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Update on Texas Credit Services Organization Model

Update on Texas Credit Services Organization Model. J. Scott Sheehan Payday Loan Bar Association Sonoma, California November 1-2, 2012. Texas Legislature -- 2011. http://www.legis.state.tx.us/). Recap of the 2011 Legislative Session.

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Update on Texas Credit Services Organization Model

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  1. Update on Texas Credit Services Organization Model J. Scott Sheehan Payday Loan Bar Association Sonoma, California November 1-2, 2012

  2. Texas Legislature -- 2011 http://www.legis.state.tx.us/)

  3. Recap of the 2011 Legislative Session • HB 2592 and HB 2594 eff. 1-1-12. HB 2593 did not pass. Amended Chapter 393. • Licensing with the Office of the Consumer Credit Commissioner as “Credit Access Businesses” • Additional disclosures • Quarterly reporting to the agency • Few substantive restrictions were added. No prepayment penalties. • No amendments regarding the 180-day issue

  4. What’s happened the past 12 months • Licensing, rulemaking (7 TAC 83), examination by the Office of the Consumer Credit Commissioner, and quarterly reports • Adverse local ordinances in Dallas, Austin, and San Antonio • Market conditions • Senate and House Interim Study Reports due out in November • Preparation for the 2013 Legislative Session

  5. Recap of the Office of the Consumer Credit Commissioner • OCCC just presented its Fiscal Year End Report to the Texas Finance Commission (8-31-11 thru 8-31-12) • 3,022 CAB licenses; 290 CAB examinations • 97.02% level of acceptable compliance • Complaints 113 for FY ‘11; 282 for FY ’12 • Q2 data: 900,038 transactions; 600,971 consumers; $467 avg. payday; $22.83 per hundred avg. payday; $707 avg. single-pay title; $21.30 per hundred avg. single-pay title

  6. The Home Rule City Ordinances • Powers of Home Rule City and State Preemption Concepts • Dallas Ordinance, Austin Ordinance, and San Antonio Ordinance • Finance Commission Resolution (4-20-12) • Lawsuits challenging the ordinances • Possible ways to avoid the ordinances

  7. Market conditions the past 12 months • Market continues to grow • New companies setting up programs (store-front and Internet). Currently 3,022 licenses. • CAB Lenders raising additional financing capacity • Companies have to deal with the adverse ordinances, especially Dallas, Austin, and San Antonio • Cautious optimism about 2013 Legislative Session and resolving the local ordinances

  8. Texas Legislature -- 2013 http://www.legis.state.tx.us/)

  9. Key Participants • CSAT (industry best practices and preemption) • Office of the Consumer Credit Commissioner (clarifying amendments and preemption) • Other Title 4 entities (might weigh in on preemption) • Texas Municipal League (might weigh in on preemption) and certain cities • Consumer Advocate Groups (e.g., Texas; Appleseed; Center for Public Policy Priorities; certain religious groups)(adverse; cycle of debt; might re-urge rate caps)

  10. Revised CSAT Industry Best Practices • Transaction limits: 35% of gross monthly income on single-pay deferred presentment; 25% limit on scheduled payment on multiple-pay deferred presentment; 70% limit of retail value on title transactions. • Declining principal balances: Fully amortizing, equal pay installments on multiple payment transactions. • Extended repayment: once ever 12 months; if transaction has been refinanced 4 times. • Principal reduction: 5% on single pay title transaction or adjusted accrual.

  11. Closing Remarks The next major battleground is the Texas Legislature

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