HomeMy WebLinkAbout2018-O-18 - Credit Access Businesses ORDINANCE NO. 2018-0-18
AN ORDINANCE OF THE CITY OF STEPHENVILLE CREATING CHAPTER 119: CREDIT ACCESS BUSINESSES;
SETTING FORTH REGISTRATION REQUIREMENTS AND CREDIT EXTENSION GUIDELINES FOR CREDIT
ACCESS BUSINESSES; PROVIDING DEFINITIONS; ESTABLISHING AUTHORITY TO ENFORCE; PROVIDING A
PENALTY;
WHEREAS, certain credit access businesses engage in abusive and predatory lending practices,
offering easy money to those members of our community who are in a tight spot with onerous terms and
fees; and
WHEREAS, the practices of certain access businesses cause members of our community to
become trapped in a cycle of short term, high interest loans resulting in large debt and huge payments;
and
WHEREAS, the Pew Charitable Trusts, in their publication entitled Payday Lending in America:
Who Borrows, Where they Borrow, and Why, (July 2012), wrote that "payday loans are sold as two-week
credit products that provide fast cash, but borrowers are actually indebted for an average of five months
per year." The report further noted that "on average, a borrower takes out eight loans of$375 each per
year and spends$520 on interest;" and
WHEREAS, the Pew Charitable Trusts, in their publication entitled Payday Lending in America:
Who Borrows, Where they Borrow, and Why, (July 2012), also noted: "How much borrowers spend on
loans depends heavily on the fees permitted by their state.The same$500 storefront loan would generally
cost about$55 in Florida,$75 in Nebraska,$87.50 in Alabama,and$100 in Texas,even if it were provided
by the same national company in all those states. Previous research has found that lenders tend to charge
the maximum permitted in a state;" and
WHEREAS, the Pew Charitable Trusts, in their publication entitled Payday Lending in America:
Who Borrows, Where they Borrow, and Why, (July 2012),also stated that"the vast majority of borrowers
use the loans on a long-term basis, not a temporary one. Thus it seems that the payday loan industry is
selling a product few people use as designed and that imposes debt that is consistently more costly and
longer lasting than advertised;" and
WHEREAS, the Community Financial Services Association of America (CFSA), the national trade
association for companies that offer small dollar, short-term loans or payday advances includes the
following in the "Member Best Practices" as listed on its internet site (http://cfsaa.com/cfsa-member-
best-practices.aspx): "Members shall not allow customers to rollover a payday advance (the extension of
an outstanding advance by payment of only a fee) unless expressly authorized by state law, but in such
cases where authorized will limit rollovers to four or the state limit, whichever is less." The need for
consumer understanding was also outlined on this website: "A contract between a member and the
customer must fully outline the terms of the payday advance transaction. Members agree to disclose the
cost of the service fee both as a dollar amount and as an annual percentage rate ("APR");" and
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WHEREAS,the Center for Responsible Lending, a non-profit, non-partisan organization, states on
its internet site (http://www.responsiblelending.org/other-consumer-loans /tools-resources/fast-
facts.html)that: "car title loans are based on the value of a borrower's car-the ability to repay the loans
is not factor in the lending decision..."; "loan rates for a car title are typically 20-30 times that of rates
charged by credit card issuers..."; "the average car title customer renews their loan 8 times..."; and, "on a
$500 title loan, this average customer will pay back $650 in interest over eight months; the principal
borrowed will be in addition;" and
WHEREAS, lenders hold onto the motor vehicle title and when borrowers cannot continue to pay
the fees,they can lose their vehicles,which can drastically affect the borrower's means of transportation
for work and other essential household functions.
NOW,THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF STEPHENVILLE:
That the Code of Ordinances of the City of Stephenville is hereby amended to include the following:
CHAPTER 119:CREDIT ACCESS BUSINESSES
119.01.Short title and purpose.
A. This article may be known and cited as"Credit Access Businesses Regulation."
B. The purpose of this article is to protect the welfare of the citizens of the City of Stephenville by
monitoring credit access businesses in an effort to reduce abusive and predatory lending
practices.To this end,this chapter establishes a registration program for credit access businesses,
imposes restrictions on extensions of consumer credit made by credit access businesses, and
imposes recordkeeping requirements on credit access businesses.
119.02. Definitions.
The following words, terms and phrases, when used in this article, shall have the meanings
ascribed to them in this section, except where the context clearly indicates a different meaning:
Certificate of registration means a certificate of registration issued by the director under this
article to the owner or operator of a credit access business.
Consumer means an individual who is solicited to purchase or who purchases the services of a
credit access business.
Consumer's language of preference is the language the consumer understands best.
Credit access business has the meaning given that term in V.T.C.A., Finance Code§ 393.601.
Deferred presentment transaction has the meaning given that term in V.T.C.A., Finance Code §
393.601.
ro Director means the director of the department designated by the city council, city manager, or
city council or city manager's designee,to enforce and administer this chapter.
Extension of consumer credit has the meaning given that term in V.T.C.A., Finance Code§393.001.
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Motor vehicle title loan has the meaning given that term in V.T.C.A., Finance Code § 393.601.
Registrant means a person issued a certificate of registration for a credit access business under
this chapter and includes all owners and operators of the credit access business identified in the
registration application filed under this article.
State license means a license to operate a credit access business issued by the Texas Consumer
Credit Commissioner under V.T.C.A., Finance Code ch. 393, subch. G.
119.03.Violations; penalty.
A. A person who violates a provision of this article,or who fails to perform an act required of
the person by this article, commits an offense.A person commits a separate offense for each and
every violation relating to an extension of consumer credit, and for each day during which a
violation is committed, permitted, or continued.
B. An offense under this article is punishable by a fine of not more than $500.00 per day in
accordance with Chapter 10, section 10.99 of the Stephenville,Texas Code of Ordinances.
C. A culpable mental state is not required for the commission of an offense under this article and
need not be proved.
D. The penalties provided for in subsection B.are in addition to any other remedies that the city may
have under city ordinances and state law.
119.04. Defenses.
It is a defense to prosecution under this article that at the time of the alleged offense, the
person was not required to be licensed by the state as a credit access business under V.T.C.A.,
Finance Code ch. 393, subch. G.
119.05. Registration required.
A person commits an offense if the person acts, operates, or conducts business as a credit
access business without a valid certificate of registration. A certificate of registration is required
for each physically separate credit access business.
119.06. Registration application.
A. To obtain a certificate of registration for a credit access business, a person must submit an
application on a form provided for that purpose to the director.The application must contain the
following:
1. The name, street address, mailing address, facsimile number, and telephone number of the
applicant.
2. The business or trade name,street address,mailing address,facsimile number,and telephone
number of the credit access business.
3. The names, street addresses, mailing addresses, and telephone numbers of all owners of the
credit access business and other persons with a financial interest in the credit access business,
and the nature and extent of each person's interest in the credit access business.
ro 4. A copy of a current,valid state license held by the credit access business pursuant to V.T.C.A.,
Finance Code ch. 393, subch. G.
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5. A copy of a current, valid certificate of occupancy showing that the credit access business is
in compliance with the code.
6. A non-refundable application fee in the amount of$50.00. This fee is subject to changes at
the discretion of the City Council.
B. An applicant or registrant shall notify the director within 45 days after any material change in the
information contained in the application for a certificate of registration, including, but not limited
to, any change of address and any change in the status of the state license held by the applicant
or registrant.
119.07. Issuance and display of certificate of registration; presentment upon request.
A. The director shall issue to the applicant a certificate of registration upon receiving a completed
application under section 119.06.
B. A certificate of registration issued under this section must be conspicuously displayed to the
public in the credit access business.The certificate of registration must be presented upon request
to the director or any peace officer for examination.
119.08. Expiration and renewal of certificate of registration.
A. A certificate of registration expires on the earlier of:
1. One year after the date of issuance; or
2. The date of revocation,suspension,surrender,expiration without renewal,or other termination
of the registrant's state license.
B. A certificate of registration may be renewed by making application in accordance with section
119.06. A registrant shall apply for renewal at least 30 days before the expiration of the
registration.
C. An annual registration fee of$250.00 will be due upon registration renewal. This fee is subject to
changes at the discretion of the City Council.
119.09. Non-transferability.
A certificate of registration for a credit access business is not transferable.
119.10. Location of credit access businesses.
Any lot containing a credit access business establishment shall be located at least 1,000 feet
from any lot containing another credit access business establishment, as measured in a straight
line between the nearest points of one lot to the other lot.
119.11. Maintenance of records.
A. A credit access business shall maintain a complete set of records of all extensions of consumer
credit arranged or obtained by the credit access business, which must include the following
ri information:
1. The name and address of the consumer;
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2. The principal amount of cash actually advanced;
3. The length of the extension of consumer credit, including the number of installments and
renewals;
4. The fees charged by the credit access business to arrange or obtain an extension of consumer
credit;and
5. The documentation used to establish a consumer's income under section 20-31 of this article.
B. A credit access business shall maintain a copy of each written agreement between the credit
access business and a consumer evidencing an extension of a consumer credit(including, but not
limited to, any refinancing or renewal granted to the consumer).
C. A credit access business shall maintain copies of all quarterly reports filed with the Texas
Consumer Credit Commissioner under V.T.C.A., Finance Code §393.627.
D. The records required to be maintained by a credit access business under this section must be
retained for at least three years and made available for inspection by the city upon request during
the usual and customary business hours of the credit access business.
119.12. Restriction on extension of consumer credit.
A. The cash advanced under an extension of consumer credit that a credit access business obtains
for a consumer or assists a consumer in obtaining in the form of a deferred presentment
transaction may not exceed 20 percent of the consumer's gross monthly income.
B. The cash advanced under an extension of consumer credit that a credit access business obtains
for a consumer or assists a consumer in obtaining in the form of a motor vehicle title loan may
not exceed the lesser of:
1. Three percent of the consumer's gross annual income; or
2. Seventy percent of the retail value of the motor vehicle.
C. A credit access business shall use a paycheck or other documentation establishing income to
determine a consumer's income.
D. An extension of consumer credit that a credit access business obtains for a consumer or assists a
consumer in obtaining and that provides for repayment in installments may not be payable in
more than four installments. Proceeds from each installment must be used to repay at least 25
percent of the principal amount of the extension of consumer credit. An extension of consumer
credit that provides for repayment in installments may not be refinanced or renewed.
E. An extension of consumer credit that a credit access business obtains for a consumer or assists a
consumer in obtaining and that provides for a single lump sum repayment may not be refinanced
or renewed more than three times. Proceeds from each refinancing or renewal must be used to
repay at least 25 percent of the principal amount of the original extension of consumer credit.
fl F. For purposes of this section, an extension of consumer credit that is made to a consumer within
seven days after a previous extension of consumer credit has been paid by the consumer will
constitute a refinancing or renewal.
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119.13. Requirement of consumer understanding of agreement.
A. Every credit access business location must maintain on its premises, to be available for use by
consumers,agreements in the English and Spanish languages.
B. For every consumer who cannot read, every agreement between the credit access business and
a consumer evidencing an extension of consumer credit (including, but not limited to, any
refinancing or renewal granted to the consumer) must be read to the consumer in its entirety,
prior to the consumer's signature.
C. For every consumer who cannot read, every disclosure and notice required by law must be read
to the consumer in its entirety, prior to the consumer's signature.
119.14. Referral to consumer credit counseling.
A credit access business shall provide a form, to be prescribed by the director,to each consumer seeking
assistance in obtaining an extension of consumer credit which references non-profit agencies that provide
financial education and training programs and agencies with cash assistance programs.The form will also
contain information regarding extensions of consumer credit, and must include the information required
by subsections 119.11 A 1-5 of this article specific to the loan agreement with the consumer. If the
director has prescribed a form in the consumer's language of preference, the form must be provided in
the consumer's language of preference.
PASSED and APPROVED this 12th day of June, 2018.
Ss.%"--""
Doug Svien, ayor
ATTEST:
v L . 41,
Staci L. :, Ci Secretary
Reviewed by Allen Bar es,
City Administrator
Approved as to form and legality by
Randy Thomas,City Attorney
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