Online Lending Protections for Texans
HB 1442, which went into effect on September 1, 2019, includes important new protections for online lending and loans or cash advances through apps. It clarifies state law to make sure it applies to many types of online loans.
What do I do if I have a problem with a loan or cash advance I got online or through an app?
The Texas Office of Consumer Credit Commissioner, the state regulator for consumer loans, may be able to help you. It is important to contact the consumer help line or submit a complaint so that the Office knows of problems that Texans are facing with loans. They also have a team that can help resolve issues if a consumer lending business is breaking the law. Examples of issues consumers face may include:
- The interest rate on a loan seems too high or the payments are unaffordable.
- Harassing calls or other harassing communications if a payment is late or if the loan is in default.
- Requiring insurance or membership fees associated directly with a loan.
- A business is not delivering what was promised.
You also may want to contact the Consumer Financial Protection Bureau, an agency of the federal government with a mission to protect consumers. They have an online and telephone-based system to take complaints in many languages. Both the Consumer Bureau and the Texas Office of Consumer Credit Commissioner should work with you to try to resolve your issue. It is best to reach out to both agencies for help.
Identity Theft Protections for Survivors of Domestic Violence and Financial Abuse
HB 2697, which went into effect on September 1, 2019, adds clarity to the criminal definition of identity theft in Texas to ensure that it covers coerced debt and financial abuse, which occur often in domestic violence situations. Coerced debts—debts taken out by an abuser through force, threat, or fraud—now fall clearly under the definition of identity theft in Texas.
Does the new law apply to coerced debts that were taken out before September 1, 2019?
The new law applies only to debts that were taken out by threat or force after September 1, 2019. Debts taken out by fraud were expressly covered under the previous law, and so many identity theft protections already apply to those debts. For coerced credit card debts, there may be other protections under a different law as well, Texas Penal Code 32.31, which establishes criminal penalties for credit card abuse, including abuse through threat, force, or fraud.
How can I learn more about identity theft protections for survivors of domestic violence or financial abuse?
It is important always to think of safety first when dealing with situations of domestic abuse and financial abuse. We recommend contacting the National Domestic Violence Hotline if you fear for your safety or the safety of a loved one.
To help victims and their advocates understand the different strategies and protections available, Texas Appleseed partnered with the Texas Coalition on Coerced Debt to create a toolkit. You can access the toolkit at: http://financialabusehelp.org/.
Debt Buyers Prohibited from Suing to Collect and Reviving Old Debts
HB 996, which went into effect on September 1, 2019, adds new protections for Texans with old debts, often called “time-barred debts” or “zombie debts.” The new law prohibits debt buyers—generally businesses that buy defaulted debts and try to collect them—from suing or using arbitration to collect a time-barred debt. It makes these prohibited practices a violation of the Texas Fair Debt Collections Practices Act, Chapter 392 of the Texas Finance Code. Under the new law, once a debt is time-barred, a debt buyer cannot sue to collect the debt even if a payment is made. The new law also prohibits debt buyers from suing to collect if any payment is made on a time-barred debt.
How do I know if a debt I have is “time-barred”?
For most consumer credit in Texas, debts are generally considered time-barred if four years or more have passed since the account went into default. When a debt collector contacts you, they are required to provide you with verification of the debt. If a debt collector does not provide you with verification, you should ask for it.
What if a debt collector contacts me to collect a debt I think is time-barred?
Under the new law, debt collectors must provide you with specific written notices in their first written communication if they are collecting a time-barred debt. The notice should tell you that they cannot sue to collect the debt and give you information about whether or not they are reporting the debt on your credit report. You can choose to negotiate payment of the debt if you would like. Payments will not restart the clock to sue to collect the debt.
It is important to note that payments made before a debt is considered time-barred could restart the time-period to sue on a debt. exas Appleseed has published a toolkit to help people understand their debt collection rights under state and federal law: http://mydebtcollectionrights.org/.
What if a debt buyer sues me to collect a debt I think is time-barred?
If you are sued by a debt buyer for a debt you think is time-barred, it is best to have an attorney represent you. If your income is low, you may qualify for free legal services. The National Association of Consumer Advocates also has a list of private consumer attorneys.
If you are sued for a debt, it is important to answer the lawsuit, so that you can assert your rights. The Texas Appleseed debt collection toolkit includes a form to help Texans answer debt collection lawsuits. Make sure to include information about why your debt is time-barred in your answer to the lawsuit.
Since suing on a time-barred debt by a debt buyer now violates Texas law, you may also have a legal claim against the debt buyer who is suing you.
Beware of rent-to-own businesses that threaten or file criminal complaints—they could be breaking the law
HB 2524, is effective on September 1, 2019, and applies to all theft of service offenses related to rent-to-own contracts after that date. Rent-to-own companies were found to be abusing the theft of service law as a way to intimidate customers into paying on their contracts or actually getting customers arrested. HB 2524 aims to help fix this problem.
The new law does not fully close the loophole in Texas law that allowed rent-to-own businesses to use our criminal justice system as a debt collector. However, it does limit the circumstances when the criminal theft of service law applies to a rent-to-own transaction. A criminal complaint may still occur in situations where:
- The customer disposes of the property under the rent-to-own contract in violation of the agreement and to the benefit of any person not entitled to the property (for example, customer sells or pawns the property in violation of the contract), or
- Where the customer intentionally or knowingly secures the service by deception, threat, or fraud (for example putting false information in an application or using someone else’s identity).
The new law also:
- Establishes a higher burden to prove a theft of service crime was committed if the rent-to-own customer made three or more complete payments under the rent-to-own contract; and
- Allows customers to refute criminal charges if they show that that they intended to return the rent-to-own property and were unable to.
I have a rent-to-own contract from before September 1, 2019. Does the new law apply to me?
The new law applies to any offense that happens after September 1, 2019, even if the contract was signed before that date.
I think a rent-to-own company filed a criminal complaint against me in violation of the new law. What can I do?
If you are prosecuted, you will need a lawyer to defend you in the criminal matter. If you cannot afford to hire an attorney to represent you in the criminal matter, you can ask for a court-appointed attorney to represent you at no charge. Make sure to tell your lawyer why you think the rent-to-own business violated the law.
You also may want to speak to a consumer lawyer to see if you think the rent-to-own business violated debt collection practices laws by making wrongful threats of criminal charges—threating or accusing you of a criminal violation when you didn’t commit a crime. Section 392.301(2) of the Texas Finance Code prohibits people collecting a debt from threatening to falsely accuse or falsely accusing someone of committing a crime.