The 85th Texas Legislative Session starts on Tuesday, January 10, 2017. At this point, (3) bills have been posted ahead of the session. See below for information on the bills as well as a few comments.
Ramon Romero (D): HB 60
Relating to requiring a credit access business to verify the vehicle identification number used to obtain a motor vehicle title loan. Before obtaining a title loan for a consumer, to physically inspect the vehicle used as collateral, photograph the vehicle identification number, and verify that the number matches the number on the title provided by the consumer. Requires the CAB to retain the photograph until the second anniversary of the date the extension of credit is made.
Comments: This really is something that any decent operator will do anyway. Not sure why additional regulation is needed here. CABs have a very long list of regulations they abide by so why is Mr. Romero wanting to add more?
Matt Schaefer (R): HB 153
Relating to the authority of a municipality to regulate occupations. Prohibits a municipality from adopting any ordinance that: (1) establishes additional, more stringent licensing requirements for an occupation that requires an occupational license issued by a state licensing authority, or (2) requires a person to obtain an occupational license issued by the municipality. Provides that any ordinance violating this prohibition is void.
Comments: Anything that will void the city ordinances related to payday, installment, and auto title loans makes sense. The city ordinances have caused over 1,500 businesses to close and have caused thousands of people to lose their jobs who worked at those stores. With the increased cost of doing business that resulted from trying to survive the ordinances, CAB owners had no choice but to increase rates and that has hurt consumers – it was that or go out of business.
Diego Bernal (D): HB 197
Relating to contracts and other documents issued by credit access businesses. Requires the contract and other documents provided by a CAB to be: (1) provided before signing written in both English and Spanish, (2) written in plain language, and (3) printed in an easily readable font and type size. Requires the Finance Commission to adopt rules implementing this provision. Requires the CAB disclosure and notice to be available in both English and Spanish at each CAB business location.
Comments: CAB consumer loan document packages are typically 25 pages – if you have to create document package in both languages that will be 50+ pages of documents, tons of ink, paper, and toner. That will mean an increase in costs and slower processing times which will be a major concern for business owners and an inconvenience for the customer, and likely even higher rates. Who decides what “plain” language is? Will all the current document packages have to be re-written? What is “reasonable” font size? I know 12 point font is required in the TILA disclosures but due to all the regulations and other disclosures that are required to be provided, CABs (and other entities like banks) need to shrink font as small as possible so the documents aren’t too long. (remember 25 pages+ to start). If you go 12 point font on a document that is mostly 8 point font it is going to cause the document to double in size. 50 pages in English, 50 pages in Spanish! And, the CAB has to make copies of the signed loan documents for their files so that becomes 200 pages! All that for a $300 loan? If this one passes we should all get into the paper, ink, and toner business!
This blog post was written by Michael Brown, President of CAB Consulting and the Texas Organization of Financial Service Centers. He can be reached at 214-293-8676, or Michael@CreditAccessBusiness.com.