CAB Model

The Era of the Credit Access Business (CAB) in Texas

In 2011, the Texas Legislature finally addressed long-debated concerns about payday lending by enacting two landmark laws: House Bills 2592 and 2594. These bills introduced new regulations and created the official CAB license, bringing greater structure and oversight to an industry previously operating under the broader Credit Services Organization (CSO) model.

A New Framework for Payday Loans and Auto Title Loans

Prior to 2011, payday lending in Texas operated under the more simple CSO model, which relied on third-party lenders and limited state oversight.  All you needed was $100 for the CSO certificate and $100 for a surety bond and you were in business.  The passage of HB 2594 changed this landscape by requiring CSOs engaging in payday and auto title lending to obtain a Credit Access Business license. This regulation, effective January 1, 2012, introduced tighter controls, requiring CABs to register with the Office of Consumer Credit Commissioner (OCCC)—the state agency now governing the payday and auto title loan industry.

Under the new framework, CAB applicants must undergo a comprehensive review process. This includes:

  • Detailed assessments of the business’s operations.
  • Background checks on company principals, including personal and professional histories.
  • Payment of additional fees as part of the licensing process.
  • Submission of quarterly transaction reports to the OCCC, with the first reports due April 2012.

These changes mark a departure from the more flexible and less regulated CSO model, closing long-standing regulatory gaps.

Enhanced Transparency and Consumer Protections

HB 2592 introduced new requirements aimed at promoting transparency and educating consumers. CABs are now required to:

  • Provide clear notices and disclosures to customers in both retail and online settings.
  • Update customer documentation to clarify terms, costs, and the nature of the financial arrangement.
  • Offer and display information about alternative financial resources beyond payday loans, ensuring customers are aware of all available options.

These requirements underscore the state’s intent to create a more consumer-centric industry, ensuring customers are well-informed and treated fairly.

Collaborative Rulemaking for Implementation

In preparation for these sweeping changes, the OCCC convened a series of collaborative stakeholder meetings during the summer of 2011. These meetings included business owners, consumer advocates, and regulatory officials, all working together to shape practical implementation of the new laws. The finalized rules, reflecting input from all parties, were released in October 2011, giving businesses time to prepare for the January 2012 rollout.

The new “CAB” era represented a new chapter for payday and auto title lending in Texas—one defined by increased accountability, transparency, and consumer protections. As the industry evolved under these regulations, both businesses and customers benefited from clearer guidelines and a fairer marketplace.