Can a Texas credit services organization help a consumer get a loan that isn't a payday or car-title loan?

Plain-English summary

Texas regulates "credit services organizations," companies that, for a fee, help consumers get credit from other lenders or improve their credit, under chapter 393 of the Finance Code. A House committee chair asked the AG a focused question: does chapter 393 let such a company help a consumer obtain consumer credit in some form other than a payday loan or a motor vehicle title loan?

The AG answered by reading the chapter as a whole. The base definition of "credit services organization" is broad. It covers a person who, for valuable consideration, provides (or says it can provide) services connected to "the extension of consumer credit by others," including obtaining an extension of consumer credit for a consumer or advising and assisting with that. Nothing in that definition limits the company to particular loan types. Credit services organizations have to register with the Secretary of State, give disclosure statements, use specific contract language, and obtain a surety bond.

In 2011 the Legislature added two subchapters (C-1 and G) that imposed extra licensing and notice requirements on "certain" credit services organizations, namely "credit access businesses." A credit access business is defined as a credit services organization that helps a consumer get an extension of consumer credit "in the form of a deferred presentment transaction" (a payday loan) "or a motor vehicle title loan." The AG's key point: the 2011 amendments singled out that subset for heavier regulation but did not rewrite or shrink the general definition of credit services organization, and the word "certain" implies the new rules apply to "some but not all" credit services organizations. "Extension of consumer credit" is itself defined broadly as "the right to defer payment of debt offered or granted primarily for personal, family, or household purposes." Payday and title loans are just two examples of that broader category, not the whole of it. So the plain language does not bar a credit services organization, when it is not acting as a credit access business, from helping a consumer obtain credit in another form.

The Office of Consumer Credit Commissioner had argued the opposite, pointing to a 2012 bulletin suggesting the Legislature meant the rules to cover such transactions even without a post-dated check or vehicle title. The AG gave that little weight: a single legislator's testimony does not establish legislative intent, the Commissioner's enforcement authority over chapter 393 runs specifically "with respect to a credit access business," and Texas courts give an informal agency bulletin much less deference than a formal rule, perhaps none, especially where the statute is unambiguous. The AG added that the Legislature could regulate other forms of credit if it chose, but it had not done so.

On the second question, whether an unsecured "signature loan" (no collateral, no post-dated check, no debit authorization) is allowed, the AG declined to rule. Whether a specific product complies with chapter 393 depends on the facts of the particular offering, which an AG opinion cannot decide. The AG offered general guideposts instead: chapter 393 does not require the credit to be secured, but it does prohibit charging a consumer just for referring them to a retail seller offering credit "substantially the same as that available to the public" (section 393.303), and it prohibits using "a device, subterfuge, or pretense" to evade the credit-access-business rules (section 393.602(c)). Whether any particular deal trips those bars is a fact question.

Currency note

This opinion was issued in 2019. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

For the legislator who asked and for the consumer-finance industry, the opinion read chapter 393 to leave credit services organizations free, as a matter of statute, to assist with extensions of consumer credit beyond payday and car-title loans, with the heavier 2011 credit-access-business regime reserved for those two specific loan forms. For the Office of Consumer Credit Commissioner, the opinion declined to adopt the position of its 2012 bulletin and explained why a court likely would not defer to it. For anyone designing a specific product, the opinion stopped short of approving it: the AG flagged the referral-fee bar in section 393.303 and the anti-evasion bar in section 393.602(c) as the live constraints, and left the compliance of any particular offering to a factual determination outside the opinion process.

Common questions

Q: What is a credit services organization?
A: Under section 393.001(3), it is a person who, for pay, provides or offers services connected to getting credit from others, such as obtaining an extension of consumer credit for a consumer or improving a consumer's credit, or advising on those.

Q: What is a "credit access business"?
A: A credit services organization that helps a consumer get an extension of consumer credit "in the form of a deferred presentment transaction" (payday loan) "or a motor vehicle title loan" (sections 393.221(1), 393.601(2)). The 2011 amendments added extra licensing and disclosure rules for these.

Q: Can a credit services organization help with loans that are not payday or title loans?
A: Yes, the AG concluded. Chapter 393 does not restrict credit services organizations, other than when operating as credit access businesses, from assisting with extensions of consumer credit in other forms.

Q: Did the AG approve unsecured "signature loans"?
A: No. Whether a specific product complies with chapter 393 is a fact question beyond an AG opinion. The AG noted the credit need not be secured, but pointed to the bars on referral fees for publicly available credit (section 393.303) and on using a device or subterfuge to evade regulation (section 393.602(c)).

Q: How much weight does the Consumer Credit Commissioner's 2012 bulletin carry?
A: The AG said a court would likely give an informal bulletin significantly less deference than a formal rule, and may give it none, particularly where the statute is unambiguous.

Background and statutory framework

Chapter 393 of the Finance Code (sections 393.001-.628) governs credit services organizations. Section 393.001(3) defines the term broadly, section 393.001(4) defines "extension of consumer credit," and sections 393.101(a), 393.105, 393.201, and 393.401 impose registration, disclosure, contract, and surety-bond requirements. The 2011 amendments added Subchapter C-1 (sections 393.221-.224) and Subchapter G (sections 393.601-.628) for "certain" credit services organizations, i.e., "credit access businesses," defined in sections 393.221(1) and 393.601(2) by reference to deferred presentment transactions and motor vehicle title loans; "deferred presentment transaction" is defined at section 341.001(6) and section 393.221(2). The Commissioner's enforcement authority over chapter 393 runs "with respect to a credit access business" (section 14.101), and only licensed lenders may make consumer loans under chapter 342 (section 342.051(a)). The AG construed the statute by its plain meaning (Gunn v. McCoy, 554 S.W.3d 645 (Tex. 2018); Tex. Dep't of Transp. v. City of Sunset Valley, 146 S.W.3d 637 (Tex. 2004); State v. Shumake, 199 S.W.3d 279 (Tex. 2006)), discounted reliance on a single legislator's testimony (Robinson v. Crown Cork & Seal Co., 335 S.W.3d 126 (Tex. 2010)), and addressed agency deference (Tex. Dep't of Ins. v. Am. Nat'l Ins. Co., 410 S.W.3d 843 (Tex. 2012); R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619 (Tex. 2011); Fiess v. State Farm Lloyds, 202 S.W.3d 744 (Tex. 2006)), citing its own prior opinions KP-0115 (2016) and KP-0128 (2017), and noting the State's police power to regulate businesses (Lowe v. Tex. Liquor Control Bd., 255 S.W.2d 252 (Tex. App.-Amarillo 1952, no writ)).

Citations and references

Statutory provisions:

• Tex. Fin. Code ch. 393 (§§ 393.001, 393.101, 393.105, 393.201, 393.221-.224, 393.303, 393.401, 393.601-.628)
• Tex. Fin. Code § 14.101; § 341.001; § 342.051

Cases:

• Tex. Dep't of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 642 (Tex. 2004)
• Gunn v. McCoy, 554 S.W.3d 645, 672 (Tex. 2018)
• Robinson v. Crown Cork & Seal Co., Inc., 335 S.W.3d 126, 191-92 (Tex. 2010)
• Tex. Dep't of Ins. v. Am. Nat'l Ins. Co., 410 S.W.3d 843, 853-54 (Tex. 2012)
• R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 625 (Tex. 2011)
• Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex. 2006)
• State v. Shumake, 199 S.W.3d 279, 284 (Tex. 2006)
• Lowe v. Tex. Liquor Control Bd., 255 S.W.2d 252, 256 (Tex. App.-Amarillo 1952, no writ)

Attorney General opinions:

• Tex. Att'y Gen. Op. No. KP-0115 (2016)
• Tex. Att'y Gen. Op. No. KP-0128 (2017)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0277
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2019/kp-0277.pdf

Original opinion text

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

November 1, 2019

The Honorable Jim Murphy
Chair, Committee on Pensions, Investments, and Financial Services
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Opinion No. KP-0277

Re: Authority of a credit services organization to assist a consumer with obtaining an extension of consumer credit in a form other than a deferred presentment transaction or a motor vehicle title loan (RQ-0300-KP)

Dear Representative Murphy:

You ask whether chapter 393 of the Finance Code permits a credit services organization to assist a consumer with obtaining an extension of consumer credit in a form other than a deferred presentment transaction or a motor vehicle title loan.[1]

Chapter 393 governs credit services organizations, and a review of the full context of that chapter is necessary to answer your question. TEX. FIN. CODE §§ 393.001-.628; see Tex. Dep't of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 642 (Tex. 2004) ("We must read the statute as a whole and not just isolated portions."). In construing the meaning of a statute, our primary goal "is to give effect to the Legislature's intent." Gunn v. McCoy, 554 S.W.3d 645, 672 (Tex. 2018). In doing so, courts "rely on the plain meaning of the text as expressing legislative intent unless a different meaning is supplied by legislative definition or is apparent from the context, or the plain meaning leads to absurd results." Id. Thus, we look to the Legislature's chosen language.

Chapter 393 defines "credit services organization" as

a person who provides, or represents that the person can or will provide, for the payment of valuable consideration any of the following services with respect to the extension of consumer credit by others:

(A) improving a consumer's credit history or rating;

(B) obtaining an extension of consumer credit for a consumer; or

(C) providing advice or assistance to a consumer with regard to Paragraph (A) or (B).

TEX. FIN. CODE § 393.001(3).[2] Chapter 393 places multiple requirements on credit services organizations, including registering with the Secretary of State, providing disclosure statements to consumers, incorporating specific contract language in their contracts with consumers, and obtaining a surety bond, among other requirements. Id. §§ 393.101(a) ("Registration Statement"), 393.105 ("Disclosure Statement"), 393.201 ("Form and Terms of Contract"), 393.401 ("Surety Bond").

In 2011, the Legislature amended chapter 393 by adding subchapters C-1 and G, which place additional requirements on "certain credit services organizations," namely credit access businesses. Id. §§ 393.221-.224 (Subchapter C-1, titled "Notice and Disclosure Requirements for Certain Credit Services Organizations"), 393.601-.628 (Subchapter G, titled "Licensing and Regulation of Certain Credit Services Organizations") (emphasis added).[3] The Legislature defined "credit access business" as "a credit services 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." Id. §§ 393.221(1), .601(2). It also defined "deferred presentment transaction," also called "a payday loan," as:

a transaction in which:

(A) a cash advance in whole or part is made in exchange for a personal check or authorization to debit a deposit account;

(B) the amount of the check or authorized debit equals the amount of the advance plus a fee; and

(C) the person making the advance agrees that the check will not be cashed or deposited or the authorized debit will not be made until a designated future date.

Id. § 341.001(6); see also id. § 393.221(2) (defining "deferred presentment transaction" by reference to section 341.001 and referring to the term as "a payday loan"). And it defined "motor vehicle title loan" as "a loan in which an unencumbered motor vehicle is given as security for the loan." Id. § 393.221(3). Thus, through the 2011 amendments, the Legislature identified a specific type of credit services organization—a credit access business—that obtains for a consumer or assists a consumer in obtaining a payday loan or a motor vehicle title loan. And the Legislature augmented the regulations applicable to a credit services organization when operating as a credit access business.

But those amendments did not otherwise amend the definition of credit services organization or evidence an intent to revoke the authority of a credit services organization when not operating as a credit access business. To the contrary, throughout chapter 393, the plain language recognizes the continuing existence of credit services organizations beyond credit access businesses. The definition of "credit access business" identifies the term as a type of credit services organization. See id. § 393.221(1). Furthermore, when the Legislature added the subchapters in 2011 related to credit access businesses, it described the subchapters as applying to "certain" credit services organizations, implying that the new provisions applied to "some but not all" credit services organizations. Id. §§ 393.221-.224, 393.601-.628; see also NEW OXFORD AMERICAN DICTIONARY 284 (3d ed. 2010) (defining "certain" in this context to mean "some but not all").

The Legislature maintained the definition of credit services organization to include one who obtains for a consumer or assists in obtaining an extension of consumer credit without limiting that credit to certain forms as it did with credit access businesses. Compare TEX. FIN. CODE § 393.001(3) (defining "credit services organization"), with id. §§ 393.221(1), .601(2) (defining "credit access business").[4] "Extension of consumer credit" is defined broadly to include "the right to defer payment of debt offered or granted primarily for personal, family, or household purposes or to incur the debt and defer its payment." Id. § 393.001(4). Payday loans and motor vehicle title loans are two methods for deferring payment of debt that would qualify as extensions of consumer credit. But the plain language of chapter 393 does not restrict credit services organizations, other than when operating as credit access businesses, from obtaining for a consumer or assisting a consumer in obtaining an extension of consumer credit in another form.

The Office of the Consumer Credit Commissioner ("the Commissioner") takes the position that because the Legislature expressly referenced only payday loans and motor vehicle title loans, chapter 393 does not authorize extensions of credit through other forms of debt. OCCC Brief at 1.[5] The Legislature granted the Commissioner authority to enforce "Chapter 393 with respect to a credit access business." TEX. FIN. CODE § 14.101 (emphasis added). "An administrative agency's construction of a statute it implements ordinarily warrants deference when: (1) the agency's interpretation has been formally adopted; (2) the statutory language at issue is ambiguous; and (3) the agency's construction is reasonable." Tex. Dep't of Ins. v. Am. Nat'l Ins. Co., 410 S.W.3d 843, 853-54 (Tex. 2012).

In a 2012 bulletin, the Commissioner concluded that while the "Texas Finance Code does not specifically prohibit" a credit services organization from assisting a consumer in obtaining credit without taking a post-dated check or a motor vehicle title, "the legislature intended that the bills cover transactions ... even where the CSO does not require the consumer to provide a post-dated check, debit authorization, or motor vehicle title."[6] As this office previously recognized, a Texas state court "would give significantly less deference to an agency bulletin than to a formal rule on the same issue." Tex. Att'y Gen. Op. No. KP-0115 (2016) at 4; see also R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 625 (Tex. 2011); Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex. 2006). Given the Texas Supreme Court's comments in Fiess and Texas Citizens, a Texas court may not give any deference to an informal agency bulletin. Id. Particularly when, as here, the statutory language is unambiguous, a court likely will not look beyond the plain language of the statute to construe its meaning. State v. Shumake, 199 S.W.3d 279, 284 (Tex. 2006). The Legislature may regulate obtaining extensions of credit using specific forms of debt other than payday and motor vehicle title loans, as the Commissioner cautioned in the 2012 bulletin. See Lowe v. Tex. Liquor Control Bd., 255 S.W.2d 252, 256 (Tex. App.-Amarillo 1952, no writ) ("In the interest of public health, morals, or general welfare, the State has the authority under its police power to regulate a business, profession or occupation."); see also OCCC Bulletin ("If the legislature finds that this business practice conflicts with its intent, it could consider passing additional legislation that would put further regulatory restrictions on CSOs that obtain extensions of credit for consumers."). But the Legislature has not done so, and chapter 393 does not limit credit services organizations to obtaining extensions of credit for consumers in the form of payday or motor vehicle title loans.

You also ask whether chapter 393 allows a credit services organization to assist a consumer with obtaining an extension of credit through a "signature loan," whereby no security is obtained from the consumer in exchange for the extension of consumer credit or cash advance and no personal check or authorization to debit a deposit account is obtained from the consumer. Request Letter at 1.[7] A determination about whether any specific service complies with the requirements of chapter 393 will involve a factual inquiry into the specific offering, and such questions are beyond the scope of an attorney general opinion. See Tex. Att'y Gen. Op. No. KP-0128 (2017) at 1 (advising that this office cannot approve of the proposed transactions as a matter of law through the opinion process due to the necessary factual determinations). However, we can provide general guidance regarding the requirements in chapter 393.

As discussed above, chapter 393 defines "extension of consumer credit" as "the right to defer payment of debt offered or granted primarily for personal, family, or household purposes or to incur the debt and defer its payment." TEX. FIN. CODE § 393.001(4). While the Legislature identified two forms of debt that qualify as extensions of consumer credit in connection with the regulation of a credit services organization—payday loans and motor vehicle title loans—it did not create an exhaustive list of the types of debt a credit services organization may assist a consumer in obtaining under chapter 393. Furthermore, nothing in chapter 393 requires that the extension of credit be secured in order for a credit services organization to assist a consumer in obtaining it. However, the statute does prohibit a credit services organization from assisting in obtaining an extension of credit that is substantially the same as that available to the public:

A credit services organization or a representative of the organization may not charge or receive from a consumer valuable consideration solely for referring the consumer to a retail seller who will or may extend to the consumer credit that is substantially the same as that available to the public.

Id. § 393.303. And the Legislature prohibited the use of "a device, subterfuge, or pretense to evade the application" of the regulations for credit access businesses. Id. § 393.602(c). Whether any specific extension of credit is substantially the same as that available to the public, or uses a device, subterfuge, or pretense to evade regulation as a credit access business, are fact questions that this office cannot decide through an attorney general opinion.

SUMMARY

Chapter 393 of the Finance Code does not restrict credit services organizations, other than when operating as credit access businesses, from obtaining for a consumer or assisting in obtaining an extension of consumer credit in a form other than a deferred presentment transaction or motor vehicle title loan.

A determination about whether any specific extension of credit complies with the requirements of chapter 393 will involve a factual inquiry into the precise offering, and such questions are beyond the scope of an attorney general opinion.

Very truly yours,

KEN PAXTON
Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

RYAN L. BANGERT
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

[1] See Letter from Honorable Jim Murphy, Chair, House Comm. on Pensions, Invs. & Fin. Servs., to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (July 30, 2019), https://www2.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").

[2] The Legislature originally enacted the predecessor to chapter 393 in 1987. Act of May 30, 1987, 70th Leg., R.S., ch. 764, § 1, 1987 Tex. Gen. Laws 2716, 2716-20. It made non-substantive recodifications in 1997 and has not amended the definition of "credit services organization" since that time. Act of May 24, 1997, 75th Leg., R.S., ch. 1008, § 1, sec. 393.001, 1997 Tex. Gen. Laws 3091, 3568.

[3] Act of May 26, 2011, 82d Leg., R.S., ch. 1301, § 1, 2011 Tex. Gen. Laws 3717, 3717-18 (adding subchapter C-1); Act of May 26, 2011, 82d Leg., R.S., ch. 1302, § 2, 2011 Tex. Gen. Laws 3719, 3719-24 (adding subchapter G).

[4] Briefing submitted in response to your request contends that testimony about the amendments suggests that the Legislature intended in 2011 to distinguish between credit services organizations that provide credit repair services and credit services organizations that provide extensions of credit, renaming the latter credit access businesses. See Brief from Michael Rigby, Gen. Counsel, Office of Consumer Credit Comm'r, to Virginia K. Hoelscher, Chair, Op. Comm. at 5 (Sept. 6, 2019) ("OCCC Brief"). However, the Legislature did not remove the latter service from the definition of credit services organization. Furthermore, "a single statement by a single legislator does not evidence legislative intent" nor determine legislative intent. Robinson v. Crown Cork & Seal Co., Inc., 335 S.W.3d 126, 191-92 (Tex. 2010).

[5] See also Brief from Jennifer Allmon, Exec. Dir., Tex. Catholic Conf. of Bishops, & Gus Reyes, Exec. Dir., Tex. Christian Life Comm'n, to Op. Comm. at 2 (Sept. 5, 2019) (arguing that "credit services organization" and "credit access business" should be read interchangeably); Brief from Christina Kaeini, Sr. Intergov'tl Relations Coordinator, City of Austin, to Op. Comm. at 1 (Sept. 5, 2019) (all briefs on file with the Op. Comm.).

[6] Available at https://occc.texas.gov/sites/default/files/uploads/disclosures/b12-5-cab-accepting-check-title.pdf ("OCCC Bulletin").

[7] We understand your question to refer to a credit services organization assisting a consumer with obtaining an extension of credit from a third-party lender. See Request Letter at 1. Under the statutory definition, a credit services organization provides certain "services with respect to the extension of consumer credit by others." TEX. FIN. CODE § 393.001(3) (emphasis added). Only licensed, regulated lenders can make consumer loans under chapter 342 of the Finance Code. See id. § 342.051(a) (requiring a license to make, transact, or negotiate loans under chapter 342).