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A BILL TO BE ENTITLED
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AN ACT
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relating to the regulation of, including fee and installment plan |
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assistance, certain small loans made to consumers. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 342, Finance Code, is amended by adding |
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Subchapter N to read as follows: |
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SUBCHAPTER N. SMALL LOANS |
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Sec. 342.651. DEFINITION. In this subchapter, "small loan" |
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means a loan subject to this chapter the maximum principal amount of |
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which is not greater than the lesser of: |
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(1) $700; or |
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(2) 30 percent of the borrower's gross monthly income. |
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Sec. 342.652. REGULATION OF SMALL LOANS. (a) A license |
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holder engaging in the business of making, transacting, or |
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negotiating a small loan shall make, transact, or negotiate the |
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small loan as provided by this subchapter. |
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(b) To the extent of any conflict between this subchapter |
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and other provisions of this chapter, this subchapter controls. |
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(c) A license holder may not: |
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(1) make a small loan to a borrower if, as a result of |
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making that loan, the sum of the maximum principal amount of the |
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small loan and the outstanding principal balances of all other |
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small loans made by all license holders to the borrower is an amount |
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that exceeds the lesser of: |
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(A) $700; or |
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(B) 30 percent of the borrower's gross monthly |
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income; |
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(2) make a small loan to a borrower who is in default |
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on another small loan until the earlier of: |
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(A) the date the other loan is paid in full; or |
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(B) the second anniversary of the origination |
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date of the loan; |
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(3) make a small loan to a borrower who is under |
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contract with any license holder to pay off a small loan through an |
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installment plan until the earlier of: |
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(A) the date the installment plan is paid in |
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full; or |
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(B) the second anniversary of the origination |
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date of the installment plan; or |
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(4) make a small loan to a borrower if making the small |
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loan would result in the borrower receiving more than eight small |
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loans from all license holders during any consecutive 12-month |
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period. |
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Sec. 342.653. INSTALLMENT PLAN. (a) If a borrower notifies |
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a license holder that the borrower will be or is unable to repay a |
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small loan when the loan is due, the license holder shall inform the |
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borrower that the borrower may convert the small loan to a loan to |
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be paid under an installment plan. |
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(b) The license holder must convert the small loan to a loan |
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to be paid under an installment plan at the borrower's request. |
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(c) The installment plan must be in writing and signed by |
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both the borrower and the license holder. |
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(d) The license holder may not assess a fee, an interest |
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charge, or other charges on the borrower as a result of converting |
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the small loan to a loan to be paid under an installment plan as |
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provided by this section. |
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(e) The installment plan for a small loan must provide for |
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the payment of all installments due on the loan over a period not |
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less than: |
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(1) 90 days for a loan amount equal to or less than |
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$400; or |
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(2) 180 days for a loan amount greater than $400. |
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(f) The borrower may pay the total of installments due on |
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the small loan at any time. The license holder may not charge any |
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penalty, fee, or other charge to the borrower for prepayment of the |
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installment plan by the borrower. |
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(g) The license holder must include a conspicuous provision |
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in a small loan agreement or small loan note that the borrower has |
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access to an installment plan. |
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(h) The license holder shall return any postdated checks |
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that the borrower gave to the license holder for the original small |
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loan at the initiation of the installment plan. |
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(i) A license holder may take postdated checks for |
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installment plan payments at the time the installment plan is |
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originated. If any check accepted as payment under the installment |
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plan is dishonored, the license holder may not charge the borrower |
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any fee for the dishonored check. |
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(j) If a borrower defaults on the installment plan, the |
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license holder may charge the borrower a one-time installment plan |
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default fee of $25. |
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(k) If the license holder enters into an installment plan |
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contract or agreement with the borrower through a third party that |
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is representing the borrower, this section applies to the |
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installment plan contract or agreement as if it had originated with |
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the license holder. |
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Sec. 342.654. DISCLOSURE. In addition to any other |
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disclosures required by law, an application for a small loan must |
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include a statement on the front page of the loan application in at |
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least 12-point type that is substantially similar to the following: |
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"AT THE TIME YOU REPAY THIS LOAN, YOU SHOULD HAVE SUFFICIENT FUNDS |
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TO MEET YOUR OTHER FINANCIAL OBLIGATIONS. IF YOU CANNOT PAY OTHER |
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BILLS BECAUSE YOU ARE PAYING OFF THIS DEBT, YOU SHOULD ENTER INTO |
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THE INSTALLMENT PLAN OFFERED IN CONNECTION WITH THIS LOAN." |
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Sec. 342.655. SMALL LOAN INFORMATION SYSTEM. (a) The |
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commissioner shall, by contract with a vendor or service provider |
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or otherwise, develop and implement a small loan information system |
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that allows a license holder to determine: |
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(1) whether a borrower has any outstanding small |
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loans; |
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(2) the number of small loans the borrower has |
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outstanding; |
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(3) whether the borrower is eligible for a small loan |
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under this subchapter; |
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(4) whether the borrower is paying off a small loan |
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under an installment plan; and |
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(5) any other information necessary for a license |
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holder to comply with this subchapter. |
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(b) The small loan information system must provide that the |
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information entered into or stored by the system is: |
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(1) accessible to and usable by a license holder and |
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the commissioner from any location in this state; and |
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(2) secure against public disclosure, tampering, |
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theft, or unauthorized acquisition or use. |
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(c) A license holder that makes a small loan shall enter or |
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update the information required under Subsection (a) into the small |
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loan information system at the time the license holder makes the |
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small loan. A license holder shall enter and update all required |
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information for every outstanding small loan. |
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(d) The commissioner may charge license holders who make |
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small loans a fee, in an amount determined by finance commission |
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rule, to be used for the operation and administration of the small |
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loan information system. |
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(e) The finance commission shall adopt rules establishing |
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standards and procedures for the retention, archiving, and deletion |
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of information entered into or stored by the small loan information |
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system. |
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(f) Notwithstanding Chapter 552, Government Code, or any |
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other law, information in the small loan information system may not |
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be inspected by or disclosed to the public. |
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SECTION 2. Subchapter N, Chapter 342, Finance Code, as |
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added by this Act, applies only to a loan entered into on or after |
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the effective date of this Act. A loan entered into before the |
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effective date of this Act is governed by the law in effect on the |
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date the loan was entered into, and the former law is continued in |
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effect for that purpose. |
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SECTION 3. This Act takes effect September 1, 2011. |