Texas Payday Loans

Relevant Legal Excerpts for Texas Payday Loans

Section 83.604 Payday Loans; Deferred Presentment Transactions

(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 Figure: 7 TAC §83.604(c) 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.

(e) Procedures.

(1) 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) The transaction must be documented by a written agreement signed by the borrower and the licensee. The agreement must contain the name of the licensee; the transaction date; the amount of the check; a statement of the total amount charged, expressed both as a dollar amount and as an annual percentage rate (APR); and the earliest date on which the check may be deposited. 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 shall 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."

(3) The borrower shall 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.

(4) A check may not be held for more than 31 days and then subsequently presented to the bank for payment.

(5) 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 the following paragraphs.

(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, §392.001 et seq.

(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.

Section 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.

Section 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.

Section 342.252. Alternate interest charge.

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.

Section 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.

Section 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.

Section 342.255. Maximum loan term.

The maximum 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.

Section 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.

Section 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.

Section 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.

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

(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).

Section 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.

Section 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.

(c) A lender may take as security for a loan made under Subchapter E or F an assignment of:

(1) a warrant drawn against a state fund; or
(2) a claim against a state fund or a state agency.

Section 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.

Section 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.

Section 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.

Section 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.

Section 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.

Section 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.

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