BILL ANALYSIS

Senate Research Center	S.B. 1906
89R6240 MLH-D	By: Creighton
	Business & Commerce
	3/25/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

S.B. 1906 provides for an across the board six percent increase on existing rate brackets for interest charges on cash advances as part of loans not secured by real property.

Across the country, several states have recently enacted legislation to modernize statutes governing traditional consumer installment lending in an effort to expand consumers access to regulated state credit options. Some of the largest states (California, Florida, Kansas, Kentucky, North Carolina, and Virginia) have successfully passed legislation in recent years to promote a more accessible and lower cost credit option that is regulated and supervised by the state. The Texas Legislature has not revisited the rate structure in Subchapter E, Chapter 342, Finance Code, since 2001.

Simultaneously, the online lending marketplace has exploded, with out-of-state lenders charging APRs as high as 199 percent. Between 2021 and 2023, over 1.3 million loans were made accounting for over $12.9 billion in loans made by online, out-of-state lenders in Texas.

S.B. 1906 modernizes the existing rate bracket structure, enhancing consumer protections and protecting vulnerable households from high-cost, out-of-state online lenders who operate beyond the reach of state regulation.

As proposed, S.B. 1906 amends current law relating to increasing the interest rate of certain consumer loans.

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 342.201(e), Finance Code, as follows:

(e) Authorizes a loan contract under Chapter 342 (Consumer Loans) that is not secured by real property to provide for a rate or amount of interest computed using the true daily earnings method or the scheduled installment earnings method that does not exceed:

(1)� 36 percent, rather than 30 percent, a year on that part of the cash advance that is less than or equal to the amount computed under Subchapter C (General Provisions), Chapter 341 (Revised Ceilings and Brackets), using the reference base amount of $500;

(2)� 30 percent, rather than 24 percent, a year on that part of the cash advance that is more than the amount computed for Subdivision (1) but less than or equal to an amount computed under Subchapter C, Chapter 341, using the reference base amount of $1,050; and

(3)� 24 percent, rather than 18 percent, a year on that part of the cash advance that is more than the amount computed for Subdivision (2) but less than or equal to an amount computed under Subchapter C, Chapter 341, using the reference base amount of $2,500.

SECTION 2. Makes application of this Act prospective.

SECTION 3. Effective date: September 1, 2025.