El Paso City Council Ok’s City Attorney to Draft Ordinance
El Paso City Council Ok’s City Attorney to Draft Ordinance
Yesterday in El Paso, the City Council unanimously voted to proceed with enacting an ordinance to regulate Payday and Auto Title Loan businesses. The Council asked the City Attorney to draft the ordinance and it could be approved by January. This will be the 4th such ordinance in Texas, if it is ultimately put into effect.
As of today we know of ordinances in Dallas, San Antonio, and Austin. I believe that each of the cities are entangled in legal proceedings brought against them by CAB’s.
Some of the details of the proposed El Paso ordinance are:
• Require lenders to provide borrower’s with financial counseling information.
• Payday loans would not be allowed for more than 20% of the borrower’s monthly income.
• Auto Title Loans would be limited to 3% of the borrower’s annual income.
• Auto Title Loans would also be limited to no more than 70% of the vehicle value.
• Installment loans would be limited to no more than 4 installments, refinances would be limited to 3.
• CAB’s would be asked to register with the City of El Paso.
• Would go into effect in July 2013.
It is curious that the effective date is July 2013. I am thinking that the City of El Paso knows that there will be activity in the Texas Legislature regarding CAB operating rules and city ordinances. Consider the additional compliance burdens on licensed CAB’s with locations in cities with ordinances. Is it reasonable to ask any business to manage compliance to Federal, State, and now City regulations too?
As an industry, we need to dig our heels in on the local ordinances. 2012 has been a good year for CAB’s under the new licensing and we have demonstrated our good faith, desire to operate legally and fairly. Let the State of Texas handle this and keep the cities out of it. The Texas Finance Commission has expressed its position on the ordinances, and they indicated that an improvement on this problem was needed. So, it is my opinion that the version of the El Paso ordinance that was unveiled may not make it to July 2013. Something different might end up being put in place, or perhaps nothing at all after the session.
If you are interested in learning more, I am working with my contacts in El Paso and Austin to gather additional information on how to play a part in the fight against the ordinances. Will know more soon, the session starts next month and the El Paso bill is slated to be formally introduced on December 19th.
Texas Debt Buyer Bill is set to be signed by Governor Abbott
Texas Debt Buyer Bill is set to be signed by Governor Abbott
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.
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Texas Legislative Session as of this week: (7) bills related to Credit Access Businesses
Texas Legislative Session as of this week: (7) bills related to Credit Access Businesses
- HB 60, Introduced by Romero Jr: Requiring a Credit Access Business to verify the vehicle identification number used to obtain a motor vehicle.
- HB 197, Introduced by Bernal: Relating to the contracts and other documents issued by a Credit Access Business (requiring to have English & Spanish). Also, to read the contract in its entirety to consumers who cannot read.
- HB 877, Introduced by Chris Turner: Relating to certain telemarketing calls by a Credit Access Business. Prevents a CAB or an employee of a CAB to make telemarketing calls to consumers who are on the Texas No Call List.
- HB 1134, Introduced by Republican Tom Craddick wishes to add that City Ordinances should not be pre-empted and that Cities should be allowed to regulate State Licensed Business’s, such as Credit Access Business’s. In fact, the language used in Craddick’s proposed bill goes on to state that “this chapter does not preempt a municipal ordinance regulated a CAB or any form of an extension of consumer credit that a CAB is authorized to obtain for a consumer or assist a consumer in obtaining. If a municipal ordinance described by Subsection (a) conflicts with a provision of this chapter regulating a CAB, the more stringent regulation controls to the extent of the conflict”
- First, we must remind you that Tom Craddick proposed similar bills in the last session two years ago, in 2015.
- How this can affect us. Right now, only a couple of cities are enforcing the ordinance or at a minimum sending city employees out to ensure that CAB’s are registered. If this rule were to go into effect, the city would not need to enforce the Ordinance, it will be under a State Law, allowing OCCC examiners to enforce City Ordinance Regulations, which they do not currently do right now.
- SB 560, Introduced by Hannock. This bill is to empower the OCCC to enforce and apply penalties for those CAB’s who charge a surcharge on those paying via debit or credit card. To the best of our knowledge, none of our members are doing this anyways. If you charge someone a fee for paying with their debit or credit card, you are already out of compliance as this a state-wide rule that is currently in existence, one which carries some hefty penalties by the Attorney General’s office. This Bill by Hannock applies a $500.00 fine for each infraction.
- HB 975, Introduced by Giddings, relating to the threat or pursuit of criminal charges against a consumer in association with certain extensions of consumer credit and providing a civil penalty for the Credit Access Business.
- This bill is interesting as it states that a CAB cannot file a criminal charge against a consumer, unless the CAB has “extrinsic evidence sufficient to prove that the consumer committed an offense”. If a CAB or anyone for the matter could determine what sufficient evidence of a crime is, then that would essentially eliminate District Attorneys as they are the officials in the capacity to make that determination of whether a case should be brought against someone or not. This one may not last too long.
- HB 741, Introduced by Bernal: Relating to the affordability of extension of consumer credit. This bill is extremely vague as well. It states that a CSO must verify a consumer’s income, and establish that the income verified to be used demonstrates that a consumer can reasonably repay the loan in cash.
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.
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House Bill 2019
House Bill 2019
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
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