TITLE 7. BANKING AND SECURITIES

PART 1. FINANCE COMMISSION OF TEXAS

CHAPTER 2. RESIDENTIAL MORTGAGE LOAN ORIGINATORS REGULATED BY THE OFFICE OF CONSUMER CREDIT COMMISSIONER

SUBCHAPTER A. APPLICATION PROCEDURES

7 TAC §2.108

The Finance Commission of Texas (commission) adopts new §2.108 (relating to Military Licensing), in 7 TAC, Chapter 2, concerning Residential Mortgage Loan Originators Regulated by the Office of Consumer Credit Commissioner.

The commission adopts new §2.108 without changes to the proposed text as published in the August 30, 2019, issue of the Texas Register (44 TexReg 4599).

In general, the purpose of new §2.108 is to specify residential mortgage loan originator licensing requirements for military service members, military veterans, and military spouses, in accordance with Chapter 55 of the Texas Occupations Code, as amended by SB 1200, which the Texas Legislature passed in the 2019 legislative session.

Chapter 55 of the Texas Occupations Code describes licensing requirements for military service members, military veterans, and military spouses. Chapter 55 applies to licenses that "must be obtained by an individual to engage in a particular business." Tex. Occ. Code §55.001(3). Chapter 55 includes an exemption for fees or penalties based on late renewal; an expedited license application procedure for certain previously licensed individuals; and a provision to credit military service, training, or education toward licensing requirements. SB 1200 adds a new section to Chapter 55, providing that a military spouse may engage in a licensed occupation in Texas without an applicable license, if the spouse is licensed in good standing in another jurisdiction with licensing requirements that are substantially equivalent to Texas's requirements.

Adopted new §2.108 specifies residential mortgage loan originator licensing requirements for military service members, military veterans, and military spouses, in accordance with Chapter 55. Subsection (a) explains the purpose of the section. Subsection (b) incorporates definitions from Texas Occupations Code, §55.001. Subsection (c) describes an exemption for fees or penalties based on late renewal. Subsection (d) describes the expedited license application procedure for certain previously licensed individuals. Subsection (e) describes the authority for a military spouse licensed in another jurisdiction to operate in Texas, in accordance with SB 1200. Under subsection (e), the OCCC will consider a residential mortgage loan originator to be licensed in a jurisdiction with substantially equivalent requirements if the residential mortgage loan originator is licensed in accordance with the federal S.A.F.E. Mortgage Licensing Act, 12 U.S.C. §§5101-5117. Subsection (f) explains that military service, training, or education will be credited toward licensing requirements as part of an applicant's employment history.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. The OCCC did not receive any informal written precomments on the rule text draft.

The commission received no written comments on the proposal.

The new rule is adopted under Texas Occupations Code, §§55.002, 55.004(a), 55.0041(e) (as added by SB 1200), and 55.007(b), which authorize a state agency to adopt rules implementing requirements of Chapter 55 of the Texas Occupations Code. In addition, Texas Finance Code, §180.004(b) grants the commission the authority to implement rules to comply with Texas Finance Code, Chapter 180.

The statutory provisions affected by the adoption are contained in Texas Occupations Code, Chapter 55 and Texas Finance Code, Chapter 180.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903821

Matthew J. Nance

Deputy General Counsel

Finance Commission of Texas

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 936-7660


PART 2. TEXAS DEPARTMENT OF BANKING

CHAPTER 31. PRIVATE CHILD SUPPORT ENFORCEMENT AGENCIES

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), adopts the repeal of Chapter 31, §§31.1, 31.11 - 31.20, 31.31 - 31.34, 31.36 - 31.39, 31.51 - 31.56, 31.72 - 31.76, 31.91 - 31.96, and 31.111 - 31.115, concerning private child support enforcement agencies. The repeals are adopted without changes to the proposed text as published in the August 30, 2019, issue of the Texas Register (44 TexReg 4600). The repealed rules will not be republished.

The repeal of Chapter 31, Subchapter A, §31.1, is in response to the passage of Senate Bill 614 (SB 614) in the 86th Regular Session of the Texas Legislature. Per recommendation of the Sunset Advisory Commission, SB 614 removes the requirement that private child support enforcement agencies register with the department.

The department received no comments regarding the proposed repeal.

SUBCHAPTER A. GENERAL PROVISIONS

7 TAC §31.1

The repeal of Chapter 31, Subchapter A, §31.1 is adopted under Texas Finance Code, §396.051(b), which requires the commission to adopt rules as necessary for administration of the chapter.

Texas Finance Code, Chapter 396 is affected by the repealed section.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903799

Catherine Reyer

General Counsel

Texas Department of Banking

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 475-1301


SUBCHAPTER B. HOW DO I REGISTER MY AGENCY TO ENGAGE IN THE BUSINESS OF CHILD SUPPORT ENFORCEMENT?

7 TAC §§31.11 - 31.20

The repeal of Chapter 31, Subchapter B, §§31.11 - 31.20, is adopted under Texas Finance Code, §396.051(b), which requires the commission to adopt rules as necessary for administration of the chapter.

Texas Finance Code, Chapter 396.203 is affected by the repealed sections.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903800

Catherine Reyer

General Counsel

Texas Department of Banking

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 475-1301


SUBCHAPTER C. WHAT ARE MY AGENCY'S RESPONSIBILITIES AFTER REGISTRATION?

7 TAC §§31.31 - 31.34, 31.36 - 31.39

The repeal of Chapter 31, Subchapter C, §§31.31 - 31.34, 31.36 - 31.39, is adopted under Texas Finance Code, §396.051(b), which requires the commission to adopt rules as necessary for administration of the chapter.

Texas Finance Code, Chapter 396 is affected by the repealed sections.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903801

Catherine Reyer

General Counsel

Texas Department of Banking

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 475-1301


SUBCHAPTER D. WHAT ARE THE DEPARTMENT REQUIREMENTS FOR ADDING AN OFFICE, CLOSING AN OFFICE, RELOCATING AN OFFICE, TRANSFERRING CONTROL OF MY AGENCY, CEASING TO DO BUSINESS, OR CHANGING MY EMAIL OR WEB SITE ADDRESSES?

7 TAC §§31.51 - 31.56

The repeal of Chapter 31, Subchapter D, §§31.51 - 31.56, is adopted under Texas Finance Code, §396.051(b), which requires the commission to adopt rules as necessary for administration of the chapter.

Texas Finance Code, Chapter 396 is affected by the repealed sections.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903802

Catherine Reyer

General Counsel

Texas Department of Banking

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 475-1301


SUBCHAPTER E. HOW DOES THE DEPARTMENT EXERCISE ITS ENFORCEMENT AUTHORITY?

7 TAC §§31.72 - 31.76

The repeal of Chapter 31, Subchapter E, §§31.72 - 31.76, is adopted under Texas Finance Code, §396.051(b), which requires the commission to adopt rules as necessary for administration of the chapter.

Texas Finance Code, Chapter 396 is affected by the repealed sections.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903803

Catherine Reyer

General Counsel

Texas Department of Banking

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 475-1301


SUBCHAPTER F. FOREIGN AGENCIES REGISTERED IN OTHER STATES

7 TAC §§31.91 - 31.96

The repeal of Chapter 31, Subchapter F, §§31.91 - 31.96, is adopted under Texas Finance Code, §396.051(b), which requires the commission to adopt rules as necessary for administration of the chapter.

Texas Finance Code, Chapter 396 is affected by the repealed sections.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903804

Catherine Reyer

General Counsel

Texas Department of Banking

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 475-1301


SUBCHAPTER G. CIVIL REMEDIES

7 TAC §§31.111 - 31.115

The repeal of Chapter 31, Subchapter G, §§31.111 - 31.115, is adopted under Texas Finance Code, §396.051(b), which requires the commission to adopt rules as necessary for administration of the chapter.

Texas Finance Code, Chapter 396 is affected by the repealed sections.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903805

Catherine Reyer

General Counsel

Texas Department of Banking

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 475-1301


CHAPTER 33. MONEY SERVICES BUSINESSES

7 TAC §§33.3, 33.13, 33.15, 33.27, 33.51

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), adopts amendments to §§33.3, 33.13, 33.15, 33.27, and 33.51, concerning bullion depository agents, without changes to the proposed text as published in the August 30, 2019, issue of the Texas Register (44 TexReg 4603). The amended rule will not be republished.

The amendments to §§33.3, 33.13, 33.15, 33.27, and 33.51 are in response to the passage of House Bill 2458 (HB 2458) in the 86th Regular Session of the Texas Legislature.

In 2015, the Texas Legislature passed House Bill 483 (HB 483), which established the Texas Bullion Depository within the Office of the Comptroller of Public Accounts. HB 483 amended sections of Texas Finance Code Chapter 151 regarding regulation of money services businesses, outlining basic requirements for licensure of bullion depository agents by the department. The commission subsequently amended various sections of Chapter 33 to implement the new legislation.

HB 2458 removes all statutory references to licensed depository agents, instead allowing the depository to use private, independently managed financial institutions to provide retail locations for the provision of depository services to the public. These amendments delete references to bullion depository agents in various sections of Chapter 33.

The department received no comments regarding the proposed amendments.

The amendments to Chapter 33 are adopted under Texas Finance Code §151.102, which authorizes the commission to adopt rules for the regulation of money services businesses.

Texas Finance Code, §§151.002, 151.003, 151.201, 151.207, 151.302, 151.502, 151.602, and 151.702 are affected by the amended sections.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903806

Catherine Reyer

General Counsel

Texas Department of Banking

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 475-1301


7 TAC §§33.71 - 33.75

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), adopts the repeal of §§33.71 - 33.75 without changes to the proposed text as published in the August 30, 2019, issue of the Texas Register (44 TexReg 4607). The repealed sections will not be republished.

The repeal of §§33.71 - 33.75 is in response to the passage of House Bill 2458 (HB 2458) in the 86th Regular Session of the Texas Legislature.

In 2015, the Texas Legislature passed House Bill 483 (HB 483), which established the Texas Bullion Depository within the Office of the Comptroller of Public Accounts. HB 483 amended sections of Texas Finance Code, Chapter 151 regarding regulation of money services businesses, outlining basic requirements for licensure of bullion depository agents by the department. The commission subsequently amended various sections of Chapter 33 to implement the new legislation.

HB 2458 removes all statutory references to licensed depository agents, instead allowing the depository to use private, independently managed financial institutions to provide retail locations for the provision of depository services to the public. This repeal deletes those sections that deal exclusively with bullion depository agents.

The department received no comments regarding the proposed repeal.

The repeal of §§33.71 - 33.75 is adopted under Texas Finance Code, §151.102, which authorizes the commission to adopt rules for the regulation of money services businesses.

Texas Finance Code, §§151.002, 151.003, 151.201, 151.207, 151.302, 151.502, 151.602, and 151.702 are affected by the repealed sections.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903807

Catherine Reyer

General Counsel

Texas Department of Banking

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 475-1301


PART 4. DEPARTMENT OF SAVINGS AND MORTGAGE LENDING

CHAPTER 79. RESIDENTIAL MORTGAGE LOAN SERVICERS

SUBCHAPTER B. COMPLAINTS AND INVESTIGATIONS

7 TAC §79.20

The Finance Commission of Texas (the commission) adopts amendments to 7 TAC §79.20, concerning investigations.

The Finance Commission adopts amendments to 7 TAC §79.20 with changes to the proposed text as published in the July 19, 2019, issue of the Texas Register (44 TexReg 3599). The rules will be republished.

The amendments are adopted to provide consistent procedures for persons to complain about conduct of entities regulated by the department. The amendments are adopted in response to a recommendation of the Sunset Advisory Commission that the department update its complaint processing provisions to be in line with the Sunset Advisory Commission's Licensing and Regulation Model guidelines (Sunset Model).

The Sunset Model is intended as a guide to assist in evaluating occupational licensing and regulatory agencies to see if they are efficient, effective, fair, and accountable in their mission to protect the public. Complaint filing, processing, and recordkeeping are topics covered in the Sunset Model. The amendments implement the applicable recommendations contained in the Sunset Model.

The Department distributed a draft of the proposed amendment to the Office of the Governor, who had no comments. The Department then held a stakeholders meeting, to which it did not receive any formal written precomments, but did receive verbal feedback. The Department appreciates the thoughtful input provided by stakeholders and believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

The Department received no comments on the proposal.

The rules are adopted under Government Code §2001.004, which provides the authority to adopt rules of practice stating the nature and requirements of all available formal and informal procedures, Finance Code §11.307, which provides that the finance commission shall adopt rules applicable to each entity regulated by the Department relating to consumer complaints, Finance Code §13.011, which provides that the savings and mortgage lending commissioner shall prepare information concerning the Department's regulatory functions and consumer complaint procedures, and Finance Code §158.003, which provides that the finance commission may adopt rules necessary to ensure that residential mortgage loan servicers comply with federal and state laws, rules, and regulations.

Other statutes affected by the adopted amendments are found in Finance Code Chapter 156, 157, 158, and 180.

§79.20.Investigations.

(a) Investigations will be conducted as deemed appropriate in light of all the relevant facts and circumstances then known. Such investigation may include any or all of the following:

(1) review of documentary evidence;

(2) interviews with complainants, registrants, and third parties;

(3) obtaining reports, advice, and other comments and assistance of other state and/or federal regulatory, enforcement, or oversight bodies; and

(4) other lawful investigative techniques as the Commissioner reasonably deems necessary and/or appropriate, including, but not limited to, requesting that complainants and/or other parties made the subject of complaints provide explanatory, clarifying, or supplemental information.

(b) If the Department requests reports or other information of registrant and registrant does not respond as required a $150 penalty may be assessed against the registrant.

(c) A complaint investigation fee may be assessed against a person required to be registered under this Act. The amount of the complaint investigation fee assessed is limited to costs incurred, will be at the discretion of the Commissioner, and may not exceed $975 per complaint.

(d) The Commissioner may conduct a Departmental investigation if the Commissioner, after due consideration of the circumstances, determines that the investigation is necessary to prevent immediate harm and to carry out the purposes of the Act.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903815

Ernest C. Garcia

General Counsel

Department of Savings and Mortgage Lending

Effective date: November 7, 2019

Proposal publication date: July 19, 2019

For further information, please call: (512) 475-2534


SUBCHAPTER C. HEARINGS AND APPEALS

7 TAC §79.30

The Finance Commission of Texas (the commission) adopts amendments to 7 TAC §79.30, concerning hearings and appeals.

The Finance Commission adopts amendments to 7 TAC §79.30 without changes to the proposed text as published in the July 19, 2019, issue of the Texas Register (44 TexReg 3600). The rules will not be republished.

The Department received no comments on the proposal.

The amendments are adopted to provide consistent procedures for resolving complaints concerning entities regulated by the department. The amendments are adopted in response to a recommendation of the Sunset Advisory Commission that the department update its complaint resolution provisions to be in line with the Sunset Advisory Commission's Licensing and Regulation Model guidelines (Sunset Model).

The Sunset Model is intended as a guide to assist in evaluating occupational licensing and regulatory agencies to see if they are efficient, effective, fair, and accountable in their mission to protect the public. Complaint resolution, hearings, and appeals are topics covered in the Sunset Model. The amendments implement the applicable recommendations contained in the Sunset Model.

The Department distributed a draft of the proposed amendment to the Office of the Governor, who had no comments. The Department then held a stakeholders meeting, to which it did not receive any formal written precomments, but did receive verbal feedback. The Department appreciates the thoughtful input provided by stakeholders and believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

The rules are adopted under Government Code §2001.004, which provides the authority to adopt rules of practice stating the nature and requirements of all available formal and informal procedures, Finance Code §11.307, which provides that the finance commission shall adopt rules applicable to each entity regulated by the Department relating to consumer complaints, Finance Code §13.011, which provides that the savings and mortgage lending commissioner shall prepare information concerning the Department's regulatory functions and consumer complaint procedures, and Finance Code §158.003, which provides that the finance commission may adopt rules necessary to ensure that residential mortgage loan servicers comply with federal and state laws, rules, and regulations.

Other statutes affected by the adopted amendments are found in Finance Code Chapter 156, 157, 158, and 180.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903817

Ernest C. Garcia

General Counsel

Department of Savings and Mortgage Lending

Effective date: November 7, 2019

Proposal publication date: July 19, 2019

For further information, please call: (512) 475-2534


CHAPTER 80. TEXAS RESIDENTIAL MORTGAGE LOAN COMPANIES

SUBCHAPTER C. DUTIES AND RESPONSIBILITIES

7 TAC §80.201

The Finance Commission of Texas (the commission) adopts amendments to 7 Texas Administrative Code Chapter 80, Subchapter C, §80.201, concerning loan status forms. The amended rule is adopted with changes to the proposed text as published in the April 26, 2019, issue of the Texas Register (44 TexReg 2131) and will be republished.

The commission received numerous comments on the proposed amendments in May 2019. In addition, a stakeholders meeting was held on September 9, 2019, at which time additional comments were received.

The adoption regarding 7 TAC §80.201 is to clarify the usage of conditional pre-qualification and conditional loan approval forms, when such forms are provided by mortgage loan companies to mortgage applicants or prospective mortgage applicants. Adopted Graphic Form A the conditional pre-qualification letter content and Form B the conditional loan approval letter content: (1) make the content of the conditional pre-qualification forms or letters used by mortgage loan companies, mortgage bankers and residential mortgage loan originators more uniform; (2) help emphasize to the mortgage applicants that the pre-qualification form is not a loan approval or commitment to lend; (3) make the content of the conditional loan approval forms or letters used by mortgage loan companies, mortgage bankers and residential mortgage loan originators more uniform; and (4) help emphasize to the mortgage applicant that the conditional loan approval form states that the applicant is in fact approved for a mortgage loan, provided that certain conditions are met prior to loan closing.

Public comment received from various individuals, business entities and the Texas Mortgage Bankers Association stated that the effective date of any rule / form amendment should not be effective for 90 to 150 days to allow for systems to be updated with any amended forms. The commission agrees with these comments and therefore the adopted rule amendments will not take effect until May 1, 2020.

Mr. John Fleming on behalf of the Texas Mortgage Bankers Association commented that the proposed language in subsections (a) and (b), referencing that there was no requirement for the forms to be issued, could lead to confusion regarding voluntary usage of the forms and he suggested alternate language. The commission believes that language in such paragraphs as existing and adopted convey that issuance of the forms is not mandatory, but rather, when written confirmation is provided, the substance in the loan status forms should be conveyed to an applicant or prospective applicant.

Stacy G. London commented that Forms A and B, should include the contact information of the originator. The commission agrees with such comment and therefore Forms A and B shall require an originator to provide their mailing address, email address and a phone number, as well as their NMLS number.

Comments received from the Texas Realtors association recommended that any rule amendment state that conditional loan approvals should not be issued absent verification by the company or originator. The commission agrees with this comment and therefore the adopted rule amendment will state this explicitly in subsection (b).

Comments received from various individuals, business entities (including Encompass Lending Group) and the Association of Texas Mortgage Professionals, (through both Mr. Everett Ives and Daniel Jara) stated that any amendments should recognize that verifications are often accomplished through automated or electronic means. The commission agrees with these comments and therefore the adopted rule amendments will state explicitly in subsection (b) that verifications may be conducted manually or by electronic means.

Comments received from the firm of Pepper Hamilton suggested that the title of Form A should be Conditional Approval or Pre-Approval and that the title to Form B should be changed to Loan Commitment. The commission agrees that it would be helpful to modify the title of Form A for further clarification and as adopted Form A shall be entitled Conditional Pre-Qualification Letter. As to changing the title of Form B to Loan Commitment, the commission believes that such a title would convey more than is intended to a prospective applicant or applicant and therefore as adopted the title to Form B shall remain Conditional Approval Letter.

Mr. Everett Ives on behalf of the Association of Texas Mortgage Professionals as to Form B commented that the word "encumbrances" in paragraph 2 should be changed to the broader "conditions or exceptions". Similarly, Stacy G. London commented that the language used could be broader, such as a "title commitment acceptable to lender". The commission agrees with such comments and therefore the adopted form B deletes the word encumbrances and instead the sentence will read that "(t)he lender receives an acceptable title commitment".

Mr. Everett Ives on behalf of the Association of Texas Mortgage Professionals as to Form B commented that paragraph 3 could also make reference to ingress, setbacks, easements and shortages in area or deletions on Schedule B of a title commitment. Similarly, Stacy G. London commented that such paragraph should simply read that the "title commitment is acceptable to lender and title company". The commission agrees that broader language is preferable and therefore such paragraph shall read "(t)he lender receives an acceptable survey".

Mr. Everett Ives on behalf of the Association of Texas Mortgage Professionals as well as Wayne King and Paul Marsh of Encompass Lending Group commented that the forms when referring to "loan" documents that the lender may require should be changed to refer to "all" documents that the lender may require as many documents that require signature, such as disclosures, are not strictly "loan" documents. The commission agrees with this comment and therefore the adopted forms in paragraph 6 will refer to all documents a lender may require.

Several comments received stated that depositories were not required to use loan status forms and placed non depositories at somewhat of a disadvantage as non-depositories were required to use loan status forms. However, Tex. Fin. Code §§156.105 and 157.02012 require the Finance Commission to adopt loan status forms applicable to non-depositories and there is no jurisdiction to require depositories to use similar forms.

The proposed amendments as published considered adding language that a Form B loan approval form would not be issued until all "credit requirements" had been met. Mr. Everett Ives on behalf of the Texas Mortgage Professionals objected to such phrase as being too broad and thus limiting the possible usage of Form B. John Fleming on behalf of the Texas Mortgage Bankers Association commented that use of such phrase would require further clarification. The commission agrees with such comments and the phrase "credit requirements" will be omitted in reference to Form B, in this adopted version.

The proposed amendments as published contemplated the addition of a subsection to state that an individual was required to be licensed to issue a loan status form, but it was thereafter decided that such statement was not required in this rule. In addition, the firm of Pepper Hamilton, LLP objected to the inclusion of such language.

The adoption is made under the authority of Texas Finance Code §11.306 and §156.102.

The statutory provisions affected by the adoptions are contained in Texas Finance Code, Chapter 156.

§80.201.Loan Status Forms.

(a) Except as otherwise provided by subsection (c) of this section, when provided to a mortgage applicant or prospective mortgage applicant, written confirmation of conditional pre-qualification shall include the information in Form A, Figure: 7 TAC §80.201(a). This information can be provided by utilizing Form A or an alternate form that includes all of the information found on Form A. There is no requirement to issue a written confirmation of conditional pre-qualification. Form A or an alternate form may be modified by adding any of the following as needed:

Figure: 7 TAC §80.201(a) (.pdf)

(1) Any additional aspects of the loan as long as not misleading;

(2) Any additional items that the originator has reviewed in determining conditional qualifications; or

(3) Any additional terms, conditions, and requirements.

(b) When provided to a mortgage applicant or prospective mortgage applicant, written notification of conditional loan approval on the basis of credit worthiness, but not on the basis of collateral, shall include the information in Form B, Figure: 7 TAC §80.201(b). This information can be provided by utilizing Form B or an alternate form that includes all of the information found on Form B. There is no requirement to issue a written notification of conditional loan approval. Form B or an alternate form may be modified by adding the additional information permitted by subsection (a)(1) - (3) of this section, or disclosure of fees charged. A disclosure of fees charged, on Form B or an alternate form, does not serve as a substitute for any fee disclosure required by state or federal laws or regulations. A conditional loan approval should not be issued unless the company or originator has verified that, absent any material changes prior to closing, the mortgage applicant or prospective mortgage applicant has satisfied all loan requirements related to credit, income, assets, and debts. Verification may be conducted manually or by electronic means.

Figure: 7 TAC §80.201(b) (.pdf)

(c) Subsection (a) of this section does not apply to "firm offers of credit," as that term is defined in 15 U.S.C. §1681a (l).

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903808

Ernest C. Garcia

General Counsel

Department of Savings and Mortgage Lending

Effective date: May 1, 2020

Proposal publication date: April 26, 2019

For further information, please call: (512) 475-2534


SUBCHAPTER D. COMPLIANCE AND ENFORCEMENT

7 TAC §80.301, §80.302

The Finance Commission of Texas (the commission), on behalf of the Department of Savings and Mortgage Lending (the department), adopts amendments to 7 TAC §80.301, concerning complaints and investigations, and to 7 TAC 80.302, concerning hearings. The amendments are adopted without changes to the proposed text as published in the July 19, 2019, issue of the Texas Register (44 TexReg 3601). The rules will not be republished.

The Department received no comments on the proposal.

The amendments are adopted to provide consistent procedures for persons to complain about conduct of entities regulated by the department and for resolving complaints concerning entities regulated by the department. The amendments are adopted in response to a recommendation of the Sunset Advisory Commission that the department update its complaint processing and resolution provisions to be in line with the Sunset Advisory Commission' Licensing and Regulation Model guidelines (Sunset Model).

The Sunset Model is intended as a guide to assist in evaluating occupational licensing and regulatory agencies to see if they are efficient, effective, fair, and accountable in their mission to protect the public. Complaint filing, processing, recordkeeping, resolution, hearings, and appeals are topics covered in the Sunset Model. The amendments implement the applicable recommendations contained in the Sunset Model.

The Department distributed a draft of the proposed amendment to the Office of the Governor, who had no comments. The Department then held a stakeholders meeting, to which it did not receive any formal written precomments, but did receive verbal feedback. The Department appreciates the thoughtful input provided by stakeholders and believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

The amendments are adopted under Government Code §2001.004, which provides the authority to adopt rules of practice stating the nature and requirements of all available formal and informal procedures, Finance Code §11.307, which provides that the finance commission shall adopt rules applicable to each entity regulated by the Department relating to consumer complaints, Finance Code §13.011, which provides that the savings and mortgage lending commissioner shall prepare information concerning the Department's regulatory functions and consumer complaint procedures, and Finance Code § 156.102, which provides that the finance commission may adopt and enforce rules necessary for the intent of or to ensure compliance with Chapter 156.

Other statutes affected by the adopted amendments are found in Finance Code Chapter 156, 157, 158, and 180.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903819

Ernest C. Garcia

General Counsel

Department of Savings and Mortgage Lending

Effective date: November 7, 2019

Proposal publication date: July 19, 2019

For further information, please call: (512) 475-2534


CHAPTER 81. MORTGAGE BANKERS AND RESIDENTIAL MORTGAGE LOAN ORIGINATORS

SUBCHAPTER B. LICENSING

7 TAC §81.110

The Finance Commission of Texas (the commission) adopts new 7 TAC §81.110, concerning licensing military service members, military veterans, and military spouses.

The Finance Commission adopts new 7 TAC §81.110 without changes to the proposed text as published in the August 30, 2019, issue of the Texas Register (44 TexReg 4608). The rule will not be republished.

The Department received no comments on the proposal.

The new rule is adopted to implement the requirements of Occupations Code Chapter 55 regarding licensing Military Service Members, Military Veterans, and Military Spouses, as they pertain to the Department and to Residential Mortgage Loan Originators generally.

Occupations Code Chapter 55 contains sections regarding penalty exemptions, extensions of deadlines, alternative licensing arrangements, out of state licenses, expedited procedures, eligibility requirements, fees, and notice provisions.

The Department distributed a draft of the proposed new rule to the Office of the Governor, who had no comments.

The new rule is adopted under Occupations Code §55.002, which provides that a state agency that issues a license shall adopt rules regarding exempting certain individuals from penalties for failure to renew a license; Occupations Code §55.004(a), which provides that a state agency that issues a license shall adopt rules regarding alternative licensing for Military Service Members, Military Veterans, and Military Spouses; Occupations Code §55.0041(e), which provides that a state agency that issues a license shall adopt rules regarding recognizing out-of-state licenses of Military Spouses; Occupations Code §55.007(b), which provides that a state agency that issues a license shall adopt rules regarding license eligibility requirements for applicants with military experience; Finance Code §156.102, which provides that the finance commission may adopt and enforce rules necessary for the intent of or to ensure compliance with Chapter 156; Finance Code §157.0023, which provides that the finance commission may adopt and enforce rules necessary for the intent of or to ensure compliance with Chapter 157; and Finance Code §180.004, which provides that the finance commission may implement rules necessary to comply with Chapter 180.

Other statutes affected by the adopted new rule are found in Finance Code Chapter 156, 157, and 180.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903820

Ernest C. Garcia

General Counsel

Department of Savings and Mortgage Lending

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 475-2534


SUBCHAPTER C. DUTIES AND RESPONSIBILITIES

7 TAC §81.201

The Finance Commission of Texas (the commission) on behalf of the Department of Savings and Mortgage Lending (the department), adopts amendments to 7 Texas Administrative Code Chapter 81, Subchapter C, §81.201 concerning loan status forms. The amendments are adopted with changes to the proposed text as published in the April 26, 2019, issue of the Texas Register (44 TexReg 2132). The rule will be republished.

The commission received numerous comments on the proposed amendments in May of 2019. In addition, a stakeholders meeting was held on September 9, 2019, at which time additional comments were received.

The adoption regarding 7 Texas Administrative Code §81.201 is to clarify the usage of conditional pre-qualification and conditional loan approval forms, when such forms are provided by mortgage bankers and residential mortgage loan originators to mortgage applicants or prospective mortgage applicants. Adopted Graphic Form A the conditional pre-qualification letter content and Form B the conditional loan approval letter content: (1) make the content of the conditional pre-qualification forms or letters used by mortgage loan companies, mortgage bankers and residential mortgage loan originators more uniform; (2) help emphasize to the mortgage applicants that the pre-qualification form is not a loan approval or commitment to lend; (3) make the content of the conditional loan approval forms or letters used by mortgage loan companies, mortgage bankers and residential mortgage loan originators more uniform; and (4) help emphasize to the mortgage applicant that the conditional loan approval form states that the applicant is in fact approved for a mortgage loan, provided that certain conditions are met prior to loan closing.

Public comment received from various individuals, business entities and the Texas Mortgage Bankers Association stated that the effective date of any rule / form amendment should not be effective for 90 to 150 days to allow for systems to be updated with any amended forms. The commission agrees with these comments and therefore the adopted rule amendments will not take effect until May 1, 2020.

Mr. John Fleming on behalf of the Texas Mortgage Bankers Association commented that the proposed language in subsections (a) and (b) referencing that there was no requirement for the forms to be issued could lead to confusion regarding voluntary usage of the forms and he suggested alternate language. The commission believes that language in such paragraphs as existing and adopted convey that issuance of the forms is not mandatory. But rather, when written confirmation is provided, the substance in the loan status forms should be conveyed to an applicant or prospective applicant.

Stacy G. London commented that Forms A and B, should include the contact information of the originator. The commission agrees with such comment and therefore Forms A and B, shall require an originator to provide their mailing address, email address and a phone number as well as their NMLS number.

Comments received from the Texas Realtors association recommended that any rule amendment state that conditional loan approvals should not be issued absent verification by the company or originator. The commission agrees with this comment and therefore the adopted rule amendment will state this explicitly in subsection (b).

Comments received from various individuals, business entities (including Encompass Lending Group) and the Association of Texas Mortgage Professionals, (through both Mr. Everett Ives and Daniel Jara) stated that any amendments should recognize that verifications are often accomplished through automated or electronic means. The commission agrees with these comments and therefore the adopted rule amendments will state explicitly in subsection (b) that verifications may be conducted manually or by electronic means.

Comments received from the firm of Pepper Hamilton suggested that the title of Form A should be Conditional Approval or Pre-Approval and that the title to Form B should be changed to Loan Commitment. The commission agrees that it would be helpful to modify the title of Form A for further clarification and as adopted Form A shall be entitled Conditional Pre-Qualification Letter. As to changing the title of Form B to Loan Commitment, the commission believes that such a title would convey more than is intended to a prospective applicant or applicant and therefore as adopted the title to Form B shall remain Conditional Approval Letter.

Mr. Everett Ives on behalf of the Association of Texas Mortgage Professionals as to Form B commented that the word "encumbrances" in paragraph 2 should be changed to the broader "conditions or exceptions". Similarly, Stacy G. London commented that the language used could be broader, such as a "title commitment acceptable to lender". The commission agrees with such comments and therefore the adopted from B deletes the word encumbrances and instead the sentence will read that "[t]he lender receives an acceptable title commitment".

Mr. Everett Ives on behalf of the Association of Texas Mortgage Professionals as to Form B commented that paragraph 3 could also make reference to ingress, setbacks, easements and shortages in area or deletions on Schedule B of a title commitment. Similarly, Stacy G. London commented that such paragraph should simply read that the "title commitment is acceptable to lender and title company". The commission agrees that broader language is preferable and therefore such paragraph shall read "[t]he lender receives an acceptable survey".

Mr. Everett Ives on behalf of the Association of Texas Mortgage Professionals as well as Wayne King and Paul Marsh of Encompass Lending Group commented that the forms when referring to "loan" documents that the lender may require should be changed to refer to "all" documents that the lender may require as many documents that require signature, such as disclosures, are not strictly "loan" documents. The commission agrees with this comment and therefore the adopted forms in paragraph 6 will refer to all documents a lender may require.

Several comments received stated that depositories were not required to use loan status forms and placed non depositories at somewhat of a disadvantage as non-depositories were required to use loan status forms. However, Texas Fin. Code §§156.105 and 157.02012 require the Finance Commission to adopt loan status forms applicable to non-depositories and there is no jurisdiction to require depositories to use similar forms.

The proposed amendments as published considered adding language that a Form B loan approval form would not be issued until all "credit requirements" had been met. Mr. Everett Ives on behalf of the Texas Mortgage Professionals objected to such phrase as being too broad and thus limiting the possible usage of Form B. John Fleming on behalf of the Texas Mortgage Bankers Association commented that use of such phrase would require further clarification. The commission agrees with such comments and the phrase "credit requirements" will be omitted in reference to Form B, in this adopted version.

The proposed amendments as published contemplated the addition of a subsection to state that an individual was required to be licensed to issue a loan status form, but it was thereafter decided that such statement was not required in this rule and it has therefore been omitted from this adopted version. In addition, the firm of Pepper Hamilton, LLP objected to the inclusion of such language.

The adoption is made under the authority of Texas Finance Code §§11.306 and 157.0023.

The statutory provisions affected by the adoptions are contained in Texas Finance Code, Chapter 157.

§81.201.Loan Status Forms.

(a) Except as otherwise provided by subsection (c) of this section, when provided to a mortgage applicant or prospective mortgage applicant written confirmation of conditional pre-qualification shall include the information in Form A, Figure: 7 TAC §81.201(a). This information can be provided by utilizing Form A or an alternate form that includes all of the information found on Form A. There is no requirement to issue a written confirmation of conditional pre-qualification. Form A or an alternate form may be modified by adding any of the following as needed:

Figure: 7 TAC §81.201(a) (.pdf)

(1) Any additional aspects of the loan as long as not misleading;

(2) Any additional items that the originator has reviewed in determining conditional qualifications; or

(3) Any additional terms, conditions, and requirements.

(b) When provided to a mortgage applicant or prospective mortgage applicant, written notification of conditional loan approval on the basis of credit worthiness, but not on the basis of collateral, shall include the information in Form B, Figure 7: TAC §81.201(b). This information can be provided by utilizing Form B or an alternate form that includes all of the information found on Form B. There is no requirement to issue a written notification of conditional loan approval. Form B or an alternate form may be modified by adding the additional information permitted by subsection (a)(1) - (3) of this section, or disclosure of fees charged. A disclosure of fees charged, on Form B or an alternate form, does not serve as a substitute for any fee disclosure required by state or federal laws or regulations. A conditional loan approval should not be issued unless the company or originator has verified that, absent any material changes prior to closing, the mortgage applicant or prospective mortgage applicant has satisfied all loan requirements related to credit, income, assets, and debts. Verification may be conducted manually or by electronic means.

Figure: 7 TAC §81.201(b) (.pdf)

(c) Subsection (a) of this section does not apply to "firm offers of credit," as that term is defined in 15 U.S.C. §1681a(1).

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903810

Ernest C. Garcia

General Counsel

Department of Savings and Mortgage Lending

Effective date: May 1, 2020

Proposal publication date: April 26, 2019

For further information, please call: (512) 475-2534


PART 5. OFFICE OF CONSUMER CREDIT COMMISSIONER

CHAPTER 83. REGULATED LENDERS AND CREDIT ACCESS BUSINESSES

SUBCHAPTER A. RULES FOR REGULATED LENDERS

DIVISION 5. INTEREST CHARGES ON LOANS

7 TAC §83.501

The Finance Commission of Texas (commission) adopts amendments to §83.501 (relating to Maximum Interest Charge) in 7 TAC, Chapter 83, concerning Regulated Lenders and Credit Access Businesses.

The commission adopts the amendments without changes to the proposed text as published in the August 30, 2019, issue of the Texas Register (44 TexReg 4610). The rule will not be republished.

The commission received no written comments on the proposal.

In general, the purpose of the adopted amendments to §83.501 is to implement HB 3855, which the Texas Legislature passed in the 2019 legislative session, by adding a reference to the single equivalent daily rate authorized under HB 3855.

Texas Finance Code, §342.201(e) allows a lender to charge a three-tiered interest rate on a loan subject to Chapter 342, Subchapter E of the Texas Finance Code. HB 3855 adds a new subsection at Texas Finance Code, §342.201(e-1), specifying that the lender may charge this amount by either: (1) applying an applicable daily rate to each bracket of the unpaid principal balance, or (2) applying a single equivalent daily rate to the entire principal balance.

The adopted amendments to §83.501 implement HB 3855 by specifying that a lender may apply the single equivalent daily rate. In subsection (c), an amendment to paragraph (2) specifies that the currently authorized method for applying a daily rate to brackets applies when the loan is made under Texas Finance Code, §342.201(e) and (e-1)(1). New paragraph (3) explains that interest may be calculated by applying the single equivalent daily rate if the loan is made under Texas Finance Code, §342.201(e) and (e-2).

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. The OCCC received one informal written precomment on the rule text draft. The precomment relates primarily to proposed amendments to model plain language clauses at §90.203. For this reason, the precomment is discussed in connection with the separate adopted amendments to §90.203.

The amendments to §83.501 are adopted under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to ensure compliance with Title 4 of the Texas Finance Code. Additionally, Texas Finance Code, §342.551 authorizes the commission to adopt rules to enforce Chapter 342.

The statutory provisions affected by the adoption are contained in Texas Finance Code, Chapter 342.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903813

Matthew J. Nance

Deputy General Counsel

Office of Consumer Credit Commissioner

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 936-7660


CHAPTER 85. PAWNSHOPS AND CRAFTED PRECIOUS METAL DEALERS

SUBCHAPTER A. RULES OF OPERATION FOR PAWNSHOPS

DIVISION 3. PAWNSHOP EMPLOYEE LICENSE

7 TAC §85.309

The Finance Commission of Texas (commission) adopts new §85.309 (relating to Military Licensing), in 7 TAC, Chapter 85, concerning Pawnshops and Crafted Precious Metal Dealers.

The commission adopts new §85.309 without changes to the proposed text as published in the August 30, 2019, issue of the Texas Register (44 TexReg 4611).

The commission received no written comments on the proposal.

In general, the purpose of new §85.309 is to specify pawnshop employee licensing requirements for military service members, military veterans, and military spouses, in accordance with Chapter 55 of the Texas Occupations Code, as amended by SB 1200, which the Texas Legislature passed in the 2019 legislative session.

Chapter 55 of the Texas Occupations Code describes licensing requirements for military service members, military veterans, and military spouses. Chapter 55 applies to licenses that "must be obtained by an individual to engage in a particular business." Tex. Occ. Code §55.001(3). Chapter 55 includes an exemption for fees or penalties based on late renewal; an expedited license application procedure for certain previously licensed individuals; and a provision to credit military service, training, or education toward licensing requirements. SB 1200 adds a new section to Chapter 55, providing that a military spouse may engage in a licensed occupation in Texas without an applicable license, if the spouse is licensed in good standing in another jurisdiction with licensing requirements that are substantially equivalent to Texas's requirements.

Adopted new §85.309 specifies pawnshop employee licensing requirements for military service members, military veterans, and military spouses, in accordance with Chapter 55. Subsection (a) explains the purpose of the section. Subsection (b) incorporates definitions from Texas Occupations Code, §55.001. Subsection (c) describes an exemption for fees or penalties based on late renewal. Subsection (d) describes the expedited license application procedure for certain previously licensed individuals. Subsection (e) describes the authority for a military spouse licensed in another jurisdiction to operate in Texas, in accordance with SB 1200. Under subsection (e), the OCCC will determine whether a license issued in another jurisdiction is substantially equivalent by reviewing applicable legal requirements in the jurisdiction, as well as the application review process in the other jurisdiction. Subsection (f) explains that military service, training, or education will be credited toward licensing requirements as part of an applicant's employment history.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. The OCCC did not receive any informal written precomments on the rule text draft.

Regarding the effective date of this new rule, Texas Finance Code, §371.006 contains a provision requiring notice to licensees concerning rulemaking for the pawnshop industry. In order to comply with this statutory notice requirement, the delayed effective date for the new rule will be December 1, 2019.

The new rule is adopted under Texas Occupations Code, §§55.002, 55.004(a), 55.0041(e) (as added by SB 1200), and 55.007(b), which authorize a state agency to adopt rules implementing requirements of Chapter 55 of the Texas Occupations Code. In addition, Texas Finance Code, §371.006, authorizes the Finance Commission to adopt rules to enforce Chapter 371 of the Texas Finance Code, and Texas Finance Code, §11.304 authorizes the Finance Commission to adopt rules to ensure compliance with Title 4 of the Texas Finance Code.

The statutory provisions affected by the adoption are contained in Texas Occupations Code, Chapter 55 and Texas Finance Code, Chapter 180.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903814

Matthew J. Nance

Deputy General Counsel

Office of Consumer Credit Commissioner

Effective date: December 1, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 936-7660


CHAPTER 86. RETAIL CREDITORS

SUBCHAPTER B. RETAIL INSTALLMENT CONTRACT

7 TAC §86.201

The Finance Commission of Texas (commission) adopts amendments to §86.201 (relating to Documentary Fee) in 7 TAC, Chapter 86, concerning Retail Creditors.

The commission adopts the amendments without changes to the proposed text as published in the August 30, 2019, issue of the Texas Register (44 TexReg 4612). The rule will not be republished.

The commission received no written comments on the proposal.

In general, the purpose of the adopted amendments to §86.201 is to remove references to the obsolete term "motor-driven cycle," in accordance with HB 3171, which the Texas Legislature passed in the 2019 legislative session.

HB 3171 amends various provisions in the Texas Transportation Code and Texas Finance Code relating to motorcycles and mopeds. The bill amends the definitions of "motorcycle" and "moped," and removes the term "motor-driven cycle," which was considered a type of motorcycle under previous law. In particular, the bill removes "motor-driven cycle" from the list of vehicles for which a documentary fee is authorized for a retail installment transaction under Texas Finance Code, §345.251.

The adopted amendments to §86.201 remove the definition of "motor-driven cycle," remove the term "motor-driven cycle" from the definition of "covered land vehicle," and renumber other definitions accordingly. This will ensure consistency with the Texas Finance Code and Texas Transportation Code as amended by HB 3171.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. The OCCC did not receive any informal written precomments on the rule text draft.

These amendments are adopted under Texas Finance Code, §345.251(e), which authorizes the commission to adopt rules to implement and enforce the statutory provision authorizing a documentary fee for certain retail installment transactions under Texas Finance Code, Chapter 345. In addition, Texas Finance Code, §11.304 authorizes the Finance Commission to adopt rules to ensure compliance with Title 4 of the Texas Finance Code.

The statutory provisions affected by the adoption are contained in Texas Finance Code, Chapter 345.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903816

Matthew J. Nance

Deputy General Counsel

Office of Consumer Credit Commissioner

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 936-7660


CHAPTER 90. CHAPTER 342, PLAIN LANGUAGE CONTRACT PROVISIONS

SUBCHAPTER B. SECURED CONSUMER INSTALLMENT LOANS (SUBCHAPTER E)

7 TAC §90.203

The Finance Commission of Texas (commission) adopts amendments to §90.203 (relating to Model Clauses) in 7 TAC, Chapter 90, concerning Chapter 342, Plain Language Contract Provisions.

The commission adopts the amendments without changes to the proposed text as published in the August 30, 2019, issue of the Texas Register (44 TexReg 4614). The rule will not be republished.

In general, the purpose of the adopted amendments to §90.203 is to implement HB 3855, which the Texas Legislature passed in the 2019 legislative session, by adding model plain language provisions for loan contracts using the single equivalent daily rate authorized under HB 3855.

Texas Finance Code, §342.201(e) allows a lender to charge a three-tiered interest rate on a loan subject to Chapter 342, Subchapter E of the Texas Finance Code. HB 3855 adds a new subsection at Texas Finance Code, §342.201(e-1), specifying that the lender may charge this amount by either: (1) applying an applicable daily rate to each bracket of the unpaid principal balance, or (2) applying a single equivalent daily rate to the entire principal balance.

The adopted amendments to §90.203 implement HB 3855 by adding model clauses for loans where the lender uses the single equivalent daily rate. In paragraphs (7)(C) and (7)(E), amendments to clauses (i) and (ii) specify that the currently authorized model clauses can be used when the interest charge is computed by applying a daily rate to brackets under Texas Finance Code, §342.201(e-1)(1). In paragraphs (7)(C) and (7)(E), new clauses (iii) and (iv) contain model clauses that can be used when the interest charge is computed as a single equivalent daily rate under Texas Finance Code, §342.201(e-1)(2).

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. The OCCC received one informal written precomment on the rule text draft. The precomment recommends including language in the model clauses specifying that the lender has used the single equivalent daily rate as defined by the Texas Finance Code. In response to this precomment, each new model clause in the amendments to §90.203 includes the following sentence: "The interest rate is computed by applying a single equivalent daily rate under the Texas Finance Code."

The commission received no written comments on the proposal.

The amendments to §90.203 are adopted under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to ensure compliance with Title 4 of the Texas Finance Code. Additionally, Texas Finance Code, §341.502 authorizes the commission to adopt rules governing the form of plain language contracts for loans under Chapter 342.

The statutory provisions affected by the adoption are contained in Texas Finance Code, Chapters 341 and 342.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 18, 2019.

TRD-201903818

Matthew J. Nance

Deputy General Counsel

Office of Consumer Credit Commissioner

Effective date: November 7, 2019

Proposal publication date: August 30, 2019

For further information, please call: (512) 936-7660