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A BILL TO BE ENTITLED
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AN ACT
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relating to certain extensions of consumer credit facilitated by |
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credit access businesses; providing a civil penalty. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 392.301(a), Finance Code, is amended to |
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read as follows: |
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(a) In debt collection, a debt collector may not use |
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threats, coercion, or attempts to coerce that employ any of the |
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following practices: |
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(1) using or threatening to use violence or other |
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criminal means to cause harm to a person or property of a person; |
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(2) accusing falsely or threatening to accuse falsely |
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a person of fraud or any other crime; |
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(3) representing or threatening to represent to any |
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person other than the consumer that a consumer is wilfully refusing |
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to pay a nondisputed consumer debt when the debt is in dispute and |
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the consumer has notified in writing the debt collector of the |
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dispute; |
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(4) threatening to sell or assign to another the |
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obligation of the consumer and falsely representing that the result |
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of the sale or assignment would be that the consumer would lose a |
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defense to the consumer debt or would be subject to illegal |
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collection attempts; |
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(5) threatening that the debtor will be arrested for |
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nonpayment of a consumer debt without proper court proceedings; |
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(6) threatening to file a charge, complaint, or |
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criminal action against a debtor when the debtor has not violated a |
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criminal law; |
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(7) threatening that nonpayment of a consumer debt |
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will result in the seizure, repossession, or sale of the person's |
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property without proper court proceedings; |
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(8) referencing a certification signed by the consumer |
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as required by Section 393.630 or the penalties associated with a |
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violation of that section; or |
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(9) [(8)] threatening to take an action prohibited by |
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law. |
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SECTION 2. Subchapter A, Chapter 393, Finance Code, is |
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amended by adding Section 393.004 to read as follows: |
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Sec. 393.004. LIMITATION ON EXTENSIONS OF CONSUMER CREDIT |
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AND REFINANCING. (a) A credit services organization may not obtain |
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for a consumer or assist a consumer in obtaining an extension of |
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consumer credit in any form other than in the form of a deferred |
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presentment transaction that meets the requirements of Section |
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393.634 or 393.635, or a motor vehicle title loan that meets the |
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requirements of Section 393.636 or 393.637. |
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(b) Any refinance of an extension of consumer credit in the |
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form of a deferred presentment transaction or motor vehicle title |
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loan that a credit services organization obtains for a consumer or |
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assists a consumer in obtaining: |
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(1) must be authorized under Subchapter G; |
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(2) may not advance additional cash to the consumer; |
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and |
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(3) must meet all the requirements under Subchapter G |
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applicable to the original extension of consumer credit, except as |
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specifically provided otherwise by an applicable provision of |
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Subchapter G. |
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SECTION 3. Section 393.222, Finance Code, is amended by |
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adding Subsection (a-1) to read as follows: |
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(a-1) A credit access business shall post, in the same |
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manner as a notice required under Subsection (a), and provide as a |
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separate document to a consumer, a notice prescribed by the Finance |
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Commission of Texas regarding the availability of extended payment |
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plans that describes the parameters of the plans. |
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SECTION 4. Section 393.223(a), Finance Code, is amended to |
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read as follows: |
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(a) Before performing services described by Section |
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393.221(1), a credit access business must provide to a consumer a |
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disclosure adopted by rule of the Finance Commission of Texas that |
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discloses the following in a form prescribed by the commission: |
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(1) the interest, fees, and annual percentage rates, |
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as applicable, to be charged on a deferred presentment transaction |
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or on a motor vehicle title loan, as applicable, in comparison to |
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interest, fees, and annual percentage rates to be charged on other |
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alternative forms of consumer debt; |
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(2) the amount of accumulated fees a consumer would |
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incur by renewing or refinancing a deferred presentment transaction |
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or motor vehicle title loan that remains outstanding for a period of |
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two weeks, one month, two months, and three months; [and] |
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(3) information regarding the typical pattern of |
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repayment of deferred presentment transactions and motor vehicle |
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title loans; and |
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(4) the name of the credit access business and any |
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unique number assigned to the license issued to the business under |
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Subchapter G. |
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SECTION 5. Section 393.625, Finance Code, is amended to |
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read as follows: |
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Sec. 393.625. MILITARY BORROWERS. (a) In this section, |
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"military borrower" includes a "covered member" or a "dependent" of |
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a covered member, as those terms are defined by 10 U.S.C. Section |
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987 or a successor statute. |
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(b) An extension of consumer credit described by Section |
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393.602(a) that is obtained by a credit access business for a |
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military borrower [member of the United States military or a
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dependent of a member of the United States military] or that the |
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business assisted a military borrower [that person] in obtaining |
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must comply with 10 U.S.C. Section 987 and any regulations adopted |
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under that law, to the extent applicable. |
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(c) The term of an extension of consumer credit described by |
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Section 393.602(a), including all renewals and refinances, |
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obtained for a military borrower by a credit access business or that |
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a credit access business assists a military borrower in obtaining |
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may not exceed: |
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(1) 90 days, if the debt is a deferred presentment |
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transaction; or |
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(2) 180 days, if the debt is a motor vehicle title |
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loan. |
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SECTION 6. Subchapter G, Chapter 393, Finance Code, is |
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amended by adding Sections 393.629 through 393.639 to read as |
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follows: |
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Sec. 393.629. GENERAL LIMITATIONS ON EXTENSIONS OF CONSUMER |
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CREDIT. (a) The provisions of this chapter applicable to a credit |
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access business apply to any consumer physically located in this |
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state at the time the extension of consumer credit is made, |
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regardless of whether the extension of consumer credit was made in |
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person in this state. |
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(b) For purposes of this chapter, an extension of consumer |
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credit obtained for a consumer by a credit access business or that a |
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credit access business assists a consumer in obtaining on or before |
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the fifth day after the date the consumer pays the debt on a |
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previous extension of consumer credit in full is considered a |
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refinance of the previous debt. |
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(c) The term of an extension of consumer credit obtained for |
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a consumer by a credit access business or that a credit access |
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business assists a consumer in obtaining may not exceed 180 days. |
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(d) A credit access business that obtains for a consumer or |
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assists a consumer in obtaining an extension of consumer credit |
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shall provide to the consumer a copy of the agreement between the |
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business and the consumer, and all notices required to be given to |
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the consumer under this chapter, in Spanish if the consumer |
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requests that the documents be provided in Spanish or if the |
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agreement is negotiated in Spanish. The executed agreement between |
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the credit access business and the consumer must be written in |
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English. |
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(e) With a consumer's written consent, a debt incurred under |
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an extension of consumer credit that a credit access business |
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obtained for the consumer or assisted the consumer in obtaining may |
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be sold to another credit access business licensed under this |
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subchapter. All transaction limits applicable to the debt before |
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the sale apply to the debt after the debt is sold, except that the |
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term of the extension of consumer credit may not exceed 180 days, |
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beginning on the date the debt is sold. The sale of a debt under |
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this subsection is considered to be a refinance of the debt for |
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purposes of the applicable transaction limits. |
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(f) Before obtaining for a consumer or assisting a consumer |
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in obtaining an extension of consumer credit, a credit access |
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business shall consider the ability of the consumer to repay the |
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debt within the term provided by law for the original extension of |
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credit and any authorized renewal or refinance. |
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Sec. 393.630. LIMITATION ON OUTSTANDING DEBT. (a) A |
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consumer may have only one outstanding debt from an extension of |
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consumer credit that a credit access business obtained for the |
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consumer or assisted the consumer in obtaining. |
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(b) To obtain an extension of consumer credit facilitated |
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through the services of a credit access business, a consumer must |
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sign a written certification stating that the consumer: |
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(1) at that time has no other outstanding debt from an |
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extension of consumer credit that any credit access business |
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obtained for the consumer or assisted the consumer in obtaining; |
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(2) has not owed a debt subject to an extended payment |
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plan that a credit access business obtained for the consumer or |
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assisted the consumer in obtaining during the preceding 14 days; |
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and |
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(3) has not gone into default on a debt that a credit |
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access business obtained for the consumer or assisted the consumer |
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in obtaining during the preceding 30 days. |
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(c) For purposes of Subsection (b)(3), a consumer is not |
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considered in default if the consumer made a payment on a debt on or |
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before the 10th day after the date the payment was due. |
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(d) A credit access business shall in good faith verify that |
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a consumer is not falsifying the certification required by |
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Subsection (b), to the best knowledge and ability of the person |
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acting on behalf of the credit access business for that |
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transaction. |
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(e) A person acting on behalf of a credit access business |
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has satisfied the requirement of Subsection (d) if the person |
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considers all information that the consumer shares with the person |
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in negotiating the transaction and if the person makes a reasonable |
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effort to verify the consumer's representations with any records |
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that the credit access business typically consults in the normal |
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course of its business. |
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(f) A consumer who falsifies statements contained in the |
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certification violates this section. |
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(g) A credit access business or a consumer who violates this |
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section is subject to a civil penalty in an amount not to exceed |
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$1,000 for each violation. |
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(h) The finance commission shall adopt rules to implement |
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this section. |
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Sec. 393.631. LIMITATIONS RELATING TO MOTOR VEHICLE |
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SECURING DEBT. (a) Notwithstanding any other provision of law, the |
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proceeds of the sale of a repossessed motor vehicle that secured an |
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extension of consumer credit shall satisfy all outstanding and |
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unpaid indebtedness under that extension of credit, and the |
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consumer is not liable for any deficiency resulting from the sale |
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unless the consumer has committed fraud in obtaining the extension |
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of consumer credit. |
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(b) Any fee charged to a consumer for the repossession of a |
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motor vehicle given as security for an extension of consumer credit |
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must be reasonable. |
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Sec. 393.632. ESTABLISHMENT OF INCOME OR VALUE. (a) A |
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credit access business must require documentation to establish a |
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consumer's income for purposes of this subchapter. Acceptable |
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forms of documentation include: |
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(1) a payroll document; |
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(2) a paycheck; |
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(3) a bank statement; |
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(4) a report from a nationally or regionally |
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recognized credit and data reporting company; |
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(5) Internal Revenue Service Form W-2 from the |
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preceding year; |
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(6) the income tax return from the preceding tax year; |
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(7) a signed letter from the consumer's employer; or |
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(8) another document approved by finance commission |
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rule. |
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(b) A credit access business shall retain a copy of the |
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documentation used to establish a consumer's income under |
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Subsection (a) according to the business's standard records |
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retention policy. |
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(c) To establish the retail value of a motor vehicle for |
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purposes of this subchapter, a credit access business must: |
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(1) rely on a nationally or regionally recognized |
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vehicle appraisal guide; or |
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(2) agree in good faith with the consumer to the |
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vehicle's retail value. |
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Sec. 393.633. LOCAL ORDINANCES PREEMPTED. An ordinance |
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adopted by a municipality or other political subdivision regulating |
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a credit access business or an extension of consumer credit that a |
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credit access business obtains for a consumer or assists a consumer |
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in obtaining is preempted to the extent that the ordinance is not |
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within the political subdivision's standard zoning or police |
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powers. |
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Sec. 393.634. SINGLE-PAYMENT DEFERRED PRESENTMENT |
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TRANSACTION. (a) The principal amount of a cash advance made under |
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an extension of consumer credit in the form of a single-payment |
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deferred presentment transaction that a credit access business |
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obtains for a consumer or assists a consumer in obtaining may not |
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exceed: |
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(1) 25 percent of the consumer's gross monthly income, |
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if the consumer's annual income is not more than 125 percent of the |
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federal poverty level for a family of four; or |
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(2) 35 percent of the consumer's gross monthly income, |
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if the consumer is not described by Subdivision (1) and is not a |
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military borrower to whom a different limit applies under federal |
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law. |
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(b) The term of an original or refinanced extension of |
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consumer credit in the form of a single-payment deferred |
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presentment transaction that a credit access business obtains for a |
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consumer or assists a consumer in obtaining may not be less than 10 |
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days. |
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(c) An extension of consumer credit in the form of a |
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single-payment deferred presentment transaction that a credit |
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access business obtains for a consumer or assists a consumer in |
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obtaining may not be refinanced more than four times. |
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(d) If a consumer has refinanced a single-payment deferred |
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presentment transaction described by Subsection (c) four times: |
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(1) the credit access business shall offer an extended |
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payment plan to the consumer, unless the consumer has entered into |
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two or more extended payment plans in the preceding 12 months; and |
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(2) the consumer may request an extended payment plan |
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at any time on or after the date the consumer refinances the |
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single-payment deferred presentment transaction for the fourth |
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time and on or before the date the deferred presentment transaction |
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must be repaid in full. |
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(e) An extended payment plan authorized by Subsection (d) |
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must comply with Section 393.638. |
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Sec. 393.635. MULTIPLE-PAYMENT DEFERRED PRESENTMENT |
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TRANSACTION. (a) The sum of all scheduled payments due in a single |
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month under an extension of consumer credit in the form of a |
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multiple-payment deferred presentment transaction that a credit |
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access business obtains for a consumer or assists a consumer in |
|
obtaining may not exceed: |
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(1) 15 percent of the consumer's gross monthly income, |
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if the consumer's annual income is not more than 125 percent of the |
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federal poverty level for a family of four; or |
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(2) 20 percent of the consumer's gross monthly income, |
|
if the consumer is not described by Subdivision (1) and is not a |
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military borrower to whom a different limit applies under federal |
|
law. |
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(b) An extension of consumer credit in the form of a |
|
multiple-payment deferred presentment transaction that a credit |
|
access business obtains for a consumer or assists a consumer in |
|
obtaining may not be payable by the consumer in more than 12 |
|
installments, and the loan agreement must specify the number, date, |
|
and total amount due with regard to each installment. |
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(c) An extension of consumer credit in the form of a |
|
multiple-payment deferred presentment transaction that a credit |
|
access business obtains for a consumer or assists a consumer in |
|
obtaining must be payable on a fully amortizing, declining |
|
principal balance basis with substantially equal payments. |
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(d) The first installment of an extension of consumer credit |
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in the form of a multiple-payment deferred presentment transaction |
|
that a credit access business obtains for a consumer or assists a |
|
consumer in obtaining may not be due before the 10th day after the |
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date the consumer enters into the loan agreement. An installment |
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may not be due before the 14th day or after the 31st day after the |
|
date a previous installment is due. |
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(e) An extension of consumer credit in the form of a |
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multiple-payment deferred presentment transaction that a credit |
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access business obtains for a consumer or assists a consumer in |
|
obtaining may be refinanced only one time, and the combined terms of |
|
the original extension of consumer credit and the refinanced |
|
extension of consumer credit may not exceed 270 days. A credit |
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access business is not required to offer an extended payment plan |
|
for an extension of consumer credit in the form of a |
|
multiple-payment deferred presentment transaction. |
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Sec. 393.636. SINGLE-PAYMENT MOTOR VEHICLE TITLE LOAN. (a) |
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The principal amount of a cash advance made under an extension of |
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consumer credit in the form of a single-payment motor vehicle title |
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loan that a credit access business obtains for a consumer or assists |
|
a consumer in obtaining may not exceed the lesser of: |
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(1) six percent of the consumer's gross annual income, |
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if the consumer's annual income is not more than 125 percent of the |
|
federal poverty level for a family of four; |
|
(2) eight percent of the consumer's gross annual |
|
income, if the consumer is not described by Subdivision (1) and is |
|
not a military borrower to whom a different limit applies under |
|
federal law; or |
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(3) 70 percent of the retail value of the motor vehicle |
|
securing the debt. |
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(b) The term of an original or refinanced extension of |
|
consumer credit in the form of a single-payment motor vehicle title |
|
loan that a credit access business obtains for a consumer or assists |
|
a consumer in obtaining may not be less than 30 days. |
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(c) An extension of consumer credit in the form of a |
|
single-payment motor vehicle title loan that a credit access |
|
business obtains for a consumer or assists a consumer in obtaining |
|
may not be refinanced more than six times. |
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(d) If a consumer has refinanced a single-payment motor |
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vehicle title loan described by Subsection (c) six times: |
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(1) the credit access business must offer an extended |
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payment plan to the consumer before initiating any activities to |
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repossess the vehicle securing the debt; and |
|
(2) the consumer may request an extended payment plan |
|
at any time on or after the date the consumer refinances the motor |
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vehicle title loan for the sixth time and on or before the date the |
|
motor vehicle title loan must be repaid in full. |
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(e) An extended payment plan authorized by Subsection (d) |
|
must comply with Section 393.638. |
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Sec. 393.637. MULTIPLE-PAYMENT MOTOR VEHICLE TITLE LOAN. |
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(a) The principal amount of a cash advance made under an extension |
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of consumer credit in the form of a multiple-payment motor vehicle |
|
title loan that a credit access business obtains for a consumer or |
|
assists a consumer in obtaining may not exceed 70 percent of the |
|
retail value of the motor vehicle securing the debt. |
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(b) A scheduled payment under a contract for an extension of |
|
consumer credit in the form of a multiple-payment motor vehicle |
|
title loan that a credit access business obtains for a consumer or |
|
assists a consumer in obtaining may not exceed: |
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(1) 15 percent of the consumer's gross monthly income, |
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if the consumer's annual income is not more than 125 percent of the |
|
federal poverty level for a family of four; or |
|
(2) 20 percent of the consumer's gross monthly income, |
|
if the consumer is not described by Subdivision (1) and is not a |
|
military borrower to whom a different limit applies under federal |
|
law. |
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(c) An extension of consumer credit in the form of a |
|
multiple-payment motor vehicle title loan that a credit access |
|
business obtains for a consumer or assists a consumer in obtaining |
|
must be payable on a fully amortizing, declining principal balance |
|
basis with substantially equal payments. |
|
(d) An extension of consumer credit in the form of a |
|
multiple-payment motor vehicle title loan that a credit access |
|
business obtains for a consumer or assists a consumer in obtaining |
|
may not be payable by the consumer in more than six installments, |
|
and the loan agreement must specify the number, date, and total |
|
amount due with regard to each installment. |
|
(e) The first installment of an extension of consumer credit |
|
in the form of a multiple-payment motor vehicle title loan that a |
|
credit access business obtains for a consumer or assists a consumer |
|
in obtaining may not be due before the 10th day after the date the |
|
consumer enters into the loan agreement. A subsequent installment |
|
may not be due before the 30th day after the date the previous |
|
installment of the loan is due. |
|
(f) An extension of consumer credit in the form of a |
|
multiple-payment motor vehicle title loan that a credit access |
|
business obtains for a consumer or assists a consumer in obtaining |
|
may be refinanced only one time, and the combined terms of the |
|
original extension of consumer credit and the refinanced extension |
|
of consumer credit may not exceed 270 days. |
|
(g) A credit access business may not initiate any activities |
|
to repossess the vehicle securing the debt under a multiple-payment |
|
motor vehicle title loan that a credit access business obtains for a |
|
consumer or assists a consumer in obtaining before offering the |
|
consumer an extended payment plan. An extended payment plan |
|
authorized by this subsection must comply with Section 393.638. |
|
Sec. 393.638. EXTENDED PAYMENT PLAN REQUIREMENTS. (a) |
|
This section applies to extended payment plans permitted under |
|
Sections 393.634, 393.636, and 393.637. |
|
(b) An extended payment plan must provide for payment in at |
|
least: |
|
(1) four substantially equal installments, after |
|
which the outstanding balance will be paid in full, with respect to |
|
a single-payment deferred presentment transaction or |
|
single-payment motor vehicle title loan; or |
|
(2) two additional substantially equal installments, |
|
after which the outstanding balance, including only the fees and |
|
interest that would have been due under the original extension of |
|
consumer credit, will be paid in full, with respect to a |
|
multiple-payment motor vehicle title loan. |
|
(c) The period between installment payments on an extended |
|
payment plan may not be shorter than: |
|
(1) the term of the original extension of credit, with |
|
respect to a single-payment deferred presentment transaction; or |
|
(2) 30 days, with respect to a single-payment or |
|
multiple-payment motor vehicle title loan. |
|
(d) The first payment owed under an extended payment plan |
|
may not be due before the 10th day after the date the consumer |
|
requests an extended payment plan. |
|
(e) A credit access business may not assess additional fees |
|
or interest or assist a consumer in obtaining additional extensions |
|
of consumer credit if the consumer is paying an extension of credit |
|
under an extended payment plan. |
|
(f) A consumer may pay in full a debt subject to an extended |
|
payment plan at any time without prepayment penalties. |
|
(g) A person may not engage in debt collection or vehicle |
|
repossession activities for a debt subject to an extended payment |
|
plan if the consumer is in compliance with the extended payment |
|
plan. |
|
Sec. 393.639. RULES. The finance commission may adopt any |
|
rules necessary to implement Sections 393.629-393.638. |
|
SECTION 7. The changes in law made by this Act apply only to |
|
an extension of consumer credit made on or after the effective date |
|
of this Act. An extension of consumer credit made before the |
|
effective date of this Act is governed by the law in effect on the |
|
date the extension of consumer credit was made, and the former law |
|
is continued in effect for that purpose. For purposes of this |
|
section, a refinance or renewal of an extension of consumer credit |
|
is considered made on the date the extension of consumer credit |
|
being refinanced or renewed was made. |
|
SECTION 8. This Act takes effect September 1, 2013. |