Finance Code Chapter 392

Finance Code Chapter 392 in Texas primarily deals with the regulation of deferred presentment transactions, more commonly known as payday loans and auto title loans. This chapter aims to protect consumers from predatory lending practices associated with these high-interest, short-term loans.

Scope of Coverage: Chapter 392 specifically regulates entities that engage in deferred presentment transactions. This includes businesses that provide loans secured by a personal check or authorization to debit a consumer’s bank account on a future date, or loans secured by the title to a motor vehicle. The chapter outlines licensing requirements, operational standards, and disclosure obligations for these lenders.

Licensing and Registration: Any person or entity wanting to offer deferred presentment loans or auto title loans in Texas generally needs to obtain a license from the Office of Consumer Credit Commissioner (OCCC). This licensing process involves meeting specific qualifications, undergoing background checks, and adhering to regulatory requirements. Maintaining the license requires ongoing compliance with Chapter 392 and other applicable Texas regulations.

Loan Terms and Restrictions: Chapter 392 places several restrictions on the terms of payday and auto title loans. These include limitations on the loan amount, the length of the loan term, and the fees and interest rates that can be charged. The chapter intends to prevent borrowers from getting trapped in cycles of debt by limiting the number of times a loan can be refinanced or renewed. Certain provisions restrict the ability to sue on a defaulted debt after a specified period, thereby offering some protection to borrowers.

Disclosure Requirements: Lenders are required to provide borrowers with clear and conspicuous disclosures about the loan terms, including the finance charges, annual percentage rate (APR), total cost of the loan, and the borrower’s rights and responsibilities. These disclosures must be provided both before the loan is originated and in any advertising or marketing materials. The purpose of these disclosures is to ensure that borrowers understand the true cost of the loan and can make informed decisions.

Borrower Protections: Chapter 392 provides several protections for borrowers, including the right to rescind a loan within a certain period, limitations on collection practices, and the right to cure a default. It also prohibits lenders from engaging in unfair or deceptive trade practices. Borrowers who believe that a lender has violated Chapter 392 may have the right to file a complaint with the OCCC and pursue legal action.

Enforcement: The OCCC is responsible for enforcing the provisions of Chapter 392. This includes conducting examinations of licensed lenders, investigating complaints, and taking enforcement actions against those who violate the law. The OCCC can impose civil penalties, suspend or revoke licenses, and pursue other legal remedies to ensure compliance with Chapter 392.

In conclusion, Texas Finance Code Chapter 392 represents a regulatory framework designed to govern the payday and auto title lending industry, aiming to protect vulnerable consumers from potentially harmful lending practices while allowing legitimate short-term credit options. Changes to the chapter are regularly considered by the legislature to adapt to the evolving financial landscape.