New Rules for Texas Credit Access Businesses
New Rules for Texas Credit Access Businesses
The 2015 Texas legislative session passed a “Clean Up Bill”, which authorized the OCCC to review, repeal, and replace rules regulating CAB’s. Those new changes were proposed in September for pre- comment and voted for approval by the Texas Finance Commission Board to be published in the Texas Register on October 16, 2015 (last Friday) at the Texas Finance Commission meeting in Austin, Texas.
We have counted approximately 144 new changes to TAC 7, Chapter 83, Subchapter B. This is the first time in 4 years that any new rules for payday loan or auto title loan businesses known as “CABs” have been put into place. It is time to get educated on changes and make the necessary modifications to your documents, processes, and other operating methods.
The changes affect a broad range areas from; Definitions; Licensing Fees, Notice of Delinquency of Annual Assessment, Denial, Suspension, Revocation based on Criminal History, Examinations, Files & Records, Separation Between Third Party Lender and CABs, and Case Hearing Procedures.
CAB Consulting has thoroughly reviewed the changes and put together a compliance plan to ensure CABs, their software providers, and third party lenders are compliant moving forward into 2016. We are told the first round of changes are slated to be made effective in late December of this year or early January 2016.
If you would like to learn more, please contact Michael Brown at 214-293-8676 or Robert Wheeler at 956-639-7162.
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City of Houston Passes Payday Loan Ordinance
City of Houston Passes Payday Loan Ordinance
Yesterday the City of Houston passed a “payday loan ordinance.” The ordinance looks like the other ordinances in Dallas, Austin, San Antonio, and Austin.
The media and Houston City Council Members refer to the ordinance as Payday Loan or Payday Lending, but it also regulates Auto Title Loans, the term “Payday Loan” or “Payday Lending” is being used as an umbrella definition for the industry.
The Ordinance goes into effect on July 1, 2014. CAB Consulting and its clients have always been open to meaningful regulation of our industry. The same story has been told to the City Council by Consumer Advocate groups and the same boilerplate ordinance was passed. The 25% pay-down on principal is a major problem, the limit of 4 installments on multi-payment loans is a problem. Will likely cause an increase in defaults or increase in repossessed cars, something that neither Consumers or CABs want.
See below for the hi-lights on the Ordinance:
-CABs must register with Houston, cost $50.
-Registration Certificate must be displayed in plain sight.
-Certificates will be good for 1 year.
-Records must be kept for all transactions.
-Same basic records that are kept for Federal & OCCC Compliance will be required.
-OCCC Quarterly & Annual Reports must be kept on file.
-Records must be kept on file for 3 years.
-Cash advanced cannot exceed 20% of gross monthly income.
-Auto Title Loans may not exceed the lesser of: 3% of gross annual income, or 70% of the vehicle value.
-No more than (4) installments on multi-payment loans.
-Each refinance must include 25% payment towards the principal.
-No refinances on multi-payment loans.
-Single payment loans may not be refinanced more than 3 times.
-7 day cooling off period.
-Any new loan funded less than 7 days after a payoff is considered a refinance.
-Agreements must be written in customer’s language of preference.
-Every location must at least have agreements in English and Spanish.
-For every customer who cannot read, every agreement and disclosure must be read in its entirety to the customer in their language of preference.
-Forms with Referrals to Credit Counselors will be provided to Customers.
For more information, businesses affected by this Ordinance can contact the City of Houston Director of the Department of Administration and Regulatory Affairs.
Here is a link to the City of Houston “Payday Lending” Ordinance: Houston.Ordinance
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Getting Dynamic in the Payday and Auto Title Loan Industry
Getting Dynamic in the Payday and Auto Title Loan Industry
I know of many Credit Access Businesses in the payday loan and auto title loan industry who are getting “dynamic” with the way they are thinking. It seems like wherever I go it is the buzzword. New ideas are in play, and it is a pivotal time in our industry life cycle.
Legislative and regulatory drama is in the air as a result of the Consumer Financial Protection Bureau (“CFPB”) recently announcing their examination plans. They remain and unknown which causes fear in some, while others are inspired to conceive those new ideas that challenge established norms, tear down paradigms, and force an evolution into a new era.
Consumer need will not wane, it will continue to grow and become more sophisticated. So should your business!
What do you think “Dyanamic” means? Here are two definitions I like:
dy•nam•ic/dīˈnamik/
Adjective: Characterized by constant change, activity, or progress.
Noun: A force that stimulates change or progress within a system or process.
For many who have been in the business awhile, you know that one yellow pages ad is not going to secure your business the way it used to. Online operators who used to buy a lead for $20 and get a loan funded from a phone call and a bank statement know very well that was the “olden days.” Dynamic minds have since went to work and an evolution took place – the changes named above are only two of many.
What questions should you be asking today so that you can put your business on the track to long term success? Here’s a few to get you going… Have you embraced the reality that you need to evolve? Are you thinking about the needs of the customer? Are you looking at ways to improve vertical integration? Do you have a brand? What’s the competition doing? What’s the industry trend? Are you fully engaging the compliance process? Would you feel confident if the OCCC took you through and examination today? Is your software and reporting where it needs to be?
Michael Brown of CAB Consulting and Brokerage can be reached for questions and comments at 214-293-8676, or via email at cabconbrokerage@gmail.com.
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Notices and Disclosures for use in Credit Access Business Operations
Notices and Disclosures for use in Credit Access Business Operations
In addition to the provisional license, last Friday the OCCC worked to get rules for the Notices and Disclosures approved. The rules, referred to as “7 TAC 83.6001-7 TAC 83.6008,” define the many ways in which a Credit Access Business is required to disclose particular information to consumers regarding the potential loan they are about to apply for, or for the actual loan that consumers agree to.
There are procedural requirements that a Credit Access Business address the nature of the transaction and possible alternatives to this service before the customer completes an application. Also, the customer must acknowledge they have received these disclosures.
Considerable time has been invested in the development of several documents the OCCC advises Credit Access Businesses to use that are compliant with the law, and accomplish the goals of House Bill 2592. Focus groups have reviewed the documents, and feedback was provided that shaped the final versions. In the future it is likely that continued feedback from focus groups will shape these “dynamic” documents in a way that makes sense to all Credit Access Business consumers and stakeholders.
According to the OCCC, there is only one other state in the U.S. that has something similar or nearly as comprehensive. The process of collaboration between the OCCC and industry stakeholders appears to have resulted in an exceptional set of detailed disclosures, which should please lawmakers and consumer advocate groups. Fair regulations were passed, and rules were developed to implement the new State of Texas laws. This high level State government achievement in should be made note of at the local level. Knowing that such thorough systems are in place, city governments can now move on to more important topics like job creation and budget balancing.
The documents, which focus on single and multi-payment payday and title loans, are available through the OCCC website. CAB Consulting and Brokerage is also in possession of the documents. We are distributing them to clients, building familiarity with their intent, and drawing clarity from a 15 page two column set of rules.
If you have questions or would like to discuss, please contact CAB Consulting and Brokerage at 214-293-8676, or via email at cabconbrokerage@gmail.com
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