Texas

FINANCE CODE

TITLE 4. REGULATION OF INTEREST, LOANS, AND FINANCED TRANSACTIONS

SUBTITLE B. LOANS AND FINANCED TRANSACTIONS

CHAPTER 342. CONSUMER LOANS

SUBCHAPTER A. GENERAL PROVISIONS; APPLICABILITY OF CHAPTER

Sec. 342.001. DEFINITIONS.

In this chapter:

(1) “Irregular transaction” means a loan:

(A) that is payable in installments that are not consecutive, monthly, and substantially equal in amount; or

(B) the first scheduled installment of which is due later than one month and 15 days after the date of the loan.

(2) “Regular transaction” means a loan:

(A) that is payable in installments that are consecutive, monthly, and substantially equal in amount; and

(B) the first scheduled installment of which is due within one month and 15 days after the date of the loan.

(3) “Regulated loan license” means a consumer loan license.

(4) “Secondary mortgage loan” means a loan that is:

(A) secured in whole or in part by an interest, including a lien or security interest, in real property that is:

(i) improved by a dwelling designed for occupancy by four or fewer families; and

(ii) subject to one or more liens, security interests, prior mortgages, or deeds of trust; and

(B) not to be repaid before the 91st day after the date of the loan.

Sec. 342.002. INTEREST COMPUTATION METHODS.

(a) The scheduled installment earnings method is a method to compute an interest charge by applying a daily rate to the unpaid balance of the principal amount as if each payment will be made on its scheduled installment date. A payment received before or after the due date does not affect the amount of the scheduled principal reduction.

(b) The true daily earnings method is a method to compute an interest charge by applying a daily rate to the unpaid balance of the principal amount. The earned finance charge is computed by multiplying the daily rate by the number of days the principal balance is outstanding.

(d) Interest under the scheduled installment earnings method or true daily earnings method may not be compounded.

Sec. 342.003. PURCHASE FROM MORTGAGEE.

For the purposes of this chapter, a purchase from a mortgagee of an interest in a secondary mortgage loan that was made to secure that loan is treated as if it were a secondary mortgage loan.

Sec. 342.004. CONSTITUTIONAL INTEREST; EXEMPTION FOR LOAN WITH INTEREST RATE OF 10 PERCENT OR LESS.

(a) Except as otherwise fixed by law, the maximum rate of interest is 10 percent a year.

(b) A loan providing for a rate of interest that is 10 percent a year or less is not subject to this chapter.

(c) A loan described by Section 302.001(d) may provide for a delinquency charge as provided by that section without being subject to this chapter or any other provision of this subtitle.

Sec. 342.005. APPLICABILITY OF CHAPTER.

Except as provided by Sections 302.001(d) and 342.004(c), a loan is subject to this chapter if the loan:

(1) provides for interest in excess of 10 percent a year;

(2) is extended primarily for personal, family, or household use to a person who is located in this state at the time the loan is made;

(3) is made by a person engaged in the business of making, arranging, or negotiating those types of loans; and

(4) either:

(A) is not secured by a lien on real property; or

(B) is described by Section 342.001(4), 342.301, or 342.456 and is predominantly payable in monthly installments.

Sec. 342.006. EXEMPTION FOR CERTAIN SECONDARY MORTGAGE LOANS.

This chapter does not apply to a secondary mortgage loan made by a seller of property to secure all or part of the unpaid purchase price.

Sec. 342.007. DEFERRED PRESENTMENT TRANSACTION.

The finance commission shall adopt rules providing for the regulation of deferred presentment transactions.

Sec. 342.008. ATTEMPT TO EVADE LAW.

A person who is a party to a deferred presentment transaction may not evade the application of this subtitle or a rule adopted under this subchapter by use of any device, subterfuge, or pretense. Characterization of a required fee as a purchase of a good or service in connection with a deferred presentment transaction is a device, subterfuge, or pretense for the purposes of this section.

Sec. 342.009. RETURN OF PROPERTY IN SALE-LEASEBACK TRANSACTION.

The seller in a sale-leaseback agreement may terminate the agreement at any time by returning the property to the buyer in substantially the same condition as when the agreement was entered, less reasonable wear. On return of the property the seller is liable only for rental and other allowed charges under the agreement accruing before the date of the return.

SUBCHAPTER B. AUTHORIZED ACTIVITIES; LICENSE

Sec. 342.051. LICENSE REQUIRED.

(a) A person must hold a license issued under this chapter to:

(1) engage in the business of making, transacting, or negotiating loans subject to this chapter; or

(2) contract for, charge, or receive, directly or indirectly, in connection with a loan subject to this chapter, a charge, including interest, compensation, consideration, or another expense, authorized under this chapter that in the aggregate exceeds the charges authorized under other law.

(b) A person may not use any device, subterfuge, or pretense to evade the application of this section.

(1) a bank, savings bank, or savings and loan association organized under the laws of the United States or under the laws of the institution’s state of domicile; or

(2) subject to Chapter 651, Insurance Code.

(c-1) A person who is licensed or registered under Chapter 156 or 157 is not required to obtain a license under this section to make, negotiate, or transact a residential mortgage loan, as defined by Section 180.002.

(d) An insurance agent licensed under Subchapter B, C, D, or E, Chapter 4051, Insurance Code, is not required to obtain a license to negotiate or arrange a loan on behalf of a bank, savings bank, or savings and loan association provided that the insurance agent or the bank, savings bank, or savings and loan association does not make the provision of insurance a condition to apply for or obtain a loan or service from the bank, savings bank, or savings and loan association.

(e) An electronic return originator who is an authorized Internal Revenue Service e-file provider is not required to obtain a license to make, negotiate, or transact a loan that is based on a person’s federal income tax refund on behalf of a bank, savings bank, savings and loan association, or credit union.

(f) Repealed by Acts 2011, 82nd Leg., R.S., Ch. 655, Sec. 65(a)(15), eff. September 1, 2011.

Sec. 342.0515. RESIDENTIAL MORTGAGE LOAN ORIGINATOR ACTIVITIES.

(a) In this section, “Nationwide Mortgage Licensing System and Registry” and “residential mortgage loan originator” have the meanings assigned by Section 180.002.

(b) Unless exempt under Section 180.003, or acting under the temporary authority described under Section 180.0511, an individual who acts as a residential mortgage loan originator in the making, transacting, or negotiating of a loan subject to this chapter must:

(1) be individually licensed to engage in that activity under this chapter;

(2) be enrolled with the Nationwide Mortgage Licensing System and Registry as required by Section 180.052; and

(3) comply with other applicable requirements of Chapter 180 and rules adopted under that chapter.

(c) Subject to Section 14.112, the finance commission shall adopt rules establishing procedures for issuing, renewing, and enforcing an individual license under this section. In adopting rules under this subsection, the finance commission shall ensure that:

(1) the minimum eligibility requirements for issuance of an individual license are the same as the requirements of Section 180.055;

(2) the minimum eligibility requirements for renewal of an individual license are the same as the requirements of Section 180.059; and

(3) the applicant pays:

(A) an investigation fee in a reasonable amount determined by the commissioner; and

(B) a license fee in an amount determined as provided by Section 14.107.

(d) The finance commission may adopt rules under this chapter as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (Pub. L. No. 110-289).

Sec. 342.052. ISSUANCE OF MORE THAN ONE LICENSE FOR A PERSON.

(a) The commissioner may issue more than one license to a person on compliance with this chapter for each license.

(b) A person who is required to hold a license under this chapter must hold a separate license for each office at which loans are made, negotiated, serviced, held, or collected under this chapter.

(1) devoted to accounting or other recordkeeping; and

(2) at which loans are not made, negotiated, serviced, held, or collected under this chapter or Chapter 346.

Sec. 342.053. AREA OF BUSINESS; LOANS BY MAIL OR ONLINE.

(a) A lender is not limited to making loans to residents of the community in which the office for which the license or other authority is granted.

(b) A lender may make, negotiate, arrange, and collect loans by mail or online from a licensed office.

SUBCHAPTER C. APPLICATION FOR AND ISSUANCE OF LICENSE

Sec. 342.101. APPLICATION REQUIREMENTS.

(a) The application for a license under this chapter must:

(1) be under oath;

(2) give the approximate location from which business is to be conducted;

(3) identify the business’s principal parties in interest; and

(4) contain other relevant information that the commissioner requires for the findings required under Section 342.104.

(b) On the filing of one or more license applications, the applicant shall pay to the commissioner an investigation fee of $200.

(c) On the filing of each license application, the applicant shall pay to the commissioner a license fee in an amount determined as provided by Section 14.107.

Sec. 342.102. BOND.

(a) If the commissioner requires, an applicant for a license under this chapter shall file with the application a bond that is:

(1) in an amount not to exceed the total of:

(A) $50,000 for the first license; and

(B) $10,000 for each additional license;

(2) satisfactory to the commissioner; and

(3) issued by a surety company qualified to do business as a surety in this state.

(b) The bond must be in favor of this state for the use of this state and the use of a person who has a cause of action under this chapter against the license holder.

(1) the license holder’s faithful performance under this chapter and rules adopted under this chapter; and

(2) the payment of all amounts that become due to the state or another person under this chapter during the period for which the bond is given.

(d) The aggregate liability of a surety to all persons damaged by the license holder’s violation of this chapter may not exceed the amount of the bond.

Sec. 342.103. INVESTIGATION OF APPLICATION.

On the filing of an application and, if required, a bond, and on payment of the required fees, the commissioner shall conduct an investigation to determine whether to issue the license.

Sec. 342.104. APPROVAL OR DENIAL OF APPLICATION.

(a) The commissioner shall approve the application and issue to the applicant a license to make loans under this chapter if the commissioner finds that:

(1) the financial responsibility, experience, character, and general fitness of the applicant are sufficient to:

(A) command the confidence of the public; and

(B) warrant the belief that the business will be operated lawfully and fairly, within the purposes of this chapter; and

(2) the applicant has net assets of at least $25,000 available for the operation of the business.

(b) If the commissioner does not find the eligibility requirements of Subsection (a), the commissioner shall notify the applicant.

(c) If an applicant requests a hearing on the application not later than the 30th day after the date of notification under Subsection (b), the applicant is entitled to a hearing not later than the 60th day after the date of the request.

(d) The commissioner shall approve or deny the application not later than the 60th day after the date of the filing of a completed application with payment of the required fees, or if a hearing is held, after the date of the completion of the hearing on the application. The commissioner and the applicant may agree to a later date in writing.

Sec. 342.105. DISPOSITION OF FEES ON DENIAL OF APPLICATION.

If the commissioner denies the application, the commissioner shall retain the investigation fee and shall return to the applicant the license fee submitted with the application.

Sec. 342.106. LICENSE TERM.

A license issued under this chapter is valid for the period prescribed by finance commission rule adopted under Section 14.112.

SUBCHAPTER D. LICENSE

Sec. 342.151. NAME AND PLACE ON LICENSE.

(a) A license must state:

(1) the name of the license holder; and

(2) the address of the office from which the business is to be conducted.

(b) A license holder may not conduct business under this chapter under a name or at a place of business in this state other than the name or office stated on the license.

Sec. 342.152. LICENSE DISPLAY.

A license holder shall display a license at the place of business provided on the license.

Sec. 342.153. MINIMUM ASSETS FOR LICENSE.

(a) Except as provided by Subsection (b) or (c), a license holder shall maintain for each office for which a license is held net assets of at least $25,000 that are used or readily available for use in conducting the business of that office.

(b) A license holder who held a license under the Texas Regulatory Loan Act and was issued a license to make loans under that chapter as provided by Section 4, Chapter 274, Acts of the 60th Legislature, Regular Session, 1967, shall maintain for the office for which that license is held net assets of at least $15,000 that are used or readily available for use in conducting the business of that office.

(c) A license holder who paid the pawnbroker’s occupational tax for 1967 and was issued a license to make loans under that chapter as provided by Section 4, Chapter 274, Acts of the 60th Legislature, Regular Session, 1967, is exempt from the minimum assets requirement of Subsection (a) for the office for which that license is held.

(d) If a license holder holds a license to which Subsection (b) or (c) applies and subsequently transfers the license to another person, the minimum assets required under Subsection (a) shall apply to the license and the subsequent license holder.

Sec. 342.154. LICENSE FEE.

Not later than 30 days before the date the license expires, a license holder shall pay to the commissioner for each license held a fee in an amount determined as provided by Section 14.107.

Sec. 342.155. EXPIRATION OF LICENSE ON FAILURE TO PAY FEE.

If the fee for a license is not paid before the 16th day after the date on which the written notice of delinquency of payment has been given to the license holder, the license expires on that day.

Sec. 342.1555. GROUNDS FOR REFUSING RENEWAL.

The commissioner may refuse to renew the license of a person who fails to comply with an order issued by the commissioner to enforce this chapter.

Sec. 342.156. LICENSE SUSPENSION OR REVOCATION.

After notice and opportunity for a hearing, the commissioner may suspend or revoke a license if the commissioner finds that:

(1) the license holder failed to pay the license fee, an examination fee, an investigation fee, or another charge imposed by the commissioner under this chapter;

(2) the license holder, knowingly or without the exercise of due care, violated this chapter or a rule adopted or order issued under this chapter;

(3) a fact or condition exists that, if it had existed or had been known to exist at the time of the original application for the license, clearly would have justified the commissioner’s denial of the application; or

(4) the license holder has failed to ensure that an individual acting as a residential mortgage loan originator, as defined by Section 180.002, in the making, transacting, or negotiating of a loan subject to this chapter is licensed under this chapter in accordance with Section 342.0515.

Sec. 342.157. CORPORATE CHARTER FORFEITURE.

(a) A license holder who violates this chapter is subject to revocation of the holder’s license and, if the license holder is a corporation, forfeiture of its charter.

(b) When the attorney general is notified of a violation of this chapter and revocation of a license, the attorney general shall file suit in a district court in Travis County, if the license holder is a corporation, for forfeiture of the license holder’s charter.

Sec. 342.158. LICENSE SUSPENSION OR REVOCATION FILED WITH PUBLIC RECORDS.

The decision of the commissioner on the suspension or revocation of a license and the evidence considered by the commissioner in making the decision shall be filed in the public records of the commissioner.

Sec. 342.159. REINSTATEMENT OF SUSPENDED LICENSE; ISSUANCE OF NEW LICENSE AFTER REVOCATION.

The commissioner may reinstate a suspended license or issue a new license on application to a person whose license has been revoked if at the time of the reinstatement or issuance no fact or condition exists that clearly would have justified the commissioner’s denial of an original application for the license.

Sec. 342.160. SURRENDER OF LICENSE.

A license holder may surrender a license issued under this chapter by delivering to the commissioner:

(1) the license; and

(2) a written notice of the license’s surrender.

Sec. 342.161. EFFECT OF LICENSE SUSPENSION, REVOCATION, OR SURRENDER.

(a) The suspension, revocation, or surrender of a license issued under this chapter does not affect the obligation of a contract between the license holder and a debtor entered into before the revocation, suspension, or surrender.

(b) Surrender of a license does not affect the license holder’s civil or criminal liability for an act committed before surrender.

Sec. 342.162. MOVING AN OFFICE.

(a) A license holder shall give written notice to the commissioner before the 30th day preceding the date the license holder moves an office from the location provided on the license.

(b) The commissioner shall amend a license holder’s license accordingly.

Sec. 342.163. TRANSFER OR ASSIGNMENT OF LICENSE.

A license may be transferred or assigned only with the approval of the commissioner.

SUBCHAPTER E. INTEREST CHARGES ON NON-REAL PROPERTY LOANS

Sec. 342.201. MAXIMUM INTEREST CHARGE AND ADMINISTRATIVE FEE.

(a) A loan contract under this chapter that is a regular transaction and is not secured by real property may provide for an interest charge on the cash advance that does not exceed the amount of add-on interest equal to the amount computed for the full term of the contract at an add-on interest amount equal to:

(1) $18 for each $100 per year on the part of the cash advance that is less than or equal to the amount computed under Subchapter C, Chapter 341, using the reference base amount of $300; and

(2) $8 for each $100 per year on the part of the cash advance that is more than the amount computed for Subdivision (1) but less than or equal to an amount computed under Subchapter C, Chapter 341, using the reference base amount of $2,500.

(b) For the purpose of Subsection (a):

(1) when the loan is made an interest charge may be computed for the full term of the loan contract;

(2) if the period before the first installment due date includes a part of a month that is longer than 15 days, that portion of a month may be considered a full month; and

(3) if a loan contract provides for precomputed interest, the amount of the loan is the total of:

(A) the cash advance; and

(B) the amount of precomputed interest.

(c) A loan contract under this chapter that is an irregular transaction and is not secured by real property may provide for an interest charge, using any method or formula, that does not exceed the amount that, having due regard for the schedule of installment payments, would produce the same effective return as allowed under this section if the loan were payable in equal successive monthly installments beginning one month from the date of the contract.

(d) A loan contract under this chapter that is not secured by real property may provide for a rate or amount of interest computed using the true daily earnings method or the scheduled installment earnings method that does not exceed the alternative interest rate as computed under Subchapter A, Chapter 303. Interest may accrue on the principal balance and amounts added to principal after the date of the loan contract from time to time unpaid at the rate provided for by the contract until the date of payment in full or demand for payment in full.

(e) A loan contract under this chapter that is not secured by real property may provide for a rate or amount of interest computed using the true daily earnings method or the scheduled installment earnings method that does not exceed:

(1) 30 percent a year on that part of the cash advance that is less than or equal to the amount computed under Subchapter C, Chapter 341, using the reference base amount of $500;

(2) 24 percent a year on that part of the cash advance that is more than the amount computed for Subdivision (1) but less than or equal to an amount computed under Subchapter C, Chapter 341, using the reference base amount of $1,050; and

(3) 18 percent a year on that part of the cash advance that is more than the amount computed for Subdivision (2) but less than or equal to an amount computed under Subchapter C, Chapter 341, using the reference base amount of $2,500.

(e-1) The interest charge under Subsection (e) must be contracted for, charged, or received using the scheduled installment earnings method or the true daily earnings method under one of the following methods:

(1) applying the applicable daily rate to each part of the unpaid principal balance corresponding to the brackets described by Subsection (e) for the actual or scheduled number of days during a payment period; or

(2) applying a single equivalent daily rate to the unpaid principal balance for the actual or scheduled number of days during a payment period, where the single equivalent daily rate is determined at the inception of the loan using the scheduled installment earnings method and would earn an amount of interest authorized under Subsection (e) if the debt were paid to maturity according to the schedule of payments.

(f) A loan contract under this subchapter may provide for an administrative fee in an amount not to exceed $25 for a loan of more than $1,000 or $20 for a loan of $1,000 or less. The administrative fee is considered earned when the loan is made or refinanced and is not subject to refund. An administrative fee is not interest. A lender refinancing the loan may not contract for or receive an administrative fee for the loan more than once in any 180-day period, except that if the loan has an interest charge authorized by Subsection (e) the lender may not contract for or receive the administrative fee more than once in any 365-day period. One dollar of each administrative fee may be deposited with the comptroller for use in carrying out the finance commission’s responsibilities under Section 11.3055.

(g) The finance commission by rule may prescribe a reasonable maximum amount of an administrative fee for a loan contract under this subchapter that is greater than the maximum amount authorized by this section for the amount of the loan.

Sec. 342.202. MAXIMUM CHARGE FOR LOAN WITH SINGLE REPAYMENT.

A loan contract that exceeds the maximum cash advance under Section 342.251 and that is payable in a single installment may provide for an interest charge on the cash advance that does not exceed a rate or amount that would produce the same effective return, determined as a true daily earnings rate, as allowed under Section 342.201 considering the amount and term of the loan. If a loan under this section is prepaid in full, the lender may earn a minimum interest charge of $25.

Sec. 342.203. ADDITIONAL INTEREST FOR DEFAULT: REGULAR TRANSACTION.

(a) A loan contract that includes precomputed interest or uses the scheduled installment earnings method and that is a regular transaction may provide for additional interest for default if any part of an installment remains unpaid after the 10th day after the date on which the installment is due, including Sundays and holidays.

(b) A loan contract that uses the scheduled installment earnings method and that is a regular transaction may provide for additional interest for default if any part of an installment remains unpaid after the 10th day after the date on which the installment is due, including Sundays and holidays.

(c) A loan contract that includes simple interest and that is a regular transaction may provide for additional interest for default if any part of an installment remains unpaid after the 10th day after the date on which the installment is due, including Sundays and holidays.

(d) The additional interest may not exceed five cents for each $1 of a scheduled installment.

(e) Interest under this section may not be collected more than once on the same installment.

Sec. 342.204. ADDITIONAL INTEREST FOR INSTALLMENT DEFERMENT: REGULAR TRANSACTION.

(a) On a loan contract that includes precomputed interest or uses the scheduled installment earnings method and that is a regular transaction, an authorized lender may charge additional interest for the deferment of an installment if:

(1) the entire amount of the installment is unpaid;

(2) no interest for default has been collected on the installment; and

(3) payment of the installment is deferred for one or more full months and the maturity of the contract is extended for a corresponding period.

(b) The interest for deferment under Subsection (a) may not exceed the amount computed by:

(1) taking the difference between the refund that would be required for prepayment in full as of the date of deferment and the refund that would be required for prepayment in full one month before the date of deferment; and

(2) multiplying the results under Subdivision (1) by the number of months in the deferment period.

(c) The amount of interest applicable to each deferred balance or installment period occurring after a deferment period remains the amount applicable to that balance or period under the original loan contract.

(d) If a loan is prepaid in full during the deferment period, the borrower shall receive, in addition to the refund required under Subchapter H, a pro rata refund of that part of the interest for deferment applicable to the number of full months remaining in the deferment period on the payment date.

(e) For the purposes of this section, a deferment period is the period during which a payment is not required or made because of the deferment and begins on the day after the due date of the scheduled installment that precedes the first installment being deferred.

Sec. 342.205. COLLECTION OF DEFAULT OR DEFERMENT INTEREST.

Interest for default under Section 342.203 or for installment deferment under Section 342.204 may be collected when it accrues or at any time after it accrues.

Sec. 342.206. ADDITIONAL INTEREST FOR DEFAULT: IRREGULAR TRANSACTION.

(a) A loan contract that includes precomputed interest and that is an irregular transaction may provide for additional interest for default using the true daily earnings method for the period from the maturity date of an installment until the date the installment is paid. The rate of the additional interest may not exceed the maximum contract interest rate.

(b) A loan contract that includes simple interest and that is an irregular transaction may provide for additional interest for default if any part of an installment remains unpaid after the 10th day after the date on which the installment is due, including Sundays and holidays. The additional interest may not exceed five cents for each $1 of a scheduled installment. Interest under this subsection may not be collected more than once on the same installment.

SUBCHAPTER F. ALTERNATE CHARGES FOR CERTAIN LOANS

Sec. 342.251. MAXIMUM CASH ADVANCE.

The maximum cash advance of a loan made under this subchapter is an amount computed under Subchapter C, Chapter 341, using the reference base amount of $100, except that for loans that are subject to Section 342.259 the reference base amount is $200.

Sec. 342.252. ALTERNATE CHARGES.

(a) Instead of the charges authorized by Section 342.201, a loan contract may provide for:

(1) on a cash advance of less than $30, an acquisition charge that is not more than $1 for each $5 of the cash advance;

(2) on a cash advance equal to or more than $30 but not more than $100:

(A) an acquisition charge that is not more than the amount equal to one-tenth of the amount of the cash advance; and

(B) an installment account handling charge that is not more than:

(i) $3 a month if the cash advance is not more than $35;

(ii) $3.50 a month if the cash advance is more than $35 but not more than $70; or

(iii) $4 a month if the cash advance is more than $70; or

(3) on a cash advance of more than $100:

(A) an acquisition charge that is not more than $10; and

(B) an installment account handling charge that is not more than the ratio of $4 a month for each $100 of cash advance.

(b) For an acquisition charge authorized by this subchapter, the finance commission by rule may prescribe a reasonable maximum amount for an acquisition charge that is greater than the maximum amount authorized by the applicable section of this subchapter for the amount of the cash advance.

Sec. 342.253. MAXIMUM INTEREST CHARGE FOR LOAN WITH SINGLE REPAYMENT.

A loan contract to which Section 342.251 applies and that is payable in a single installment may provide for an acquisition charge and an interest charge on the cash advance that does not exceed a rate or amount that would produce the same effective return, determined as a true daily earnings rate, as allowed under Section 342.252 considering the amount and term of the loan. If a loan that has a term in excess of one month under this section is prepaid in full, the lender may earn a minimum of the acquisition charge and interest charge for one month. If a loan under this section has an initial term of less than one month, the lender may earn a minimum of the acquisition charge and an interest charge that produces the same effective return as the installment account handling charge computed at a daily rate for the term the loan is outstanding.

Sec. 342.254. NO OTHER CHARGES AUTHORIZED.

(a) On a loan made under this subchapter a lender may not contract for, charge, or receive an amount unless this subchapter authorizes the amount to be charged.

(b) An insurance charge is not authorized on a loan made under this subchapter.

Sec. 342.255. MAXIMUM LOAN TERM.

The maximum scheduled term of a loan made under this subchapter is:

(1) for a loan of $100 or less, the lesser of:

(A) one month for each multiple of $10 of cash advance; or

(B) six months; and

(2) for a loan of more than $100, one month for each multiple of $20 of cash advance.

Sec. 342.256. REFUND.

(a) An acquisition charge authorized under Section 342.252(1), (2), or (3) is considered to be earned at the time a loan is made and is not subject to refund.

(b) On the prepayment of a loan with a cash advance of $30 or more, the installment account handling charge authorized under Section 342.252(2) or (3) is subject to refund in accordance with Subchapter H.

Sec. 342.257. DEFAULT CHARGE; DEFERMENT OF PAYMENT.

The provisions of Subchapter E relating to additional interest for default and additional interest for the deferment of installments apply to a loan made under this subchapter. Provided, that on a loan contract in which the cash advance is $100 or more, instead of additional interest for default under Subchapter E, the contract may provide for a delinquency charge if any part of an installment remains unpaid after the 10th day after the date on which the installment is due, including Sundays and holidays. The delinquency charge on a loan with a cash advance of $100 or more may not exceed the greater of $10 or five cents for each $1 of the delinquent installment.

Sec. 342.258. SCHEDULES FOR WEEKLY, BIWEEKLY, OR SEMIMONTHLY INSTALLMENTS.

The commissioner may prepare schedules that may be used by an authorized lender for the repayment of a loan made under this subchapter by weekly, biweekly, or semimonthly installments.

Sec. 342.259. LOANS WITH LARGER ADVANCES.

(a) Instead of the charges authorized by Sections 342.201 and 342.252, a loan made under this subchapter with a maximum cash advance computed under Subchapter C, Chapter 341, using a reference base amount that is more than $100 but not more than $200, may provide for:

(1) an acquisition charge that is not more than $10; and

(2) an installment account handling charge that is not more than the ratio of $4 a month for each $100 of cash advance.

(b) An acquisition charge under this section is considered to be earned at the time a loan is made and is not subject to refund. On the prepayment of a loan that is subject to this section, the installment account handling charge is subject to refund in accordance with Subchapter H.

(c) Except as provided by this section, provisions of this chapter applicable to a loan that is subject to Section 342.252 also apply to a loan that is subject to this section.

Sec. 342.260. ALTERNATE INTEREST CHARGE COMPUTATION METHODS.

(a) A loan contract under this subchapter may provide for an interest charge computed using the true daily earnings method or the scheduled installment earnings method that does not exceed the equivalent rate or effective return of the installment account handling charge for the original scheduled term of the loan.

(b) The principal balance of a loan contract authorized by this section may not include the acquisition charge, installment account handling charge, default charges, or deferment charges or the return check fees authorized by Section 3.506, Business & Commerce Code.

(c) Interest may accrue on the principal balance from time to time unpaid at the rate provided for by the contract until the date of payment in full or demand for payment in full.

(d) A payment on a loan contract authorized by this section shall be applied to the borrower’s account in the following order or, at the lender’s option, under another method of applying a payment that is more favorable to the borrower:

(1) the straight line allocation of the acquisition charge using the original scheduled term of the loan based on the proportional scheduled payment that was paid or scheduled to be paid;

(2) default charges authorized by Section 342.257;

(3) return check fees authorized by Section 3.506, Business & Commerce Code;

(4) any other charges authorized by this subchapter;

(5) accrued interest authorized by this section; and

(6) principal.

SUBCHAPTER G. INTEREST AND OTHER CHARGES ON SECONDARY MORTGAGE LOANS

Sec. 342.301. MAXIMUM INTEREST CHARGE.

(a) A secondary mortgage loan that is a regular transaction may provide for an interest charge on the cash advance that is precomputed and that does not exceed a rate or amount that would produce the same effective return as allowed under Subchapter A, Chapter 303.

(b) For the purpose of Subsection (a):

(1) when the loan is made an interest charge may be computed for the full term of the loan contract;

(2) if the period before the first installment due date includes a part of a month that is longer than 15 days, that portion of a month may be considered a full month; and

(3) if a loan contract provides for precomputed interest, the amount of the loan is the total of:

(A) the cash advance; and

(B) the amount of precomputed interest.

(c) A secondary mortgage loan may provide for a rate or amount of interest calculated using the true daily earnings method or the scheduled installment earnings method that does not exceed the alternative rate ceiling in Subchapter A, Chapter 303. Interest may accrue on the principal balance and amounts added to principal after the date of the loan contract from time to time unpaid at the rate provided for by the contract until the date of payment in full or demand for payment in full. An interest charge under this subsection may not be precomputed.

Sec. 342.302. ADDITIONAL INTEREST FOR DEFAULT: REGULAR TRANSACTION OR TRANSACTION INCLUDING SIMPLE INTEREST.

(a) A secondary mortgage loan that includes precomputed interest and that is a regular transaction may provide for additional interest for default if any part of an installment remains unpaid after the 10th day after the date on which the installment is due, including Sundays and holidays.

(b) A secondary mortgage loan contract that uses the scheduled installment earnings method and that is a regular transaction may provide for additional interest for default if any part of an installment remains unpaid after the 10th day after the date on which the installment is due, including Sundays and holidays.

(c) The additional interest for default under this section may not exceed five cents for each $1 of a scheduled installment.

(d) Interest under this section may not be collected more than once on the same installment.

(e) A secondary mortgage loan that includes simple interest may provide for additional interest for default if any part of an installment remains unpaid after the 10th day after the date on which the installment is due, including Sundays and holidays.

Sec. 342.303. ADDITIONAL INTEREST FOR INSTALLMENT DEFERMENT: REGULAR TRANSACTIONS.

(a) On a secondary mortgage loan that includes precomputed interest or uses the scheduled installment earnings method and that is a regular transaction, an authorized lender may charge additional interest for the deferment of an installment if:

(1) the entire amount of the installment is unpaid;

(2) no interest for default has been collected on the installment; and

(3) payment of the installment is deferred for one or more full months and the maturity of the contract is extended for a corresponding period.

(b) The interest for deferment under Subsection (a) may not exceed the amount computed by:

(2) multiplying the results under Subdivision (1) by the number of months in the deferment period.

Sec. 342.304. COLLECTION OF DEFAULT OR DEFERMENT INTEREST.

Interest for default under Section 342.302 or for installment deferment under Section 342.303 may be collected when it accrues or at any time after it accrues.

Sec. 342.305. ADDITIONAL INTEREST FOR DEFAULT: IRREGULAR TRANSACTION.

A secondary mortgage loan that includes precomputed interest and that is an irregular transaction may provide for additional interest for default using the true daily earnings method for the period from the maturity date of an installment until the date the installment is paid. The rate of the additional interest may not exceed the maximum contract interest rate.

Sec. 342.306. DATE OF FIRST SCHEDULED INSTALLMENT.

On a secondary mortgage loan made under this chapter the due date of the first installment may not be scheduled later than three months after the date of the loan.

Sec. 342.307. AMOUNTS AUTHORIZED TO BE INCLUDED IN CONTRACT. A secondary mortgage loan contract may provide for:

(1) reasonable fees or charges paid to the trustee in connection with a deed of trust or similar instrument executed in connection with the secondary mortgage loan, including fees for enforcing the lien against or posting for sale, selling, or releasing the property secured by the deed of trust;

(2) reasonable fees paid to an attorney who is not an employee of the creditor in the collection of a delinquent secondary mortgage loan; or

(3) court costs and fees incurred in the collection of the loan or foreclosure of a lien created by the loan.

Sec. 342.308. AMOUNTS AUTHORIZED TO BE COLLECTED OR ADDED TO LOAN.

(a) A lender or a person who is assigned a secondary mortgage loan may collect on or before the closing of the loan, or include in the principal of the loan:

(1) reasonable fees for:

(A) title examination and preparation of an abstract of title by:

(i) an attorney who is not an employee of the lender; or

(ii) a title company or property search company authorized to do business in this state; or

(B) premiums or fees for title insurance or title search for the benefit of the mortgagee and, at the mortgagor’s option, for title insurance or title search for the benefit of the mortgagor;

(2) reasonable fees charged to the lender by an attorney who is not a salaried employee of the lender for preparation of the loan documents in connection with the mortgage loan if the fees are evidenced by a statement for services rendered;

(3) charges prescribed by law that are paid to public officials for determining the existence of a security interest or for perfecting, releasing, or satisfying a security interest;

(4) reasonable fees for an appraisal of real property offered as security for the loan prepared by an appraiser who is not a salaried employee of the lender;

(5) the reasonable cost of a credit report;

(6) reasonable fees for a survey of real property offered as security for the loan prepared by a registered surveyor who is not a salaried employee of the lender;

(7) the premiums received in connection with the sale of credit life insurance, credit accident and health insurance, or other insurance that protects the mortgagee against default by the mortgagor, the benefits of which are applied in whole or in part to reduce or extinguish the loan balance; or

(8) reasonable fees relating to real property offered as security for the loan that are incurred to comply with a federally mandated program if the collection of the fees or the participation in the program is required by a federal agency; and

(9) an administrative fee, subject to Subsection (c), in an amount not to exceed $25 for a loan of more than $1,000 or $20 for a loan of $1,000 or less.

(b) Premiums for property insurance that conform with Section 342.401 may be added to the loan contract.

(c) An administrative fee under Subsection (a)(9) is considered earned when the loan is made or refinanced and is not subject to refund. A lender refinancing the loan may not contract for or receive an administrative fee for the loan more than once in any 180-day period. Fifty cents of each administrative fee may be deposited with the comptroller for use in carrying out the finance commission’s responsibilities under Section 11.3055.

(d) Costs that conform to Section 342.4021(a) may be added to the loan contract.

SUBCHAPTER H. REFUND OF PRECOMPUTED INTEREST

Sec. 342.351. REFUND OF PRECOMPUTED INTEREST: SUM OF THE PERIODIC BALANCES.

(a) This section applies to a loan contract that includes precomputed interest authorized under Subchapter F or G and that is a regular transaction.

(b) If the contract is prepaid in full, including payment in cash or by a new loan or renewal of the loan, or if the lender demands payment in full of the unpaid balance, after the first installment due date but before the final installment due date, the lender shall refund or credit to the borrower the amount computed by:

(1) dividing the sum of the periodic balances scheduled to follow the installment date after the date of the prepayment or demand, as appropriate, by the sum of all the periodic balances under the schedule of payments set out in the loan contract; and

(2) multiplying the total interest contracted for under Section 342.252 or 342.301, as appropriate, by the result under Subdivision (1).

(c) If the prepayment in full or demand for payment in full occurs before the first installment due date, the lender shall:

(1) retain an amount computed by:

(A) dividing 30 into the amount that could be retained if the first installment period were one month and the loan were prepaid in full on the date the first installment is due; and

(B) multiplying the result under Paragraph (A) by the number of days in the period beginning on the date the loan was made and ending on the date of the prepayment or demand; and

(2) refund or credit to the borrower the amount computed by subtracting the amount retained under Subdivision (1) from the interest contracted for under Section 342.252 or 342.301, as appropriate.

Sec. 342.352. REFUND OF PRECOMPUTED INTEREST ON CONTRACT: SCHEDULED INSTALLMENT EARNINGS.

(a) This section applies to a loan contract:

(1) that includes precomputed interest and to which Section 342.351 does not apply;

(2) that includes interest contracted for under Section 342.201 or 342.260; or

(3) that has a term of more than 60 months.

(b) If the contract is prepaid in full, including payment in cash or by a new loan or renewal of the loan, or if the lender demands payment in full of the unpaid balance before final maturity of the contract, the lender earns interest for the period beginning on the date of the loan and ending on the date of the prepayment or demand, as applicable, an amount that does not exceed the amount allowed by Subsection (f) using the simple annual interest rate under the contract.

(c) If prepayment in full or demand for payment in full occurs during an installment period, the lender may retain, in addition to interest that accrued during any elapsed installment periods, an amount computed by:

(1) multiplying the simple annual interest rate under the contract by the unpaid principal balance of the loan determined according to the schedule of payments to be outstanding on the preceding installment due date;

(2) dividing 365 into the product under Subdivision (1); and

(3) multiplying the number of days in the period beginning on the day after the installment due date and ending on the date of the prepayment or demand, as appropriate, by the result obtained under Subdivision (2).

(d) The lender may also earn interest on an addition to principal, or other permissible charges, added to the loan after the date of the loan contract, accruing at the simple annual interest rate under the contract from the date of the addition until the date paid or the date the lender demands payment in full of the total unpaid balance under the loan contract.

(e) The lender shall refund or credit to the borrower the amount computed by subtracting the total amount retained under Subsections (b), (c), and (d) from the total amount of interest contracted for and precomputed in the amount of the loan.

(f) For the purposes of this section, the simple annual interest rate under a contract is equal to the rate computed under the scheduled installment earnings method.

Sec. 342.353. NO REFUND ON PARTIAL PREPAYMENT OR OF AMOUNT LESS THAN $1.

A refund is not required under this subchapter for a partial prepayment or if the amount to be refunded is less than $1.

SUBCHAPTER I. INSURANCE

Sec. 342.401. REQUIRED PROPERTY INSURANCE.

(a) On a loan that is subject to Subchapter E with a cash advance of $300 or more, a lender may require a borrower to insure tangible personal property offered as security for the loan.

(b) On a secondary mortgage loan, a lender may require a borrower to provide property insurance as security against reasonable risks of loss, damage, and destruction.

(1) the amount, term, and conditions of the loan;

(2) the value of the collateral; and

(3) the existing hazards or risk of loss, damage, or destruction.

(d) The insurance may not:

(1) cover unusual or exceptional risks; or

(2) provide coverage not ordinarily included in policies issued to the general public.

(e) A creditor may not require the purchase of duplicate property insurance if the creditor has knowledge that the borrower:

(1) has valid and collectible insurance covering the property; and

(2) has provided a loss payable endorsement sufficient to protect the creditor.

(f) For purposes of determining the knowledge required under Subsection (e), a creditor may rely on a written consent to purchase insurance in which the borrower is given the opportunity to disclose the existence of other coverage.

Sec. 342.402. CREDIT LIFE INSURANCE, CREDIT HEALTH AND ACCIDENT INSURANCE, OR INVOLUNTARY UNEMPLOYMENT INSURANCE.

(a) On a loan made under this chapter that is subject to Subchapter E with a cash advance of $100 or more, a lender may:

(1) offer a borrower credit life insurance and credit health and accident insurance as additional protection for the loan; and

(2) offer involuntary unemployment insurance to the borrower at the time the loan is made.

(b) A lender may not require that the borrower accept or provide the insurance described by Subsection (a).

(c) On a secondary mortgage loan made under this chapter, a lender may require that a borrower provide credit life insurance and credit accident and health insurance as additional protection for the loan.

Sec. 342.4021. AGREEMENTS REGARDING DEBT SUSPENSION, DEBT CANCELLATION, AND GAP WAIVER.

(a) In connection with a loan made under this chapter that is subject to Section 342.201(d) or 342.301(c), a lender may offer to the borrower a debt suspension agreement or debt cancellation agreement under similar terms and conditions as such an agreement may be offered by a bank or savings association.

(b) In connection with a loan made under this chapter that is subject to Section 342.201(d) and that is secured by a motor vehicle, a lender may offer to the borrower at the time the loan is made a gap waiver agreement.

(d) In addition to other disclosures required by state or federal law and before offering an agreement or contract authorized by this section, the lender shall provide to the borrower a notice separate from the loan documents stating that the borrower is not required to accept or provide the agreement or contract to obtain the loan.

(e) The amount charged for a product authorized by Subsection (a) or (b) must be reasonable.

Sec. 342.403. MAXIMUM AMOUNT OF INSURANCE COVERAGE.

(a) At any time the total amount of the policies of credit life insurance in force on one borrower on one loan contract may not exceed the greater of:

(1) the total amount repayable under the loan contract if the loan is an irregular transaction; or

(2) the greater of the scheduled or actual amount of unpaid indebtedness if the loan is a regular transaction.

(b) At any time the total amount of the policies of credit accident and health insurance or involuntary unemployment insurance in force on one borrower on one loan contract may not exceed the total amount repayable under the loan contract, and the amount of each periodic indemnity payment may not exceed the scheduled periodic installment payment on the loan.

Sec. 342.404. INSURANCE NOTICE.

(a) If insurance is required on a loan made under this chapter, the lender shall give to the borrower written notice that clearly and conspicuously states that:

(1) insurance is required in connection with the loan; and

(2) the borrower as an option may furnish the required insurance coverage through an insurance policy that is in existence and that is owned or controlled by the borrower or an insurance policy obtained from an insurance company authorized to do business in this state.

(b) If insurance requested or required on a loan made under this chapter is sold or obtained by a lender at a premium or rate of charge that is not fixed or approved by the commissioner of insurance, the lender shall notify the borrower of that fact. If notice is required under Subsection (a), the lender shall include that fact in the notice required by Subsection (a).

(1) a separate writing delivered with the loan contract; or

(2) a part of the loan contract.

Sec. 342.405. INSURANCE MAY BE FURNISHED BY BORROWER.

(a) If insurance is required on a loan made under this chapter, the borrower may furnish the insurance coverage through an insurance policy that is in existence and that is owned or controlled by the borrower or an insurance policy obtained by the borrower from an insurance company authorized to do business in this state.

(b) If insurance is required on a loan made under this chapter and the insurance is sold or obtained by the lender at a premium or rate of charge that is not fixed or approved by the commissioner of insurance, the borrower has the option of furnishing the required insurance under this section at any time before the sixth day after the date of the loan.

Sec. 342.406. BORROWER’S FAILURE TO PROVIDE REQUIRED INSURANCE.

(a) If a borrower fails to obtain or maintain insurance coverage required under a loan contract or requests the lender to obtain that coverage, the lender may obtain substitute insurance coverage that is substantially equivalent to or more limited than the coverage originally required.

(b) If a loan is subject to Subchapter E, the lender may obtain insurance to cover only the interest of the lender as a secured party if the borrower does not request that the borrower’s interest be covered.

(d) The lender may add the amount advanced by the lender for insurance coverage obtained under this section to the unpaid balance of the loan contract and may charge interest on that amount from the time it is added to the unpaid balance until it is paid. The rate of additional interest may not exceed the rate that the loan contract would produce over its full term if each scheduled payment were paid on the due date.

Sec. 342.407. REQUIREMENTS FOR INCLUDING INSURANCE CHARGE IN CONTRACT.

Insurance for which a charge is included in a loan contract must be written:

(1) at lawful rates;

(2) in accordance with the Insurance Code; and

(3) by a company authorized to do business in this state.

Sec. 342.408. FURNISHING OF INSURANCE DOCUMENT TO BORROWER.

If a lender obtains insurance for which a charge is included in the loan contract, the lender, not later than the 30th day after the date on which the loan contract is executed, shall deliver, mail, or cause to be mailed to the borrower at the borrower’s address specified in the contract one or more policies or certificates of insurance that clearly set forth:

(1) the amount of the premium;

(2) the kind of insurance provided;

(3) the coverage of the insurance; and

(4) all terms, including options, limitations, restrictions, and conditions, of each insurance policy.

Sec. 342.409. LENDER’S DUTY IF INSURANCE IS ADJUSTED OR TERMINATED.

(a) If insurance for which a charge is included in or added to the loan contract is canceled, adjusted, or terminated, the lender shall:

(1) credit to the amount unpaid on the loan the amount of the refund received by the lender for unearned insurance premiums, less the amount of the refund that is applied to the purchase by the lender of similar insurance; and

(2) if the amount to be credited under Subdivision (1) is more than the unpaid balance, refund promptly to the borrower the difference between those amounts.

(b) A cash refund is not required under this section if the amount of the refund is less than $1.

Sec. 342.410. PAYMENT FOR INSURANCE FROM LOAN PROCEEDS.

A lender, including an officer, agent, or employee of the lender, who accepts insurance under this subchapter as protection for a loan:

(1) may deduct the premium or identifiable charge for the insurance from the proceeds of the loan; and

(2) shall pay the deducted amounts to the insurance company writing the insurance.

Sec. 342.411. INSURANCE OR OTHER GAIN NOT INTEREST.

Any gain or advantage to the lender or the lender’s employee, officer, director, agent, general agent, affiliate, or associate from insurance or from another agreement or contract permitted under this subchapter or the provision or sale of insurance or another agreement or contract permitted under this subchapter is not additional interest or an additional charge in connection with a loan made under this chapter except as specifically provided by this chapter.

Sec. 342.412. ACTION UNDER SUBCHAPTER NOT SALE OF INSURANCE.

Arranging for insurance or collecting an identifiable charge as authorized by this subchapter is not a sale of insurance.

Sec. 342.413. REQUIRED AGENT OR BROKER PROHIBITED.

A lender may not by any direct or indirect method require the purchase of insurance from an agent or broker designated by the lender.

Sec. 342.414. DECLINATION OF EQUAL INSURANCE COVERAGE PROHIBITED.

A lender may not decline at any time existing insurance coverage providing substantially equal benefits that comply with this subchapter.

Sec. 342.415. EFFECT OF UNAUTHORIZED INSURANCE CHARGE.

(a) If a lender charges for insurance an amount that is not authorized under this subchapter, the lender:

(1) is not entitled to collect an amount for insurance or interest on an amount for insurance; and

(2) shall refund to the borrower or credit to the borrower’s account all amounts collected for insurance and interest collected on those amounts.

(b) An overcharge that results from an accidental or bona fide error may be corrected as provided by Subchapter C, Chapter 349.

Sec. 342.416. NONFILING INSURANCE.

(a) Instead of charging fees for the filing, recording, and releasing of a document securing a loan to which Subchapter E applies, an authorized lender may include in the loan contract a charge for a nonfiling insurance premium.

(b) The amount of a charge under Subsection (a) may not exceed the amount of fees authorized for filing and recording an original financing statement in the standard form prescribed by the secretary of state.

(c) A lender may receive an amount authorized under this section only if the lender purchases nonfiling insurance in connection with the loan contract.

(d) A lender is not required to furnish to a borrower a policy or certificate of insurance evidencing nonfiling insurance.

SUBCHAPTER J. AUTHORIZED LENDER’S DUTIES AND AUTHORITY

Sec. 342.451. DELIVERY OF INFORMATION TO BORROWER.

(a) When a loan is made under this chapter, the lender shall deliver to the borrower, or to one borrower if there is more than one, a copy of each document signed by the borrower, including the note or loan contract, and a written statement in English that contains:

(1) the names and addresses of the borrower and the lender; and

(2) any type of insurance for which a charge is included in the loan contract and the charge to the borrower for the insurance.

(b) If the note or loan contract shows the information required by Subsection (a), the written statement is not required.

Sec. 342.452. RECEIPT FOR CASH PAYMENT.

A lender shall give a receipt to a person making a cash payment on a loan.

Sec. 342.453. ACCEPTANCE OF PREPAYMENT.

At any time during regular business hours, the lender shall accept prepayment of a loan in full or, if the amount tendered is less than the amount required to prepay the loan in full, prepayment of an amount equal to one or more full installments.

Sec. 342.454. RETURN OF INSTRUMENTS TO BORROWER ON REPAYMENT.

Within a reasonable time after a loan is repaid in full or an open-end account is terminated according to the terms of the contract, a lender shall cancel and return to a borrower any instrument, including a note, assignment, security agreement, or mortgage that:

(1) secured the loan; and

(2) does not secure another indebtedness of the borrower to the lender.

Sec. 342.455. AGREEMENT FOR MORE THAN ONE LOAN OR CASH ADVANCE.

(a) A lender and a borrower may enter an agreement under which one or more loans or cash advances are from time to time made to or for the account of the borrower.

(b) An agreement under this section may provide for a maximum loan charge on the unpaid principal amounts from time to time outstanding at a rate that does not exceed the rate that produces the maximum interest charge computed under Section 342.201 for an equivalent loan amount.

(d) An agreement under this section must contain:

(1) the date of the agreement;

(2) the name and address of each borrower; and

(3) the name and address of the lender.

(e) If a charge for insurance coverage is to be included in a loan contract, an agreement under this section must clearly set forth a simple statement of the amount of the charge or the method by which the charge is to be computed.

(f) The lender shall deliver a copy of an agreement under this section to the borrower.

(g) The commissioner may prescribe monthly rates of charge that produce the maximum interest charge computed under Section 342.201 for use under Subsection (b).

Sec. 342.456. AGREEMENT TO MODIFY TERM OF SECONDARY MORTGAGE LOAN CONTRACT.

(a) A lender and a borrower may enter into an agreement under which a term of a secondary mortgage loan contract is amended, restated, or rescheduled.

(b) An agreement under this section must be written and signed by the lender and borrower.

(1) the date of the agreement;

(2) the name and address of the lender; and

(3) the name and address of each borrower.

(d) The lender shall deliver a copy of an agreement under this section to the borrower.

Sec. 342.457. AUTOMOBILE CLUB MEMBERSHIP OFFERED IN CONNECTION WITH A LOAN.

(a) An authorized lender may, at the time or after a loan under Subchapter E is made, offer to sell to the borrower and finance in the loan contract a charge for an automobile club membership.

(b) The lender may not require the purchase of the membership authorized under Subsection (a) as a condition for approval of the loan.

(c) The borrower shall provide the lender with written acknowledgment of the borrower’s intent to purchase the membership.

(d) The lender shall give the borrower written notice at the time the loan is made that the borrower:

(1) is not required to purchase the membership as a condition for approval of the loan; and

(2) is entitled to cancel the transaction and receive a full refund of the purchase price of the membership before the 31st day after the date the loan is made.

(e) The commissioner shall:

(1) adopt a rule providing for disclosure in Spanish of the information required by Subsection (d); and

(2) establish a form for the disclosure of the information required by Subsection (d) that conforms to the plain language and readability requirements applicable to loan contracts under Section 341.502.

(f) The amount charged for a membership as authorized by Subsection (a) must be reasonable.

SUBCHAPTER K. LIMITATIONS ON AUTHORIZED LENDER

Sec. 342.501. OBLIGATION UNDER MORE THAN ONE CONTRACT.

(a) An authorized lender may not induce or permit a person or a husband and wife to be directly or indirectly obligated under more than one loan contract at any time for the purpose or with the effect of obtaining an amount of interest greater than the amount of interest otherwise authorized under this chapter for a loan of that aggregate amount with a maximum interest charge computed under Section 342.201(a), Section 342.201(e), Section 342.252, or any combination of those sections.

(b) Subsection (a) does not prohibit the purchase of a bona fide retail installment contract or revolving charge agreement of a borrower for the purchase of goods or services.

(c) A lender who purchases all or substantially all of the loan contracts of another authorized lender and who at the time of purchase has a loan contract with a borrower whose loan contract is purchased may collect principal and authorized charges according to the terms of each loan contract.

Sec. 342.502. AMOUNT AUTHORIZED.

(a) A lender may not directly or indirectly charge, contract for, or receive an amount that is not authorized under this chapter in connection with a loan to which this chapter applies, including any fee, compensation, bonus, commission, brokerage, discount, expense, and any other charge of any nature, whether or not listed by this subsection.

(b) On a loan subject to Subchapter E or a secondary mortgage loan subject to Subchapter G a lender may assess and collect from the borrower an amount incurred by the lender for:

(1) court costs;

(2) attorney’s fees assessed by a court, in addition to those provided by Section 342.307;

(3) a fee authorized by law for filing, recording, or releasing in a public office a security for a loan;

(4) a reasonable amount spent for repossessing, storing, preparing for sale, or selling any security;

(5) a fee for recording a lien on or transferring a certificate of title to a motor vehicle offered as security for a loan made under this chapter; or

(6) a premium or an identifiable charge received in connection with the sale of insurance authorized under this chapter.

(d) On a loan subject to this chapter a lender may assess and collect a fee that does not exceed the amount prescribed by Section 3.506, Business & Commerce Code, for the return by a depository institution of a dishonored check, negotiable order of withdrawal, or share draft offered in full or partial payment of a loan.

Sec. 342.503. SECURITY FOR LOAN.

(a) A lender may not take as security for a loan made under this chapter an assignment of wages.

(b) A lender may not take as security for a loan made under Subchapter E or F a lien on real property other than a lien created by law on the recording of an abstract of judgment.

(1) a warrant drawn against a state fund; or

(2) a claim against a state fund or a state agency.

Sec. 342.504. CONFESSION OF JUDGMENT; POWER OF ATTORNEY.

A lender may not take a confession of judgment or a power of attorney authorizing the lender or a third person to confess judgment or to appear for a borrower in a judicial proceeding.

Sec. 342.505. DISCLOSURE OF AMOUNT FINANCED AND SCHEDULE OF PAYMENTS.

A lender may not take a promise to pay or loan obligation that does not disclose the amount financed and the schedule of payments, except for an open-end account.

Sec. 342.506. INSTRUMENT WITH BLANK PROHIBITED.

A lender may not take an instrument in which a blank is left to be filled in after the loan is made.

Sec. 342.507. WAIVER OF BORROWER’S RIGHT PROHIBITED.

A lender may not take an instrument in which a borrower waives any right accruing to the borrower under this chapter.

Sec. 342.508. MAXIMUM LOAN TERM.

A lender may not enter a loan contract under Section 342.201(a) or Section 342.201(e) under which the borrower agrees to make a scheduled payment of principal more than:

(1) 37 calendar months after the date on which the contract is made, if the contract is for a cash advance of $1,500 or less;

(2) 49 calendar months after the date on which the contract is made, if the contract is for a cash advance of more than $1,500 but not more than $3,000; or

(3) 60 months after the date on which the contract is made, if the contract is for a cash advance of more than $3,000.

SUBCHAPTER L. ADMINISTRATION OF CHAPTER

Sec. 342.551. ADOPTION OF RULES.

(a) The Finance Commission of Texas may adopt rules to enforce this chapter.

(b) The commissioner shall recommend proposed rules to the Finance Commission of Texas.

(c) A rule shall be entered in a permanent book. The book is a public record and shall be kept in the office of the commissioner.

Sec. 342.552. EXAMINATION OF LENDERS; ACCESS TO RECORDS.

(a) The commissioner or the commissioner’s representative shall, at the times the commissioner considers necessary:

(1) examine each place of business of each authorized lender; and

(2) investigate the lender’s transactions, including loans, and records, including books, accounts, papers, and correspondence, to the extent the transactions and records pertain to the business regulated under this chapter.

(b) The lender shall:

(1) give the commissioner or the commissioner’s representative free access to the lender’s office, place of business, files, safes, and vaults; and

(2) allow the commissioner or the commissioner’s authorized representative to make a copy of an item that may be investigated under Subsection (a)(2).

(c) During an examination the commissioner or the commissioner’s representative may administer oaths and examine any person under oath on any subject pertinent to a matter that the commissioner is authorized or required to consider, investigate, or secure information about under this chapter.

(d) Information obtained under this section is confidential.

(e) A lender’s violation of Subsection (b) is a ground for the suspension or revocation of the lender’s license.

Sec. 342.553. GENERAL INVESTIGATION.

(a) To discover a violation of this chapter or to obtain information required under this chapter, the commissioner or the commissioner’s representative may investigate the records, including books, accounts, papers, and correspondence, of a person, including an authorized lender, who the commissioner has reasonable cause to believe is violating this chapter regardless of whether the person claims to not be subject to this chapter.

(b) For the purposes of this section, a person who advertises, solicits, or otherwise represents that the person is willing to make a loan with a cash advance less than or equal to the amount computed under Subchapter C, Chapter 341, using the reference base amount of $2,500 is presumed to be engaged in the business described by Section 342.051.

Sec. 342.554. CERTIFICATE; CERTIFIED DOCUMENT.

On application by any person and on payment of any associated cost, the commissioner shall furnish under the commissioner’s seal and signed by the commissioner or an assistant of the commissioner:

(1) a certificate of good standing; or

(2) a certified copy of a license, rule, or order.

Sec. 342.555. TRANSCRIPT OF HEARING: PUBLIC.

The transcript of a hearing held by the commissioner under this chapter is a public record.

Sec. 342.556. APPOINTMENT OF AGENT.

(a) An authorized lender shall maintain on file with the commissioner a written appointment of a resident of this state as the lender’s agent for service of all judicial or other process or legal notice, unless the lender has appointed an agent under another statute of this state.

(b) If an authorized lender does not comply with this section, service of all judicial or other process or legal notice may be made on the commissioner.

Sec. 342.557. PAYMENT OF EXAMINATION COSTS AND ADMINISTRATION EXPENSES.

An authorized lender shall pay to the commissioner an amount assessed by the commissioner to cover the direct and indirect cost of an examination of the lender under Section 342.552 and a proportionate share of general administrative expense.

Sec. 342.558. AUTHORIZED LENDER’S RECORDS.

(a) An authorized lender shall maintain a record of each loan made under this chapter as is necessary to enable the commissioner to determine whether the lender is complying with this chapter.

(b) An authorized lender shall keep the record, make it available in this state, or, if the lender makes, transacts, or negotiates loans principally by mail, keep the record or make it available at the lender’s principal place of business, until the later of:

(1) the fourth anniversary of the date of the loan; or

(2) the second anniversary of the date on which the final entry is made in the record.

(d) The commissioner shall accept a lender’s system of records if the system discloses the information reasonably required under Subsection (a).

(e) An authorized lender shall keep each obligation signed by a borrower at an office in this state designated by the lender unless the obligation is transferred under an agreement that gives the commissioner access to the obligation.

Sec. 342.559. ANNUAL REPORT.

(a) Each year, not later than May 1 or a later date set by the commissioner, an authorized lender shall file with the commissioner a report that contains relevant information required by the commissioner concerning the lender’s business and operations during the preceding calendar year for each office of the lender in this state where business is conducted under this chapter.

(b) A report under this section must be:

(1) under oath; and

(2) in the form prescribed by the commissioner.

(d) Annually the commissioner shall prepare and publish a consolidated analysis and recapitulation of reports filed under this section.

Sec. 342.560. CONDUCTING ASSOCIATED BUSINESS.

An authorized lender may conduct business under this chapter in an office, office suite, room, or place of business in which any other business is conducted or in combination with any other business unless the commissioner:

(1) finds after a hearing that the lender’s conducting of the other business in that office, office suite, room, or place of business has concealed an evasion of this chapter; and

(2) orders the lender in writing to desist from that conduct in that office, office suite, room, or place of business.

SUBCHAPTER M. DEFERRED PRESENTMENT TRANSACTIONS

Sec. 342.601. DEFINITIONS.

In this subchapter:

(1) “Lender” means a lender licensed under this chapter.

(2) “Member of the United States military” means:

(A) a member of the armed forces of the United States; or

(B) a member of the Texas National Guard who is called to federal active duty.

Sec. 342.602. DISCLOSURES TO MILITARY BORROWERS.

Before engaging in a deferred presentment transaction, a lender shall provide to a customer who is a member of the United States military or the member’s spouse a written statement that clearly and conspicuously states that:

(1) the lender is prohibited by law from:

(A) garnishing the wages of any borrower, including a borrower who is a member of the United States military;

(B) conducting any collection activity against a borrower who is:

(i) a member of the armed forces of the United States who is deployed to combat or a combat support posting, for the duration of the posting;

(ii) a member of the Texas National Guard who is called to federal active duty, for the duration of the duty;

(iii) the spouse of a person described by Paragraph (i), for the duration of the posting; or

(iv) the spouse of a person described by Paragraph (ii), for the duration of the duty; or

(C) from contacting the employer of a member of the United States military about a deferred presentment debt of the member or the member’s spouse;

(2) the lender shall honor the terms of a repayment agreement entered into with a member of the United States military or the member’s spouse, including a repayment agreement negotiated through military counselors or third-party credit counselors; and

(3) the lender shall honor any statement made by a commanding officer of a member of the United States military declaring any location where deferred presentment transaction business is to be conducted by the lender to be a place at which a member of the United States military or the member’s spouse is prohibited from transacting business.

Sec. 342.603. PROHIBITED PRACTICES.

A lender may not contact the employer of a member of the United States military about a deferred presentment debt of the member or the member’s spouse.

Sec. 342.604. MILITARY BORROWER.

(a) A lender may not engage in collection activity against a borrower who is:

(1) a member of the armed forces of the United States who is deployed to combat or a combat support posting, for the duration of the posting;

(2) a member of the Texas National Guard who is called to federal active duty, for the duration of the duty;

(3) the spouse of a person described by Subdivision (1), for the duration of the posting; or

(4) the spouse of a person described by Subdivision (2), for the duration of the duty.

(b) A lender may not garnish the wages of a borrower who is a member of the United States military or the member’s spouse.

(c) A lender who engages in a deferred presentment transaction with a member of the United States military or a dependent of a member of the United States military must comply with 10 U.S.C. Section 987 and any regulations adopted under that law, to the extent applicable.

Sec. 342.605. REPAYMENT AGREEMENT.

With respect to a deferred presentment transaction, a lender shall honor a repayment agreement entered into with a borrower who is a member of the United States military or the member’s spouse, including a repayment agreement negotiated through a military counselor or a third-party credit counselor.

TITLE 5. PROTECTION OF CONSUMERS OF FINANCIAL SERVICES

CHAPTER 393. CREDIT SERVICES ORGANIZATIONS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 393.001. DEFINITIONS.

In this chapter:

(1) “Consumer” means an individual who is solicited to purchase or who purchases the services of a credit services organization.

(2) “Consumer reporting agency” has the meaning assigned by Section 603(f), Fair Credit Reporting Act (15 U.S.C. Section 1681a(f)).

(3) “Credit services organization” means a person who provides, or represents that the person can or will provide, for the payment of valuable consideration any of the following services with respect to the extension of consumer credit by others:

(A) improving a consumer’s credit history or rating;

(B) obtaining an extension of consumer credit for a consumer; or

(4) “Extension of consumer credit” means the right to defer payment of debt offered or granted primarily for personal, family, or household purposes or to incur the debt and defer its payment.

Sec. 393.002. PERSONS NOT COVERED.

(a) This chapter does not apply to:

(1) a person:

(A) authorized to make a loan or grant an extension of consumer credit under the laws of this state or the United States; and

(B) subject to regulation and supervision by this state or the United States;

(2) a lender approved by the United States secretary of housing and urban development for participation in a mortgage insurance program under the National Housing Act (12 U.S.C. Section 1701 et seq.);

(3) a bank or savings association the deposits or accounts of which are eligible to be insured by the Federal Deposit Insurance Corporation or a subsidiary of the bank or association;

(4) a credit union doing business in this state;

(5) a nonprofit organization exempt from taxation under Section 501(c)(3), Internal Revenue Code of 1986 (26 U.S.C. Section 501(c)(3));

(6) a real estate broker or salesperson licensed under Chapter 1101, Occupations Code, who is acting within the course and scope of that license;

(7) an individual licensed to practice law in this state who is acting within the course and scope of the individual’s practice as an attorney;

(8) a broker-dealer registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission acting within the course and scope of that regulation;

(9) a consumer reporting agency;

(10) a person whose primary business is making loans secured by liens on real property;

(11) a mortgage broker or loan officer licensed under Chapter 156, Finance Code, who is acting within the course and scope of that license; or

(12) an electronic return originator who:

(A) is an authorized Internal Revenue Service e-file provider; and

(B) makes, negotiates, arranges for, or transacts a loan that is based on a person’s federal income tax refund on behalf of a bank, savings bank, savings and loan association, or credit union.

(b) In an action under this chapter, a person claiming an exemption under this section has the burden of proving the exemption.

Sec. 393.003. WAIVER VOID.

A waiver of a provision of this chapter by a consumer is void.

SUBCHAPTER B. REGISTRATION AND DISCLOSURE STATEMENTS

Sec. 393.101. REGISTRATION STATEMENT.

(a) Before conducting business in this state, a credit services organization shall register with the secretary of state by filing a statement that:

(1) contains the name and address of:

(A) the organization; and

(B) each person who directly or indirectly owns or controls at least 10 percent of the outstanding shares of stock in the organization; and

(2) fully discloses any litigation or unresolved complaint relating to the operation of the organization filed with a governmental authority of this state or contains a notarized statement that there has been no litigation or unresolved complaint of that type.

(b) The organization shall keep a copy of the registration statement in its files.

(c) The secretary of state may not require an organization to provide information other than information contained in the registration statement.

(d) A registration certificate expires on the first anniversary of its date of issuance. A registered credit services organization may renew a registration certificate by filing a renewal application, in the form prescribed by the secretary of state, and paying the renewal fee.

Sec. 393.102. UPDATE OF REGISTRATION STATEMENT.

A credit services organization shall update information contained in the registration statement not later than the 90th day after the date on which the information changes.

Sec. 393.103. INSPECTION OF REGISTRATION STATEMENT.

A credit services organization shall allow a consumer to inspect the registration statement on request.

Sec. 393.104. FILING FEE.

The secretary of state may charge a credit services organization a reasonable fee to cover the cost of filing a registration statement or renewal application in an amount not to exceed $100.

Sec. 393.105. DISCLOSURE STATEMENT.

Before executing a contract with a consumer or receiving valuable consideration from a consumer, a credit services organization shall provide the consumer with a document containing:

(1) a complete and detailed description of the services to be performed by the organization for the consumer and the total cost of those services;

(2) an explanation of the consumer’s right to proceed against the surety bond or account obtained under Section 393.302;

(3) the name and address of the surety company that issued the surety bond or the name and address of the depository and the trustee and the account number of the surety account, as appropriate;

(4) a complete and accurate statement of the consumer’s right to review information on the consumer maintained in a file by a consumer reporting agency, as provided by the Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.);

(5) a statement that information in the consumer’s file is available for review:

(A) without charge on request made to the consumer reporting agency not later than the 30th day after the date on which the agency receives notice the consumer has been denied credit; and

(B) for a minimal charge at any other time;

(6) a complete and accurate statement of the consumer’s right to dispute directly with a consumer reporting agency the completeness or accuracy of an item contained in the consumer’s file maintained by the agency;

(7) a statement that accurate information cannot be permanently removed from the files of a consumer reporting agency;

(8) a complete and accurate statement explaining:

(A) when consumer information becomes obsolete; and

(B) that a consumer reporting agency is prevented from issuing a report containing obsolete information; and

(9) a complete and accurate statement of the availability of nonprofit credit counseling services.

Sec. 393.106. COPY OF DISCLOSURE STATEMENT.

A credit services organization shall keep in its files a copy of a document required under Section 393.105, signed by the consumer, acknowledging receipt, until the second anniversary of the date on which the organization provides the document.

SUBCHAPTER C. CONTRACT FOR SERVICES

Sec. 393.201. FORM AND TERMS OF CONTRACT.

(a) Each contract for the purchase of the services of a credit services organization by a consumer must be in writing, dated, and signed by the consumer.

(b) In addition to the notice required by Section 393.202, the contract must:

(1) contain the payment terms, including the total payments to be made by the consumer, whether to the organization or to another person;

(2) fully describe the services the organization is to perform for the consumer, including each guarantee and each promise of a full or partial refund and the estimated period for performing the services, not to exceed 180 days;

(3) contain the address of the organization’s principal place of business; and

(4) contain the name and address of the organization’s agent in this state authorized to receive service of process.

(c) A contract with a credit access business, as defined by Section 393.601, for the performance of services described by Section 393.602(a) must, in addition to the requirements of Subsection (b) and Section 393.302:

(1) contain a statement that there is no prepayment penalty;

(2) contain a statement that a credit access business must comply with Chapter 392 and the federal Fair Debt Collection Practices Act (15 U.S.C. Section 1692 et seq.) with respect to an extension of consumer credit described by Section 393.602(a);

(3) contain a statement that a person may not threaten or pursue criminal charges against a consumer related to a check or other debit authorization provided by the consumer as security for a transaction in the absence of forgery, fraud, theft, or other criminal conduct;

(4) contain a statement that a credit access business must comply, to the extent applicable, with 10 U.S.C. Section 987 and any regulations adopted under that law with respect to an extension of consumer credit described by Section 393.602(a);

(5) disclose to the consumer:

(A) the lender from whom the extension of consumer credit is obtained;

(B) the interest paid or to be paid to the lender; and

(6) the name and address of the Office of Consumer Credit Commissioner and the telephone number of the office’s consumer helpline.

Sec. 393.202. NOTICE OF CANCELLATION.

(a) The contract must conspicuously state the following, in type that is boldfaced, capitalized, underlined, or otherwise distinguished from the surrounding written material and in immediate proximity to the space reserved for the consumer’s signature: “You, the buyer, may cancel this contract at any time before midnight of the third day after the date of the transaction. See the attached notice of cancellation form for an explanation of this right.”

(b) The contract must have attached two easily detachable copies of a cancellation notice. The notice must be in boldfaced type and in the following form:

“Notice of Cancellation

You may cancel this contract, without any penalty or obligation, within three days after the date the contract is signed.

If you cancel, any payment made by you under this contract will be returned within 10 days after the date of receipt by the seller of your cancellation notice.

To cancel this contract, mail or deliver a signed dated copy of this cancellation notice, or other written notice, to:

(name of seller) at (address of seller)(place of business) not later than midnight (date)

I hereby cancel this transaction.

(date)

(purchaser’s signature)“

Sec. 393.203. ISSUANCE OF CONTRACT AND OTHER DOCUMENTS.

A credit services organization shall give to the consumer, when the document is signed, a copy of the completed contract and any other document the organization requires the consumer to sign.

Sec. 393.204. BREACH OF CONTRACT.

The breach by a credit services organization of a contract under this chapter, or of an obligation arising from a contract under this chapter, is a violation of this chapter.

SUBCHAPTER C-1. NOTICE AND DISCLOSURE REQUIREMENTS FOR CERTAIN CREDIT SERVICES ORGANIZATIONS

Sec. 393.221. DEFINITIONS.

In this subchapter:

(1) “Credit access business” means a credit services organization that obtains for a consumer or assists a consumer in obtaining an extension of consumer credit in the form of a deferred presentment transaction or a motor vehicle title loan.

(2) “Deferred presentment transaction” has the meaning assigned by Section 341.001. For purposes of this chapter, this definition does not preclude repayment in more than one installment. The term is also referred to as a payday loan.

(3) “Motor vehicle title loan” or “auto title loan” means a loan in which an unencumbered motor vehicle is given as security for the loan. The term does not include a retail installment transaction under Chapter 348 or another loan made to finance the purchase of a motor vehicle.

Sec. 393.222. POSTING OF FEE SCHEDULE; NOTICES.

(a) A credit access business shall post, in a conspicuous location in an area of the business accessible to consumers and on any Internet website, including a social media site, maintained by the credit access business:

(1) a schedule of all fees to be charged for services performed by the credit access business in connection with deferred presentment transactions and motor vehicle title loans, as applicable;

(2) a notice of the name and address of the Office of Consumer Credit Commissioner and the telephone number of the office’s consumer helpline; and

(3) a notice that reads as follows:

“An advance of money obtained through a payday loan or auto title loan is not intended to meet long-term financial needs. A payday loan or auto title loan should only be used to meet immediate short-term cash needs. Refinancing the loan rather than paying the debt in full when due will require the payment of additional charges.”

(b) The Finance Commission of Texas may adopt rules to implement this section.

Sec. 393.223. CONSUMER TRANSACTION INFORMATION.

(a) Before performing services described by Section 393.221(1), a credit access business must provide to a consumer a disclosure adopted by rule of the Finance Commission of Texas that discloses the following in a form prescribed by the commission:

(1) the interest, fees, and annual percentage rates, as applicable, to be charged on a deferred presentment transaction or on a motor vehicle title loan, as applicable, in comparison to interest, fees, and annual percentage rates to be charged on other alternative forms of consumer debt;

(2) the amount of accumulated fees a consumer would incur by renewing or refinancing a deferred presentment transaction or motor vehicle title loan that remains outstanding for a period of two weeks, one month, two months, and three months; and

(3) information regarding the typical pattern of repayment of deferred presentment transactions and motor vehicle title loans.

(b) If a credit access business obtains or assists a consumer in obtaining a motor vehicle title loan, the credit access business shall provide to the consumer a notice warning the consumer that in the event of default the consumer may be required to surrender possession of the motor vehicle to the lender or other person to satisfy the consumer’s outstanding obligations under the loan.

Sec. 393.224. ADMINISTRATIVE PENALTY.

The consumer credit commissioner, in accordance with rules adopted by the Finance Commission of Texas, may assess an administrative penalty against a credit access business that knowingly and wilfully violates this subchapter or a rule adopted under this subchapter in the manner provided by Subchapter F, Chapter 14.

SUBCHAPTER D. PROHIBITIONS AND RESTRICTIONS

Sec. 393.301. REPRESENTATIVE.

In this subchapter, a representative of a credit services organization includes:

(1) a salesperson, agent, or other representative of the organization; and

(2) an independent contractor who sells or attempts to sell the services of the organization.

Sec. 393.302. CHARGE OR RECEIPT OF CONSIDERATION BEFORE COMPLETION OF SERVICES.

A credit services organization or a representative of the organization may charge or receive from a consumer valuable consideration before completely performing all the services the organization has agreed to perform for the consumer only if the organization has obtained a surety bond for each of its locations or established and maintained a surety account for each of its locations in accordance with Subchapter E.

Sec. 393.303. CHARGE OR RECEIPT OF CONSIDERATION FOR REFERRAL.

A credit services organization or a representative of the organization may not charge or receive from a consumer valuable consideration solely for referring the consumer to a retail seller who will or may extend to the consumer credit that is substantially the same as that available to the public.

Sec. 393.304. FALSE OR MISLEADING REPRESENTATION OR STATEMENT.

A credit services organization or a representative of the organization may not:

(1) make or use a false or misleading representation in the offer or sale of the services of the organization, including:

(A) guaranteeing to “erase bad credit” or words to that effect unless the representation clearly discloses this can be done only if the credit history is inaccurate or obsolete; and

(B) guaranteeing an extension of consumer credit regardless of the person’s credit history unless the representation clearly discloses the eligibility requirements for obtaining the extension; or

(2) make, or advise a consumer to make, a statement relating to a consumer’s credit worthiness, credit standing, or credit capacity that the person knows, or should know by the exercise of reasonable care, to be false or misleading to a:

(A) consumer reporting agency; or

(B) person who has extended consumer credit to a consumer or to whom a consumer is applying for an extension of consumer credit.

Sec. 393.305. FRAUDULENT OR DECEPTIVE CONDUCT.

A credit services organization or a representative of the organization may not directly or indirectly engage in a fraudulent or deceptive act, practice, or course of business relating to the offer or sale of the services of the organization.

Sec. 393.306. ADVERTISING SERVICES WITHOUT FILING REGISTRATION STATEMENT.

A credit services organization or a representative of the organization may not advertise the services of the organization if the organization has not filed a registration statement required by Subchapter B.

Sec. 393.307. CAUSING WAIVER PROHIBITED.

A credit services organization may not attempt to cause a consumer to waive a right under this chapter.

SUBCHAPTER E. SURETY BOND; SURETY ACCOUNT

Sec. 393.401. SURETY BOND.

(a) The surety bond of a credit services organization must be issued by a surety company authorized to do business in this state.

(b) A copy of the bond shall be filed with the secretary of state.

Sec. 393.402. SURETY ACCOUNT.

(a) The surety account of a credit services organization must be held in trust at a federally insured bank or savings association located in this state.

(b) The name of the depository and the trustee and the account number of the surety account must be filed with the secretary of state.

Sec. 393.403. AMOUNT OF SURETY BOND OR ACCOUNT.

The surety bond or account of a credit services organization must be in the amount of $10,000.

Sec. 393.404. BENEFICIARY OF SURETY BOND OR ACCOUNT.

The surety bond or account of a credit services organization must be in favor of:

(1) this state for the benefit of a person damaged by a violation of this chapter; and

(2) a person damaged by a violation of this chapter.

Sec. 393.405. CLAIM AGAINST SURETY BOND OR ACCOUNT.

(a) A person making a claim against a surety bond or account of a credit services organization for a violation of this chapter may file suit against:

(1) the organization; and

(2) the surety or trustee.

(b) A surety or trustee is liable only for actual damages, reasonable attorney’s fees, and court costs awarded under Section 393.503(a).

(c) The aggregate liability of a surety or trustee for an organization’s violation of this chapter may not exceed the amount of the surety bond or account.

Sec. 393.406. TERM OF SURETY BOND OR ACCOUNT.

The surety bond or account of a credit services organization must be maintained until the second anniversary of the date on which the organization ceases operations.

Sec. 393.407. PAYMENT OF MONEY IN SURETY ACCOUNT TO CREDIT SERVICES ORGANIZATION.

(a) A depository may not pay money in a surety account to the credit services organization that established the account or a representative of the organization unless the organization or representative presents a statement issued by the secretary of state indicating that the requirement of Section 393.406 has been satisfied in relation to the account.

(b) The secretary of state may conduct an investigation and require information to be submitted as necessary to enforce this section.

SUBCHAPTER F. CRIMINAL PENALTIES AND CIVIL REMEDIES

Sec. 393.501. CRIMINAL PENALTY.

(a) A person commits an offense if the person violates this chapter.

(b) An offense under this chapter is a Class B misdemeanor.

Sec. 393.502. INJUNCTIVE RELIEF.

A district court on the application of the attorney general or a consumer may enjoin a violation of this chapter.

Sec. 393.503. DAMAGES.

(a) A consumer injured by a violation of this chapter is entitled to recover:

(1) actual damages in an amount not less than the amount the consumer paid the credit services organization;

(2) reasonable attorney’s fees; and

(3) court costs.

(b) A consumer who prevails in an action under this section may also be awarded punitive damages.

Sec. 393.504. DECEPTIVE TRADE PRACTICE.

A violation of this chapter is a deceptive trade practice actionable under Subchapter E, Chapter 17, Business & Commerce Code.

Sec. 393.505. STATUTE OF LIMITATIONS.

An action under Section 393.503 or 393.504 must be brought not later than the fourth anniversary of the date on which the contract to which the action relates is executed.

SUBCHAPTER G. LICENSING AND REGULATION OF CERTAIN CREDIT SERVICES ORGANIZATIONS

Sec. 393.601. DEFINITIONS.

In this subchapter:

(1) “Commissioner” means the consumer credit commissioner.

(2) “Credit access business” means a credit services organization that obtains for a consumer or assists a consumer in obtaining an extension of consumer credit in the form of a deferred presentment transaction or a motor vehicle title loan.

(3) “Deferred presentment transaction” has the meaning assigned by Section 341.001. For purposes of this chapter, this definition does not preclude repayment in more than one installment.

(4) “Finance commission” means the Finance Commission of Texas.

(5) “Motor vehicle title loan” means a loan in which an unencumbered motor vehicle is given as security for the loan. The term does not include a retail installment transaction under Chapter 348 or another loan made to finance the purchase of a motor vehicle.

(6) “Office” means the Office of Consumer Credit Commissioner.

Sec. 393.602. APPLICABILITY.

(a) This subchapter applies only to a credit services organization that, with respect to a consumer who is located in this state at the time of the transaction, obtains for a consumer or assists a consumer in obtaining an extension of consumer credit in the form of:

(1) a deferred presentment transaction; or

(2) a motor vehicle title loan.

(b) A credit access business may assess fees for its services as agreed to between the parties. A credit access business fee may be calculated daily, biweekly, monthly, or on another periodic basis. A credit access business is permitted to charge amounts allowed by other laws, as applicable. A fee may not be charged unless it is disclosed.

(c) A person may not use a device, subterfuge, or pretense to evade the application of this subchapter. A lawful transaction governed under another statute, including Title 1, Business & Commerce Code, does not violate this subsection and may not be considered a device, subterfuge, or pretense to evade the application of this subchapter.

Sec. 393.603. LICENSE REQUIRED. A credit services organization must obtain a license under this subchapter for each location at which the organization operates as a credit access business in performing services described by Section 393.602(a).

Sec. 393.604. APPLICATION FOR LICENSE.

(a) An application for a license under this subchapter must:

(1) be under oath;

(2) give the approximate location from which the business is to be conducted;

(3) identify the business’s principal parties in interest;

(4) contain the name, physical address, and telephone number of all third-party lender organizations with which the business contracts to provide services described by Section 393.602(a) or from which the business arranges extensions of consumer credit described by Section 393.602(a); and

(5) contain other relevant information that the commissioner requires for the findings required under Section 393.607.

(b) On the filing of one or more license applications, the applicant shall pay to the commissioner an investigation fee of $200. Except for good cause as determined by the finance commission, a separate investigation fee is not required for multiple license applications.

(c) On the filing of each license application, the applicant shall pay to the commissioner a license fee in an amount determined as provided by Section 14.107.

Sec. 393.605. BOND.

(a) If the commissioner requires, an applicant for a license under this subchapter shall file with the application a bond that is:

(1) in an amount satisfactory to the commissioner that does not exceed the lesser of:

(A) $10,000 for the first license and $10,000 for each additional license; or

(B) $2,500,000; and

(2) issued by a surety company qualified to do business as a surety in this state.

(b) The bond must be in favor of this state for the use of this state and the use of a person who has a cause of action under this subchapter against the license holder.

(1) the license holder’s faithful performance under this subchapter and rules adopted under this subchapter; and

(2) the payment of all amounts that become due to this state or another person under this subchapter during the period for which the bond is given.

(d) The aggregate liability of a surety to all persons damaged by the license holder’s violation of this subchapter may not exceed the amount of the bond.

(e) A credit access business that files a bond under this section is not required to file a bond under Subchapter E.

(f) A credit access business, instead of obtaining a surety bond, may satisfy the requirements of this section by depositing an amount described by Subsection (a)(1) in a surety account held in trust at a federally insured bank or savings association located in this state. The name of the depository, trustee, and account number of the surety account must be filed with the office.

Sec. 393.606. INVESTIGATION OF APPLICATION.

On the filing of an application and a bond, if required under Section 393.605, and on payment of the required fees, the commissioner shall conduct an investigation to determine whether to issue the license.

Sec. 393.607. APPROVAL OR DENIAL OF APPLICATION.

(a) The commissioner shall approve the application and issue to the applicant a license to operate as a credit access business for purposes of engaging in the activity to which this subchapter applies if the commissioner finds that:

(1) the financial responsibility, experience, character, and general fitness of the applicant are sufficient to:

(A) command the confidence of the public; and

(B) warrant the belief that the business will be operated lawfully and fairly, within the purposes of this subchapter; and

(2) the applicant has net assets of at least $25,000 available for the operation of the business as determined in accordance with Section 393.611.

(b) If the commissioner does not find the eligibility requirements of Subsection (a) have been met, the commissioner shall notify the applicant.

(d) The commissioner shall approve or deny the application not later than the 30th day after the date of the filing of a completed application with payment of the required fees, or if a hearing is held, after the date of the completion of the hearing on the application. The commissioner and the applicant may agree to a later date in writing.

Sec. 393.608. DISPOSITION OF FEES ON DENIAL OF APPLICATION.

If the commissioner denies the application, the commissioner shall retain the investigation fee and shall return to the applicant the license fee submitted with the application.

Sec. 393.6085. LICENSE TERM.

A license issued under this chapter is valid for the period prescribed by finance commission rule adopted under Section 14.112.

Sec. 393.609. NAME AND PLACE OF LICENSE.

(a) A license issued under this subchapter must state:

(1) the name of the license holder; and

(2) the address of the office from which the business is to be conducted, except as provided by Subsection (c).

(b) A license holder may not conduct business under this subchapter under a name other than the name stated on the license.

(c) A license holder may not conduct business at a location other than the address stated on the license, except that a license holder:

(1) is not required to have an office in this state; and

(2) may operate using e-commerce methods, including the Internet.

Sec. 393.610. LICENSE DISPLAY.

A license holder shall display a license at the place of business provided on the license. With respect to business conducted through the Internet, this requirement may be satisfied by displaying the license on the business’s Internet website.

Sec. 393.611. MINIMUM ASSETS FOR LICENSE.

A license holder shall maintain net assets used or readily available for use in conducting the business of each of the offices for which a license is held under this subchapter, in an amount that is not less than the lesser of:

(1) $25,000 for each office; or

(2) $2,500,000 in the aggregate.

Sec. 393.6115. GROUNDS FOR REFUSAL TO RENEW.

The commissioner may refuse to renew the license of a credit access business who fails to comply with an order issued by the commissioner to enforce this chapter.

Sec. 393.612. LICENSE FEE.

Not later than the 30th day before the date the license expires, a license holder shall pay to the commissioner for each license held a fee in an amount determined as provided by Section 14.107.

Sec. 393.613. EXPIRATION OF LICENSE ON FAILURE TO PAY FEE.

If the fee for a license is not paid before the 16th day after the date on which the written notice of delinquency of payment has been given to the license holder, the license expires on that day.

Sec. 393.614. LICENSE SUSPENSION OR REVOCATION.

(a) After notice and opportunity for a hearing, the commissioner may suspend or revoke a license if the commissioner finds that:

(1) the license holder failed to pay the license fee, an examination fee, an investigation fee, or another charge imposed by the commissioner under this subchapter;

(2) the license holder, knowingly or without the exercise of due care, violated this chapter or a rule adopted or order issued under this chapter; or

(b) If in a three-year period the commissioner suspends or revokes under this section the licenses of five or more credit access businesses owned or controlled by the same person, including a corporation that owns multiple businesses, the commissioner may suspend or revoke the licenses of all credit access businesses owned or controlled by that person.

Sec. 393.615. LICENSE SUSPENSION OR REVOCATION FILED WITH PUBLIC RECORDS.

Sec. 393.616. REINSTATEMENT OF SUSPENDED LICENSE; ISSUANCE OF NEW LICENSE AFTER REVOCATION.

Sec. 393.617. SURRENDER OF LICENSE.

A license holder may surrender a license issued under this subchapter by delivering to the commissioner:

(1) the license; and

(2) a written notice of the license’s surrender.

Sec. 393.618. EFFECT OF LICENSE SUSPENSION, REVOCATION, OR SURRENDER.

(a) The suspension, revocation, or surrender of a license issued under this subchapter does not affect the obligation of a contract between the license holder and a consumer entered into before the revocation, suspension, or surrender.

(b) Surrender of a license does not affect the license holder’s civil or criminal liability for an act committed before surrender.

Sec. 393.619. MOVING AN OFFICE.

(a) A license holder shall give written notice to the commissioner before the 30th day before the date the license holder moves an office from the location provided on the license.

(b) The commissioner shall amend a license holder’s license accordingly.

Sec. 393.620. TRANSFER OR ASSIGNMENT OF LICENSE.

A license may be transferred or assigned only with the approval of the commissioner.

Sec. 393.621. ADMINISTRATION.

The office shall administer this subchapter.

Sec. 393.622. RULES.

(a) The finance commission may:

(1) adopt rules necessary to enforce and administer this subchapter;

(2) adopt rules with respect to the quarterly reporting by a credit access business licensed under this subchapter of summary business information relating to extensions of consumer credit described by Section 393.602(a); and

(3) adopt rules with respect to periodic examination by the office relating to extensions of consumer credit described by Section 393.602(a), including rules related to charges for defraying the reasonable cost of conducting the examinations.

(b) The finance commission may adopt rules under this section to allow the commissioner to review, as part of a periodic examination, any relevant contracts between the credit access business and the third-party lender organizations with which the credit access business contracts to provide services described by Section 393.602(a) or from which the business arranges extensions of consumer credit described by Section 393.602(a). A contract or information obtained by the commissioner under this section is considered proprietary and confidential to the respective parties to the contract, and is not subject to disclosure under Chapter 552, Government Code.

(c) Nothing in Section 393.201(c) or Sections 393.601-393.628 grants authority to the finance commission or the Office of Consumer Credit Commissioner to establish a limit on the fees charged by a credit access business.

Sec. 393.623. PROVIDING OR ADVERTISING SERVICES WITHOUT LICENSE PROHIBITED.

A credit access business or a representative of the business may not provide or advertise the services of the business if the business is not licensed under this subchapter.

Sec. 393.624. RESTRICTIONS ON OFF-SITE ADVERTISING.

(a) A credit access business may not advertise on the premises of a nursing facility, assisted living facility, group home, intermediate care facility for persons with mental retardation, or other similar facility subject to regulation by the Department of Aging and Disability Services.

(b) The finance commission may adopt rules to implement this section.

Sec. 393.625. MILITARY BORROWERS.

An extension of consumer credit described by Section 393.602(a) that is obtained by a credit access business for a member of the United States military or a dependent of a member of the United States military or that the business assisted that person in obtaining must comply with 10 U.S.C. Section 987 and any regulations adopted under that law, to the extent applicable.

Sec. 393.626. DEBT COLLECTION PRACTICES.

A violation of Chapter 392 by a credit access business with respect to an extension of consumer credit described by Section 393.602(a) constitutes a violation of this subchapter.

Sec. 393.627. QUARTERLY REPORT TO COMMISSIONER.

A credit access business shall file a quarterly report with the commissioner on a form prescribed by the commissioner that provides the following information relating to extensions of consumer credit described by Section 393.602(a) during the preceding quarter:

(1) the number of consumers for whom the business obtained or assisted in obtaining those extensions of consumer credit;

(2) the number of those extensions of consumer credit obtained by the business or that the business assisted consumers in obtaining;

(3) the number of refinancing transactions of the extensions of consumer credit described by Subdivision (2);

(4) the number of consumers refinancing the extensions of consumer credit described by Subdivision (2);

(5) the number of consumers refinancing more than once the extensions of consumer credit described by Subdivision (2);

(6) the average amount of the extensions of consumer credit described by Subdivision (2);

(7) the total amount of fees charged by the business for the activities described by Subdivision (1);

(8) the number of vehicles surrendered or repossessed under the terms of an extension of consumer credit in the form of a motor vehicle title loan obtained by the business or that the business assisted a consumer in obtaining;

(9) the mean, median, and mode of the number of extensions of consumer credit obtained by consumers as a result of entering into the extensions of consumer credit described by Subdivision (2); and

(10) any related information the commissioner determines necessary.

Sec. 393.628. TEXAS FINANCIAL EDUCATION ENDOWMENT.

(a) As part of the licensing fee and procedures described under this subchapter, each credit access business or license holder shall pay to the commissioner an annual assessment to improve consumer credit, financial education, and asset-building opportunities in this state. The annual assessment may not exceed $200 for each license as specified by the finance commission.

(b) The commissioner shall remit to the comptroller amounts received under Subsection (a) for deposit in an interest-bearing deposit account in the Texas Treasury Safekeeping Trust Company. Money in the account may be spent by the finance commission only for the purposes provided by this section. Amounts in the account may be invested and reinvested in the same manner as funds of the Employees Retirement System of Texas, and the interest from those investments shall be deposited to the credit of the account.

(c) The Texas Financial Education Endowment shall be administered by the finance commission to support statewide financial education and consumer credit building activities and programs, including:

(1) production and dissemination of approved financial education materials at licensed locations;

(2) advertising, marketing, and public awareness campaigns to improve the credit profiles and credit scores of consumers in this state;

(3) school and youth-based financial literacy and capability;

(4) credit building and credit repair;

(5) financial coaching and consumer counseling;

(6) bank account enrollment and incentives for personal savings; and

(7) other consumer financial education and asset-building initiatives as considered appropriate by the finance commission.

(d) In implementing this section, the finance commission may solicit gifts, grants, and donations for this purpose.

(e) The finance commission may partner with other state agencies and entities to implement this section.

(f) The finance commission shall adopt rules to administer this section.

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