Are you a consumer who is considering a short term loan in the State of Texas?
As with every state, Texas has their own specific policies and guidelines that relate specific to short term, installment and payday loans. These regulations will cover almost every lender you will encounter locally or operating online, although some tribal lenders may follow different regulations. Additional questions or concerns about lending and loan offers should be independently investigated.
Texas Administrative Code
TITLE 7 BANKING AND SECURITIES
PART 5 OFFICE OF CONSUMER CREDIT COMMISSIONER
CHAPTER 83 REGULATED LENDERS AND CREDIT ACCESS BUSINESSES
SUBCHAPTER A RULES FOR REGULATED LENDERS
DIVISION 6 ALTERNATE CHARGES FOR CONSUMER LOANS
RULE §83.604 Payday Loans; Deferred Presentment Transactions
(a) Definitions. For the purposes of this chapter, the following words and terms, when used in this chapter, will have the following meanings, unless the context clearly indicates otherwise.
(1) Check–A check, draft, share draft, or other instrument for the payment of money.
(2) Payday loan or deferred presentment transaction–
(A) A transaction in which:
(i) a cash advance in whole or part is made in exchange for a personal check or authorization to debit a deposit account;
(ii) the amount of the check or authorized debit equals the amount of the advance plus a fee; and
(iii) the person making the advance agrees that the check will not be cashed or deposited or the authorized debit will not be made until a designated future date.
(B) This type of transaction is often referred to as a “payday loan,” “payday advance,” or “deferred deposit loan.”
(b) Authorization. A licensee may engage in a payday loan or deferred presentment transaction under this chapter and subject to the provisions of Texas Finance Code, Chapter 342, Subchapter F. A payday loan or deferred presentment transaction is a loan of money. The check given in the transaction may serve as security for the payment of the loan. A person who negotiates, arranges, or acts as an agent for an authorized lender in a payday loan or deferred presentment transaction that has an effective annual rate of greater than 10% is required to be licensed.
(c) Maximum charge. A licensee may charge an amount that does not exceed the rates authorized in Texas Finance Code, §§342.251 – 342.259. The chart in the following figure provides examples of the maximum authorized rates for loans made under Texas Finance Code, Chapter 342, Subchapter F. Texas Finance Code, §342.254 which prohibits other charges applies to this section.
(d) Minimum term. A licensee may engage in a payday loan or deferred presentment transaction with a term of not less than 7 days.
(1) Check accepted. If a check is accepted, the licensee must require that the check be made payable to the actual name of the company printed on the license and must be dated the day the loan is made.
(2) Written agreement. The transaction must be documented by a written agreement signed by the borrower and the licensee. The agreement must contain:
(A) the name of the licensee;
(B) the transaction date;
(C) the amount of the check;
(D) a statement of the total amount charged, expressed both as a dollar amount and as an annual percentage rate (APR); and
(E) the earliest date on which the check may be deposited.
(3) Required notices. The agreement must also contain a notice of the name and address of the Office of Consumer Credit Commissioner and the telephone number of the consumer helpline. Additionally, the lender must provide a notice to the consumer that reads as follows: “This cash advance is not intended to meet long-term financial needs. This loan should only be used to meet immediate short-term cash needs. Renewing the loan rather than paying the debt in full when due will require the payment of additional charges.”
(4) Prepayment. The borrower must have a right to prepay the loan and redeem the check at any time prior to the due date. If the loan is prepaid in full, the lender must refund any unearned finance charges.
(5) Check presentation to depository institution. A check may not be held for more than 31 days and then subsequently presented to the depository institution for payment.
(6) Fee schedule notice required. The licensee must post a notice of the fee schedule for engaging in a payday or deferred presentment loan.
(f) Conditions. A lender may accept a check to secure payment of a payday loan if the lender complies with paragraphs (1) and (2) of this subsection.
(1) Duplicate and multiple loans. The provisions of Texas Finance Code, §342.501 and §83.851 of this title (relating to Duplication of Loans) apply to loans made under the authority of this section. In accordance with Texas Finance Code, §342.501, a lender and a borrower may renew a loan, but the loan must be converted from a single payment balloon loan to a declining balance installment note. Alternatively, the payday loan or deferred presentment transaction may be renewed without limitation to the number of renewals where the effect of the total amount of the interest charge would not exceed the total amount authorized by Texas Finance Code, §342.252 and §342.259 having due regard for the amount of the cash advance and the time the cash advance is outstanding. The result is that the acquisition charge may only be earned once in a month and the installment account handling charge may continue to be earned on a equivalent daily charge basis in accordance with the limitations of Texas Finance Code, Chapter 342, Subchapter F. In lieu of a renewal, a lender and a borrower may agree to extend the maturity date of the existing payday loan or deferred presentment transaction.
(2) Collection practices. A payday loan constitutes a credit relationship for all purposes, including collection. If a borrower defaults, including the return of the check to the licensee from a financial institution due to insufficient funds, closed account, or stop payment order, the licensee may pursue all legally available civil means to collect the debt. Collection practices must be in accordance with this chapter and with the Texas Debt Collection Practices Act, Texas Finance Code, Chapter 392.
(3) Fair lending. A lender must make a good faith effort to assess the borrower’s ability to repay the payday loan or deferred presentment transaction under the loan terms.