By: Thompson of Harris H.B. No. 3812

A BILL TO BE ENTITLED

AN ACT

relating to extensions of consumer credit in the form of a motor vehicle title loan that a credit access business obtains for a consumer or assists a consumer in obtaining; providing a civil penalty.

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

SECTION 1. Section 393.601, Finance Code, is amended by amending Subdivision (5) and adding Subdivisions (5-a) and (7) to read as follows:

(5) "Motor vehicle title loan" means a single-payment or multiple-payment loan in which an unencumbered motor vehicle is given as the only security for the loan, except as provided by Section 393.702. The term does not include a retail installment transaction under Chapter 348 or another loan made to finance the purchase of a motor vehicle.

(5-a) "Multiple-payment motor vehicle title loan" means a motor vehicle title loan that is not a single-payment motor vehicle title loan.

(7) "Single-payment motor vehicle title loan" means a motor vehicle title loan for which the entire principal, interest, and fees are required under the terms of the loan to be payable in a single payment.

SECTION 2. Chapter 393, Finance Code, is amended by adding Subchapter G-1 to read as follows:

SUBCHAPTER G-1. REGULATIONS IN CONNECTION WITH MOTOR

VEHICLE TITLE LOANS

Sec. 393.701. DEFINITIONS. In this subchapter:

(1) "Finance commission" means the Finance Commission of Texas.

(2) "Military borrower" includes a "covered member" or a "dependent" with respect to a covered member, as those terms are defined by 10 U.S.C. Section 987 or a successor statute.

(3) "Motor vehicle title loan" has the meaning assigned by Section 393.601.

(4) "Multiple-payment motor vehicle title loan" has the meaning assigned by Section 393.601.

(5) "Refinance" means a rollover, renewal, or other type of transaction in which all or a portion of the principal, fees, or interest due under an outstanding motor vehicle title loan becomes due on a later date. The term does not include an extended payment plan described by Section 393.709. The term includes a new extension of consumer credit that:

(A) consists of debt arising from principal, fees, or interest that was not paid in full under an outstanding or previous extension of consumer credit; or

(B) is made on or before the fifth day after the date a previous extension of consumer credit that a credit access business obtained for a consumer or assisted a consumer in obtaining was paid in full.

(6) "Single-payment motor vehicle title loan" has the meaning assigned by Section 393.601.

Sec. 393.702. PAYMENT METHOD. (a) A credit access business shall accept a payment made in cash or by electronic transfer, cashier's check, teller's check, or money order offered by the consumer or another party, to retire or otherwise pay down debt incurred under an extension of consumer credit in the form of a single-payment motor vehicle title loan or a multiple-payment motor vehicle title loan that a credit access business obtained for a consumer or assisted a consumer in obtaining under this chapter.

(b) For a single-payment or multiple-payment motor vehicle title loan, a consumer may also grant a security interest in an authorized debit of a bank account.

Sec. 393.703. TERM OF LOAN FOR MILITARY BORROWERS. The term of an extension of consumer credit in the form of a motor vehicle title loan, including all refinances, obtained for a military borrower by a credit access business or that a credit access business assists a military borrower in obtaining may not exceed 180 days.

Sec. 393.704. LIMITATION ON OUTSTANDING DEBT. (a) At any one time, a consumer may have only one outstanding debt from a motor vehicle title loan that a credit access business obtained for the consumer or assisted the consumer in obtaining.

(b) A credit access business that violates this section is subject to a civil penalty in an amount not to exceed $1,000 for each violation.

Sec. 393.705. LIMITATIONS RELATING TO MOTOR VEHICLE SECURING DEBT. (a) The proceeds of the sale of a repossessed motor vehicle that secured a motor vehicle title loan shall satisfy all outstanding and unpaid indebtedness under that extension of consumer credit, and the consumer is not liable for any deficiency resulting from the sale unless the consumer has committed fraud or has committed a wilful act of misconduct that damages or impairs the value of the motor vehicle.

(b) Any fee charged to a consumer for the repossession of a motor vehicle given as security for a motor vehicle title loan must be reasonable and may not exceed the amount actually paid by the credit access business or the lender to a third party for the repossession.

(c) A repossession under this chapter must comply with Chapter 9, Business & Commerce Code, except as otherwise provided by this section.

Sec. 393.706. ESTABLISHMENT OF CONSUMER'S INCOME OR VEHICLE VALUE; REFERENCE AMOUNT. (a) A credit access business must require documentation to establish a consumer's income for purposes of this subchapter. Acceptable forms of documentation include paper, facsimile, or electronic copies of:

(1) a payroll document;

(2) a paycheck;

(3) a bank statement;

(4) a report from a nationally or regionally recognized credit and data reporting company;

(5) Internal Revenue Service Form W-2 from the preceding year;

(6) the income tax return from the preceding tax year;

(7) a signed letter from the consumer's employer at the time the single-payment motor vehicle title loan or multiple-payment motor vehicle title loan is sought;

(8) an executed certification on a form adopted by finance commission rule that attests to the consumer's monthly or annual income; or

(9) any other document approved by finance commission rule.

(b) A credit access business shall retain a copy of the documentation used to establish a consumer's income under Subsection (a) according to the business's standard records retention policy and any applicable rule or regulation establishing a record retention period.

(c) A credit access business that relies in good faith on a document presented by the consumer under Subsection (a) to establish a consumer's income has complied with this section to the extent the income established under that document meets the applicable requirements under this subchapter.

(d) A credit access business that obtains for a consumer or assists a consumer in obtaining an extension of consumer credit in the form of a single-payment motor vehicle title loan or a multiple-payment motor vehicle title loan through the Internet or other electronic means may rely on nationally or regionally recognized database reporting systems and may maintain a record of the database reporting system results used to comply with Subsections (a) and (b).

(e) To establish the retail value of a motor vehicle for purposes of this subchapter, a credit access business must:

(1) rely on a nationally or regionally recognized vehicle appraisal guide or agree in good faith with the consumer to the vehicle's retail value; and

(2) record the recognized or agreed-on value.

(f) For purposes of this subchapter, $28,000 is the initial reference amount with respect to a consumer's income, and the consumer credit commissioner shall adjust this amount annually in accordance with the Consumer Price Index.

Sec. 393.707. SINGLE-PAYMENT MOTOR VEHICLE TITLE LOAN. (a) The amount advanced to a consumer under 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, excluding fees, may not exceed the lesser of:

(1) six percent of the consumer's gross annual income, if the consumer's gross annual income is less than the reference amount;

(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

(3) 70 percent of the retail value of the motor vehicle securing the debt.

(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 or longer than 60 days.

(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.

(d) If a consumer who has not entered into an extended payment plan with the credit access business in the preceding 12 months refinances a single-payment motor vehicle title loan for the sixth time:

(1) the credit access business must offer at least one extended payment plan to the consumer before initiating any activities to repossess the vehicle securing the debt;

(2) the consumer may request, before the offer required by Subdivision (1) is made, an extended payment plan at any time on or after the date the consumer refinances the motor vehicle title loan for the sixth time and on or before the fifth day after the date on which the sixth refinance must be repaid in full;

(3) to comply with the requirement of Subdivision (1), the credit access business shall send a written notice to the consumer disclosing the following:

(A) the amount due under the current terms of the extension of consumer credit if the consumer declines an extended payment plan;

(B) the amounts due on each of the installment dates of an extended payment plan; and

(C) the date by which the consumer must accept the extended payment plan in writing, which date shall be at least five days after the date of such notice;

(4) the credit access business may not repossess the vehicle securing the debt unless:

(A) the consumer fails to accept the extended payment plan in writing on or before the deadline contained in the notice required by Subdivision (3);

(B) the consumer declines the extended payment plan; or

(C) the consumer fails to make a payment required by an extended payment plan that the consumer accepted; and

(5) if the consumer declines an extended payment plan that a credit access business is required to offer under Subdivision (1), the consumer must sign an extended payment plan waiver on a form prescribed by the finance commission.

(e) An extended payment plan required to be offered under Subsection (d) must comply with Section 393.709.

(f) A credit access business may offer a consumer an extended payment plan that provides the consumer with additional time to repay the debts obtained through a single-payment motor vehicle title loan, either before or after the consumer refinances the single-payment motor vehicle title loan for the sixth time, more than once in a 12-month period so long as the credit access business does not assess additional fees under the extended payment plan and the credit access business fully describes the terms of the extended payment plan, including all due dates and the amount due on each due date, to the consumer before the consumer enters into the extended payment plan. An extended payment plan offered under this subsection is not required to comply with Section 393.709.

Sec. 393.708. MULTIPLE-PAYMENT MOTOR VEHICLE TITLE LOAN. (a) The amount advanced to a consumer under 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, excluding fees, may not exceed 70 percent of the retail value of the motor vehicle securing the debt.

(b) The sum of all fees, principal, interest, and other amounts due under any scheduled payment 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 exceed:

(1) 20 percent of the consumer's gross monthly income, if the consumer's gross annual income is less than the reference amount; or

(2) 30 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.

(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. If a credit access business precomputes its fees under a multiple-payment motor vehicle title loan and a consumer prepays the loan in full, the credit access business shall refund any unearned fees to the consumer.

(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 12 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 28th 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 not be refinanced and the loan term may not exceed 365 days, except as provided by Subsection (g).

(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 at least one extended payment plan. An extended payment plan may cause the extension of consumer credit to extend beyond 365 days so long as the extended payment plan complies with Section 393.709 and the credit access business fully describes the terms of the extended payment plan, including all due dates and the amount due on each due date, to the consumer before the consumer enters into the extended payment plan.

(h) If the credit access business is required to offer a consumer an extended payment plan under Subsection (g), the credit access business shall send a written notice to the consumer disclosing the following:

(1) the amount due under the current terms of the extension of consumer credit if the consumer declines an extended payment plan;

(2) the amounts due on each of the installment dates of an extended payment plan; and

(3) the date by which the consumer must accept the extended payment plan in writing, which date shall be at least five days after the date of such notice.

(i) The credit access business may not repossess the vehicle securing the debt unless:

(1) the consumer fails to accept the extended payment plan in writing on or before the deadline contained in the notice required by Subsection (h)(3);

(2) the consumer declines the extended payment plan; or

(3) the consumer fails to make a payment required by an extended payment plan that the consumer accepted.

(j) If the consumer declines the extended payment plan, the consumer must sign an extended payment plan waiver on a form prescribed by the finance commission.

Sec. 393.709. EXTENDED PAYMENT PLAN REQUIREMENTS. (a) This section applies to extended payment plans required to be offered under Sections 393.707(d) and 393.708.

(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 motor vehicle title loan; or

(2) two substantially equal installments added to the original and refinanced term of the extension of consumer credit, after which the outstanding balance, including only the fees 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 30 days, with respect to a single-payment motor vehicle title loan or a 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 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.

(h) A person may not use a device, subterfuge, or pretense to evade the extended payment plan requirements and limitations imposed on a credit access business under this subchapter.

Sec. 393.710. REFINANCES. (a) Any refinance of an extension of consumer credit in the form of a single-payment motor vehicle title loan or multiple-payment motor vehicle title loan that a credit access business obtains for a consumer or assists a consumer in obtaining:

(1) must be authorized under this subchapter;

(2) must be in the same form as the original extension of consumer credit; and

(3) must meet all the requirements applicable to the original extension of consumer credit, including the duration, transaction, and extended payment plan requirements under this subchapter, including the applicable income-based or vehicle value-based limitations under Section 393.707(a) or 393.708(b), except as otherwise provided by this chapter.

(b) The terms of a refinanced extension of consumer credit may be the same as or different from the terms of the original extension of consumer credit.

(c) A person may not use a device, subterfuge, or pretense to evade the refinance requirements and limitations imposed on a credit access business with respect to a single-payment motor vehicle title loan or multiple-payment motor vehicle title loan under this subchapter.

Sec. 393.711. RULES. The finance commission shall adopt any rules necessary to implement this subchapter.

SECTION 3. 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 of an extension of consumer credit is considered made on the date the extension of consumer credit being refinanced was made.

SECTION 4. This Act takes effect September 1, 2015.