Section 83.5005 - Separation Between Credit Access Business and Third-Party Lender(a) Generally. A licensee assists consumers in obtaining extensions of credit by others, as provided by Texas Finance Code, § RSA 393.001(3).(b) Independent operation. A licensee must operate independently from any third-party lender that makes a loan in connection with a transaction under Texas Finance Code, Chapter 393. Independent operation includes the following requirements: (1) A licensee must be a separate legal entity from any third-party lender that makes a loan in connection with a transaction under Texas Finance Code, Chapter 393.(2) The individuals who make major operational decisions for a licensee must be different from the individuals who make major operational decisions for any third-party lender.(3) A licensee may not perform the functions of a third-party lender, except by written agreement in accordance with this section.(4) A licensee may not delegate functions to a third-party lender, except by written agreement in accordance with this section.(5) A licensee may not select the underwriting criteria used in determining whether the lender will make a loan to the consumer, but a licensee may apply underwriting criteria selected by the third-party lender.(6) A licensee may not lend money to a consumer in connection with a transaction under Texas Finance Code, Chapter 393. In particular, a licensee may not borrow money from another person and then lend that money to a consumer.(7) A licensee may not act as a general agent of a third-party lender, but may act as a special limited agent under a written agreement with a third-party lender in accordance with this section.(8) A licensee may not directly or indirectly share fees for credit access business services with a third-party lender. If a third-party lender receives any portion of a fee for credit access business services charged by a licensee, it must be promptly remitted to the licensee.(9) A licensee must document each transfer of money between itself and a third-party lender, in a manner sufficient to show each amount that was remitted in connection with each transfer. A licensee must maintain sufficient and complete records to show the exact amounts that were earned by the licensee and the third-party lender in connection with a deferred presentment transaction or motor vehicle title loan.(c) The OCCC may consider the following factors in determining whether a licensee operates independently from a third-party lender in compliance with this section: (1) the extent of common ownership or control between the licensee and any third-party lender, including common ownership or control resulting from familial relationships between owners and directors of the licensee and any third-party lender;(2) whether a licensee shares common officers, directors, or employees with a third-party lender;(3) the sufficiency of documentation of transfers of money between the licensee and a third-party lender; and(4) whether the licensee's course of performance is consistent with its written agreements with third-party lenders and its agreements with consumers, including agreements that specify a time within which the licensee will act on a guarantee.(d) Representations regarding relationship with third-party lender. Under Texas Finance Code, § RSA 393.304, a licensee may not make a false or misleading representation in the offer or sale of services. In particular, a licensee may not make a false or misleading representation regarding its relationship with a third-party lender or any guarantee that the licensee provides to a third-party lender on the consumer's behalf. For example, a licensee may not represent that it will enter a letter of credit with the third-party lender if, in its course of performance, it does not actually enter a letter of credit as that term is defined in Texas Business & Commerce Code, §5.102(a)(10). A licensee may not represent that it guarantees repayment to a third-party lender on the consumer's behalf if it does not act on that guarantee as described in its representations.7 Tex. Admin. Code § 83.5005
Adopted by Texas Register, Volume 45, Number 44, October 30, 2020, TexReg 7710, eff. 11/5/2020