Serving the Church in Texas

HB 741: protects consumers of payday and auto title loans

Michael Barba

The Texas Catholic Conference of Bishops supports HB 741.

HB 741 establishes that a credit services organization (CSO)[1] may not: extend credit to a consumer, or offer advice or assistance to a consumer unless they first evaluate the consumer’s ability to repay the extended credit alongside all other known obligations. We applaud Rep. Bernal for filing this legislation.

The federal government[2] recently established a similar provision which requires lenders to consider eight ability-to-repay indicators:

1.      current or reasonably expected income or assets;

2.      current employment status;

3.      the monthly payment on the covered transaction;

4.      the monthly payment on any simultaneous loan;

5.      the monthly payment for mortgage-related obligations;

6.      current debt obligations, alimony, and child support;

7.      the monthly debt-to-income ratio or residual income; and

8.      credit history.

By requiring CSOs to verify these indicators, borrowers are protected from abusive lending practices, by which abusive lenders trap working Texans in a cycle of debt. The federal regulation establishes that records verifying their ability-to-repay practices be retained for a minimum of 3 years. We respectfully submit that this length of time is sufficient for the state to ensure compliance.

[1] Defined in Texas Finance Code Sec. 393.001 as: “a person who provides, or represents that the person can or will provide, for the payment of valuable consideration any of the following services with respect to the extension of consumer credit by others:

(A)  improving a consumer's credit history or rating;

(B)  obtaining an extension of consumer credit for a consumer; or

(C)  providing advice or assistance to a consumer with regard to Paragraph (A) or (B).”
[2] Acting through the Consumer Financial Protection Bureau (CFPB), established by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, the federal government regulates the financial industry.