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HomeMy WebLinkAbout(0081) FW Credit Access Business Reg Ord 12.4.2019.PDFORDINANCE NO. 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 Chapter 20 Credit Access Businesses Ordinance No. Pagel of 8 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.responsiblelendina.ora/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. Page 2 of 8 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 Chapter 20 Credit Access Businesses Ordinance No. Page 3 of 8 (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. 20-455- 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. Chapter 20 Credit Access Businesses Ordinance No. Page 4 of 8 (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. Chapter 20 Credit Access Businesses Ordinance No. Page 5 of 8 (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 Chapter 20 Credit Access Businesses Ordinance No. Page 6 of 8 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 Chapter 20 Credit Access Businesses Ordinance No. Page 7 of 8 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 FORM AND LEGALITY: Melinda Ramos, Sr. Assistant City Attorney Mary Kayser, City Secretary Adopted: Effective: Chapter 20 Credit Access Businesses Ordinance No. Page 8 of 8