| (a) Definitions. For the purposes of this subchapter,
the following words and terms, when used in this subchapter, will
have the following meanings, unless the context clearly indicates
otherwise.
(1) Check--A check, draft, share draft, or other instrument
for the payment of money.
(2) Payday loan or deferred presentment transaction--
(A) A transaction in which:
(i) a cash advance in whole or in part is made in exchange
for a personal check or authorization to debit a deposit account;
(ii) the amount of the check or authorized debit equals
the amount of the advance plus a fee; and
(iii) the person making the advance agrees that the
check will not be cashed or deposited or the authorized debit will
not be made until a designated future date.
(B) This type of transaction is often referred to as
a "payday loan," "payday advance," or "deferred deposit loan."
(b) Authorization. A licensee may engage in a payday
loan or deferred presentment transaction under this subchapter and
subject to the provisions of Texas Finance Code, Chapter 342, Subchapter
F. A payday loan or deferred presentment transaction is a loan of
money. The check given in the transaction may serve as security for
the payment of the loan. A person who negotiates, arranges, or acts
as an agent for an authorized lender in a payday loan or deferred
presentment transaction that has an effective annual rate of greater
than 10% is required to be licensed.
(c) Maximum charge. A licensee may charge an amount
that does not exceed the rates authorized in Texas Finance Code, §§342.251
- 342.259. The chart in the following figure provides examples of
the maximum authorized rates for loans made under Texas Finance Code,
Chapter 342, Subchapter F. Texas Finance Code, §342.254 which
prohibits other charges applies to this section.
Attached Graphic
(d) Minimum term. A licensee may engage in a payday
loan or deferred presentment transaction with a term of not less than
7 days.
(e) Procedures.
(1) Check accepted. If a check is accepted, the licensee
must require that the check be made payable to the actual name of
the company printed on the license and must be dated the day the loan
is made.
(2) Written agreement. The transaction must be documented
by a written agreement signed by the borrower and the licensee. The
agreement must contain:
(A) the name of the licensee;
(B) the transaction date;
(C) the amount of the check;
(D) a statement of the total amount charged, expressed
both as a dollar amount and as an annual percentage rate (APR); and
(E) the earliest date on which the check may be deposited.
(3) Required notices. The agreement must also contain
a notice of the name and address of the Office of Consumer Credit
Commissioner and the telephone number of the consumer helpline. Additionally,
the lender must provide a notice to the consumer that reads as follows:
"This cash advance is not intended to meet long-term financial needs.
This loan should only be used to meet immediate short-term cash needs.
Renewing the loan rather than paying the debt in full when due will
require the payment of additional charges."
(4) Prepayment. The borrower must have a right to prepay
the loan and redeem the check at any time prior to the due date. If
the loan is prepaid in full, the lender must refund any unearned finance
charges.
(5) Check presentation to depository institution. A
check may not be held for more than 31 days and then subsequently
presented to the depository institution for payment.
(6) Fee schedule notice required. The licensee must
post a notice of the fee schedule for engaging in a payday or deferred
presentment loan.
(f) Conditions. A lender may accept a check to secure
payment of a payday loan if the lender complies with paragraphs (1)
and (2) of this subsection.
(1) Duplicate and multiple loans. The provisions of
Texas Finance Code, §342.501 and §83.851 of this title (relating
to Duplication of Loans) apply to loans made under the authority of
this section. In accordance with Texas Finance Code, §342.501,
a lender and a borrower may renew a loan, but the loan must be converted
from a single payment balloon loan to a declining balance installment
note. Alternatively, the payday loan or deferred presentment transaction
may be renewed without limitation to the number of renewals where
the effect of the total amount of the interest charge would not exceed
the total amount authorized by Texas Finance Code, §342.252 and §342.259
having due regard for the amount of the cash advance and the time
the cash advance is outstanding. The result is that the acquisition
charge may only be earned once in a month and the installment account
handling charge may continue to be earned on a equivalent daily charge
basis in accordance with the limitations of Texas Finance Code, Chapter
342, Subchapter F. In lieu of a renewal, a lender and a borrower may
agree to extend the maturity date of the existing payday loan or deferred
presentment transaction.
(2) Collection practices. A payday loan constitutes
a credit relationship for all purposes, including collection. If a
borrower defaults, including the return of the check to the licensee
from a financial institution due to insufficient funds, closed account,
or stop payment order, the licensee may pursue all legally available
civil means to collect the debt. Collection practices must be in accordance
with this subchapter and with the Texas Debt Collection Practices
Act, Texas Finance Code, Chapter 392.
(3) Fair lending. A lender must make a good faith effort
to assess the borrower's ability to repay the payday loan or deferred
presentment transaction under the loan terms.
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| Source Note: The provisions of this §83.604 adopted to be effective November 9, 2006, 31 TexReg 8992; amended to be effective November 4, 2010, 35 TexReg 9698; amended to be effective July 10, 2014, 39 TexReg 5142 |
