14 Sep Texas Regulatory Update
The Finance Commission of Texas (“Commission”) recently updated its rules regarding the licensing of regulated lenders, effective September 8, 2016.
7 TEXAS ADMINSTRATIVE CODE CHAPTER 83
The term “Amount Financed” now means the amount calculated in accordance with Regulation Z.
“Proprietors” under the definition of “Principal Party” for sole proprietorships no longer includes spouses with a community property interest. In addition, there is no longer a requirement to disclose community property interests and documentation regarding separate property status. This requirement has been replaced with a requirement to disclose the names of the spouses of principal parties if requested.
A new section was added which describes the license application requirements when a licensed entity transfers its license or ownership of the entity. If a transfer of ownership occurs, the transferee must submit either a license transfer application or a new license application on transfer of ownership no later than 30 days after the transfer.
“License Transfer” means a sale, assignment or transfer of a regulated loan license.
“Permission to Operate” means a temporary authorization from the Texas Office of the Consumer Credit Commissioner (“OCCC”), allowing a transferee to operate under a transferor’s license while final approval is pending for a license transfer application or a new license application on transfer of ownership.
“Transfer of Ownership” means any purchase or acquisition of control of a licensed entity (including acquisition by gift, devise, or descent), or a substantial portion of a licensed entity’s assets, where a substantial change in management or control of the business occurs. The term does not include a change in proportionate ownership or a relocation of regulated transactions from one licensed location to another licensed location. The rule outlines what is considered a transfer of ownership for a sole proprietorship, general partnership, limited partnership, corporation and limited liability company.
“Transferee” means the entity that controls business at a licensed location after a transfer of ownership.
“Transferor” means the licensed entity that controls business at a licensed location before a transfer of ownership.
No regulated loan license may be sold, transferred, or assigned without the written approval of the OCCC. A license transfer is approved when the OCCC issues its final approval of a license transfer application.
The rule sets forth the application procedures including required documentation and information which must be provided to the OCCC.
Before the transferee begins performing regulated lender activity under a license, the transferor is responsible to any consumer and to the OCCC for all regulated lender activity performed under the license. If a transferee begins performing regulated lender activity under a license before the OCCC’s final approval of an application, then the transferor and transferee are each responsible to any consumer and to the OCCC for activity performed under the license during this period. After the OCCC’s final approval of an application, the transferee is responsible to any consumer and to the OCCC for all regulated lender activity performed under the license. The transferee is responsible for any transactions that it purchases from the transferor. In addition, if the transferee receives a license transfer, then the transferee’s responsibility includes all activity performed under the license before the license transfer.
The rule outlines the procedures and requirements for updating application and contact information. It also sets forth the fees for fingerprinting, license amendments, license duplicates, and annual renewal and assessments.
Notice of delinquency in the payment of an annual assessment fee is given when the OCCC sends the delinquency notice:
- By mail to the address on file with the OCCC as a master file address; or
- By e-mail to the address on file with the OCCC as a master file e-mail address, if the licensee has provided one.
The rule sets forth the circumstances when a license will be denied, suspended or revoked based on criminal history. The OCCC may deny a license application if the OCCC does not find that the financial responsibility, experience, character, and general fitness of the applicant are sufficient to command the confidence of the public and warrant the belief that the business will be operated lawfully and fairly.
In addition to those items previously required to be retained, a licensee must now retain copies of any record maintained under the Department of Defense’s Military Lending Act Rule regarding whether the borrower is a covered borrower as well as any mandatory disclosures required by such Act in each borrower’s loan records and documents file.