House Bill 996 a “Debt Buyer Bill” is set to be signed by Governor Abbott.  This particular bill limits when a debt buyer can initiate legal action or arbitration to collect consumer debt. It also requires specific notices to be provided to the consumer with respect to out-of-statute debt.  The new provisions are effective Sept. 1, 2019.  Texas Credit Access Businesses definitely work with debt buyers who will need to conform to the new rules.  

Also, it would be a good idea to get some input from our friends at Kilpatrick Townsend & Stockton (https://www.kilpatricktownsend.com/) on whether any of this new bill can be applied to a Credit Access Business who takes ownership of a customer debt after they pay out the third-party lender under the guaranty arrangement.  

What is the definition of a Debt Buyer:

·         A person who purchases or otherwise acquires a consumer debt from a creditor or other subsequent owner of the consumer debt (thinking out loud, is this a CAB??), regardless of whether the person collects the consumer debt, hires a third party to collect the consumer debt, or hires an attorney to pursue collection litigation in connection with the consumer debt.

The term “Debt Buyer” does not include:

·         A person who acquires a charged-off debt incidental to the purchase of a portfolio that predominantly consists of consumer debt that has not been charged off; or

·         A check services company that acquires the right to collect on a paper or electronic negotiable instrument, including an Automated Clearing House (ACH) authorization to debit an account that has not been processed.”

·         The legislation prohibits a debt buyer from bringing suit or initiating arbitration on consumer debt if the applicable statute of limitations statute of limitations on a consumer debt has expired it cannot be revived.

Consumer Notices must be provided:

With the passage of this legislation, Texas joins other jurisdictions in having to provide notices regarding the expiration of the statute of limitations. (the statute of limitations is 6 years from due date)

In Texas, one of the three required disclosures will apply depending on whether the credit reporting period has expired and whether the debt buyer credit reports.

1.      If the credit reporting period has not expired and the debt buyer does credit report this is the notice that must be sent:

“THE LAW LIMITS HOW LONG YOU CAN BE SUED ON A DEBT. BECAUSE OF THE AGE OF YOUR DEBT, WE WILL NOT SUE YOU FOR IT. IF YOU DO NOT PAY THE DEBT, [INSERT NAME OF DEBT BUYER] MAY CONTINUE TO REPORT IT TO CREDIT REPORTING AGENCIES AS UNPAID FOR AS LONG AS THE LAW PERMITS THIS REPORTING. THIS NOTICE IS REQUIRED BY LAW.”

2.      If the credit reporting period has not expired but the debt buyer does not credit report:

“THE LAW LIMITS HOW LONG YOU CAN BE SUED ON A DEBT. BECAUSE OF THE AGE OF YOUR DEBT, WE WILL NOT SUE YOU FOR IT. THIS NOTICE IS REQUIRED BY LAW.”

3.      If the credit reporting period has expired:

“THE LAW LIMITS HOW LONG YOU CAN BE SUED ON A DEBT. BECAUSE OF THE AGE OF YOUR DEBT, WE WILL NOT SUE YOU FOR IT, AND WE WILL NOT REPORT IT TO ANY CREDIT REPORTING AGENCY. THIS NOTICE IS REQUIRED BY LAW.”

The notice must be “in at least 12-point type that is boldfaced, capitalized, or underlined or otherwise conspicuously set out from the surrounding written material.”

It is important that it is mentioned that the content from this blog post was gathered  from the www.Consumerfsblog.com which is a publication of Maurice Wutscher, a financial services law firm.  Our Texas Credit Access Businesses sincerely appreciate the content which was directly cited, summarized, reorganized, and paraphrased in this post.  Here is a link to their blog / website:

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.

This bill was authored by Craddick, and is “relating to a limitation of total charges in connection with certain extensions of consumer credit facilitated by a credit service organization.” The bill states it is amending Texas Finance Code Chapter 393, subchapter D by adding 393.308 which states that the total charges on a arranged by CSO loan cannot exceed those outlined in Texas Finance Code Chapter 342, E & F. There are pending changes to Chapter 342 in SB 823 from Carona it is possible that this bill intends to correspond with that bill. Or, this could be a way to address the methods allegedly employed by operators to adapt to local ordinances. Currently, a maximum of either 24% APR or 80% APR is chargeable on “regulated lender loans” under Chapter 342. Credit Access Businesses (or at least that use of that exact term) are absent from this bill. HB 2019 would go into effect on 9-1-2013.

Click here for a PDF of HB 2019! HB.2019

• Review your company policy regarding acceptable methods of payment for motor vehicle title loans in Texas as a Credit Access Business. With tax season upon us, there will be an increase in the number of folks paying off loans, especially motor vehicle title loans as the income tax refunds start to pour in over the next few weeks.  For that reason, it is a good time to issue this reminder.
• Many seasoned companies choose to only accept certain forms of payment on the pay-off a title loan prior to releasing that title for certain reasons.  For example, what if a paper check is accepted and that check bounces later?  Your business could have released the title to the customer without being paid!
• Accepting debit cards without getting the consumer sign the debit card receipt could be viewed as a swipe transaction versus a signature transaction and it could result in “chargeback.” Days later this would occur which would also mean that your business could have released the title without getting paid.
• Allow several days to pass before relinquishing the title so that you are assured the payment has successfully cleared. (If you accept these payment types).
• There is no right or wrong way of doing this. We cannot hold a consumer’s title for an extended period. (10) Days is what we have seen as the norm for an acceptable amount of time of holding on to the vehicle title.  In some cases, where if a check is used, the title will be released after the check clears. This normally takes 3 to 5 business days. Other cases involving a debit card, the store-front requires the consumer to do a signature transaction where the consumer signs the receipt as they would at a restaurant. Of course,
• Cash is always ideal for Credit Access Businesses in these situations, but not everyone uses it and consumers may not prefer it when amounts are larger.

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.

This bill was authored by Villarreal, and is “relating to authorized charges for certain consumer loans.” The first section of the bill addresses loans under Chapter 342. This is an intricate bill, with many components that are outside of the traditional CSO-CAB environment. Considerable dialogue with operators, lawmakers, advocates and regulators would be required to make first make an apples to apples comparison to the proposed measures in HB 2315 and its alternatives.
The first proposed Section 342.201 would establish a maximum interest charge for certain loans in certain amounts, as dictated by Chapter 341, subsection C.
There would be limits on interest charges at certain tiers and loan amounts, and the specifics are difficult to understand with a close review of Chapter 341, subsection C. More information is needed in order to accurately report on this section.
Villarreal moves on to a recommended amendment of Chapter 342.252 that appears to coincide with SB 823 and micro loans. In this section, acquisition charges and installment account handling charges are outlined, however they appear to be incomplete as critical items have been lined out that site certain rates.

Acquisition charges:
$29 or less, an acquisition charge of ??? (“not more than $1 for each $5” was lined out)
$30 or more, an acquisition charge ??? (“that is not more than the amount equal to 1/10th of the amount of the cash advance” was lined out)
$100 and up, acquisition charge ??? (“not more than $10” was lined out)

Installment account handling charges:
$35 or less, not more than $3 per month
$35 to $70 cash advances, $3.50 per month
$70 to $99, $4 per month installment account handling charge
$100 and up, not more than $4 per month for each $100 of cash advance (aka 4% per month)

The Texas Finance Commission would need to prescribe by rule the maximum amount of an acquisition charge. And, this bill states that an acquisition charge under this subchapter is not to be considered interest.

The final section of the bill offers “Section 342.259(a),” an amendment to Chapter 342. This section provides for an “acquisition charge” (no amount named and “that is not more than $10” is lined out), and an “installment account handling charge” that is not more than the ratio of $4 a month for each $100 of cash advance.” This appears to repeat some of the same criteria as cited earlier in the bill. More correspondence is needed with Representative Villarreal’s office in order to fully grasp this bill.

This bill would go into effect on 9-1-2013.

Click here for a PDF of HB 2315! HB.2315

This bill was authored by Senator Carona, and is “relating to authorized acquisition and delingquency charges for certain consumer loans.” The term “certain consumer loans” is referring to what is commonly referred to as “micro loans.” The loans referenced in this bill are funded under Texas Finance Code Chapter 342, or the “regulated lender license.” The regulated lender loans are different from CAB loans in that they are funded by the licensee, not a third party lender for whom the CAB is a special limited agent. As well, the regulated lender loans have historically been “term loans” that go beyond the 180 constraint of CAB transactions into terms of 12,24,36 months. These term loans are either 24% or 80% depending on whether they are Subchapter E, or Subchapter F. Now, it looks like something new is being addressed in this bill and loan amounts that are less than $30, $30 or more but not over $100, and then “cash advances of more than $100.”

The bill says that the following charges are authorized on the loan types below:

“Acquisition charges:”
$29 or less, an acquisition charge that is not more than $1 for each $5 of advance (aka 20% of loan amount)
$30 or more, an acquisition charge that is not more than the amount equal to 1/10th of the amount of the advance (aka 10% of loan amount)
$100 and up, acquisition charge of not more than 10% of the advance.

Then, there are monthly “Installment account handling charges:”
$35 or less, $3 per month installment account handling charge, flat fee
$35 to $70 cash advances, $3.50 per month installment account handling charge, flat fee
$70 and up, $4 per month installment account handling charge, flat fee
$100 and up, not more than $4 per month for each $100 of cash advance (aka 4% per month)

Default charges are addressed as well:
Loans of $100 or more, instead of additional interest the contract may provide for a delinquency charge after 10 days, on any installment payment within the term of the loan. Cannot exceed “the greater of $20, or 5 cents for each $1 of the late payment.

Later in the bill after most of the items in Chapter 342 are covered, there is another provision where “instead of charges authorized under Chapter 342.252 and 342.201, it addresses loans that could be instead funded under Chapter 341, in the amount of $100-$200. There would be a 10% acquisition charge and a monthly installment account handling charge of no more than $4 per month for each $100 of cash advance. Would go into effect 9-1-2013.

Click here for a PDF of SB 823! SB.823