Part I.
Finance Commission of Texas
Chapter 1.
Consumer Credit Commissioner
Subchapter A. Regulated Loan License
1.
General Provisions
7 TAC §§1.4, 1.7, 1.8, 1.10, 1.11
(Editor's note: The text of the following sections
proposed for repeal will not be published. The sections may be examined in
the offices of the Finance Commission of Texas or in the Texas Register office,
Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Finance Commission of Texas (the commission) proposes the
repeal of §§1.4, 1.7, 1.8, 1.10, and 1.11. The repeals are necessary
because the sections that are proposed for repeal relate to prohibitions on
authorized lenders under authority of Chapter 3, Texas Civil Statutes, Article
5069.301
et seq.
, which was repealed by the
75th Legislature (1997). These rules have also been reviewed as part of a
rule review required under House Bill 1, Article IX, Section 167, 75th Legislature
(1997). Moreover, they are being replaced by a new set of rules for Chapter
3A, a new chapter of the
Texas Credit Title
which encompasses old chapters 3 through 5. The new rules are being published
for comment in the
Texas Register
.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period of the repeals as proposed will be in effect,
there will be no fiscal implications for state or local government as a result
of administering or enforcing the repeal.
Ms. Pettijohn also has determined that for each year of the first five-year
period the repeals as proposed will be in effect, the public benefit anticipated
as a result of the repeal is the removal of unenforceable and obsolete regulations
which will provide space for replacement rules. These is no anticipated cost
to persons who are required to comply with the repeal as proposed. There will
be no adverse economic effect on small businesses.
Comments on the proposed repeals may be submitted in writing to Leslie
L. Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas 78705-4207.
The repeals are proposed under Texas Civil Statutes, Article
5069-3A.901, which authorizes the Finance Commission to adopt rules to enforce
new Chapter 3A. The repeal will not be adopted until the proposed replacement
sections are adopted.
The statutory provisions (as currently in effect) affected by the proposed
repeals; Texas Civil Statutes, Article 5069, Chapter 3A, Subchapter K.
§1.4.Conditional Granting of Credit.
§1.7.Solicitation of Borrowers.
§1.8.Duplication of Loans.
§1.10.Inducements Prohibited.
§1.11.Loan Size, Duration, and Schedule of Installments: Limitations.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of the Secretary of State, on
June 30, 1999.
TRD-9903914
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: August 15, 1999
For further information, please call: (512) 936-7640
7 TAC §§1.151, 1.152, 1.154-1.156
(Editor's note: The text of the following sections
proposed for repeal will not be published. The sections may be examined in
the offices of the Finance Commission of Texas or in the Texas Register office,
Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Finance Commission of Texas (the commission) proposes the
repeal of §§1.151, 1.152, and 1.154-1.156. The repeals are necessary
because the sections that are proposed for repeal relate to prohibitions on
authorized lenders under authority of Chapter 3, Texas Civil Statutes, Article
5069.301
et seq.
, which was repealed by the
75th Legislature (1997). These rules have also been reviewed as part of a
rule review required under House Bill 1, Article IX, Section 167, 75th Legislature
(1997). Moreover, they are being replaced by a new set of rules for Chapter
3A, a new chapter of the
Texas Credit Title
which encompasses old chapters 3 through 5. The new rules are being published
for comment in the
Texas Register
.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period of the repeals as proposed will be in effect,
there will be no fiscal implications for state or local government as a result
of administering or enforcing the repeal.
Ms. Pettijohn also has determined that for each year of the first five-year
period the repeals as proposed will be in effect, the public benefit anticipated
as a result of the repeal is the removal of unenforceable and obsolete regulations
which will provide space for replacement rules. These is no anticipated cost
to persons who are required to comply with the repeal as proposed. There will
be no adverse economic effect on small businesses.
Comments on the proposed repeals may be submitted in writing to Leslie
L. Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas 78705-4207.
The repeals are proposed under Texas Civil Statutes, Article
5069-3A.901, which authorizes the Finance Commission to adopt rules to enforce
new Chapter 3A. The repeal will not be adopted until the proposed replacement
sections are adopted.
The statutory provisions (as currently in effect) affected by the proposed
repeals; Texas Civil Statutes, Article 5069, Chapter 3A, Subchapter K.
§1.151.Collection Practices.
§1.152.Collection Contacts.
§1.154.Simulated Legal Process or Documents Prohibited.
§1.155. Impersonation and Fictitious Names Prohibited.
§1.156.Complaint Proceedings Before Commissioner.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of the Secretary of State, on
June 30, 1999.
TRD-9903915
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: August 15, 1999
For further information, please call: (512) 936-7640
7 TAC §§1.171, 1.173-1.179
(Editor's note: The text of the following sections
proposed for repeal will not be published. The sections may be examined in
the offices of the Finance Commission of Texas or in the Texas Register office,
Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Finance Commission of Texas (the commission) proposes the
repeal of §§1.171 and 1.173-1.179. The repeals are necessary
because the sections that are proposed for repeal relate to prohibitions on
authorized lenders under authority of Chapter 3, Texas Civil Statutes, Article
5069.301
et seq.
, which was repealed by the
75th Legislature(1997). These rules have also been reviewed as part of a rule
review required under House Bill 1, Article IX, Section 167, 75th Legislature
(1997). Moreover, they are being replaced by a new set of rules for Chapter
3A, a new chapter of the Texas Credit Title which encompasses old chapters
3 through 5. The new rules are being published for comment in the
Texas Register
.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period of the repeals as proposed will be in effect,
there will be no fiscal implications for state or local government as a result
of administering or enforcing the repeal.
Ms. Pettijohn also has determined that for each year of the first five-year
period the repeals as proposed will be in effect, the public benefit anticipated
as a result of the repeal is the removal of unenforceable and obsolete regulations
which will provide space for replacement rules. These is no anticipated cost
to persons who are required to comply with the repeal as proposed. There will
be no adverse economic effect on small businesses.
Comments on the proposed repeals may be submitted in writing to Leslie
L. Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas 78705-4207.
The repeals are proposed under Texas Civil Statutes, Article
5069-3A.901, which authorizes the Finance Commission to adopt rules to enforce
new Chapter 3A. The repeal will not be adopted until the proposed replacement
sections are adopted.
The statutory provisions (as currently in effect) affected by the proposed
repeals; Texas Civil Statutes, Article 5069, Chapter 3A, Subchapter K.
§1.171.Place of Loan.
§1.173.Full Disclosure Requirements Other Than Open End or Revolving Loan Plans.
§1.174.Full Disclosure Requirements Open End and Revolving Loan Plans.
§1.175.Misleading Advertising.
§1.176. Credit Cards Letters of Credit.
§1.177. Advertisements in Form of Negotiable Instruments.
§1.178.Multiple Page Assignments.
§1.179. Use of State Agency Name.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of the Secretary of State, on
June 30, 1999.
TRD-9903916
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: August 15, 1999
For further information, please call: (512) 936-7640
7 TAC §§1.851-1.863
The Finance Commission of Texas (the commission) proposes
the adoption of new §§1.851-1.863, concerning prohibitions
on authorized lenders as provided in Subchapter K, Chapter 3A, Article 5069.
Simultaneously, the Finance Commission is repealing various rules and adopting
these rules in their place. These rules being repealed were reviewed and those
being proposed to be adopted here were evaluated and an assessment made that
the reasons for (re)adopting the rule continues to exist.
Secton 1.851 addresses the prohibitions on obligating a consumer on more
than one loan contract with the purpose or effect of obtaining a higher interest
charge than the statute would allow on a single loan for the same aggregate
amount as prescribed by Article 5069-3A.851. The rule serves to clarify and
identify situations that result in a violation. The rule also provides that
refunds may be required to correct violations. The rule is necessary to effectuate
the intent of the statute and to prescribe procedures for handling violations
of the statute.
Section 1.852 limits the distribution of listings of borrowers for the
purpose of soliciting the same borrowers to obtain another loan. This rule
serves to limit potential debt overburdening of borrowers in the small loan
classification where the highest rates are charged. This is a readoption of
an existing rule, however, the restrictions have been limited to borrowers
with Subchapter F loans, where before the restriction on list distribution
applied to all borrowers with a regulated loan.
Section 1.853 further clarifies the prohibition for licensees on misleading
advertising found in §341.403 of the Finance Code. The rule defines phrases
and practices that will be considered misleading. This section will benefit
the consumer public by eliminating or reducing confusing and potentially misleading
advertising.
Section 1.854 prohibits the use of preapproved offers of credit unless
the offer is unconditional. This is a new provision and will serve to reduce
confusion of consumers who receive offers of credit that purport to be "approved,"
but upon further review, in fact, have conditional features. The rule further
provides that offers of credit may not be conditioned upon the purchase of
goods and services unless that practice has been specifically authorized in
statute. This rule is further designed to protect consumers from usury violations.
Section 1.855 restricts licensees from using mailing pieces that resemble
negotiable instruments. Advertising using facsimile negotiable instruments
is confusing and misleading to consumers. This rule intends to protect consumers
from misleading advertising.
Section 1.856 permits licensed lenders to publicly display their status
as licensed and examined lenders.
Section 1.857 and Section 1.858 prescribe the disclosure requirements for
advertising closed-end and open-end transactions. The rules also provide that
a lender who complies with the Federal Truth-In-Lending Act is deemed to comply
with the section. The rules are intended to provide consumers with accurate,
comparable information for shopping for credit products.
Section 1.859 requires a licensee to consider the borrower's financial
ability to repay a loan when structuring the terms of a loan. This rule is
designed to prohibit a lender from overburdening a consumer's debt load beyond
that consumer's capacity to repay. If a lender violates the section, the commissioner
may require the lender to restructure the debt.
Sections 1.860-1.863 address collection practices of licensed lenders.
These rules detail procedures for collecting debts, including who may be contacted
regarding a debt and when a lender may communicate with a borrower. The rules
are intended to prevent abusive and harassing collecting practices and to
assure lawful remedies are used to collect debts.
The Subchapter K rules are also necessary due to the repeal of the former
Article 5069, Chapters 3, 4, and 5 and the adoption of new Article 5069-3A.001
Leslie L. Pettijohn, Consumer Credit Commissioner has determined that for
the first five-year period these rules will be in effect, there will be no
fiscal implications for state or local government as a result of administering
or enforcing these rules.
Commissioner Pettijohn also has determined that for each year of the first
five-year period these rules will be in effect, the public benefit anticipated
as a result of the adoption of the new rules is the clarification to lenders
of the maximum allowable charges provided under the law and guidelines for
compliance, thereby assisting lenders and borrowers in constructing transactions
that comply with the law. It is anticipated that there will be no adverse
economic effect on small businesses.
Comments on the proposed adoption of the new sections may be submitted
in writing to Leslie L. Pettijohn, Consumer Credit Commissioner, 2601 North
Lamar Boulevard, Austin, Texas 78705-4207.
The new sections are proposed under Texas Civil Statutes, Article
5069-3A.901, which authorizes the Finance Commission to adopt rules to enforce
new Chapter 3A.
Texas Civil Statutes, Article 5069-3A, Subchapter K is affected by these
proposed new sections.
§1.851.Duplication of Loans.
(a)
A licensee may have more than one loan contract under Chapter
3A with the same borrower at the same time; however, in such an event the
total interest charges assessed on the several cash advances shall not exceed
the total interest charges that could be legally imposed on one cash advance
of an amount equal to the total of the several separate cash advances. The
commissioner may require refunds of interest charges in excess of that which
could be legally charged under the chapter. The commissioner shall prescribe
the method of determining any excess charges.
(b)
Married applicants, who under the authority of Regulation
B 12 C.F.R §202.11(c), voluntarily apply for and maintain separate accounts,
and who have the ability to repay the obligation, will not violate the prohibition
on duplicate loans.
(c)
No loan may be made by a licensee in one office to any
borrower or to the spouse of the borrower when the borrower or spouse has
a loan in another office operated by the same entity, affiliate, parent, subsidiary,
or an entity under the same ownership, management, or control whether partial
or complete when the total interest charges of the separate loans exceed the
total interest charges that could be legally imposed on one cash advance.
If loans are granted that violate this section, the rates shall be adjusted
to rates applicable to a single loan of equivalent amounts.
§1.852.Solicitation of Borrowers.
(a)
No licensee, its agents, or employees, shall take, acquire,
or compile a listing of borrowers with an outstanding Subchapter F loan of
another nonaffiliated licensee for the purpose of soliciting the same borrowers
or their spouses to acquire loans.
(b)
An individual may not solicit in any manner the borrowers
of a licensee with which the individual was associated through employment
or ownership within 90 days upon acceptance of employment or association with
another lender licensed by the Office of Consumer Credit Commissioner.
(c)
A lender is not prohibited from the placement of advertisements
in newspapers, magazines, through radio and television, or other similar media
wherein the advertisement is directed toward the general public.
§1.853.Misleading Advertising.
(a)
No licensee shall advertise that loans will be made at
any other place other than that named in its license except for Subchapter
G loans, which may be closed at a title company or an attorney's office. Every
advertisement shall state or clearly indicate the identity of the licensee,
and in such a manner as to prevent confusion with the name of any other unrelated
licensee.
(b)
No licensee shall use blind loan advertisements which give
only telephone numbers or addresses.
(c)
In determining whether any particular advertising matter
violates §341.403 of the Finance Code, the general arrangement of copy
and statements or representations made shall be considered to determine if
the inference or impression may reasonably be drawn that the statements or
representations are inaccurate, deceptive, or misleading.
(d)
It shall be considered misleading:
(1)
to use phrases such as "lowest costs," "lowest rates,"
"quickest service," "easy payments," "repayment in easy installments;"
(2)
to advertise "new reduced rates" or "a new type of
service" or any similar comparative expression unless the statement is in
fact accurate with respect to the business of the licensee advertised and
unless the advertisement clearly indicates that the new plan refers specifically
to a change in the particular licensee's plan of operation, and which change
must be of more than minor importance with respect to the business of the
licensee. Any such advertisement shall not be used for a period longer than
60 days after the plan has been put into effect;
(3)
to make any statement or representation with reference
to the ease of procuring a loan, the speed with which it may be effected,
the freedom from credit inquiries addressed to particular sources of information,
or to any other implied differentiation in policy or loan service, unless
the licensee shall comply with the representation made;
(4)
to advertise offers to borrowers on loans in general
or on particular classes or types of loans during a certain limited time,
unless in general practice, the licensee actually makes a reasonable number
of the loans within the limited time and upon the basis of the offer; or
(5)
for any licensee other than a lawfully chartered banking
institution to use the work "bank," or any derivative, in any advertisement
wherein its use might mislead the public to believe that the licensee is an
authorized banking institution or is conducting a banking business.
§1.854.Conditional Offers of Credit.
(a)
No licensee shall solicit business by means of a "pre-approved,"
"approved," or any similar expression unless the statement or offer is unconditional.
The term "unconditional" means not limited in any way.
(b)
No licensee shall require the purchase of any goods, services,
or intangibles from any person or firm as a condition to the granting or extending
of credit, except as specifically authorized by the Texas Credit Title. This
prohibition is not applicable to insurance premium financing or similar transactions
wherein the loan is made solely for the purpose of financing the purchase.
This section shall not be construed so as to prohibit the conduct of another
business by a licensee as is authorized by Article 3A.910 of the Texas Credit
Title.
§1.855.Advertisements in Form of Negotiable Instruments.
No licensee shall advertise, display, or distribute mailing pieces
which have a similarity or resemblance to a blank counter check, postal or
express money order, U.S. currency, cash, exchange certificate, or any negotiable
instrument whatsoever, or any federal, state, or local government warrant.
No licensee shall use an envelope which in any way indicates or implies that
it is from federal, state, or local government.
§1.856.Use of State Agency Name.
It shall be permissible for a licensee of the Office of Consumer Credit
Commissioner to publicly display or advertise the following statement: "This
office is licensed and examined by the Office of Consumer Credit Commissioner
of the State of Texas."
§1.857.Full Disclosure Requirements--Other than Open End or Revolving Loan Plans.
(a)
If rates or charges are stated in advertising, they shall
be expressed in terms of an "annual percentage rate" (simple annual interest
rate). Any advertisement that states the amount of any installment payment,
the dollar amount of any finance charge or the number of installments or the
period of repayment shall also state:
(1)
the amount of the loan expressed as "amount financed" (cash
advance);
(2)
the number, amount, and due dates or periods of payments
scheduled to repay the indebtedness if the credit is extended;
(3)
the rate of the finance charge; and
(4)
the sum of the payments expressed as "total of payments"
(amount of loan).
(b)
The information required by this subsection shall be clearly
shown in such a manner as not to be deceiving or misleading.
(c)
If any licensee advertises that the first installment on
a loan may be extended beyond one month from the loan date, the licensee must
also clearly state whether a charge is to be made for the extension.
(d)
For purposes of this section, compliance by an authorized
lender with the Federal Truth-In-Lending Act and regulations promulgated thereunder
relating to closed-end transactions shall constitute compliance with the Texas
Credit Title, Article 3A.855 and these administrative rules.
§1.858.Full Disclosure Requirements--Open End and Revolving Loan Plans.
(a)
Any advertisement of an open-end or revolving loan plan
which states any of the specific terms of that plan, shall also clearly and
conspicuously set forth the following items:
(1)
the time period, if any, within which any credit extended
may be repaid without incurring a finance charge;
(2)
the method of determining the balance upon which a
finance charge will be imposed;
(3)
the method of determining the amount of the finance
charge;
(4)
the method by which any charge for insurance, if any,
is to be calculated;
(5)
when periodic rates may be used to compute the finance
charge the periodic rates expressed as annual percentage rates.
(b)
For purposes of this section, compliance by an authorized
lender with the Federal Truth-In-Lending Act and regulations promulgated thereunder
relating to open-end credit transactions shall constitute compliance with
the Texas Credit Title and these administrative rules.
§1.859.Loan Size, Duration, and Schedule of Installments: Limitation.
When making or negotiating a loan under Chapter 3A of the Texas Credit
Title, licensees shall consider, in determining the size, duration, and schedule
of installments of a loan, the financial ability of the borrower to repay
the loan. The lender should evaluate whether the borrower should be reasonably
able to repay the loan in cash in the time and means provided in the loan
contract and repay all other known obligations concurrently. Upon finding
by the commissioner that this section has not been complied with, the commissioner
shall have the authority to require adjustments of the loan or loans on terms
as the commissioner may require.
§1.860.Collection Practices.
(a)
In attempting to collect money due on a loan or to take
possession of any property securing a loan, a licensee or the licensee's agent
shall not use any means other than appeals to reason or lawful remedies authorized
under the laws of this state. The licensee is also bound by the remedies prescribed
in any instrument securing the loan.
(b)
A licensee or the licensee's agent shall not use any physical
force or violence against any person or use any physical force or violence
against any property.
§1.861.Collection Contacts.
(a)
A licensee or the licensee's agent shall have the right
to contact any person in order to secure information concerning a borrower
unless any person other than the borrower, the borrower's spouse, a member
of the borrower's household, a comaker, endorser, surety, or guarantor of
the obligation, objects to any contact by a licensee or the licensee's agent.
Upon receipt of the objection, the licensee or agent, shall cease and desist
from any further contact with the person.
(b)
A licensee or the licensee's agent shall not solicit the
payment of all or any part of any debt subject to this title from any person
other than the borrower, the borrower's spouse, a member of the borrower's
household, a comaker, endorser, surety, or guarantor of the obligation.
(c)
Without the prior written consent of the borrower given
directly to the licensee or the express permission of a court of competent
jurisdiction, a licensee may not communicate with a borrower in connection
with the collection of a loan at any unusual time or place. In the absence
of any knowledge to the contrary, a licensee can assume that the convenient
time for communicating with a borrower is after 8:00 a.m. and before 9:00
p.m., local time at the borrower's location.
(d)
Without the prior written consent of the borrower given
directly to the licensee or the express permission of a court of competent
jurisdiction, a licensee may not communicate with a borrower in connection
with the collection of a loan at the borrower's place of employment if the
licensee knows or has reason to believe that the borrower's employer prohibits
the borrower from receiving the communication.
(e)
Without the prior written consent of the borrower given
directly to the licensee or the express permission of a court of competent
jurisdiction, a licensee may not communicate any information pertaining to
a debt or obligation unless the person receiving the information is the borrower,
the borrower's attorney, a consumer reporting agency, another creditor, or
the attorney of the creditor. Unless notified pursuant to subsection (a),
this prohibition does not apply to a licensee seeking information about the
location of the borrower.
§1.862.Simulated Legal Process or Documents Prohibited.
In attempting to collect money due on a loan or to take possession
of any property securing a loan, a licensee or the licensee's agent shall
not use any simulated legal process, simulated legal document, or legal form
designed to suggest that legal proceedings have been commenced or completed
when in fact they have not.
§1.863.Impersonation and Fictitious Names Prohibited.
In attempting to collect money due on a loan, to take possession of
any property securing a loan, or to secure information concerning a loan,
a licensee or the licensee's agent shall not impersonate or attempt to impersonate
any law enforcement officer or other agent of federal, state, or local governments,
nor shall a licensee or a licensee's agent use any fictitious name unless
the name used is an established or recognized trade name of the licensee.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on
June 30, 1999.
TRD-9903917
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: August 15, 1999
For further information, please call: (512) 936-7640
Chapter 85.
Rules of Operation for Pawnshops
7 TAC §85.1, §85.2
(Editor's note: The text of the following sections proposed for
repeal will not be published. The sections may be examined in the offices
of the Office of Consumer Credit Commissioner or in the Texas Register office,
Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Office of Consumer Credit Commissioner (the
agency) proposes the repeal of §85.1, defining terms, and §85.2,
concerning licensing of pawnshops. The subjects of these sections will be
addressed in new replacement sections that the agency is simultaneously proposing
and publishing for comment. The process of the repeal and simultaneous adoption
of replacement rules is part of the agency's rule review process. Adoption
of the repeals is necessary as the sections that are proposed for repeal would
conflict with the adoption of new rules. Furthermore, repeal of obsolete rules
will reduce the volume of existing rules, providing additional space for replacement
rules. This process of repeal and adoption benefits the public and the industry
by making the rules more accessible and readable.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period the proposed repeals will be in effect, there
will be no fiscal implications for state or local government as a result of
administering or enforcing the repeals. There is no anticipated impact on
local or state employment as a result of implementing the repeals.
Ms. Pettijohn also has determined that for each year of the first five-year
period the proposed repeals will be in effect, the public benefit anticipated
as a result of the repeal is the removal of obsolete rules which will provide
space for replacement rules and the overall improvement in accessibility and
clarity of the remaining rules. There will be no anticipated cost to persons
who are required to comply with the repeals as proposed. There will be no
adverse economic effect on small businesses as compared to the effect on large
businesses.
Comments on the proposed repeals may be submitted in writing to Leslie
L. Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas 78705-4207.
The repeals are proposed under Texas Finance Code, §371.006,
which authorizes the commissioner to adopt rules relating to the administration
and enforcement of the Texas Pawnshop Act.
The statutory provisions affected by the proposed amendment are Chapter
371 of the Finance Code, Chapter 371.
§85.1. Definitions.
§85.2. Pawnshop Licensing.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of the Secretary of State, on
July 5, 1999.
TRD-9904015
Leslie L. Pettijohn
Commissioner
Office of Consumer Credit Commissioner
Earliest possible date of adoption: August 15, 1999
For further information, please call: (512) 936-7640
7 TAC §§85.21, 85.31, 85.41, 85.51, 85.61, 85.71, 85.81
(Editor's note: The text of the following sections proposed for
repeal will not be published. The sections may be examined in the offices
of the Office of Consumer Credit Commissioner or in the Texas Register office,
Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Office of Consumer Credit Commissioner (the
agency) proposes the repeal of §§85.21 concerning business records,
§85.31 relating to crime victim assistance, §85.41 regarding security
of persons and pledged goods, §85.51 concerning lost or damaged pledged
personal property, §85.61 relating to advertising, §85.71 regarding
examinations and investigations, and §85.81 concerning miscellaneous
operating provisions. The repeals are necessary for administrative purposes
in clarifying the printed version of the Texas Administrative Code. The sections
that are proposed for repeal were challenged in district court. Upon appeal,
the appeals court ruled that a technical and procedural violation in the manner
of adoption invalidated the rule adoption.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period the proposed repeals will be in effect, there
will be no fiscal implications for state or local government as a result of
administering or enforcing the repeal.
Ms. Pettijohn also has determined that for each year of the first five-year
period the proposed repeal will be in effect, the public benefit anticipated
as a result of the repeal is the removal of obsolete rules which will provide
space for replacement rules and the overall improvement in accessibility and
clarity of the remaining rules. There will be no anticipated cost to persons
who are required to comply with the repeal as proposed. There will be no adverse
economic effect on small businesses.
Comments on the proposed repeal may be submitted in writing to Leslie L.
Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas 78705-4207.
The repeal is proposed under Texas Finance Code, §371.006,
which authorizes the commissioner to adopt rules relating to the administration
and enforcement of the Texas Pawnshop Act.
The statutory provisions affected by the proposed amendment are Chapter
371 of the Texas Finance Code.
§85.21. Business Records.
§85.31. Crime Victim Assistance.
§85.41. Security of Persons and Pledged Goods.
§85.51. Pledged Personal Property Lost or Damaged--Liability of Pawnbroker.
§85.61. Advertising.
§85.71. Examinations and Investigations.
§85.81. Miscellaneous Operating Provisions.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of the Secretary of State, on
July 5, 1999.
TRD-9904014
Leslie L. Pettijohn
Commissioner
Office of Consumer Credit Commissioner
Earliest possible date of adoption: August 15, 1999
For further information, please call: (512) 936-7640
§§85.101-85.104
The Office of Consumer Credit Commissioner (the commissioner)
proposes the adoption of new §§85.101-85.104 concerning general
provisions.
Simultaneously, the Office of Consumer Credit Commissioner is repealing
various rules and adopting these rules in their place. The rules being repealed
and those being proposed to be adopted here were reviewed and evaluated. An
assessment was made that the reasons for (re)adopting the rule continues to
exist. The process of repeal of certain rules and the adoption of these rules
benefit the public and the industry by making the rules more accessible, readable,
and providing clarity and guidance in certain administrative and enforcement
procedures.
Section 85.101 delineates the purpose and scope of this chapter of rules.
The purpose and scope more clearly define the applicability of the chapter.
This rule is necessary to ensure consistent application of the administrative
rules to all persons who are engaging in transactions that are tantamount
to pawn transactions even if they are not labeled as such.
Section 85.102 defines various terms that are used within the rules and
the Texas Pawnshop Act. Definition of the terms is necessary to advise persons
trying to comply with the rules on the meaning and effect of certain terms.
The definitions are also necessary to ensure consistent application of the
licensing and enforcement rules. For example, the definition of "principal
party" is important to determine which individuals affiliated with a new pawnshop
are required to submit personal affidavits, fingerprint investigation forms,
and other forms in the licensing of a pawnshop.
Section 85.103 addresses the applicability of the chapter. The rule is
necessary to clarify that any person who may attempt to disguise a transaction
that would otherwise fit the definition of a pawn transaction may not evade
the application of the chapter by employing a device or subterfuge.
Section 85.104 prescribes the dates for renewal and expiration of pawnshop
and pawnshop employee licenses. The rule is necessary to stagger the dates
of renewal from other licenses that the agency issues, so as to more evenly
distribute the workload throughout the year.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five- year period these rules will be in effect, there will
be no fiscal implications for state or local government as a result of administering
or enforcing these rules. There is no anticipated impact on local or state
employment as a result of implementing the proposed rules.
Commissioner Pettijohn also has determined that for each year of the first
five-year period these rules will be in effect, the public benefit anticipated
as a result of the adoption of the new rules is the clarification and accessibility
of definitions, requirements, and procedures under the Texas Pawnshop Act.
There will be no anticipated cost to persons who are required to comply with
the rules as proposed. It is anticipated that there will be no adverse economic
effect on small business as compared to the effect on large businesses. The
agency specifically invites comments from the public on the issues of whether
or not the proposed rules will have an adverse economic effect on small business.
If the rule is believed to have such an effect, then comments are invited
on how the agency may legally and feasibly reduce that effect considering
the purpose of the statute under which the rule is adopted. Additionally,
if the rule is believed to adversely impact small business, then comments
are specifically requested on how the cost of compliance for a small business
compares with the cost of compliance for the largest business affected by
the rule under any of the following standards: (a) cost per employee; (b)
cost for each hour of labor; or (c) cost for each $100 sales.
Comments on the proposed adoption of the new sections may be submitted
in writing to Leslie L. Pettijohn, Consumer Credit Commissioner, 2601 North
Lamar Boulevard, Austin, Texas 78705-4207.
The new sections are proposed under Texas Finance Code, §371.006,
which authorizes the commissioner to adopt rules to administer and enforce
the Texas Pawnshop Act.
§85.101. Purpose and Scope.
(a)
Purpose. The purpose of this chapter is to assist in the
administration and enforcement of the Texas Finance Code, Chapter 371, which
may be cited as the Texas Pawnshop Act.
(b)
Scope. This chapter applies to a person engaged in the
business of:
(1)
lending money on the security of pledged goods; or
(2)
purchasing goods on condition that the goods may
be redeemed or repurchased by the seller for a fixed price within a fixed
period.
§85.102. Definitions.
Words and terms used in this chapter that are defined in Texas Finance
Code, Chapter 371, have the same meanings as defined in that chapter unless
the context clearly indicates otherwise. The following words and terms, when
used in this chapter, shall have the following meanings unless the context
clearly indicates otherwise.
(1)
Bank deposits - Cash on deposit in banks or in other federally
insured depository institutions. The value of deposits shall be reduced by
any taxes or penalties that would be due and payable if the funds were withdrawn
on the date of valuation.
(2)
Book value - The dollar amount assigned to assets
using generally accepted accounting principles (GAAP). In evaluating merchandise
inventory, the lower of the cost or the market value of the asset method is
generally used when determining book value.
(3)
Commissioner - The Commissioner of the Office of
Consumer Credit Commissioner of the State of Texas as defined in Chapter 14
of the Texas Finance Code.
(4)
Facility - The physical space used or proposed for
the use of the operation of a pawnshop.
(5)
Merchandise inventory - Tangible personal property
held by a pawnbroker or applicant for immediate sale in the pawnshop or proposed
pawnshop.
(6)
Operator - A person or entity who manages the daily
operations of a pawnshop. This term includes a party to a management agreement
for oversight and supervision of the operations of the pawnshop on behalf
of the owners of the pawnshop.
(7)
Pawnbroker - A person who has an ownership interest
in a pawnshop as shown in an application for a pawnshop license filed with
the commissioner. When general duties and prohibitions are described, pawnbroker
also includes a pawnshop employee unless the context indicates otherwise.
(8)
Pledged goods - Tangible personal property held by
a pawnbroker as collateral for a pawn loan and that has not become the property
of the pawnbroker by a taking into inventory due to non-payment of the loan.
(9)
Principal party Each proprietor and adult individual
with a substantial relationship to the proposed business of the applicant.
An individual with a substantial relationship to the proposed business of
the applicant shall include but is not limited to:
(A)
a general partner;
(B)
a voting member of a limited liability corporation;
(C)
a corporate officer, including the Chief Executive Officer
or President, the Chief Financial Officer or Treasurer, and an officer with
substantial responsibility for operations or compliance with the Texas Pawnshop
Act;
(D)
a director of a corporation;
(E)
a shareholder owning 5% or more of the outstanding voting
stock;
(F)
a trustee; and
(G)
an operator.
§85.103. Attempted Evasion of Applicability of Chapter.
A person may not use any device, subterfuge, or pretense to evade the
application of this chapter. A device, subterfuge, or pretense includes any
transaction that in form may appear on its face to be something other than
a pawn transaction, but in substance meets the definition of a pawn transaction
as defined in the Texas Pawnshop Act, §371.003(8).
§85.104. Renewal Dates of Licenses.
A pawnshop license and a pawnshop employee license shall expire on
June 30th of each year unless the annual fee for the following year has been
paid.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on
July 5, 1999.
TRD-9904016
Leslie L. Pettijohn
Commissioner
Office of Consumer Credit Commissioner
Earliest possible date of adoption: August 15, 1999
For further information, please call: (512) 936-7640
7 TAC §§85.201-85.212
The Office of Consumer Credit Commissioner (the commissioner)
proposes the adoption of new §§85.201-85.212 concerning the licensing
of pawnshops.
Simultaneously, the Office of Consumer Credit Commissioner is repealing
various rules and adopting these rules in their place. These rules being repealed
were reviewed and those being proposed to be adopted here were evaluated and
an assessment made that the reasons for (re)adopting the rule continues to
exist. The process of repeal of certain rule and the adoption of these rules
benefit the public and the industry by making the rules more accessible, readable,
and providing clarity and guidance in certain administrative and enforcement
procedures.
Section 85.201 clarifies the requirement that any person who desires to
engage in the business of making pawn loans must obtain a license before being
authorized to make pawn loans. Additionally, the section requires that an
individual be appropriately authorized to make pawn loans before advertising
the operation of a pawnshop. This is consistent with the requirement of Texas
Finance Code, §341.404.
Section 85.202 prescribes the requirements for filing a new pawnshop application.
The rule states the specific forms and accompanying information that must
be filed with a new application. The rule is necessary to provide consistent
procedures for the filing of pawnshop license applications and to advise the
public and the industry of the filing requirements. Additionally, in subsection
(c) the rule implements the provisions of House Bill 1878 regarding the distance
requirement of a new pawnshop from existing pawnshops in counties with a population
of greater than 250,000.
Section 85.203 prescribes the requirements for relocating a pawnshop license.
The rule states the specific forms and accompanying information that must
be filed with the relocation application. The rule is necessary to provide
consistent procedures for the filing and processing of pawnshop license applications
and to advise the public and the industry of the filing requirements. Additionally,
in subsection (f) the rule implements the provisions of House Bill 1878 regarding
the distance requirement of existing pawnshop licenses from existing pawnshops
in counties with a population of greater than 250,000. Specifically, the rule
is necessary to fairly interpret and consistently apply the provisions of
§371.059 of the Texas Pawnshop Act. During the legislative enactment
of House Bill 1878, the legislative history indicates that §371.059(b)(2)
was intended to apply to licenses that are not actively being used for the
operation of a pawnshop. The rule is drafted to apply the statute in that
fashion.
Section 85.204 addresses the requirement for active operation of approved
applications and provides authority for the approval of a temporary facility.
The rule discusses the appropriate time frames for both of these requirements.
The rule is necessary to provide consistent procedures, to prevent circumvention
of the distance requirements, and to prevent a person from monopolizing a
trade location and area without the intention of opening and operating a pawnshop.
Section 85.205 prescribes the requirements for filing an application for
the transfer of ownership of a pawnshop license. The rule states the specific
forms and accompanying information that must be filed with the application.
The rule is necessary to provide consistent procedures for the filing of pawnshop
license applications and to advise the public and the industry of the filing
requirements.
Section 85.206 discusses the procedures that will be used in processing
and evaluating license applications for pawnshops. The rule defines when an
application will be accepted, the order in which decisions on competing applications
will be made, and the procedures for protesting an application.
Section 85.207 states the process that will be followed if the commissioner
requires a bond of an applicant.
Section 85.208 discusses the notification and transfer requirements of
a pawnshop licensee if the licensee has a change in the organizational form
of business or a change in proportionate ownership of the licensee.
Section 85.209 requires an applicant to file supplemental information to
an application if any subsequent action or additional information would have
required a different response than that filed in the original application.
This rule is necessary to advise the commissioner of relevant facts to be
considered in determining whether to grant the application or to investigate
changed circumstances regarding a licensee's fitness to be or to remain licensed.
Section 85.210 provides the authority for a licensee to designate a license
from an active status to an inactive status. The rule also requires a licensee
who desires to activate an inactive license to comply with the requirements
for relocation of a license.
Section 85.211 encompasses the fee schedule for pawnshop licenses. The
fees stated in this section are consistent with the fees set by the statute
and the existing fee structure for administrative licensing activities. The
fees are required in order to allow the agency to recover the costs associated
with performing the licensing function.
Section 85.212 explains the treatment of license applications and associated
documents received by the agency as open records under the Texas Government
Code. The rule is necessary to advise applicants of the treatment and the
public nature of documents that are filed with the agency.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five- year period these rules will be in effect, there will
be no fiscal implications for state or local government as a result of administering
or enforcing these rules. There is no anticipated impact on local or state
employment as a result of implementing the proposed rules.
Commissioner Pettijohn also has determined that for each year of the first
five-year period these rules will be in effect, the public benefit anticipated
as a result of the adoption of the new rules is the clarification and accessibility
of the procedures and requirements for pawnshop licensing. Persons who are
required to comply with the rules are required to make certain filings as
prescribed in §§85.202, 85.203 and 85.205. The majority of these
filings are simply copies of business records that a pawnshop should maintain
during the ordinary course of business. It is estimated that the costs of
making these copies of records should not exceed $50. In order to comply with
the distance requirements of the statute, it is possible that a pawnshop applicant
would have to obtain an official survey instrument to demonstrate the distance
between the proposed location and existing pawnshops. If a pawnshop were required
to obtain this, the costs could range from $200 to $500. Persons who are required
to comply with the rules as proposed will be expected to pay the fees as printed
in the fee schedule (§85.211). The fees are related to each pawnshop
licensee and fingerprint fees relate to the number of principal parties associated
with an applicant. The investigation fee and annual fee for pawnshop licenses
are required by the statute (Texas Finance Code, §§371.055; 371.064).
The fingerprint fee is $40 and the fee for a duplicate of a license is $10.
The fee for amending a license is $25 unless the amendment to the license
is a relocation in a county with a population of 250,000 or more, in which
case the fee is $250. An applicant who appeals a denied application may be
required to pay the costs associated with the hearing. The hearing costs will
vary according to the detailed nature of the hearing. Since 1996, no hearings
have been conducted on the appeal of a denied pawnshop license. All cases
were either settled and the license approved or the denial decision was not
appealed to a hearing. The average cost of a hearing on a denied pawnshop
employee license for the same period of time was $500. The estimated cost
of an appeal of a denied pawnshop license may run from $500 to $2000. The
cost of compliance to appeal a denied application should not vary significantly
based upon the size of the operation. The denial of a new application is for
a new operation and, therefore, cannot be compared on the basis of the cost
per employee or level of sales. If the pawnshop is not authorized to operate,
then it likely has no employees and no sales. The agency believes that the
rule should not have an adverse economic effect on small businesses compared
to large businesses. The agency specifically invites comments from the public
on the issues of whether or not the proposed rules will have an adverse economic
effect on small business. If the rule is believed to have such an effect,
then comments are invited on how the agency may legally and feasibly reduce
that effect considering the purpose of the statute under which the rule is
adopted. Additionally, if the rule is believed to adversely impact small business,
then comments are specifically requested on how the cost of compliance for
a small business compares with the cost of compliance for the largest business
affected by the rule under any of the following standards: (a) cost per employee;
(b) cost for each hour of labor; or (c) cost for each $100 sales.
Comments on the proposed adoption of the new sections may be submitted
in writing to Leslie L. Pettijohn, Consumer Credit Commissioner, 2601 North
Lamar Boulevard, Austin, Texas 78705-4207.
The new sections are proposed under Texas Finance Code, §371.006
which authorizes the commissioner to adopt rules to administer and enforce
the Texas Pawnshop Act. Additionally, these rules of procedure are proposed
pursuant to Texas Government Code, §2001.004, requiring an agency to
adopt rules of practice relating to the nature and requirements of administrative
procedures.
The rules affect Subchapter B of Chapter 371, Texas Finance Code
§85.201. Engaging in Business.
An application must be filed and approved before any person engages
in the business of making pawn loans. The application and approval is required
without regard to the rate of interest or pawn service charge contracted for,
charged, or received, if any. An applicant shall not advertise the opening
of a new pawnshop prior to approval.
§85.202. Filing of New Application.
(a)
An application for issuance of a new pawnshop license
must be submitted on forms prescribed by the commissioner at the date of filing.
The application shall include the following:
(1)
Required forms. All questions must be answered.
(A)
Application form (Form ADM-10/11).
(i)
A physical street address must be listed for the proposed
location for which the applicant can show proof of ownership or an executed
lease agreement. A post office box or a mail box location at a private mail-receiving
service may not be used except for a physical location that does not receive
general mail delivery. An application will not be accepted if the address
or the full legal property description has not yet been determined or the
application is for an inactive license.
(ii)
If the applicant is a corporation, then the officers
and directors' sections on the form (ADM-011) must be completed.
(iii)
The section inquiring about owners requires an answer
based upon the applicant's entity type. If an individual's interest in an
entity is community property, then a spouse with a community property interest
must also be listed. If the business interest is owned by a married individual
as separate property, documentation establishing or confirming that status
must be provided.
(I)
Sole proprietorship. The individual owning and operating
the business must be named.
(II)
General partnership. Each partner must be listed and
the percentage of ownership stated.
(III)
Corporation. Each shareholder holding voting stock must
be named if the corporation is privately held. If a parent corporation is
the sole or part owner of the proposed business, a narrative or diagram must
be attached that describes each level of ownership and management. This narrative
or diagram requires the listing of the names of all officers, directors, and
stockholders owning 5% or more stock at each level.
(IV)
Limited partnership. Each partner, general and limited,
must be listed and the percentage of ownership stated. If a partner is a business
entity and not an individual, a narrative or diagram must be attached that
describes each level of ownership. This narrative or diagram requires the
listing of the names of all officers, directors, and stockholders owning 5%
or more stock at each level.
(V)
Limited liability company. Each manager, officer, agent,
and member, as those terms are used by the Texas Limited Liability Company
Act, Texas Civil Statutes Art. 1528n, must be named. If a member is a business
entity and not an individual, a narrative or diagram must be attached that
describes each level of ownership. This narrative or diagram requires the
listing of the names of all officers, directors, and stockholders owning 5%
or more stock at each level.
(VI)
Trusts or estates. Each beneficiary, trustee, and executor
must be named.
(iv)
Manager. Each person who is responsible for the day-to-day
operation of one or more of applicant's proposed locations must be named.
The manager must be:
(I)
a principal party as defined above;
(II)
a licensed pawnshop employee identified by license number;
or
(III)
an applicant for a pawnshop employee license with the
date of application.
(v)
Supervisor. Each person who will be responsible for the
supervision of a licensed location must be named. The supervisor must be:
(I)
a principal party as defined above;
(II)
a licensed pawnshop employee identified by license number;
or
(III)
an applicant for a pawnshop employee license with the
date of application.
(vi)
Signature. On an application for a sole proprietorship
or a partnership, each proprietor and general partner must sign. On an application
for a corporate applicant, two officers must sign unless only one officer
of the corporation has been appointed. On an application for a limited liability
company, two authorized members must sign unless the company only has one
member. On an application for a trust or an estate, each trustee or executor
must sign.
(B)
Statutory agent disclosure (Form ADM-13). This form must
be completed by all applicants. The statutory agent is the person or entity
to whom any legal notice may be delivered. The agent must be a Texas resident
and list an address for legal service. If the statutory agent is an individual,
the address must be a residential address. On an application for a corporation,
the statutory agent listed on Form ADM-13 should be the registered agent listed
in the articles of incorporation. On an application for a limited liability
company, the statutory agent listed on Form ADM-13 must be the registered
agent listed in the articles of organization. If the statutory agent is not
listed in the relevant organizational document, then the applicant must submit
certified minutes appointing the new agent.
(C)
Personal affidavit (Form ADM-15/16). Each individual listed
on the license application (ADM-10/11) as a principal party, except for a
pawnshop employee or an applicant for a pawnshop employee license, must complete
this form. The percentage of ownership stated on this form must correspond
to the individual's percentage listed on the license application Form ADM-10/11.
The record of business association must also include the individual's association
with the entity applying for the license.
(D)
Fingerprint cards. A complete set of legible fingerprints
shall be provided for each individual having a substantial relationship with
the applicant. An individual has a substantial relationship with an applicant
if it is a "principal party" as that term is defined in 7 TAC §85.102.
An individual who has previously been licensed by the commissioner or a principal
party of an entity currently licensed by the commissioner is not required
to provide fingerprints. The commissioner may require fingerprints of an employee
or another person with some relationship to the applicant if the commissioner
believes that the individual's involvement in the pawnshop operation is relevant
to the applicant's eligibility for a license. All fingerprints should be submitted
on the format provided by the agency and approved by the Department of Public
Safety and the Federal Bureau of Investigation. A request for fingerprint
cards may be made by submitting a completed Form ADM-030.
(E)
Financial statement (Form ADM-17/18/19).
(i)
General information. A financial statement must be dated
no earlier than sixty (60) days prior to the date of application. An applicant
may also submit an audited financial statement dated within one year prior
to the application date in order to expedite verification procedures. A financial
statement must be certified as true, correct, and complete by a principal
party. A financial statement should be prepared in accordance with generally
accepted accounting principles (GAAP). A financial statement must reflect
the net assets as defined in the Texas Pawnshop Act §371.003 of at least
the lesser of the following amounts:
(I)
The amount required in the Texas Pawnshop Act §371.072(a);
or
(II)
The amount required by the Texas Pawnshop Act §371.072(b)
as the license existed or should have existed under the law and rules in effect
on August 31, 1999. A change in net asset requirement occurs with respect
to any change of ownership or other event causing a change in the net asset
requirement that may have occurred prior to September 1, 1999. The change
in the net asset requirement is effective as of the date of change of ownership
or other event causing the change of the net asset requirement.
(ii)
Sole proprietorship. A sole proprietor must complete
all sections of Form ADM-17 and the attached schedules, Form ADM-18/19, or
provide a personal financial statement that contains all of the information
requested by Forms ADM - 17/18/19.
(iii)
Partnership. A balance sheet for the partnership itself
must be submitted. In addition, each general partner must submit a balance
sheet. Each balance sheet for the partnership and the partners must be dated
the same day. The information requested in Schedules 1-6 (ADM-18/19) must
be submitted and attached to any balance sheet that is appended to the application.
(iv)
Corporation or limited liability company. A corporation
or a limited liability company must file a balance sheet. The information
requested in Schedules 1-6 (ADM-18/19) must be submitted and attached to any
balance sheet that is appended to the application. A financial statement is
generally not required of related parties, but may be required by the commissioner
if the commissioner believes the information is relevant.
(v)
Trusts or estates. A trust or an estate must file a balance
sheet. The information requested in Schedules 1-6 (ADM-18/19) must be submitted
and attached to any balance sheet that is appended to the application. A financial
statement is generally not required of related parties, but may be required
by the commissioner if the commissioner believes the information is relevant.
(F)
Assumed name certificate (Forms ADM-20 and ADM-21). For
an applicant that does business under an assumed name as that term is defined
in Tex. Bus. & Comm. Code, §36.02(7), an assumed name certificate
must be filed as provided in this subsection.
(i)
Corporation, limited partnership, or limited liability
company. An applicant using or planning to use an assumed name must file an
assumed name certificate (ADM-21 or its equivalent) in compliance with Tex.
Bus. & Comm. Code, §36.0011, as amended. Evidence of the filing bearing
the appropriate filing stamp must be submitted or, alternatively, a certified
copy.
(ii)
All other applicants. An applicant using or planning
to use an assumed name must file an assumed name certificate (ADM-20 or its
equivalent) with the county clerk of the county where the proposed business
is located in compliance with Tex. Bus. & Comm. Code, §36.0010, as
amended. An applicant must provide a copy of the assumed name certificate
that shows the filing stamp of the county clerk or, alternatively, a certified
copy.
(2)
Other required filings.
(A)
Statement of experience. An applicant for a new license
should provide an attached statement setting forth the details of the applicant's
prior experience in the pawn or credit-granting business. If an individual
named on the application does not have significant experience in the pawnshop
business as planned for the prospective licensee, the applicant must provide
a written statement explaining the applicant's relevant experience and why
the commissioner should find that the applicant has the necessary experience.
(B)
Entity documents.
(i)
Partnership. A partnership applicant must submit a complete
copy of the partnership agreement. This copy must be signed and dated by each
partner. A limited partnership must submit a copy of the articles of partnership
filed with the secretary of state, any amendments, and a copy of the secretary
of state's acknowledgment.
(ii)
Corporation.
(I)
A corporate applicant, domestic or foreign, must provide
the following documents:
(-a-)
A copy of the articles of incorporation and any amendments;
(-b-)
A copy of the corporate by-laws;
(-c-)
Minutes of corporate meetings that record the election
of each current officer and director as listed on the license application
(Form ADM-10/11); and
(-d-)
A certificate of good standing from the comptroller
of public accounts.
(II)
A foreign corporate applicant must provide a certificate
of authority to do business in Texas; and
(III)
A publicly held corporation or an applicant owned by
a publicly held corporation must submit the most recent quarterly and annual
reports required by §15(d) of the Securities Exchange Act of 1934 (Form
10-K and Form 10-Q) for the applicant or for the parent company respectively.
(iii)
Trusts. A copy of the instrument that created the trust
and the trust agreement must be filed with the application.
(iv)
Estates. A copy of the instrument establishing the estate
must be filed with the application.
(C)
Map. A map must be provided of the area where the proposed
license will be situated graphically defining the site of the proposed pawnshop,
the location, including the name and address, of each pawnshop within three
miles of the location, and the scale at which the map was constructed. The
commissioner may require a survey to determine the distance from the proposed
pawnshop location to existing operating pawnshops.
(D)
Zoning. Each applicant shall file a certificate of occupancy
or other evidence that the operation of a pawnshop is permitted at the proposed
site.
(E)
Lease agreement or proof of ownership. Each applicant
shall file an executed lease agreement, deed, or other evidence that the entity
has control of the proposed site.
(F)
Proof of general liability and fire insurance. Each applicant
shall file a copy of a general liability and fire insurance policy in an amount
sufficient to protect pledged goods including jewelry. The policy must explicitly
cover loss of pledged goods.
(b)
Subsequent applications. If the applicant is currently
licensed and filing an application for a new location, the applicant must
provide the forms and other information that are unique to the new location
including the application form (ADM 10/11) and an updated financial statement
as provided in this section. Other information required by this section need
not be filed if the information on file with the agency is current and valid.
(c)
Distances shall be measured in a direct line despite travel
patterns and natural or manmade obstacles and shall be measured from front
door to front door. The commissioner may require a survey to determine distances
from the proposed pawnshop location to existing operating pawnshops. In examining
the distance requirements of a proposed pawnshop, the existence or location
of an inactive license will not be considered in the determination of the
distance requirements. An application for a new license may not be approved
unless the eligibility requirements are met and the proposed facility is within:
(1)
a county with a population of less than 250,000 according
to the most recent decennial census regardless of distance from another operating
pawnshop;
(2)
a county with a population of 250,000 or more according
to the most recent decennial census and the pawnshop is not less than two
miles from another operating pawnshop
.§85.203. Relocation.
(a)
Definition.
(1)
As used in this section, a "relocation" occurs whenever
an existing licensee desires to locate a pawnshop to a location different
from that listed on the license.
(2)
As used in §371.059 of the Texas Pawnshop Act
and in this section, "the relocation of a licensed pawnshop" means the act
of moving an existing pawnshop license from a location at which or premises
in which a pawnbroker holds a pawnshop license to a new location.
(b)
Approval of relocation. A pawnshop may not be relocated
without the prior approval of the commissioner. When a relocation is requested,
an application for relocation must be filed.
(c)
Filing requirements. An application for relocation must
be submitted on forms prescribed by the commissioner. The application for
relocation shall include the following:
(1)
Change of address application form (Form ADM-22).
(2)
Financial statement (ADM-17/18/19). If the license
requested for relocation includes the activation of a license that is inactive
at the date of the request for relocation, an updated financial statement
is required. The instructions in 7 TAC §85.202 are applicable to this
filing.
(3)
Other required filings.
(A)
Map. A map must be provided of the area where the proposed
license will be situated graphically defining the site of the proposed pawnshop,
the location, including the name and address, of each pawnshop within three
miles of the location, and the scale at which the map was constructed. The
commissioner may require a survey to determine the distance from the proposed
pawnshop location to existing operating pawnshops.
(B)
Zoning. Each applicant shall file a certificate of occupancy
or other evidence that the operation of a pawnshop is permitted at the proposed
site.
(C)
Lease agreement or proof of ownership. Each applicant
shall file an executed lease agreement, deed, or other evidence that the entity
has control of the proposed site.
(D)
Proof of general liability and fire insurance. If the
license requested for relocation includes the activation of a license that
is inactive at the date of the request for relocation, a copy of a general
liability and fire insurance policy in an amount sufficient to protect pledged
goods including jewelry must be filed. The policy shall explicitly cover loss
of pledged goods.
(d)
Engaging in business. An applicant may not advertise the
opening of a relocated pawnshop prior to approval, except that a pawnbroker
who intends to relocate a pawnshop may, beginning 90 days or less prior to
the projected date of relocation, post a sign inside the existing shop and
give customers a written notice of the anticipated relocation pursuant to
the subsection below.
(e)
Notice to customer. A written notice of relocation must
be given to each pledger whose pledged goods will be moved. Five days prior
to relocation the pawnbroker must mail written notices to each pledger who
has not been given a written notice prior to that date. A notice must identify
the pawnshop, both the old and the new location, the telephone number of the
new location, and the date the relocation is effective. The commissioner may
modify the notification requirement if the relocation adversely affects pledgers.
The modification may require the pawnbroker to extend the maturity date of
pawn transactions or waive the collection of pawn service charges which may
accrue after relocation. No relocation may be made which will adversely affect
pledgers to the extent that redemption is unreasonable or impossible due to
the distance between the locations. The commissioner may approve notification
by signs in lieu of notification by mail if no pledgers will be adversely
affected.
(f)
Relocation distances. Distances shall be measured in a
direct line despite travel patterns and natural or manmade obstacles, and
shall be measured from front door to front door. The commissioner may require
a survey to determine distances from the proposed pawnshop location to existing
operating pawnshops. In examining the distance requirements of a proposed
pawnshop, the existence or location of an inactive license will not be considered
in the determination of the distance requirements. An application for relocation
may not be approved unless the eligibility requirements are met.
(1)
If the proposed facility is within a county with a population
of less than 250,000 according to the most recent decennial census, there
is no distance requirement from another operating pawnshop;
(2)
If the proposed facility is within a county with
a population of 250,000 or more according to the most recent decennial census
and:
(A)
if the pawnshop was licensed and was not operating on
September 1, 1999, and prior to this application had not begun or reinstated
operations since September 1, 1999, it may locate not less than one mile from
an operating pawnshop;
(B)
if the pawnshop has been operating continuously at its
current location for at least three years, it may locate within one mile of
its current location regardless of distance from another operating pawnshop;
(C)
if the pawnshop has been operating continuously at its
current location for at least three years, it may locate not less than one
mile from an operating pawnshop;
(D)
if the pawnshop license was designated to an inactive
status after September 1, 1999, and remains in an inactive status continuously
for at least three years, it may locate within one mile from an operating
pawnshop; or
(E)
if the pawnshop has been operating at its current location
for less than three years it may locate not less than two miles from another
operating pawnshop.
§85.204. Temporary and Permanent Operation of Facility.
(a)
The pawnshop must commence operation within a period of
six months after the date of approval unless an extension is granted, in writing,
by the commissioner. No more than one six- month extension will be approved
by the commissioner, unless good cause for the extension is shown. At the
end of any approved extension, if the pawnshop has not been opened, the authority
for approval of the pawnshop shall be forfeited.
(b)
The commissioner may approve opening and operating a temporary
facility for an approved application, provided that the facility is within
a one-half mile radius of the approved, permanent site. The operation of the
temporary facility will cease immediately upon the permanent facility being
completed for occupancy. The temporary facility shall not operate longer than
18 months unless extended in writing by the commissioner.
§85.205. Transfer of License.
(a)
Definition. As used in this section, a "transfer of ownership"
occurs whenever an existing owner relinquishes any interest in a licensee
or an entirely new person has obtained an ownership interest in the licensee.
This term also includes any purchase or acquisition of control over more than
5% of the outstanding voting stock of any licensed corporation or of any corporation
which is the parent or controlling stockholder of a licensed corporation.
This term also includes any acquisition of a license by gift, devise, or descent.
(b)
Approval of transfer. No pawnshop license may be sold,
transferred, or assigned without written approval of the commissioner.
(c)
Filing requirements. An application for transfer of a
pawnshop license must be submitted on forms prescribed by the commissioner.
The application for transfer must include the following:
(1)
Application form (Form ADM-10/11). The instructions in
7 TAC §85.202 are applicable to this filing.
(2)
Statutory agent disclosure (Form ADM-13). The instructions
in 7 TAC §85.202 are applicable to this filing.
(3)
Personal affidavit (Form ADM-15/16). Each individual
listed on the license application (ADM-10/11) who is a principal party, except
for a pawnshop employee or an applicant for a pawnshop employee license, of
the transferee must complete this form. The instructions set forth in 7 TAC
§85.202 are applicable to this filing.
(4)
Fingerprints. A complete set of legible fingerprints
shall be provided for each individual having a substantial relationship with
the applicant. An individual has a substantial relationship with an applicant
if it is a "principal party" as that term is defined in 7 TAC §85.102.
An individual who has previously been licensed by the commissioner or a principal
party of an entity currently licensed by the commissioner is not required
to provide fingerprints. The commissioner may require fingerprints of an employee
or another person with some relationship to the applicant if the commissioner
believes that the individual's background history is relevant to the applicant's
eligibility for a license. All fingerprints should be submitted on a format
provided by the agency and approved by the Department of Public Safety and
the Federal Bureau of Investigation. A request for acceptable fingerprint
cards may be made by submitting a completed Form ADM-030.
(5)
Evidence of the transfer of ownership. Documentation
evidencing the transfer of ownership must be filed with the application. This
must include one of the following:
(A)
a copy of the asset purchase agreement when the license
or other assets have been purchased, including a statement relating to the
sale of the license;
(B)
a copy of the stock purchase agreement or other evidence
of a stock transfer; or
(C)
a copy of any document that transferred ownership in a
licensee by gift, devise, or descent, such as a probated will or a court order.
(6)
Financial statement (ADM-17/18/19). The instructions
in 7 TAC §85.202 are applicable to this filing.
(7)
Other required filings. All filings required of new
license applicants pursuant to 7 TAC §85.202 must be filed and completed
by any applicant for transfer of a license. If the applicant is currently
licensed and acquiring another location, the applicant must provide the information
that is unique to the new location. Other information required by this subsection
need not be filed if the information on file with the agency is current and
valid.
(d)
Transferee operating under transferrers license. No business
under the license may be conducted by any transferee until the application
has been received, all applicable fees have been paid, and a request for permission
to operate has been approved by the commissioner. The commissioner may approve
a written agreement after the transfer application has been filed whereby
a transferrer grants a transferee the authority to operate under the transferrers
license pending approval of the transferee's license application. The agreement
must provide that the transferrer accepts full responsibility to the commissioner
and any customer of the licensed business for any acts of the transferee in
connection with the operation of the business. The written agreement between
the transferrer and the transferee must be submitted with a request to operate
under the transferrers license. The agreement may include a provision whereby
the transferee may operate using the transferee's name during the pendency
of the application if the transferee has an existing pawnshop license issued
under this chapter. The agreement shall be for a limited time as provided
in the agreement and in no case may such authority extend beyond 180 days.
The commissioner may deny a request for permission to operate during the pendency
of the application.
(e)
Application filing deadline. An application filed in connection
with a transfer of ownership may be filed in advance but must be filed no
later than ten (10) calendar days following the actual transfer.
§85.206. Processing of Application.
(a)
Initial review. A response to an application will ordinarily
be made within 10 working days of receipt stating that the application is
accepted for filing or stating that the application is incomplete and specifying
the information required for acceptance.
(b)
Application acceptance. An application will not be accepted
until it contains the appropriate fees and substantially all of the items
required in accordance with 7 TAC §§85.202, 85.203, or 85.205 as
appropriate.
(c)
Complete application. An application is complete when
it:
(1)
conforms to the statutes, rules, and the commissioner's
published instructions;
(2)
all fees have been paid; and
(3)
all requests for additional information have been
satisfied.
(d)
Competing application. An application in a county with
a population of 250,000 or more will be acted upon based on the chronological
order in which the application was accepted pursuant to Subsection (b) of
this section. A competing application may not be granted until a final ruling
on any preceding competing application has been made.
(e)
Notice of application and protest procedures. A notice
of the application will be mailed to each pawnshop licensee in the county
of the proposed location. The notice will state a date and time, 10 working
days following the date of notice, by which any interested person may request
a hearing. Any pawnbroker who believes that the applicant's proposed pawnshop
will significantly affect that pawnbroker's current business may submit a
sworn petition to be admitted as a party in opposition to an application for
a new or relocated pawnshop. The petition must present the commissioner with
relevant facts designed to show how the protesting pawnshop licensee will
be affected by the approving of the proposed application and the basis for
the protest. Upon a showing that the pawnshop licensee would be significantly
affected by the granting of the license, the commissioner shall admit the
protesting pawnshop licensee as a party. Any person intending to appear, present
evidence, and be heard on a license application may do so only if written
notice of the intention is filed and received by the commissioner as required
in the notice of application. A copy of the written notice shall be delivered
to the applicant and certification of that delivery shall be made to the commissioner
at the time of filing.
(f)
Decision on application. The commissioner may approve
or deny an application.
(1)
Approval. The commissioner shall approve the application
upon payment of the appropriate fees and a finding of the eligibility and
statutory location requirements.
(A)
Eligibility requirements.
(i)
Good moral character. In evaluating an applicant's moral
character the commissioner will consider criminal history information described
in 7 TAC §85.601 and the applicant's conduct and activities as described
in 7 TAC §85.602.
(ii)
A belief that the pawnshop will be operated lawfully
and fairly. In evaluating this standard, the commissioner will consider an
applicant's background and history. If the commissioner questions the applicant's
ability to meet this standard, the commissioner may require further conditions,
such as probation, to favorably consider an applicant for a license.
(iii)
Financial responsibility. In evaluating the financial
responsibility of an applicant, the commissioner may investigate the history
of an applicant and the principal parties of the applicant as to the payment
of debts, taxes, and judgments, if any, and handling of financial affairs
generally.
(iv)
Experience. In evaluating experience, the commissioner
will consider the applicant's background and history as well as the personnel
that the applicant plans to use in the operation and management of the pawnshop.
(v)
General fitness to command the confidence of the public.
The applicant's overall background and history will be considered. Providing
misleading information on the application or failing to disclose information
to the agency may be grounds for denial.
(vi)
Net assets. Net assets are calculated by taking the sum
of current assets and subtracting all liabilities either secured by those
current assets or unsecured. Liabilities not included in the calculation are
those assets that are secured by assets other than current assets including
subordinated debt. Debt that is either unsecured or secured by current assets
may be subordinated to the net asset requirement pursuant to an agreement
of the parties providing that assets other than current assets are sufficient
to secure the debt.
(B)
Distance requirement. A pawnshop within a county with
a population of 250,000 or more must be not less than two miles from an existing
pawnshop or if the application is for a relocation it must meet the requirements
in 7 TAC §85.202(f)(2).
(2)
Denial.
(A)
If an application has not been completed within 30 days
after notice of deficiency has been sent to the applicant, the application
may be denied.
(B)
The commissioner may also deny an application when the
applicant fails to demonstrate the eligibility requirements or the applicant
fails to meet the distance requirements.
(g)
Hearing. When an application is denied, the applicant
has 30 days from the date of the denial to request a hearing in writing to
contest the denial. Also, upon a proper and timely protest pursuant to subsection
(e), a hearing shall be set. This hearing shall be conducted within 60 days
of the date of the appeal or protest unless the parties agree to an extension
of time or the administrative law judge grants an extension of time pursuant
to the Administrative Procedure Act, Texas Government Code, Chapter 2001 and
7 TAC §9.01 et seq. The commissioner shall make a final decision approving
or denying the license.
(h)
Processing time. The commissioner shall ordinarily approve
or deny a license application within 60 days after the date the application
is complete. The commissioner may take more time if previous competing applications
are on file, the placement of a reinstated expired pawnshop license would
have an impact on the approval of an application, or where other good cause
exists as defined by Texas Government Code, §2005.004 for exceeding the
established time periods in this section.
§85.207. Bond.
The commissioner may require a bond under Texas Pawnshop Act §371.056,
when the commissioner finds that this would serve the public interest. When
a bond is required, the commissioner shall give written notice to the applicant.
Upon failure to submit a bond within 40 calendar days of the date of the commissioner's
notice, the pending application may be denied.
§85.208. Change in Form or Proportionate Ownership.
(a)
Organizational form. If a licensee desires to change the
organizational form of its business (e.g. from sole proprietorship to corporation),
the licensee must advise the commissioner in writing of the change within
ten (10) calendar days by filing the appropriate transfer documents as provided
in 7 TAC §85.205.
(b)
Merger. A merger of a corporate licensee is a change of
ownership and requires the filing of a transfer application pursuant to 7
TAC §85.205. A merger of the parent corporation of a licensee with another
corporation that results in the creation of a new corporate entity requires
a transfer application pursuant to 7 TAC §85.205. A merger of the parent
corporation of a licensee with another corporation that results in the situation
where the surviving corporation is not the existing parent corporation requires
a transfer application pursuant to 7 TAC §85.205. A merger of another
corporation with a beneficial interest beyond the parent corporation only
requires notification within 10 calendar days.
(c)
Proportionate ownership. A mere change in the proportion
of ownership among the current owners does not require the filing of a transfer
application. A change in the proportionate interests of two or more current
owners of pawnshop licenses must be reported in writing.
(d)
Notice deadline. A notice filed in connection with a change
in proportionate ownership may be filed in advance but must be filed no later
than ten (10) calendar days following the actual change.
§85.209. Amendments to Pending Applications.
Each applicant shall provide the commissioner with information supplemental
to that contained in the applicant's original application documents and attachments.
Any action, fact, or information that would require a materially different
answer than that given in the original license application and which relates
to the qualifications for license must be reported to the commissioner within
10 business days after the person has knowledge of the action, fact, or information.
§85.210. Designation of Active or Inactive Status.
(a)
Inactivation of an active license. A licensee may cease
operating a pawnshop and render the license inactive by giving notice of the
cessation of operations to the commissioner not less than 30 days prior to
the anticipated cessation date. Notification must be filed on the license
amendment form (ADM-22). The notice must include a valid mailing address,
the fee for amending the license, a certification that no loans will be made
or collected under this license until it is activated, a notice to pledgors
that pawn loans are being relocated, and a plan ensuring pledged goods are
made available for redemption. If an active license is not being used for
the active operation of a pawnshop, the commissioner may unilaterally place
the license in inactive status.
(b)
Activation of an inactive license. Activation of an inactive
license to a location other than that listed on the license must comply with
the relocation requirements set forth in 7 TAC §85.203.
§85.211. Fees.
(a)
New licenses. A $500 investigation fee is assessed each
time an application for a new license is filed and is non-refundable. In addition,
the applicant is initially required to pay an annual license fee of $100 that
is not prorated but is refundable if the license application is denied.
(b)
Subsequent licenses. A $250 investigation fee is assessed
each time an application for a new license of an existing licensee is filed
or if the application involves substantially identical principals and owners
of a licensed pawnshop and is non-refundable. In addition, the applicant is
initially required to pay an annual license fee of $100 that is not prorated
but is refundable if the license application is denied.
(c)
License transfers. An investigation fee of $500 for the
first license transfer and $250 on each additional license transfer sought
simultaneously is required and is non-refundable. If the application involves
substantially identical principals and owners of a licensed pawnshop, then
the fee is $250 for the first license transfer.
(d)
Fingerprint checks. The fee to investigate each applicant's
fingerprint record is $40 per set and is non-refundable. This fee must be
paid for each set of fingerprints filed with applications for new licenses
or license transfers.
(e)
Annual Renewal Fee. A $125 annual renewal fee is required
by June 30 each year to keep a license from expiring.
(f)
License amendment. A fee of $25 must be paid each time
a licensee seeks to amend a license by rendering a license inactive, activating
an inactive license, changing the assumed name of the licensee, or relocating
an office. An activation or relocation in a county with a population of 250,000
or more shall require a $250 investigation fee and other fees as may be required
of a new license applicant.
(g)
License duplicate. The fee for a license duplicate is
$10.
(h)
Each applicant for a new or relocated license shall pay
$1.00 to the commissioner for each notice of application that is required
to be mailed.
(i)
Costs of hearing. The commissioner or administrative law
judge may assess the costs of an administrative appeal hearing afforded under
7 TAC §85.206(g), including the cost of the administrative law judge,
the court reporter, and agency staff representing the agency at a hearing.
If it is determined that a protest is frivolous or without basis, then the
cost associated with the hearing may be assessed solely to the protesting
party.
(j)
Excess payment of fees. Any excess payment of fees received
by the commissioner may be held to offset anticipated fees that may be owed
by the licensee or applicant.
§85.212. Applications and Notices as Public Records.
Once a license application or notice is accepted by the commissioner,
it becomes a "state record" under Texas Government Code, §441.180(11),
and "public information" under Texas Government Code, §552.002. Certain
information, such as social security numbers, may be protected under the provisions
of the Texas Government Code. Under Texas Government Code, §§441.190,
441.191 and 552.004, the original applications and notices must be preserved
as "state records" and "public information" unless destroyed with the approval
of the director and librarian of the State Archives and Library Commission
under Texas Government Code, §441.187. Under Texas Government Code, §441.191,
the commissioner may not return any original documents associated with a license
application or notice to the applicant or licensee. An individual may request
copies of a state record under the authority of the Texas Government Code,
Chapter 552.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on
July 5, 1999.
TRD-9904017
Leslie L. Pettijohn
Commissioner
Office of Consumer Credit Commissioner
Earliest possible date of adoption: August 15, 1999
For further information, please call: (512) 936-7640
9.
Collection Practices
10.
Advertising
Subchapter K. Prohibitions on Authorized Lenders
Part V.
Office of Consumer Credit Commissioner
Subchapter A. General Provisions
Subchapter B. Pawnshops
Subchapter C. Pawnshop Employee License