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Credit Services Organizations

In Texas, credit service organizations (“CSOs”) are governed by Chapter 393 of the Finance Code and the secretary of state’s administrative rules found in 1 Texas Administrative Code Chapter 74, as well as any other applicable state or federal law.

Registration with the Secretary of State

Section 393.101, Finance Code, provides that, unless exempt from registration, before conducting business in Texas, a CSO must register with the secretary of state. See Form 2801 (Word, Acrobat). A registration must be accompanied by proof of security or a statement explaining why proof of security is not required and the registration fee. Each registration is effective for one year and may be renewed.

The secretary of state is a filing officer for CSO registrations and security and does not have authority to regulate the business practices of a CSO. The secretary of state cannot resolve disputes about CSO services, investigate the business practices of a CSO, or determine whether a consumer is entitled to a refund.

Licensing by the Office of the Consumer Credit Commissioner

Effective January 1, 2012, CSOs that are considered “credit access businesses” must obtain a license from the Office of the Consumer Credit Commissioner in addition to registering with the Secretary of State.

“Credit access businesses” are CSOs that obtain for or assist a consumer in obtaining an extension of consumer credit in the form of deferred presentment transactions or vehicle title loans.

For more information on licensing of credit access businesses, see HB 2592 and HB 2594. You might also check with the Office of the Consumer Credit Commissioner for more information.

Finance Commission Rules

HB 2592, effective January 1, 2012, also requires the Finance Commission to adopt rules regarding disclosure of fees and interest rates that credit access business will charge for deferred presentment transactions or vehicle title loans and authorizes other rules as well. Credit access businesses may want to keep an eye out for these rules.