Bill Text: TX HB2594 | 2011-2012 | 82nd Legislature | Enrolled

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Bill Title: Relating to the licensing and regulation of certain credit services organizations and the regulation of certain extensions of consumer credit obtained by those organizations or with regard to which the organizations provide assistance; providing an administrative penalty.

Spectrum: Slight Partisan Bill (Democrat 10-4)

Status: (Passed) 2011-06-17 - Effective on 1/1/12 [HB2594 Detail]

Download: Texas-2011-HB2594-Enrolled.html

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H.B. No. 2594

AN ACT
relating to the licensing and regulation of certain credit services
organizations and the regulation of certain extensions of consumer
credit obtained by those organizations or with regard to which the
organizations provide assistance; providing an administrative
penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 393.201, Finance Code, is amended by
adding Subsection (c) to read as follows:
(c) A contract with a credit access business, as defined by
Section 393.601, for the performance of services described by
Section 393.602(a) must, in addition to the requirements of
Subsection (b) and Section 393.302:
(1) contain a statement that there is no prepayment
penalty;
(2) contain a statement that a credit access business
must comply with Chapter 392 and the federal Fair Debt Collection
Practices Act (15 U.S.C. Section 1692 et seq.) with respect to an
extension of consumer credit described by Section 393.602(a);
(3) contain a statement that a person may not threaten
or pursue criminal charges against a consumer related to a check or
other debit authorization provided by the consumer as security for
a transaction in the absence of forgery, fraud, theft, or other
criminal conduct;
(4) contain a statement that a credit access business
must comply, to the extent applicable, with 10 U.S.C. Section 987
and any regulations adopted under that law with respect to an
extension of consumer credit described by Section 393.602(a);
(5) disclose to the consumer:
(A) the lender from whom the extension of
consumer credit is obtained;
(B) the interest paid or to be paid to the lender;
and
(C) the specific fees that will be paid to the
credit access business for the business's services; and
(6) the name and address of the Office of Consumer
Credit Commissioner and the telephone number of the office's
consumer helpline.
SECTION 2. Chapter 393, Finance Code, is amended by adding
Subchapter G to read as follows:
SUBCHAPTER G. LICENSING AND REGULATION OF CERTAIN CREDIT SERVICES
ORGANIZATIONS
Sec. 393.601. DEFINITIONS. In this subchapter:
(1) "Commissioner" means the consumer credit
commissioner.
(2) "Credit access business" means a credit services
organization that obtains for a consumer or assists a consumer in
obtaining an extension of consumer credit in the form of a deferred
presentment transaction or a motor vehicle title loan.
(3) "Deferred presentment transaction" has the
meaning assigned by Section 341.001. For purposes of this chapter,
this definition does not preclude repayment in more than one
installment.
(4) "Finance commission" means the Finance Commission
of Texas.
(5) "Motor vehicle title loan" means a loan in which an
unencumbered motor vehicle is given as security for the loan. The
term does not include a retail installment transaction under
Chapter 348 or another loan made to finance the purchase of a motor
vehicle.
(6) "Office" means the Office of Consumer Credit
Commissioner.
Sec. 393.602. APPLICABILITY. (a) This subchapter applies
only to a credit services organization that obtains for a consumer
or assists a consumer in obtaining an extension of consumer credit
in the form of:
(1) a deferred presentment transaction; or
(2) a motor vehicle title loan.
(b) A credit access business may assess fees for its
services as agreed to between the parties. A credit access business
fee may be calculated daily, biweekly, monthly, or on another
periodic basis. A credit access business is permitted to charge
amounts allowed by other laws, as applicable. A fee may not be
charged unless it is disclosed.
(c) A person may not use a device, subterfuge, or pretense
to evade the application of this subchapter. A lawful transaction
governed under another statute, including Title 1, Business &
Commerce Code, does not violate this subsection and may not be
considered a device, subterfuge, or pretense to evade the
application of this subchapter.
Sec. 393.603. LICENSE REQUIRED. A credit services
organization must obtain a license under this subchapter for each
location at which the organization operates as a credit access
business in performing services described by Section 393.602(a).
Sec. 393.604. APPLICATION FOR LICENSE. (a) An application
for a license under this subchapter must:
(1) be under oath;
(2) give the approximate location from which the
business is to be conducted;
(3) identify the business's principal parties in
interest;
(4) contain the name, physical address, and telephone
number of all third-party lender organizations with which the
business contracts to provide services described by Section
393.602(a) or from which the business arranges extensions of
consumer credit described by Section 393.602(a); and
(5) contain other relevant information that the
commissioner requires for the findings required under Section
393.607.
(b) On the filing of one or more license applications, the
applicant shall pay to the commissioner an investigation fee of
$200. Except for good cause as determined by the finance
commission, a separate investigation fee is not required for
multiple license applications.
(c) On the filing of each license application, the applicant
shall pay to the commissioner for the license's year of issuance a
license fee in an amount determined as provided by Section 14.107.
Sec. 393.605. BOND. (a) If the commissioner requires, an
applicant for a license under this subchapter shall file with the
application a bond that is:
(1) in an amount satisfactory to the commissioner that
does not exceed the lesser of:
(A) $10,000 for the first license and $10,000 for
each additional license; or
(B) $2,500,000; and
(2) issued by a surety company qualified to do
business as a surety in this state.
(b) The bond must be in favor of this state for the use of
this state and the use of a person who has a cause of action under
this subchapter against the license holder.
(c) The bond must be conditioned on:
(1) the license holder's faithful performance under
this subchapter and rules adopted under this subchapter; and
(2) the payment of all amounts that become due to this
state or another person under this subchapter during the calendar
year for which the bond is given.
(d) The aggregate liability of a surety to all persons
damaged by the license holder's violation of this subchapter may
not exceed the amount of the bond.
(e) A credit access business that files a bond under this
section is not required to file a bond under Subchapter E.
(f) A credit access business, instead of obtaining a surety
bond, may satisfy the requirements of this section by depositing an
amount described by Subsection (a)(1) in a surety account held in
trust at a federally insured bank or savings association located in
this state. The name of the depository, trustee, and account number
of the surety account must be filed with the office.
Sec. 393.606. INVESTIGATION OF APPLICATION. On the filing
of an application and a bond, if required under Section 393.605, and
on payment of the required fees, the commissioner shall conduct an
investigation to determine whether to issue the license.
Sec. 393.607. APPROVAL OR DENIAL OF APPLICATION. (a) The
commissioner shall approve the application and issue to the
applicant a license to operate as a credit access business for
purposes of engaging in the activity to which this subchapter
applies if the commissioner finds that:
(1) the financial responsibility, experience,
character, and general fitness of the applicant are sufficient to:
(A) command the confidence of the public; and
(B) warrant the belief that the business will be
operated lawfully and fairly, within the purposes of this
subchapter; and
(2) the applicant has net assets of at least $25,000
available for the operation of the business as determined in
accordance with Section 393.611.
(b) If the commissioner does not find the eligibility
requirements of Subsection (a) have been met, the commissioner
shall notify the applicant.
(c) If an applicant requests a hearing on the application
not later than the 30th day after the date of notification under
Subsection (b), the applicant is entitled to a hearing not later
than the 30th day after the date of the request.
(d) The commissioner shall approve or deny the application
not later than the 30th day after the date of the filing of a
completed application with payment of the required fees, or if a
hearing is held, after the date of the completion of the hearing on
the application. The commissioner and the applicant may agree to a
later date in writing.
Sec. 393.608. DISPOSITION OF FEES ON DENIAL OF APPLICATION.
If the commissioner denies the application, the commissioner shall
retain the investigation fee and shall return to the applicant the
license fee submitted with the application.
Sec. 393.609. NAME AND PLACE OF LICENSE. (a) A license
issued under this subchapter must state:
(1) the name of the license holder; and
(2) the address of the office from which the business
is to be conducted, except as provided by Subsection (c).
(b) A license holder may not conduct business under this
subchapter under a name other than the name stated on the license.
(c) A license holder may not conduct business at a location
other than the address stated on the license, except that a license
holder:
(1) is not required to have an office in this state;
and
(2) may operate using e-commerce methods, including
the Internet.
Sec. 393.610. LICENSE DISPLAY. A license holder shall
display a license at the place of business provided on the license.
With respect to business conducted through the Internet, this
requirement may be satisfied by displaying the license on the
business's Internet website.
Sec. 393.611. MINIMUM ASSETS FOR LICENSE. A license holder
shall maintain net assets used or readily available for use in
conducting the business of each of the offices for which a license
is held under this subchapter, in an amount that is not less than
the lesser of:
(1) $25,000 for each office; or
(2) $2,500,000 in the aggregate.
Sec. 393.612. ANNUAL LICENSE FEE. Not later than December
1, a license holder shall pay to the commissioner for each license
held an annual fee for the year beginning the next January 1, in an
amount determined as provided by Section 14.107.
Sec. 393.613. EXPIRATION OF LICENSE ON FAILURE TO PAY
ANNUAL FEE. If the annual fee for a license is not paid before the
16th day after the date on which the written notice of delinquency
of payment has been given to the license holder, the license expires
on the later of:
(1) that day; or
(2) December 31 of the last year for which an annual
fee was paid.
Sec. 393.614. LICENSE SUSPENSION OR REVOCATION. (a) After
notice and a hearing the commissioner may suspend or revoke a
license if the commissioner finds that:
(1) the license holder failed to pay the annual
license fee, an examination fee, an investigation fee, or another
charge imposed by the commissioner under this subchapter;
(2) the license holder, knowingly or without the
exercise of due care, violated this chapter or a rule adopted or
order issued under this chapter; or
(3) a fact or condition exists that, if it had existed
or had been known to exist at the time of the original application
for the license, clearly would have justified the commissioner's
denial of the application.
(b) If in a three-year period the commissioner suspends or
revokes under this section the licenses of five or more credit
access businesses owned or controlled by the same person, including
a corporation that owns multiple businesses, the commissioner may
suspend or revoke the licenses of all credit access businesses
owned or controlled by that person.
Sec. 393.615. LICENSE SUSPENSION OR REVOCATION FILED WITH
PUBLIC RECORDS. The decision of the commissioner on the suspension
or revocation of a license and the evidence considered by the
commissioner in making the decision shall be filed in the public
records of the commissioner.
Sec. 393.616. REINSTATEMENT OF SUSPENDED LICENSE; ISSUANCE
OF NEW LICENSE AFTER REVOCATION. The commissioner may reinstate a
suspended license or issue a new license on application to a person
whose license has been revoked if at the time of the reinstatement
or issuance no fact or condition exists that clearly would have
justified the commissioner's denial of an original application for
the license.
Sec. 393.617. SURRENDER OF LICENSE. A license holder may
surrender a license issued under this subchapter by delivering to
the commissioner:
(1) the license; and
(2) a written notice of the license's surrender.
Sec. 393.618. EFFECT OF LICENSE SUSPENSION, REVOCATION, OR
SURRENDER. (a) The suspension, revocation, or surrender of a
license issued under this subchapter does not affect the obligation
of a contract between the license holder and a consumer entered into
before the revocation, suspension, or surrender.
(b) Surrender of a license does not affect the license
holder's civil or criminal liability for an act committed before
surrender.
Sec. 393.619. MOVING AN OFFICE. (a) A license holder shall
give written notice to the commissioner before the 30th day before
the date the license holder moves an office from the location
provided on the license.
(b) The commissioner shall amend a license holder's license
accordingly.
Sec. 393.620. TRANSFER OR ASSIGNMENT OF LICENSE. A license
may be transferred or assigned only with the approval of the
commissioner.
Sec. 393.621. ADMINISTRATION. The office shall administer
this subchapter.
Sec. 393.622. RULES. (a) The finance commission may:
(1) adopt rules necessary to enforce and administer
this subchapter;
(2) adopt rules with respect to the quarterly
reporting by a credit access business licensed under this
subchapter of summary business information relating to extensions
of consumer credit described by Section 393.602(a); and
(3) adopt rules with respect to periodic examination
by the office relating to extensions of consumer credit described
by Section 393.602(a), including rules related to charges for
defraying the reasonable cost of conducting the examinations.
(b) The finance commission may adopt rules under this
section to allow the commissioner to review, as part of a periodic
examination, any relevant contracts between the credit access
business and the third-party lender organizations with which the
credit access business contracts to provide services described by
Section 393.602(a) or from which the business arranges extensions
of consumer credit described by Section 393.602(a). A contract or
information obtained by the commissioner under this section is
considered proprietary and confidential to the respective parties
to the contract, and is not subject to disclosure under Chapter 552,
Government Code.
(c) Nothing in Section 393.201(c) or Sections
393.601-393.628 grants authority to the finance commission or the
Office of Consumer Credit Commissioner to establish a limit on the
fees charged by a credit access business.
Sec. 393.623. PROVIDING OR ADVERTISING SERVICES WITHOUT
LICENSE PROHIBITED. A credit access business or a representative
of the business may not provide or advertise the services of the
business if the business is not licensed under this subchapter.
Sec. 393.624. RESTRICTIONS ON OFF-SITE ADVERTISING. (a) A
credit access business may not advertise on the premises of a
nursing facility, assisted living facility, group home,
intermediate care facility for persons with mental retardation, or
other similar facility subject to regulation by the Department of
Aging and Disability Services.
(b) The finance commission may adopt rules to implement this
section.
Sec. 393.625. MILITARY BORROWERS. An extension of consumer
credit described by Section 393.602(a) that is obtained by a credit
access business for a member of the United States military or a
dependent of a member of the United States military or that the
business assisted that person in obtaining must comply with 10
U.S.C. Section 987 and any regulations adopted under that law, to
the extent applicable.
Sec. 393.626. DEBT COLLECTION PRACTICES. A violation of
Chapter 392 by a credit access business with respect to an extension
of consumer credit described by Section 393.602(a) constitutes a
violation of this subchapter.
Sec. 393.627. QUARTERLY REPORT TO COMMISSIONER. A credit
access business shall file a quarterly report with the commissioner
on a form prescribed by the commissioner that provides the
following information relating to extensions of consumer credit
described by Section 393.602(a) during the preceding quarter:
(1) the number of consumers for whom the business
obtained or assisted in obtaining those extensions of consumer
credit;
(2) the number of those extensions of consumer credit
obtained by the business or that the business assisted consumers in
obtaining;
(3) the number of refinancing transactions of the
extensions of consumer credit described by Subdivision (2);
(4) the number of consumers refinancing the extensions
of consumer credit described by Subdivision (2);
(5) the number of consumers refinancing more than once
the extensions of consumer credit described by Subdivision (2);
(6) the average amount of the extensions of consumer
credit described by Subdivision (2);
(7) the total amount of fees charged by the business
for the activities described by Subdivision (1);
(8) the number of vehicles surrendered or repossessed
under the terms of an extension of consumer credit in the form of a
motor vehicle title loan obtained by the business or that the
business assisted a consumer in obtaining;
(9) the mean, median, and mode of the number of
extensions of consumer credit obtained by consumers as a result of
entering into the extensions of consumer credit described by
Subdivision (2); and
(10) any related information the commissioner
determines necessary.
Sec. 393.628. TEXAS FINANCIAL EDUCATION ENDOWMENT. (a) As
part of the licensing fee and procedures described under this
subchapter, each credit access business or license holder shall pay
to the commissioner an annual assessment to improve consumer
credit, financial education, and asset-building opportunities in
this state. The annual assessment may not exceed $200 for each
license as specified by the finance commission.
(b) The commissioner shall remit to the comptroller amounts
received under Subsection (a) for deposit in an interest-bearing
deposit account in the Texas Treasury Safekeeping Trust Company.
Money in the account may be spent by the finance commission only for
the purposes provided by this section. Amounts in the account may
be invested and reinvested in the same manner as funds of the
Employees Retirement System of Texas, and the interest from those
investments shall be deposited to the credit of the account.
(c) The Texas Financial Education Endowment shall be
administered by the finance commission to support statewide
financial education and consumer credit building activities and
programs, including:
(1) production and dissemination of approved
financial education materials at licensed locations;
(2) advertising, marketing, and public awareness
campaigns to improve the credit profiles and credit scores of
consumers in this state;
(3) school and youth-based financial literacy and
capability;
(4) credit building and credit repair;
(5) financial coaching and consumer counseling;
(6) bank account enrollment and incentives for
personal savings; and
(7) other consumer financial education and
asset-building initiatives as considered appropriate by the
finance commission.
(d) In implementing this section, the finance commission
may solicit gifts, grants, and donations for this purpose.
(e) The finance commission may partner with other state
agencies and entities to implement this section.
(f
) The finance commission shall adopt rules to administer
this section.
SECTION 3. Section 14.101, Finance Code, is amended to read
as follows:
Sec. 14.101. GENERAL DUTIES OF COMMISSIONER. The
commissioner shall enforce this chapter, Subtitles B and C of Title
4, Chapter 393 with respect to a credit access business, and Chapter
394 in person or through an assistant commissioner, examiner, or
other employee of the office.
SECTION 4. Section 14.107, Finance Code, is amended to read
as follows:
Sec. 14.107. FEES. (a) The finance commission shall
establish reasonable and necessary fees for carrying out the
commissioner's powers and duties under this chapter, Title 4,
Chapter 393 with respect to a credit access business, and Chapters
371, 392, and 394 and under Chapters 51, 302, 601, and 621, Business &
Commerce Code.
(b) The finance commission by rule shall set the fees for
licensing and examination under Chapter 393 with respect to a
credit access business or Chapter 342, 347, 348, 351, or 371 at
amounts or rates necessary to recover the costs of administering
those chapters. The rules may provide that the amount of a fee
charged to a license holder is based on the volume of the license
holder's regulated business and other key factors. The
commissioner may provide for collection of a single annual fee from
a person licensed under Subchapter G of Chapter 393 or Chapter 342,
347, 348, 351, or 371 to include amounts due for both licensing and
examination.
SECTION 5. Section 14.201, Finance Code, is amended to read
as follows:
Sec. 14.201. INVESTIGATION AND ENFORCEMENT AUTHORITY.
Investigative and enforcement authority under this subchapter
applies only to this chapter, Subtitles B and C of Title 4, Chapter
393 with respect to a credit access business, and Chapter 394.
SECTION 6. Section 14.2015(a), Finance Code, is amended to
read as follows:
(a) Except as provided by Subsection (b), information or
material obtained or compiled by the commissioner in relation to an
examination by the commissioner or the commissioner's
representative of a license holder or registrant under Subtitle B
or C, Title 4, Subchapter G of Chapter 393, or Chapter 394 is
confidential and may not be disclosed by the commissioner or an
officer or employee of the Office of Consumer Credit Commissioner,
including:
(1) information obtained from a license holder or
registrant under Subtitle B or C, Title 4, Subchapter G of Chapter
393, or Chapter 394;
(2) work performed by the commissioner or the
commissioner's representative on information obtained from a
license holder or registrant for the purposes of an examination
conducted under Subtitle B or C, Title 4, Chapter 393 with respect
to a credit access business, or Chapter 394;
(3) a report on an examination of a license holder or
registrant conducted under Subtitle B or C, Title 4, Chapter 393
with respect to a credit access business, or Chapter 394; and
(4) any written communications between the license
holder or registrant, as applicable, and the commissioner or the
commissioner's representative relating to or referencing an
examination conducted under Subtitle B or C, Title 4, Chapter 393
with respect to a credit access business, or Chapter 394.
SECTION 7. Section 14.251, Finance Code, is amended by
adding Subsection (a-1) and amending Subsection (b) to read as
follows:
(a-1) The commissioner shall assess an administrative
penalty against a credit access business who knowingly and wilfully
violates or causes a violation of Chapter 393, or a rule adopted
under Chapter 393.
(b) The commissioner may order a person who violates or
causes a violation of this chapter, Chapter 394, or Subtitle B,
Title 4, or a rule adopted under this chapter, Chapter 394, or
Subtitle B, Title 4, or a credit access business who violates or
causes a violation of Chapter 393 or a rule adopted under Chapter
393, to make restitution to an identifiable person injured by the
violation.
SECTION 8. Section 14.261(a), Finance Code, is amended to
read as follows:
(a) In administering this chapter, the commissioner may
accept assurance of voluntary compliance from a person who is
engaging in or has engaged in an act or practice in violation of:
(1) this chapter or a rule adopted under this chapter;
(2) Chapter 393, if the person is a credit access
business, or Chapter 394; or
(3) Subtitle B, Title 4, or a rule adopted under
Subtitle B, Title 4.
SECTION 9. Section 14.262, Finance Code, is amended to read
as follows:
Sec. 14.262. EFFECT OF ASSURANCE. (a) An assurance of
voluntary compliance is not an admission of a violation of:
(1) this chapter or a rule adopted under this chapter;
(2) Chapter 393 with respect to a credit access
business or Chapter 394; or
(3) Subtitle B, Title 4, or a rule adopted under
Subtitle B, Title 4.
(b) Unless an assurance of voluntary compliance is
rescinded by agreement or voided by a court for good cause, a
subsequent failure to comply with the assurance is prima facie
evidence of a violation of:
(1) this chapter or a rule adopted under this chapter;
(2) Chapter 393 with respect to a credit access
business or Chapter 394; or
(3) Subtitle B, Title 4, or a rule adopted under
Subtitle B, Title 4.
SECTION 10. This Act takes effect January 1, 2012.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2594 was passed by the House on May
13, 2011, by the following vote: Yeas 84, Nays 50, 2 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 2594 on May 26, 2011, by the following vote: Yeas 103, Nays 35,
1 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 2594 was passed by the Senate, with
amendments, on May 23, 2011, by the following vote: Yeas 28, Nays
2, 1 present, not voting.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor