, Finance Code, as added by Chapter 135 (H.B. 1344), Acts of the 80th Legislature, Regular Session, 2007, is amended by adding Sections 351.0031, 351.0032, 351.0033, 351.0034, 351.0035, and 351.0036 to read as follows:

Sec. 351.0031. BOND. (a) An applicant shall post a bond in the amount of $50,000.

(b) The bond must be in favor of this state for the use of a borrower 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 borrower under this chapter.

Sec. 351.0032. CERTIFICATE OF REGISTRATION. (a) The commissioner shall register an applicant and shall issue a certificate attesting to the registration if the commissioner finds that:

(1) the applicant meets the qualification requirements of Sections 351.002(a)(1), (2), and (3); 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.

Sec. 351.0033. EXPIRATION OF REGISTRATION; RENEWAL. (a) Registration as a facilitator expires on the first December 31 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.

(c) The commissioner shall renew a registration on receiving an application for renewal that complies with Subsection (b) unless the commissioner finds that the registrant has violated this chapter or that the registrant no longer meets the qualifications for registration under Section 351.0032(a). If the commissioner denies an application for renewal, the commissioner shall notify the registrant, stating the reason for the denial.

Sec. 351.0034. HEARING ON DENIAL OF REGISTRATION OR RENEWAL. (a) An applicant or registrant is entitled to a hearing on written request made to the commissioner not later than the fifth day after the date the applicant or registrant receives notice of the commissioner's denial of an application for registration or renewal.

(b) The commissioner shall hold an informal hearing promptly after the commissioner receives the request.

Sec. 351.0035. COMPUTATION OF INTEREST. (a) The refund anticipation loan interest rate is the rate, expressed as a percentage, computed according to the following formula: RAL RATE = (F x 365) / ((L - F) x T) where:

"RAL RATE" is the refund anticipation loan interest rate;

"F" is the total amount of refund anticipation loan fees;

"L" is the total amount of the refund anticipation loan; and

"T" is the number of days in the refund anticipation loan.

(b) If a deposit account is established or maintained wholly or partly for the purpose of receiving a borrower's tax refund to repay the amount owed on a refund anticipation loan, the loan matures for purposes of determining the refund anticipation loan interest rate on the estimated date the tax refund will be deposited in the deposit account. If a deposit account is not established or maintained for the repayment of the loan, the loan matures for purposes of determining the interest rate on the estimated date the tax refund will be received by the creditor.

Sec. 351.0036. MAXIMUM INTEREST RATE. (a) A refund anticipation loan may not provide for interest that exceeds the lesser of:

(1) 36 percent a year; or

(2) the applicable alternative rate ceiling under Chapter 303.

(b) A refund anticipation loan that provides for an interest rate in violation of this section is void.

SECTION 7. Chapter 351, Finance Code, as added by Chapter 135 (H.B. 1344), Acts of the 80th Legislature, Regular Session, 2007, is amended by adding Sections 351.0041, 351.0042, 351.0043, 351.0044, 351.0045, 351.0046, 351.0047, 351.00471, 351.00472, 351.00473, 351.00474, 351.00475, 351.0048, and 351.0049 to read as follows:

Sec. 351.0041. FEE SCHEDULE POSTING. (a) A facilitator shall display schedules showing the fees for a refund anticipation loan or check currently charged by the facilitator at each place of business in this state where the registrant facilitates refund anticipation loans or checks.

(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; 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) must include:

(1) the interest rates for refund anticipation loans of $300, $500, $1,000, $1,500, $2,000, and $5,000;

(2) the following title centered on the page in bold-faced 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 will still owe the entire amount of the loan. If your refund is delayed, you may have to pay additional costs. YOU CAN GET YOUR REFUND IN 8 TO 15 DAYS WITHOUT PAYING ANY EXTRA FEES OR TAKING OUT A LOAN. You can have your tax return filed electronically and your refund 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; and

(2) the fee actually charged for the refund anticipation loan or check is the same as the fee displayed on the schedule.

Sec. 351.0042. APPLICATION DISCLOSURES. (a) At the time a borrower applies for a refund anticipation loan or check, the facilitator or lender shall disclose to the borrower on a form separate from the application:

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

(2) the fee for preparing a tax return and any other fee charged to the borrower;

(3) the time in which the proceeds of the refund anticipation loan or check will be paid to the borrower if the loan or check is approved;

(4) for refund anticipation loans:

(A) the following title centered on the page in bold-faced capital letters and 18-point type: "NOTICE";

(B) the following statement: "This is a loan. You are borrowing money against your tax refund. If your tax refund is less than expected, you will still owe the entire amount of the loan. If your refund is delayed, you may have to pay additional costs. YOU CAN USUALLY GET YOUR REFUND IN 8 TO 15 DAYS WITHOUT GETTING A LOAN OR PAYING EXTRA FEES. 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."; and

(C) the refund anticipation loan interest rate computed as set forth in Section 351.0035; and

(5) for refund anticipation checks:

(A) the following title centered on the page in bold-faced 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 8 TO 15 DAYS 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."

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

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

(2) in English and in the language used primarily for oral communication between the facilitator and the borrower.

Sec. 351.0043. ORAL DISCLOSURES. (a) If a borrower applies for a refund anticipation loan, the facilitator shall orally disclose to the borrower in the language primarily used for oral communication between the facilitator and borrower:

(1) that the product is a loan that only lasts one to two weeks;

(2) if the borrower's tax refund is less than expected, that the borrower is liable for the full amount of the loan and must repay the difference;

(3) the amount of the refund anticipation loan fee; and

(4) the refund anticipation loan interest rate.

(b) If a borrower applies for a refund anticipation check, the facilitator shall orally disclose to the borrower in the language primarily used for oral communication between the facilitator and borrower:

(1) the amount of the refund anticipation check fee; and

(2) that the borrower can receive a refund in the same amount of time without a fee if the tax return is filed electronically and the borrower chooses direct deposit to the borrower's own bank account.

(c) If the facilitator at any time provides an estimate of the amount that the borrower will receive after deducting tax preparation and refund anticipation loan or check fees, the facilitator shall describe the options that the borrower can choose from as:

"You can receive (state the full refund amount) in 3 to 8 weeks."

"You can receive (state the full refund amount) in 8 to 15 days with electronic filing and direct deposit to your own bank account. This option will not cost you a fee to receive your refund."

"You can receive (state the refund amount minus the refund anticipation check fee, tax preparation fee, and any other fee charged) in 8 to 15 days, but you will not receive anything in 3 to 8 weeks. This option will cost you (state the amount of refund anticipation-related fees), plus your tax preparation fees are deducted from the refund."

"You can receive (state refund amount minus refund anticipation loan fee, tax preparation fee, and any other fee charged) in one to two days, but you will not receive anything in 8 to 15 days or 3 to 8 weeks. This option will cost you (state the amount of refund anticipation loan-related fees), plus your tax preparation fees are deducted from the refund."

(d) The disclosures described by Subsection (c) may be used by the facilitator to satisfy the requirements of Subsection (a)(3) or Subsection (b).

Sec. 351.0044. 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 advertise a refund anticipation loan without including the following statement:

"[Name of refund anticipation loan product] is a loan. You can get your refund in about 8 to 15 days without a loan or extra fees if you use electronic filing and direct deposit."

(c) A facilitator may not advertise a refund anticipation check without including the following statement:

"The [name of refund anticipation check product] costs [refund anticipation check fee]. You can get your refund in about 8 to 15 days without this fee if you use electronic filing and direct deposit."

(d) For a print advertisement, the disclosure required by Subsections (b) and (c) must be in type size that is one-half as large as the largest type size in the advertisement. For a radio or television advertisement, the disclosures required by Subsections (b) and (c) must receive at least seven seconds of broadcast time.

Sec. 351.0045. MODIFICATION OF REFUND RECEIPT ESTIMATE. The commissioner may by rule revise the disclosures required by this chapter to the extent that the 8- to 15-day estimate for receiving a refund from the Internal Revenue Service is no longer appropriate.

Sec. 351.0046. PROHIBITED PRACTICES. (a) A facilitator or an officer, agent, employee, or other representative of a facilitator may not:

(1) charge or impose a fee or other consideration in the making or facilitating of a refund anticipation loan or refund anticipation check apart from the fee charged by the lender that provides the loan or check;

(2) engage in unfair or deceptive acts or practices in facilitating a refund anticipation loan or check, including making an oral statement contradicting information required to be disclosed under this chapter;

(3) fail to comply with this chapter;

(4) misrepresent a material fact in obtaining or attempting to obtain a registration as a facilitator;

(5) engage in conduct that violates Subchapter E, Chapter 17, Business & Commerce Code; or

(6) in facilitating a refund anticipation loan or check, threaten to take an action prohibited by this chapter or any other law or that the person does not intend to take.

(b) The prohibition of Subsection (a)(1) does not include any charge or fee imposed by the facilitator on all of the facilitator's customers, including tax preparation fees, if the same fee amount is charged to the facilitator's customers who do not receive refund anticipation loans, refund anticipation checks, or any other tax-related financial product.

Sec. 351.0047. 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 borrower copies, in a form that can be kept by the borrower, of:

(1) the complete loan or check application and agreement; and

(2) the disclosures that a lender 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. 351.00471. 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, if applicable, in an action brought by or against a borrower;

(4) an assignment of or order for payment of wages or other compensation for services;

(5) a provision in which the borrower 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. 351.00472. ADDITIONAL SECURITY INTEREST PROHIBITED. A facilitator or an officer, agent, employee, or other representative of a facilitator may not take or arrange for a lender to take a security interest in a borrower's property other than the proceeds of the borrower's tax refund to secure payment of a refund anticipation loan.

Sec. 351.00473. CERTAIN ACTIONS WITH RESPECT TO OUTSTANDING OR DELINQUENT REFUND ANTICIPATION LOANS PROHIBITED. A facilitator or an officer, agent, employee, or other representative of a facilitator may not:

(1) directly or indirectly, individually or in cooperation with another person, engage in the collection of an outstanding or delinquent refund anticipation loan for another lender or assignee; or

(2) act as facilitator for a refund anticipation loan or check that contains a provision permitting the lender to repay from the proceeds of the borrower's tax refund, by offset or other means, another outstanding or delinquent refund anticipation loan.

Sec. 351.00474. ASSOCIATION WITH CHECK CASHING ENTERPRISE PROHIBITED. A facilitator or an officer, agent, employee, or other representative of a facilitator may not:

(1) refer a borrower to or solicit a borrower on behalf of a third party who cashes a check for a fee; or

(2) permit a third party to cash a check for a fee in a place of business identified in the facilitator's application for registration.

Sec. 351.00475. CERTAIN CHARGES PROHIBITED. A facilitator may not directly or indirectly arrange for any third party to charge any interest, a fee, or another charge related to a refund anticipation loan or check, other than the refund anticipation loan or refund anticipation check fee imposed by the lender, including the charging of:

(1) fees for insurance;

(2) attorney's fees;

(3) collection costs; or

(4) fees for cashing a check.

Sec. 351.0048. VIOLATION OF RULES. A facilitator or an officer, agent, employee, or other representative of a facilitator may not violate a rule adopted by the finance commission under this chapter.

Sec. 351.0049. ANNUAL REPORTS. (a) On or before July 1 of 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 April 15 of the preceding year and ending April 14 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 average number of days for which refund anticipation loans facilitated by the facilitator were outstanding before being repaid;

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

(5) any other information required by the commissioner.

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

(d) Annually the commissioner shall prepare and make available to the public a consolidated report of reports filed under this section.

SECTION 8. Chapter 351, Finance Code, as added by Chapter 135 (H.B. 1344), Acts of the 80th Legislature, Regular Session, 2007, is amended by adding Sections 351.0051 and 351.0052 to read as follows:

Sec. 351.0051. HEARING. (a) If the commissioner believes 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.

(b) The commissioner may make investigations, subpoena witnesses, and require audits and reports in preparation for a hearing under this section.

(c) A hearing under this section shall be open to the public.

(d) After the hearing the commissioner shall make findings of fact and conclusions of law.

Sec. 351.0052. CEASE AND DESIST ORDER. If the commissioner finds under Section 351.0051(d) that an action of a facilitator violates this chapter or a rule adopted under this chapter, the commissioner shall order the facilitator to cease and desist from the action.

SECTION 9. The heading to Section 351.006, Finance Code, as added by Chapter 135 (H.B. 1344), Acts of the 80th Legislature, Regular Session, 2007, is amended to read as follows:

Sec. 351.006. REVOCATION OR SUSPENSION OF REGISTRATION.

SECTION 10. Section 351.006, Finance Code, as added by Chapter 135 (H.B. 1344), Acts of the 80th Legislature, Regular Session, 2007, is amended by amending Subsection (a) and adding Subsection (d) to read as follows:

(a) If the commissioner finds under Section 351.005 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 a cease and desist order of the commissioner that has not been stayed on application of the registrant, the [The] commissioner may revoke or suspend the registration of a facilitator [if the commissioner concludes that the facilitator has violated this chapter]. The commissioner shall recite the basis of the decision in an order revoking or suspending the registration.

(d) 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.

SECTION 11. Chapter 351, Finance Code, as added by Chapter 135 (H.B. 1344), Acts of the 80th Legislature, Regular Session, 2007, is amended by adding Sections 351.0071, 351.0072, and 351.0073 to read as follows:

Sec. 351.0071. COMPLAINT PROCEDURE. (a) The commissioner shall establish a complaint procedure that enables an aggrieved borrower or a member of the public to file a complaint against a registrant or non-registrant who violates a provision of this chapter. The commissioner shall maintain a toll-free number that a borrower 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 may not be disclosed to the public.

(c) On the request of a party to a complaint, the commissioner shall hold a hearing as provided by Section 351.0051. After the hearing, the commissioner may issue a cease and desist order under Section 351.0052 or suspend or revoke a registration as provided by Section 351.006.

Sec. 351.0072. DECEPTIVE TRADE PRACTICES. A violation of this chapter is a deceptive trade practice under Subchapter E, Chapter 17, Business & Commerce Code.

Sec. 351.0073. CIVIL ACTION. (a) A facilitator who fails to comply with this chapter is liable to the borrower for:

(1) actual and consequential damages;

(2) the greater of:

(A) $2,500; 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 borrower 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 borrower. A borrower is not required to exhaust any administrative remedies provided by this chapter or other applicable law.

SECTION 12. A facilitator of refund anticipation loans or checks shall file the first report with the consumer credit commissioner as required by Section 351.0049, Finance Code, as added by this Act, not later than July 1, 2011.

SECTION 13. This Act takes effect September 1, 2009.