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Home Equity Loan and Data Security Bills Filed
Monday, March 16, 2015 6:55 AM

Rep. Raymond Files Bill to Address Problems with 3 Percent Fee Cap on Home Equity Loans

Texas Rep. Richard Raymond (D-Laredo) filed legislation to address problems that have developed when making home equity loans under $50,000. HJR 131 proposes a constitutional amendment which specifies that the 3 percent fee cap applies only to fees that are paid to the lender or originator of the loan. This would exclude fees paid to a third party. Therefore, certified appraisals now required under CFPB rules on higher cost mortgages, filing fees, and document preparation fees paid to an outside lawyer would no longer count toward the 3 percent cap if the amendment is adopted.

On a $20,000 home equity loan under current law, the fees associated with loan that could be paid by the borrower are limited to $600. Filing fees, document preparation, title policies, and a certified appraisal, if required under CFPB rules, all must be counted toward the 3 percent cap and can easily exceed $1,000. The lender would have to pay everything over $600 in order to make the loan.

"This issue is yet another example where regulatory mandates that supposedly 'protect' consumers are having the opposite effect, making it difficult if not impossible for these loans to be made," said Jeff Huffman, president of the Texas Credit Union Association. "Rep. Raymond has put forward a solution that will give consumers options, improving their ability to borrow smaller amounts through home equity loans and benefit from lower interest rates."

If passed, the constitutional amendment would be on the ballot on Nov. 3, 2015.

Elkins and Davis File Bills to Protect Consumers’ Credit and Debit Card Data

Texas Rep. Gary Elkins (R-Houston) and Rep. Yvonne Davis (D-Dallas) filed HB 3478 and HB 3537 respectively, which would strengthen the law in the event of data breaches. Under these bills, if a merchant retains sensitive credit or debit card information (other than the confirmation number of a transaction) and experiences a data breach, the retailer would be required to disclose the breach to the attorney general and, as soon as possible, send notice of the breach to each financial institution that issued a credit or debit card affected by the breach. HB 3478 would also require the AG be notified within 24 hours after discovery.

"Reps. Elkins and Davis have been leaders in the legislature on issues protecting consumers and economic development. We are pleased they are taking steps to strengthen the laws to protect everyone in Texas who has a debit or credit card," Huffman said.

The bill also establishes a "Data Security Breach Victim Compensation Fund" that would pay claims to consumers who suffered financial loss in a breach and reimburse financial institutions for costs associated with the breach. The funds would come from civil penalties assessed by the attorney general of $50 per credit or debit card that is compromised.

The law, if passed, would take effect Sept. 1, 2015.

Dick Ensweiler, president and CEO of the Cornerstone Credit Union League said, "The issues of home equity lending and data security are important to the members of the Cornerstone Credit Union League. We appreciate these legislators stepping up with solutions to address these two important issues."