Texas Register, Volume 35, Number 1, Pages 1-140, January 1, 2010 Page: 61
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ADOPTED
E S Adopted rules include new rules, amendments to existing rules, and repeals of existing
rules. A rule adopted by a state agency takes effect 20 days after the date on which it is
filed with the Secretary of State unless a later date is required by statute or specified in
the rule (Government Code, 2001.036). If a rule is adopted without change to the text of the proposed rule, then the
Texas Register does not republish the rule text here. If a rule is adopted with change to the text of the proposed rule, then
the final rule text is included here. The final rule text will appear in the Texas Administrative Code on the effective date.ZEDIT SERVICES
The Office of the Secretary of State adopts the reorganization
of Chapter 74, concerning credit services organizations, by re-
pealing 74.1 and 74.21 - 74.23 and adopting new 74.1 -
74.3. The repeals and new 74.2 and 74.3 are adopted with-
out changes to the proposal published in the October 2, 2009,
issue of the Texas Register (34 TexReg 6722) and will not be re-
published. Section 74.1 is adopted with changes to subsection
(c)(4) and a correction to the agency's web address and will be
republished. The non-substantive revisions clarify the rules, up-
date the mailing address for the Office of the Secretary of State,
provide the secretary of state's website, and remove references
to specific required forms by name.
Additionally, new 74.3(b) provides for cancellation of a surety
bond or account two years after the organization ceases opera-
tions at the location for which the surety bond was established,
clarifies the meaning of "maintained" as used in subsection (a),
and reflects that the secretary of state will authorize return of
funds from a previously established surety account upon proper
filing of information pertaining to a newly established surety ac-
count.
The Office of the Secretary of State (the "Office") received sim-
ilar comments from Texas Appleseed, the American Associa-
tion of Retired Persons, Raise Texas, Texas Rio Grande Legal
Aid, Inc., and an individual private attorney (the "comments").
The comments urged the Office to adopt rules addressing an al-
leged "loophole" currently open to payday, auto title, and other
small lenders. According to the comments, by registering as
credit services organizations ("CSOs"), many Texas lenders suc-
cessfully bypass state consumer credit laws, to the detriment
of consumers. The comments urge the Office to address the
alleged loophole in the Credit Services Organization Act (the
"Act"), Chapter 393, Finance Code, by implementing the follow-
ing four recommendations:
1. Require a CSO to identify in its registration statement which
of the three authorized CSO functions it will serve. If the or-
ganization seeks to obtain an extension of consumer credit for
a consumer, further require the organization to state what type
of credit or loans it intends to obtain for consumers and details
regarding the lenders that the CSO uses to obtain extensions of
credit.
2. Define both "full and complete disclosure" and "resolved com-
plaint" as used in proposed 74.1(c)(4).TITLE 1. ADMINISTRATION
PART 4. OFFICE OF THE SECRETARY
OF STATEJanuary 1, 2010 35 TexReg 61
3. Require a CSO to provide with its registration statement a
copy of the contracts, information statements, separate notice of
cancellation, fee and interest rate information for services, num-
ber of clients served, average number of services provided per
client, and all other documents the CSO has consumers of their
products sign.
4. Review CSO registration statements annually and provide
members of the public with a statistical overview of the informa-
tion provided through the registration statements.
The comments urge these four recommendations to "provide
tools to monitor the Act's effectiveness as a law designed to
protect consumers from abusive market practices." Having fully
considered the four recommendations outlined above, the Office
declines to implement recommendations one, three, and four.
Although the Office also declines to fully implement recommen-
dation two, adopted 74.1 was revised from the proposed ver-
sion with recommendation two in mind. The revision to 74.1 is
discussed below in the paragraphs following the discussion of
recommendations one, three, and four.
Recommendations one and three urge the Office to require ad-
ditional information to be submitted with the registration state-
ment beyond the information outlined by the Texas Legislature in
393.101(a) of the Act. Section 393.101(c) of the Act, however,
expressly limits what the Office can require a CSO to submit as
follows: "The secretary of state may not require an organiza-
tion to provide information other than information contained in
the registration statement." Thus, 393.101(c) prohibits the Of-
fice from requiring information beyond the information set forth
in 393.101(a). Because the Office is prohibited from requiring
additional information to be submitted by a CSO, the Office can-
not implement recommendations one and three.
The comments urge recommendation four to obtain analysis of
the information collected under recommendations one and three.
Because the Office is prohibited from implementing recommen-
dations one and three, recommendation four is moot. This is so
notwithstanding other reasons for declining to implement recom-
mendation four.
The Office received several comments requesting that the Office
use its administrative rules to expand statutory terms. Recom-
mendation two requests definitions of "full and complete disclo-
sure" and "resolved," as used in 74.1(c)(4). Further, the Office
received a comment from the Surety & Fidelity Association of
America (the "Association") requesting an expansion of the def-
inition of "maintain" in 74.3. Having fully considered the com-
ments, the Office declines to implement the requests.
As the Association recognized, the use of "maintain" in 74.3
tracks the language of the Act. The definition of "maintained" in
74.3(b)(1) summarizes the statutory requirements for maintain-
ing a bond or account; the subsection does not impose additionalCHAPTER 74. CR
ORGANIZATIONSADOPTED RULES
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Texas. Secretary of State. Texas Register, Volume 35, Number 1, Pages 1-140, January 1, 2010, periodical, January 1, 2010; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth101165/m1/58/?rotate=90: accessed July 17, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.