HomeMy WebLinkAboutOrdinance 23991-12-2019 ORDINANCE NO. 23991-12-2019
AN ORDINANCE AMENDING CHAPTER 20, "LICENSES AND
MISCELLANEOUS BUSINESS REGULATIONS" OF THE CODE OF THE CITY
OF FORT WORTH, TO ADD ARTICLE XIII, ENTITLED "CREDIT ACCESS
BUSINESSES", REQUIRING REGISTRATION OF CREDIT ACCESS
BUSINESSES; DEFINING TERMS, ESTABLISHING A REGISTRATION FEE,
IMPOSING RESTRICTIONS ON EXTENSIONS OF CONSUMER CREDIT MADE
BY CREDIT ACCESS BUSINESSES; PROVIDING RECORD KEEPING
REQUIREMENTS; PROVIDING THAT THIS ORDINANCE SHALL BE
CUMULATIVE OF ALL ORDINANCES; PROVIDING A SAVINGS CLAUSE;
PROVIDING A SEVERABILITY CLAUSE; PROVIDING A PENALTY CLAUSE;
PROVIDING FOR PUBLICATION; AND NAMING AN EFFECTIVE DATE.
WHEREAS, certain credit access businesses engage in abusive and predatory lending
practices, offering easy money to those members of our community who are in a tight spot
with onerous terms and fees; and
WHEREAS, the practices of certain access businesses cause members of our community
to become trapped in a cycle of short term, high interest loans resulting in large debt and
huge payments; and
WHEREAS, the Pew Charitable Trusts, in their publication entitled Payday Lending in
America: Who Borrows, Where they Borrow, and Why, (July 2012), wrote that "payday
loans are sold as two-week credit products that provide fast cash,but borrowers are actually
indebted for an average of five months per year."The report further noted that"on average,
a borrower takes out eight loans of$375 each per year and spends $520 on interest;" and
WHEREAS, the Pew Charitable Trusts, in their publication entitled Payday Lending in
America: Who Borrows, Where they Borrow, and Why, (July 2012), also noted: "How
much borrowers spend on loans depends heavily on the fees permitted by their state. The
same $500 storefront loan would generally cost about $55 in Florida, $75 in Nebraska,
$87.50 in Alabama, and $100 in Texas, even if it were provided by the same national
company in all those states. Previous research has found that lenders tend to charge the
maximum permitted in a state;" and
WHEREAS, the Pew Charitable Trusts, in their publication entitled Payday Lending in
America: Who Borrows, Where they Borrow, and Why, (July 2012), also stated that "the
vast majority of borrowers use the loans on a long-term basis, not temporary one. Thus it
seems that the payday loan industry is selling a product few people use as designed and
that imposes debt that is consistently more costly and longer lasting than advertised;" and
WHEREAS, the Community Financial Services Association of America (CFSA), the
national trade association for companies that offer small dollar, short-term loans or payday
advances includes the following in the "Member Best Practices" as listed on its internet
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site (http://cfsaa.com/cfsa-member-best-practices.aspx): "Members shall not allow
customers to rollover a payday advance (the extension of an outstanding advance by
payment of only a fee) unless expressly authorized by state law, but in such cases where
authorized will limit rollovers to four or the state limit, whichever is less." The need for
consumer understanding was also outlined on this website: "A contract between a member
and the customer must fully outline the terms of the payday advance transaction. Members
agree to disclose the cost of the service fee both as a dollar amount and as an annual
percentage rate ("APR");" and
WHEREAS,the Center for Responsible Lending,a non-profit, non-partisan organization,
states on its internet site (http://www.responsiblelending.org/other-consumer-loans/tools-
resources/fast-facts.html) that: "car title loans are based on the value of a borrower's car-
the ability to repay the loans is not factor in the lending decision..."; "loan rates for a car
title are typically 20-30 times that of rates charged by credit card issuers..."; "the average
car title customer renews their loan 8 times..."; and, "on a $500 title loan, this average
customer will pay back $650 in interest over eight months; the principal borrowed will be
in addition;" and
WHEREAS,lenders hold onto the motor vehicle title and when borrowers cannot continue
to pay the fees, they can lose their vehicles, which can drastically affect the borrower's
means of transportation for work and other essential household functions.
NOW,THEREFORE,BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF FORT WORTH, TEXAS:
SECTION 1.
The Code of Ordinances of Fort Worth, Texas is hereby amended by adding a new
article, Article XIII "Credit Access Businesses" to Chapter 20, "Licenses and
Miscellaneous Business Regulations," comprised of Sections 20-450 through 20-462
which read as follows:
ARTICLE XIII-CREDIT ACCESS BUSINESSES
Sec. 20.450 - Short Title and Purpose.
(a) This article may be known and cited as "Credit Access Businesses Regulation."
(b) The purpose of this article is to protect the welfare of the citizens of the City by
monitoring credit access businesses in an effort to reduce abusive and predatory lending
practices. To this end, this article establishes a registration program for credit access
businesses, imposes restrictions on extensions of consumer credit made by credit access
businesses, and imposes recordkeeping requirements on credit access businesses.
Chapter 20 Credit Access Businesses Ordinance No.23991-12-2019
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Sec. 20-451- Definitions.
As used in this chapter:
(1) CERTIFICATE OF REGISTRATION means a certificate of registration issued by
the director under this article to the owner or operator of a credit access business.
(2) CONSUMER means an individual who is solicited to purchase or who purchases
the services of a credit access business.
(3) CONSUMER'S LANGUAGE OF PREFERENCE is the language the consumer
understands best.
(4) CREDIT ACCESS BUSINESS has the meaning given that term in Section 393.601
of the Texas Finance Code. This definition does not include a credit service
organization as defined by Section 393.001 of the Texas Finance Code whose
principal operation of business occurs through on-line transactions and does not
operate physical locations that allow onsite credit applications and approval.
(5) DEFERRED PRESENTMENT TRANSACTION has the meaning given that term
in Section 393.601 of the Texas Finance Code.
(6) DIRECTOR means the director of the department designated by the City Council,
City Manager, or City Councilor City Manager's Designee, to enforce and
administer this chapter.
(7) EXTENSION OF CONSUMER CREDIT has the meaning given that term in
Section 393.001 of the Texas Finance Code.
(8) MOTOR VEHICLE TITLE LOAN has the meaning given that term in Section
393.601 of the Texas Finance Code.
(9) PERSON means any individual, corporation, organization,partnership, association,
financial institution, or any other legal entity.
(10)REGISTRANT means a person issued a certificate of registration for a credit access
business under this chapter and includes all owners and operators of the credit access
business identified in the registration application filed under this chapter.
(11) STATE LICENSE means a license to operate a credit access business issued by
the Texas Consumer Credit Commissioner under Chapter 393, Subchapter G of the
Texas Finance Code.
Sec. 20-452-Violations; Penalty
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(a)A person who violates a provision of this chapter,or who fails to perform an act required
of the person by this chapter, commits an offense. A person commits a separate offense for
each and every violation relating to an extension of consumer credit, and for each day
during which a violation is committed, permitted, or continued.
(b) An offense under this chapter is punishable as provided in section 1-6 of this Code.
(c) A culpable mental state is not required for the commission of an offense under this
article and need not be proved.
(d) The penalties provided for in Subsection (b) are in addition to any other remedies that
the city may have under city ordinances and state law.
Sec. 20-453- Defenses
It is a defense to prosecution under this article that at the time of the alleged offense the
person was not required to be licensed by the state as a credit access business under Chapter
393, Subchapter G, of the Texas Finance Code.
Sec. 20-454-Registration Required
A person commits an offense if the person acts, operates, or conducts businesses as a credit
access business without a valid certificate of registration. A certificate of registration is
required for each physically separate credit access business.
Sec. 20455-Registration Application
(a) To obtain a certificate of registration for a credit access business, a person must submit an
application on a form provided for that purpose to the director. The application must contain
the following:
(1) The name, street address, mailing address, facsimile number, and telephone
number of the applicant.
(2) The business or trade name, street address, mailing address, facsimile number,
and telephone number of the credit access business.
(3) The names, street addresses, mailing addresses, and telephone numbers of all
owners of the credit access business, and the nature and extent of each person's
interest in the credit access business.
(4) A copy of a current, valid state license held by the credit access business
pursuant to Chapter 393, Subchapter G of the Texas Finance Code.
(5)A copy of a current,valid certificate of occupancy showing that the credit access
business is in compliance with the Fort Worth Building Code.
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(6) A non-refundable application fee for the amount established.
(b) An applicant or registrant shall notify the director within 45 days after any material
change in the information contained in the application for a certificate of registration,
including,but not limited to,any change of address and any change in the status of the state
license held by the applicant or registrant.
Sec. 20-456-Issuance and Display of Certificate of Registration; Presentment upon
Request.
(a) The director shall issue to the applicant a certificate of registration upon receiving a
completed application under Section 20-455.
(b) A certificate of registration issued under this section must be conspicuously displayed
to the public in the credit access business. The certificate of registration must be presented
upon request to the director or any peace officer for examination.
Sec. 20-457-Expiration and Renewal of Certificate of Registration.
(a) A certificate of registration expires on the earliest of:
(1)One year after the date of issuance; or
(2)The date of revocation, suspension, surrender, expiration without renewal, or other
termination of the registrant's state license.
(b)A certificate of registration may be renewed by making application in accordance with
Section 20-455. A registrant shall apply for renewal at least 30 days before the expiration
of the registration.
Sec. 20-458-Non-transferability.
A certificate of registration for a credit access business is not transferable.
Sec. 20-459- Maintenance of Records.
(a) A credit access business shall maintain a complete set of records of all extensions of
consumer credit arranged or obtained by the credit access business, which must include the
following information:
(1)The name and address of the consumer.
(2)The principal amount of cash actually advanced.
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(3) The length of the extension of consumer credit, including the number of installments
and renewals.
(4) The fees charged by the credit access business to arrange or obtain an extension of
consumer credit; and
(5)The documentation used to establish a consumer's income under Section 20-460 of this
ordinance.
(b) A credit access business shall maintain a copy of each written agreement between the
credit access business and a consumer evidencing an extension of a consumer credit
(including,but not limited to, any refinancing or renewal granted to the consumer).
(c)A credit access business shall maintain copies of all quarterly reports filed with the Texas
Consumer Credit Commissioner under Section 393.627 of the Texas Finance Code.
(d) The records required to be maintained by a credit access business under this section must
be retained for at least three years and made available for inspection by the city upon request
during the usual and customary business hours of the credit access business.
Sec.20-460-Restriction on Extension of Consumer Credit.
(a) The cash advanced under an extension of consumer credit that a credit access business
obtains for a consumer or assists a consumer in obtaining in the form of a deferred presentment
transaction may not exceed 20 percent of the consumer's gross monthly income.
(b) The cash advanced under an extension of consumer credit that a credit access business
obtains for a consumer or assists a consumer in obtaining in the form of a motor vehicle title
loan may not exceed the lesser of:
(1) Three percent of the consumer's gross annual income; or
(2) 70 percent of the retail value of the motor vehicle.
(c)A credit access business shall use a paycheck or other documentation establishing income
to determine a consumer's income.
(d) An extension of consumer credit that a credit access business obtains for a consumer or
assists a consumer in obtaining and that provides for repayment in installments may not be
payable in more than four installments.Proceeds from each installment must be used to repay
at least 25 percent of the principal amount of the extension of consumer credit. An extension
of consumer credit that provides for repayment in installments many not be refinanced or
renewed.
(e) An extension of consumer credit that a credit access business obtains for a consumer or
assists a consumer in obtaining and that provides for a single lump sum repayment may not
be refinanced or renewed more than three times. Proceeds from each refinancing or renewal
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must be used to repay at least 25 percent of the principal amount of the original extension of
consumer credit.
(f) For purposes of this section, an extension of consumer credit that is made to a consumer
within seven days after a previous extension of consumer credit has been paid by the consumer
will constitute a refinancing or renewal.
Sec. 20-461-Requirement of Consumer Understanding of Agreement.
(a) Every agreement between the credit access business and a consumer evidencing an
extension of consumer credit(including,but not limited to,any refinancing or renewal granted
to the consumer), must be written in the consumer's language of preference. Every credit
access business location must maintain on its premises,to be available for use by consumers,
agreements in the English and Spanish languages.
(b)For every consumer who cannot read,every agreement between the credit access business
and a consumer evidencing an extension of consumer credit(including,but not limited to,any
refinancing or renewal granted to the consumer) must be read to the consumer in its entirety
in the consumer's language of preference,prior to the consumer's signature.
(c) For every consumer who cannot read, every disclosure and notice required by law must
be read to the consumers in its entirety in the consumer's language of preference,prior to the
consumer's signature.
Sec.20-462-Referral to Consumer Credit Counseling.
A credit access business shall provide a form, to be prescribed by the Director, to each
consumer seeking assistance in obtaining an extension of consumer credit which references
non-profit agencies that provide financial education and training programs and agencies with
cash assistance programs. The form will also contain information regarding extensions of
consumer credit and must include the information required by section 20-459(a)(1)-(5)of this
ordinance specific to the loan agreement with the consumer. If the Director has prescribed a
form in the consumer's language of preference,the form must be provided in the consumer's
language of preference.
SECTION 2.
That this ordinance shall be cumulative of all other ordinances of the City of Fort
Worth,Texas,and shall not repeal any of the provisions of such ordinances, except in those
instances where provisions of such ordinances are in direct conflict with the provisions of
this ordinance.
SECTION 3.
That all rights or remedies of the City of Fort Worth, Texas, are expressly saved as
to any and all violations of the City Code, or any amendments thereto that have accrued at
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the time of the effective date of this ordinance; and as to such accrued violations, and all
pending litigation, both civil and criminal, same shall not be affected by this ordinance but
may be prosecuted until final disposition by the courts.
SECTION 4.
That it is hereby declared to be the intention of the City Council that the sections,
paragraphs, sentences, clauses and phrases of this ordinance are severable, and if any
phrase, clause, sentence, paragraph or section of this ordinance shall be declared void,
ineffective or unconstitutional by the valid judgment or decree of any court of competent
jurisdiction, such voidness,ineffectiveness or unconstitutionality shall not affect any of the
remaining phrases, clauses, sentences, paragraphs or sections of this ordinance, since the
same would have been enacted by the City Council without the incorporation herein of any
such void, ineffective or unconstitutional phrase, clause, sentence, paragraph or section.
SECTION 5.
That any person, firm or corporation who violates, disobeys, omits, neglects or
refuses to comply with or who resists the enforcement of any of the provisions of this
ordinance shall be fined not more than Five Hundred Dollars ($500.00) for each offense.
Each day that a violation exists shall constitute a separate offense.
SECTION 6.
That the City Secretary of the City of Fort Worth, Texas, is hereby directed to
publish this ordinance for two (2) days in the official newspaper of the City of Fort Worth,
Texas, as authorized by the V.T.C.A. Local Government Code Subsection 52.013.
SECTION 7.
This ordinance shall take effect after adoption and publication as required by law.
APPROVED AS TO AND LEGALITY:
Melinda Ramos, Sr. Assistant City Attorney gar4JKWker. 6:� ecretary
Adopted: December 17, 2019 ,>O�F0 . T.!'Ii0
Effective:
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Chapter 20 Credit Access Businesses Ordinance No.23991-12-2019
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City of Fort Worth,Texas
Mayor and Council Communication
DATE: 12/17/19 M&C FILE NUMBER: M&C 19-0404
LOG NAME: 12CREDIT ACCESS BUSINESS ORDINANCE
SUBJECT
Adopt an Ordinance Amending Chapter 20,"Licenses and Miscellaneous Business Regulations,"to Add Article XIII,"Credit Access Businesses"
of the Code of the City of Fort Worth to Establish Credit Access Businesses Regulations(ALL COUNCIL DISTRICTS)
RECOMMENDATION:
It is recommended that the City Council adopt the attached ordinance amending Chapter 20,"Licenses and Miscellaneous Business Regulations,"
to add Article XIII,"Credit Access Businesses"to the Code of the City of Fort Worth,to establish regulations for credit access business related to
registration of such businesses,restriction on extensions of consumer credit and record keeping provisions.
DISCUSSION:
In Texas,payday and auto title lenders operate as credit access businesses(CABs),a special designation for a credit service organization that
obtains for a consumer or assists a consumer in obtaining an extension of consumer credit in the form of a deferred presentment transaction or a
motor vehicle title loan,more commonly referred to as"payday loans"or"title loans."
CABs serve as loan brokers,arranging short-term loans with third-party lenders.While the lender typically charges an interest rate near 10%,
CABs may charge unlimited fees to arrange,service and provide a letter of credit or guaranty to the third-party lender who funds the payday and
auto title loan. The ability to charge unlimited fees which may be calculated as a percentage of the loan amount,results in interest rates of 200%to
500%of the loan amount. Uncapped fees,coupled with how the loans are structured has resulted in abusive and predatory lending practices
pulling vulnerable communities into deeper financial crisis by becoming trapped in a cycle of short term,high interest loans resulting in large debt
and huge payments.
The attached ordinance to protect the welfare of the citizens of the City by monitoring credit access businesses in an effort to reduce abusive and
predatory lending practices.To this end,this article establishes a registration program for credit access businesses, imposes restrictions on
extensions of consumer credit made by credit access businesses,and imposes recordkeeping requirements on credit access businesses.The
ordinance is applicable to CABs located within the City's corporate boundaries and would not be enforceable against online lenders.
A Form 1295 is not required because:This M&C does not request approval of a contract with a business entity.
FISCAL INFORMATION/CERTIFICATION:
The Director of Finance certifies that approval of these recommendations will have no material effect on City funds.
Submitted for City Managees Office by: Dana Burghdoff 8018
Originating Business Unit Head: Sarah Fullenwider 7623
Additional Information Contact: Melinda Ramos 7631