BILL ANALYSIS

 

 

Senate Research Center

C.S.S.B. 1949

86R25900 GRM-D

By: Watson et al.

 

Business & Commerce

 

4/13/2019

 

Committee Report (Substituted)

 

 

 

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

 

The Texas Office of Consumer Credit Commissioner (OCCC) is charged with regulating nonbank financial services, including most consumer loans. Increasingly, companies offer consumer loans and other financial products over the Internet and using other emerging technology. This industry is commonly referred to as financial technology or "fintech," and includes wide-ranging online lending models. 

 

In its 2017 Self-Evaluation Report to the Texas Sunset Advisory Commission, the OCCC identified as its first major issue the fact that "Texas consumer lending laws do not explicitly recognize these rapidly evolving online lending practices, and do not provide the agency with specific tools to address them." As a possible solution, the OCCC suggested specifying that Texas consumer lending laws apply to these loans. The OCCC concluded: "This change would help minimize regulatory uncertainty by making it clear which law applies, and would help the OCCC in coordinating with other states. This change would also strengthen the agency's case if it chose to bring an action to ensure an online lender's compliance with Texas law."

 

S.B. 1949 implements the OCCC's recommendation by clarifying that if an OCCC-regulated loan is made to a consumer while he or she is located in Texas, then existing Texas laws apply. This ensures the same laws apply whether a Texas consumer loan is made via a storefront, over the Internet, or through an online app. At the same time, S.B. 1949 does not change the substance of Texas' lending laws. It merely resolves regulatory uncertainty and ensures a level playing field, which will be better for Texas businesses and consumers.

 

https://occc.texas.gov/sites/default/files/uploads/reports/2018-2019-occc-self-evaluation-report.pdf (Original Author's/Sponsor's Statement of Intent)

 

C.S.S.B. 1949 amends current law relating to the applicability of laws of this state to certain consumer financial transactions.

 

RULEMAKING AUTHORITY

 

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

 

SECTION BY SECTION ANALYSIS

 

SECTION 1. Amends Section 342.005, Finance Code, as follows:

 

Sec. 342.005. APPLICABILITY OF CHAPTER. Provides that, except as provided by Sections 302.001(d) (relating to authorizing a creditor to provide for a delinquency charge in certain circumstances) and 342.004(c), a loan is subject to this chapter (Consumer Loans) if the loan:

 

(1) makes no changes to this subdivision;

 

(2) is extended primarily for personal, family, or household use to a person who is located in this state at the time the loan is made;

 

(3)�(4) makes no changes to these subdivisions.�

 

SECTION 2. Amends the heading to Section 342.053, Finance Code, to read as follows:

 

Sec. 342.053. AREA OF BUSINESS; LOANS BY MAIL OR ONLINE.

 

SECTION 3. Amends Section 342.053(b), Finance Code, to authorize a lender to make, negotiate, arrange, and collect loans by mail or online, rather than by mail, from a licensed office.

 

SECTION 4. Amends Section 343.002, Finance Code, as follows:

 

Sec. 343.002. APPLICABILITY. (a) Provides that this chapter (Home Loans) applies to a loan under this chapter that is extended to a person who is located in this state at the time the loan is made.

 

(b) Creates this subsection from existing text.

 

SECTION 5. Amends Section 345.007, Finance Code, by adding Subsection (d) to provide that this chapter (Retail Installment Sales) applies to a retail installment transaction extended to a person who is located in this state at the time the transaction is entered into.

 

SECTION 6. Amends Section 346.004(a), Finance Code, to provide that, unless the contract for the account provides otherwise, this chapter (Revolving Credit Accounts) applies to a revolving credit account described by Section 346.003 (Revolving Credit Accounts) if the loan or extension of credit is extended primarily for personal, family, or household use to a person who is located in this state at the time the loan or extension of credit is entered into.

 

SECTION 7. Amends Subchapter A, Chapter 347, Finance Code, by adding Section 347.008, as follows:

 

Sec. 347.008. APPLICABILITY. Provides that each credit transaction extended to a person who is located in this state at the time the transaction is entered into is subject to this chapter (Manufactured Home Credit Transactions).

 

SECTION 8. Amends Section 348.007(a), Finance Code, to provide that, except as otherwise provided by this section, each retail installment transaction extended to a person who is located in this state at the time the transaction is entered into is subject to this chapter (Motor Vehicle Installment Sales).

 

SECTION 9. Amends Subchapter A, Chapter 351, Finance Code, by adding Section 351.012, as follows:

 

Sec. 351.012. APPLICABILITY OF CHAPTER. Provides that this chapter (Property Tax Lenders) applies to a property tax loan that is extended to a person for payment of property taxes on real property located in this state.

 

SECTION 10. Amends the heading to Section 351.053, Finance Code, to read as follows:

 

Sec. 351.053. AREA OF BUSINESS; PROPERTY TAX LOANS BY MAIL OR ONLINE.

 

SECTION 11. Amends Section 351.053(b), Finance Code, to authorize a property tax lender to make, negotiate, arrange, and collect property tax loans by mail or online, rather than by mail, from a licensed office.

 

SECTION 12. Amends Chapter 352, Finance Code, by adding Section 352.009, as follows:

 

Sec. 352.009. APPLICABILITY OF CHAPTER. Provides that this chapter (Tax Refund Anticipation Loans) applies to a refund anticipation loan that is extended to a person who is located in this state at the time the loan is made.

 

SECTION 13. Amends Section 371.003(8), Finance Code, to redefine "pawn transaction."

 

SECTION 14. Amends Section 393.602(a), Finance Code, to provide that this subchapter (Licensing and Regulation of Certain Credit Services Organizations) applies only to a credit services organization that, with respect to a consumer who is located in this state at the time of the transaction, obtains for a consumer or assists a consumer in obtaining an extension of consumer credit in the form of certain transactions.

 

SECTION 15. Effective date: September 1, 2019.