This bill was authored by Farias, and is “relating to requirements applicable to certain CSO’s and certain extensions of consumer credit. This is about restricting payday and auto title loans.

The bill is quite extensive, a total of 12 pages in all. It first begins by redefining a deferred presentment transaction to also include loans paid back in installments. As well, there is emphasis in the bill regarding the CSO statutes on motor vehicle title loans and their definition. A “motor vehicle title loan” means a loan in which an unemcumbered motor vehicle is given as security for the loan.

Moving on in the bill there are more items that address many existing rules and regulations such as: No prepayment penalty, FDCPA, No criminal charges, Military, Lender info and interest, Itemization of charges, CAB charges, OCCC info. There is nothing really new in the bill from that point until it gets to the matter of Consumer Disclosures will now be required to be available in Spanish as well as English. In Section 6 of the bill, CSO’s are addressed. Section 6 says CSO’s may not arrange or get paid for any kind of loan for a consumer that is not a deferred presentment transaction or a motor vehicle loan. The bill goes further to include additional existing rules and regulations until the Section 393.625 and Military borrowers. It adds additional language stating that CABs may not assist consumers in obtaining loans over 90 days for deferred presentment, and over 180 days if for a motor vehicle title loan.

In Section 14 of the bill there are restrictions and limits, fees, and loans. The bill states that the total amount due on a deferred presentment loan + interest + CSO-CAB fees cannot exceed 20% of the consumer’s gross monthly income. The bill then also states that the total amount due on a motor vehicle title loan principal + interest + CSO-CAB fees cannot exceed 3% of the consumer’s annual gross income, and cannot exceed 70% of the retail value of the vehicle. The monthly gross income rule in this bill would result in a decrease in the average loan amount that many Texas consumers typically receive via CABs. By adding the CAB fee and lender interest to the number that is applied to the gross monthly income, loan amounts in Texas could shrink 20-30%. Next, comes the address of refinances, which would be limited to 3 in the case of single payment loans, and each refinance would have to include at least a 25% paydown towards the principal on the loan so that the loan is paid in full in four or fewer payments. And, there’s a “cooling off period” of sorts, where loans made 7 days or less after a recent payoff, are considered refinances.

Act would go into effect on 9-1-2013.

Click here for a PDF of HB 1886! HB.1886