Adversarial media and consumer advocate groups like Texas Appleseed like to continually throw legislators and regulators under the bus for “turning their backs on Texas consumers” by not regulating payday, installment, and auto title lenders.  So, first of all let me come to their defense by saying I have worked with many of the good folks at the OCCC and they are extremely capable and very experienced.

Also, many of our legislators put a lot of time into this discussion every session.  So far they have felt comfortable enough to leave things they way they are for the last two sessions.  I mean, after all CABs do have a 97% acceptable level of compliance in Texas.  And the complaints per loan % is something like .000153%.  Yes, it is a crazy small percentage that makes one have to ask – so what’s the problem again?  There are probably more people on the payroll of consumer advocate agencies in Texas than there were complaints last year!

Anyone who takes a minute to investigate these cries of injustice by industry opponents would disagree after reading a typical CAB agreement with its accompanying disclosures and promissory note.

In those disclosures and agreements a reader will find language on UDAAP, TILA, Military, FDCPA, FCRA, OCCC rules, and on and one.  Many document packages are 15-18 pages for a $100 loan!  So, again, how are CABs not regulated?

All of that was true up until the latest rule changes were released in September, and put on a path toward being made effective in late December or early January 2016.

What occurred on Friday, October 16, 2015?  For the first time in over (4) years new changes were made to the rules that govern Credit Access Businesses in Texas. The amendments to current regulations include clarifying changes regarding definitions, license applications, and fees. New regulations were created that outline examination authority and record keeping requirements, including a list of documents that CABs are required to maintain and relate to separation of CAB and Third Party Lender. Briefly put, the OCCC now been equipped with broader authority that will give them authority to dig further into businesses.

Here are some comments on the rule change areas from a broad perspective:

CAB Definitions: The OCCC has released changes needed to existing contracts, advertising materials, and software. These change areas will need to be located and adjusted within your documents and processes.

Updating Application, Company Credential, and Contact Information: consistency across all Texas regulatory filings and agencies will be a new area of focus. Licensee credentials and contact data are to be updated and accurate in the OCCC’s “Alecs” portal, the Credit Access Business reporting portal, Texas Comptroller account status, the Secretary of State “SOS Direct” database, and the Credit Services Organization Search database.

Denial, Suspension, Revocation based on Criminal History: There are approximately (31) changes to this section. Certain new risks related to business and personal activities of company ownership must be made clear.

Examinations: There are approximately (14) changes to examinations. Those changes must be adapted to and your company should be run through the new checklist to look for potential issues.

Files & Records: There are approximately (74) new changes in this section. File samples will need reviewing to ensure compliance with new rules. A checklist of items needed for each consumer file to meet the standards of the new rule changes will be needed. Recommended “Best Practices” for CAB ownership and employees will be developed so record keeping changes can be communicated uniformly.

Third Party Lender and CABs: It will be necessary to conduct and review of the Special Limited Agency Agreement between the CAB and the Third Party Lender. Accuracy of document to actual operating history will need to be assessed. Flow of funds and monies collected by each party will need to be scripted and the process will need to be cited in written form with accompanying reports.

License Transfers, Disclosures, and Reporting Requirements: This is slated for February 2016. There is a second phase of rules that will be presented for public comment prior to the next Finance Commission meeting in December 2015. This second phase of rules will cover “License Transfers, Disclosures, and Reporting Requirements.” CAB Consulting, as part of this CAB II engagement will continue to participate in the pre-comment / comment period for these matters on behalf of its clients so that feedback is given and precise knowledge on the second phase of rules is maintained. As this phase progresses, the information will be disseminated to clients and implementation will begin in same fashion as with Phase 1.

If this is not being regulated, then what is??  I would hate to see what the Texas Appleseed people would call “regulation” if this isn’t it!  They will not be satisfied until loans are free and guess who is the only entity out there that will make “free loans” or “loans” that lose money?  The U.S. government.

Thank you for taking a few minutes to hear a little truth about payday!  For additional information or further comment, please reach out to Michael Brown at 214-293-8676 or Michael@CreditAccessBusiness.com.