2023 Report on Availability,
Quality,
and Pricing of Certain
Financial
Services and Consumer
Loan
Products
12/1/2023
2 | P a g e
TABLE OF CONTENTS
EXECUTIVE SUMMARY ............................................................................................... 3
INTRODUCTION ......................................................................................................... 4
ECONOMIC EFFECTS ON WILLINGNESS TO BORROW AND LEND ............................... 6
LENDING VOLUMES ................................................................................................... 9
HOME EQUITY LOAN 50(A)(6) .................................................................................. 10
CONSUMER LOANS: PERSONAL/SECURED LOANS (342-E) ....................................... 13
CONSUMER LOANS: SIGNATURE/SMALL INSTALLMENT LOANS (342-F) .................. 14
PROPERTY TAX LOANS (351) .................................................................................... 17
CREDIT ACCESS BUSINESSES (PAYDAY AND TITLE LOANS) CHAPTER 393 ................. 20
PAWN LOANS (371) ................................................................................................. 24
MOTOR VEHICLE SALES FINANCE (348) .................................................................... 27
EMERGENCY OR UNEXPECTED CREDIT – PURPOSE AND AMOUNT .......................... 32
INSTALLMENT LOAN COMPARISONS – EXAMPLES OF PRICING AND RESTRICTIONS 33
EMERGING PRODUCTS AND INNOVATION .............................................................. 34
FINANCIAL EDUCATION ............................................................................................ 35
DISTRIBUTION OF LICENSED LOCATIONS BY ZIP CODE ............................................ 36
NATIONAL CREDIT TRENDS ...................................................................................... 39
ECONOMIC REPORTS AND FORECASTS: STATE OF TEXAS ........................................ 43
REPORTING REQUIREMENTS ................................................................................... 44
WORKS CITED .......................................................................................................... 45
3 | P a g e
Executive Summary
Availability of consumer loan products is being impacted by tighter lending standards, especially for higher-
risk borrowers. Loan volumes are declining in many industries and have not rebounded to pre-pandemic levels.
Delinquencies on products such as credit cards and auto loans are increasing, and credit application denials are on
the rise as well.
Pricing increases are common for transactions that allow higher lending costs to be passed on to borrowers.
Products that are routinely made at state rate limits cannot pass on increased costs of lending. The effective federal
funds effective rate has increased to 5.33% from .08% just two years ago. Cumulative inflation is approximately 20%
higher over the last three years.
Innovation in credit expands consumer options but poses complications for established regulatory frameworks.
Some novel products operate outside of state licensing; however, this may change as lawmakers and regulators
continue to review such transactions.
Economic Activity
could slowdown in 2024. Consumer debt levels continue to increase and interest rates
remain elevated. Mortgage loans have decreased substantially due to affordability concerns. If the Federal Reserve
decides to reduce the federal funds rate because inflation is on target, the impact could benefit borrowers. While
Texas has performed better than the nation during economic slowdowns over the past twenty years, there is still
inherent risk in the state.
Items of Note include borrowing trends in mortgage refinances, declining loan originations in the small dollar
sector, and special circumstances in the automobile finance sector.
Mortgage Refinances
Nearly 9 out of 10 current (2023) mortgage refinances include cash-out to
the borrower. On average, 24% of equity is loaned out during such
transactions. These are similar statistics to the 2005-2008 crisis, but the
volume of refinances thus far is much lower.
Small Dollar Sector 37% of consumers said they could not cover a $400 emergency with
current savings. In Texas, small consumer loan originations (342-F) have
declined 30% since 2019. Regulatory tightening lending standards, as
lending costs rise, could also limit availability of small dollar loans.
Automobile Financing Average interest rates for car loans are currently at 8%. Prices remain high
(at levels set during the supply chain issue of 2021); however, they are no
longer increasing. Buyers who purchased cars at elevated prices, with long
loan terms and higher interest rates, may have issues trading in vehicles
for new purchases in the future.
4 | P a g e
Introduction
The Office of Consumer Credit Commissioner (OCCC), established in 1963, licenses companies that extend consumer
loans and retail installment sales. Each industry has its own unique and specific consumer benefits as well as unique
compliance concerns. The OCCC works to ensure that the non-depository financial services industry that it regulates
provides compliant financial products. Most non-depository lenders, non-real estate lenders, and small segments
of real property loans are supervised by the OCCC. Exempt lenders (authorized lenders that are exempt from
OCCC
licensing, e.g. banks) and exempt transactions (e.g. loans at rates lower than 10%) contribute to the
remaining
marketplace.
Several types of credit products are available and range from those frequently used by Texas consumers to niche
offerings. Most of these industries must file annual reports for the preceding year that detail the growth or decline
in their transactions. This report highlights seven of the most common credit transactions that Texas consumers
received from OCCC licensees in data reports filed for the year 2022 and lists general alternatives to those products.
Industry (Statutory Provision)
Home Equity Loans - Section 50(a)(6), Article XVI of the Texas Constitution
Regulated Lenders -Texas Finance Code (TFC) ch. 342
Large Installment Loans - TFC ch. 342 subch. E
Small Installment Loans - TFC ch. 342 subch. F
Property Tax Loans - TFC ch. 351
Credit Access Businesses/(Payday and Title Loans) - TFC ch. 393
Pawn Loans - TFC ch. 371
Motor Vehicle Sales Finance - TFC ch. 348
Of the seven types of consumer credit listed above, the OCCC possesses sole authority over pawn loans, property
tax loans, and credit access business transactions. The annual report data for those three loan types should reflect
trends in the entire industry. Home equity loans, although made by OCCC licensees are common products offered by
depository institutions and other mortgage lenders not regulated by the OCCC; trends in OCCC licensed lenders
may
not be indicative of the entire marketplace. Motor Vehicle Sales Finance dealers and holders of motor vehicle
retail installment contracts are the OCCC’s largest licensee base and originate or hold retail installment transactions,
not loans. In addition, this report does not include consumer lending
transactions that are made by depository
institutions, most loans secured by real estate, or credit exempt by other laws.
5 | P a g e
Access
Overall, 88% of consumers believe access to credit and financial products is important to achieve their financial goals
while only 58% believe that they have sufficient access. (Transunion, 2023) A generational divide is observed with
younger consumers more likely to believe access is important but also are more pessimistic regarding availability
sufficient for their needs. Additional customer choice, increasing access to and improving quality of traditional
lending channels, and innovating credit for younger generations might change perceptions of access.
Competition and Availability
Historically low interest rates of 2020-2021
fueled a mortgage boom that presented
opportunities to refinance existing loans
and allowed consumers to shop for new
homes. Approximately 1/3 of all existing
mortgage debt was refinanced during this
period. (Haughwout, Donghoon, Mangrum,
Scalley, & van der Klaauw, 2023). During
this time, non-depository lenders
accounted for over 60% of mortgage
originations (Federal Financial Institutions
Examination Council, 2022) (Cameron,
2022). The boom took off suddenly in 2020
and the availability of other market participants outside of the depository space was important for the following
reasons:
1. Additional capacity to help meet surging demand.
2. Generally, when firms must compete and consumer choices increase, downward pressure is applied to prices.
3. Differing risk tolerances among lenders increases overall availability.
Although non-depository business lines are more concentrated and under increased pressure when interest rates
dramatically rose in 2022, the homeowners who were able to close loans during the boom undoubtedly benefited.
As of Q1 2023 almost 2/3 of all mortgage debt was at rates of 4% or less (FreddieMac, 2023). Ensuring there is a
robust market with many competitors is important for consumer choice and availability.
6 | P a g e
Economic Effects on Willingness to Borrow and Lend
Federal Reserve monetary policy has a trickle-down effect on lending costs for most borrowers. Financial institutions
set their prime rate (the rate offered to the most credit worthy borrowers) based on the current federal funds rate.
(Board of Governors of the Federal Reserve System, 2023) An increase in the federal funds rate causes an increase
in both new fixed rate loans (e.g. conventional mortgages, auto loans) and variable rate loans (e.g. credit cards and
adjustable rate mortgages).
At the beginning of COVID the federal
funds rate was lowered to a target of 0%
to .25% to ensure credit was available
during the uncertainty of the pandemic.
(Milstein & Wessel, 2021) As the
economy recovered from the pandemic
inflation rose faster than it had in
decades. To combat inflation, the
federal funds effective rate has
increased 528 basis points since April 1,
2020. During that same time period,
inflation rose 20%. (Federal Reserve
Bank of St. Louis, 2023) (U.S. Bureau of
Labor Statistics, 2023)
Demand of Credit
As rates rise, certain financial
institutions can pass on the rate
increase on to their customers.
Borrower demand for loans can
decrease during this time as credit
becomes more expensive. Mortgage
borrowers are especially sensitive to
rate increases and the industry saw
the lowest weekly application
volume since 1995 in October 2023.
-0.2%
8.9%
-0.5%
1.5%
3.5%
5.5%
7.5%
9.5%
2013-10-01
2014-05-01
2014-12-01
2015-07-01
2016-02-01
2016-09-01
2017-04-01
2017-11-01
2018-06-01
2019-01-01
2019-08-01
2020-03-01
2020-10-01
2021-05-01
2021-12-01
2022-07-01
2023-02-01
2023-09-01
Fed Funds & Inflation - 10 Years
Fed Funds CPI YOY
Type of Credit 2022 Rejection Rate 2023 Rejection Rate
Credit Cards 18.5% 19.6%
Mortgage 14.6% 12.1% (remains above 2019 rate
of 10.2%)
Auto Loans 5.2% 11.0% (highest rate since series
began in 2013)
Credit Card Limit Increases 35.3% 30.9%
Mortgage Refinance 9.9% 15.5%
Lender-Initiated Account Closures
5.3% 7.2%
7 | P a g e
Supply of Credit and Rejection Rates
Rejection rates for credit applications have risen from 2022 according to the October 2023 FED Survey of Consumer
Expectations Credit Access Survey. (Federal Reserve Bank of New York, 2023) Automobile loans showed the largest
increase in rejection rates reaching the highest point since the survey began tracking.
Potential Availability Concerns from the Effect of Market Conditions
The rates charged on credit products include compensation to the creditor for forbearance and risk
1
. Additionally,
creditors have fixed costs to originate, service, and collect that are captured by interest rates or a fixed fee on the
agreement. (Chen & Elliehausen, 2020)
Three of the most common credit products offered by licensees of the OCCC are motor vehicle retail installments
sales, small installment consumer loans, and large installment consumer loans. Each of these products have rate
ceilings and fee limitations and generally cannot pass on market increases to borrowers. When the cost of borrowed
funds (evidenced by the federal funds rate) and operating expenses (inflation) increase, lenders must make decisions
as loans become less profitable.
Economic theory and consumer lending studies point to credit rationing or lower
availability especially to more risky borrowers when market rates approach rate ceilings. (Vandenbrink, 1982)
(Garon, Braga, Oglesby-Neal, & Martire, 2023)
Demand has decreased in mortgage applications (at least partially) because consumers want to avoid the current
borrowing expense. Lenders have increased rejection rates in certain lines of credit due to tightening restrictions.
There are potential concerns of an unbalanced market if there are no changes in demand for loans and a lender’s
willingness to make loans is curtailed.
1
Forbearance is forgoing current income for future income. Risk or Credit Risk is the probability of loss of borrower
default.
Credit Product
Fees at Origination
Credit Rates
Can fees
automatically
increase due to
market adjustments?
348
(motor vehicle
sales)
2
Doc
be a
and
umentary Fee - Must A dealer must file for a
reasonable amount
documentary fee over
$150 is presumed
$150 and submit a
reasonable 7 TAC
cost justification to
§84.205
the OCCC which is
reviewed for
reasonableness
Certain used cars up to
$15 per $100 add-on
time price differential
(roughly 26%
depending on finance
term). New cars are
limited to 18%. 7 TAC
§84.201
342-F (small Acquisition Charge -
No
Installment Account
installment loans)
Limited to the lesser of
Handling Charge of $4
10% of the cash advance
per $100 loaned per
or $100 7 TAC §83.605
month. (Maximum
Effective rate of roughly
79% depending on
term) 7 TAC §83.606
342-E (large
No
Tiered rate depending
installment loans)
on the cash advance
Administrative Fee -
Limited to $100 7 TAC
§83.503
(maximum rate of 30%)
7 TAC §83.501
8 | P a g e
The following chart outli
nes Texas motor vehicle retail installments sales, small installment consumer loans, and
large installment consumer loans and their rate and fee limitations.
The Conference Board predict
s the federal funds rate will decrease in the second half of 2024 to near 4% and by the
end of 2024 inflation will have slowed to near 2%. (The Conference Board, 2023) If these predictions hold it would
alleviate some short-term pressure faced by lenders to limit credit availability to riskier borrowers. In the long term,
availability of credit to sub-prime borrowers should be considered in the context of how market forces on the costs
of loans affect their supply.
2
A seller cannot increase the sale price to include increased financing costs on credit sales 12 CFR Part 1026
(Regulation Z) §1026.2(a)(9)
9 | P a g e
Lending Volumes
Non-real estate loans account for most consumer loans (Installment Loans, Pawn Loans, and Payday/Title Loans).
OCCC licensed lenders and financial service providers profiled in this report made
12,310,000
3
loans for $10.8
billion in 2022. This number does not reflect the number of borrowers as they may take out several loans during a
year by refinancing a loan or receiving multiple loans throughout the year.
Loan originations
increased by approximately 8% in number over 2021. This number is still down 25% from before
the 2020 pandemic. Loan amounts for pawn transactions (371) have increased 24% since 2019 and a portion of the
transaction decrease might be explained by combining more items on one transaction instead of “splitting pawn
tickets.
4
” The number of CAB loans (393 Payday and Title) also experienced a large decline that did not rebound
after COVID. Structural developments in that industry are explained in more detail in the CAB specific section.
Pawn and CAB transaction are the shortest term of credit licensed by the OCCC with maturities ranging from one to
six months. The short terms of such loans enable consumers to obtain multiple transactions in a year if they choose
and account for the greatest number of loans annually. Small consumer loans (342-F) are the next most originated
loans; these loans have fallen almost 30% since pre-pandemic times. Compared with Pawn and CAB loans they are
the least expensive loan product. Economic and interest rate effects could be impacting 342-F loan levels and
monitoring 2023 annual report data could indicate if availability is diminishing.
$4.0
$4.5
$3.9
$5.4
$5.4
$2.6
$2.5
$1.9
$2.0
$1.9
$1.0
$1.0
$0.8
$0.9
$1.0
$3.3
$3.1
$1.9
$2.1
$2.5
$10.9
$11.1
$8.5
$10.4
$10.8
$-
$2
$4
$6
$8
$10
$12
2018 2019 2020 2021 2022
Billions
$ Loaned by License Type
0.69
0.80
0.82
1.04
1.00
3.67
3.43
2.54
2.41
2.44
7.40
7.37
5.17
5.04
5.75
4.97
4.75
3.19
2.88
3.12
16.63
16.35
11.73
11.38
12.31
0
2
4
6
8
10
12
14
16
18
2018 2019 2020 2021 2022
Millions
# Loans by License Type
3
Data submitted by OCCC licensees is aggregated and published on the OCCC website by industry. https://occc.texas.gov/publications/activity-
reports
4
Splitting Pawn Tickets can occur at the customer request in order to redeem items on different days. Splitting pawn items can also be initiated by
the pawnbroker but items normally sold as a set should not be split in order to obtain a higher finance charge due to rate ceiling limitations on
higher loan amounts.
10 | P a g e
Home Equity Loan 50(a)(6)
Overview
Home equity loans allow borrowers to use the equity accumulated in their homestead as collateral for a loan. The
loan amount is determined by the value of the property and may not exceed 80% of the fair market value of the
home. The fair market value of the homestead must be determined and agreed to, in writing, by both the borrower
and lender. A borrower may opt to have the loan set up as a revolving line of credit instead of a lump sum payment;
this is known as a home equity line of credit (HELOC).
Borrowers may not take out a home equity loan before the first anniversary (minimum of 365 days) of the closing
date of any existing home equity loan that is secured by the same homestead property. Borrowers may only have
one home equity loan against an existing homestead at any given time. Borrowers must wait at least 12 days before
closing the home equity loan. Under certain conditions, a rate & term-only refinance is allowed and the loan would
then lose its status as a Home Equity Loan.
5
Type of Customer
Borrowers need to own their home and have accumulated enough equity to borrow against it.
Lenders should
not lend based solely on the value of the home. Credit scores and debt-to-income ratios are
also considered to
ensure borrowers have enough stable income to repay the home equity loan.
Typical Rates
Home equity loans are generally the least expensive loan option offered by OCCC regulated lenders. Lenders can
offer lower interest rates because the borrower’s home is used as security. Home equity loans typically have
a fixed
rate whereas HELOCs use adjustable interest rates. Interest rates are generally set in a manner similar to other
mortgage products.
Non-interest closing costs are limited to 2% of the original
principal balance of the home equity
loan.
6
In addition to interest, lenders may charge fees, including but not limited to, title fees and an appraisal fee.
These fees add to the overall cost of the home equity loan.
Allowable Charges
Interest Rates: up to 18% (current market rate 9.82%) (Bank Rate, 2023)
Closing costs may not exceed 2% of the loan
Late fees may apply
Discount points are optional
Loan Terms
1-year prohibition on renewals
Total loans may not exceed 80% of fair market value
12-day waiting period on closing
15-30-year repayment options common
May be provided as a line of credit (HELOC)
5
Preamble for 7 TAC §153.45
6
Effective 1/01/2018 closing costs (with some exclusions) are limited to 2%.
11 | P a g e
Default
The greatest risk the borrower faces is the foreclosure and loss of their homestead. The foreclosure must be
performed
through a judicial process or an expedited foreclosure procedure (Rule 736 Texas Rules of Civil
Procedure). After foreclosure,
the borrower does not face any recourse if the lender fails to recover the loan balance.
Alternatives
Low-interest rates and flexible repayment terms make home equity loans advantageous to other types of borrowing.
However, defaulting on this type of loan could end up in foreclosure posing a high risk to borrowers. Unsecured
options
such as personal loans, unsecured bank loans, credit cards, and peer-to-peer lending typically include higher interest rates
but are considered a less risky alternative for borrowers. Another alternative is a reverse mortgage available to homeowners
62 years and older.
Trends in Home Equity Lending
7
Most of the mortgage debt in America is sitting at rates of 4% or less and with current rates approximately double that it
doesn’t make sense for most Americans to refinance. However, home appreciation has resulted in many borrowers
possessing equity in their homes and now most refinances include cash-out. In the first half of 2023 almost 9 out of 10
refinance transactions were cash-out (Freddie Mac, 2023).
When rates were at historic lows in 2020-2022 homeowners were refinancing with lower rates and obtaining accrued equity
in their homes. Now, mortgage rates are much higher, and appreciation has slowed. Some of the consumer behavior
occurring in 2023 is beginning to resemble borrowing leading up to and during the great recession of 2007-2009. One
important difference is the total equity removed from housing is much lower due to refinancing activity slowing considerably
and home prices have not significantly declined. Texas has additional protections that limit the amount of equity that is
loaned to borrowers limiting the chance of owing more than their house is worth if the market were to decline. Continued
observation in this market is important due to the potential economic impacts.
7
Figures represent yearly averages from the time frame.
Year(s) of
Refinance
Cash out Share
of Refinances
Average Dollars
of Equity
Cashed Out
Average Equity
Cashed Out as
a Percent of
Property Value
Total Home
Equity Cashed
Out per Year(in
2022 dollars,
billions)
1998-2004
53.4%
$59,286
18.1%
$136
2005-2008
76.1%
$86,750
20.9%
$332
2009-2019
35.3%
$65,182
17.1%
$66
2020-2022
56.4%
$68,667
15.7%
$211
Jan - Jun 2023
88.8%
$89,000
24.0%
$24
12 | P a g e
2022 Home Equity Lending Report
Data contained in this report is reported on a calendar year basis and reflects data through CY 2022. Data in this report
includes information reported by OCCC licensees and may not reflect data or trends for the entire mortgage industry.
This section presents data on mortgage activity conducted by lenders licensed by the OCCC, including information about
home equity and Texas Finance Code Chapter 342, Subchapter G (second-lien mortgage) loans. Home equity loans fall into
two broad categories: second mortgage and first mortgage. A first-lien home equity loan allows a consumer to refinance an
existing mortgage and receive cash (commonly called a ‘Cash-Out Refinance’). A second-lien home equity loan typically is
made at a higher interest rate than a first-lien transaction. Most 342-G loans are typically home improvement or purchase
money loans. Secondary mortgage loans may also include second-lien loans with a cash advance made to or on behalf of the
borrower.
In 2011, Texas Finance Code §342.051 (c-1) was added and provided that a person who holds a residential mortgage loan
company license under Chapter 156 or a mortgage banker license registration under Chapter 157 is not required to hold a
license under Chapter 342 to make, arrange, or service secondary mortgage loans. Other home equity lenders are regulated
by different regulatory agencies, such as the Texas Department of Savings and Mortgage Lending.
Home Equity Lending Data
LOANS MADE
2022
2021
2020
2019
2018
1st Lien Home Equity Loans
6,462
34,432
24,639
15,840
15,612
Total Dollar Amount Loaned
$1,619,641,517
$7,708,880,666
$5,334,114,525
$3,144,035,892
$2,783,790,222
Average Loan Amount
$250,641
$223,887
$216,491
$198,487
$178,311
2nd Lien Home Equity Loans
8
-
-
-
-
-
Total Dollar Amount Loaned
-
-
-
-
-
Average Loan Amount
-
-
-
-
-
342-G Loans
-
-
-
-
-
Total Dollar Amount Loaned
-
-
-
-
-
Average Loan Amount
- -
-
-
-
LOANS RECEIVABLE
2022
2021
2020
2019
2018
1st Lien Home Equity Loans
10,518
9658
9,824
10,093
15,472
Total Dollar Amount Loaned
$1,315,530,163
$829,759,690
$669,234,312
$692,430,754
$1,279,891,075
Average Loan Amount
$125,074
$85,914
$68,122
$71,230
$82,723
2nd Lien Home Equity Loans
259
487
673
1,027
1,579
Total Dollar Amount Loaned
$7,331,421
$11,731,572
$14,899,211
$66,964,593
$43,989,976
Average Loan Amount
$28,307
$24,089
$22,139
$65,204
$27,859
342-G Loans
669
1,075
1,663
2,616
5,332
Total Dollar Amount Loaned
$60,373,929
$103,136,949
$60,155,317
$294,665,056
$271,577,094
Average Loan Amount
$90,245
$95,941
$36,172
$112,640
$50,933
Number of Companies
Reporting
9
806 813 801 772 794
8
Certain transactions were reported by five or less locations. Data was withheld to protect confidentiality of reporting businesses. All brokered loans since
2021, secondary home equity loans since 2017, and 342.G loans since 2017 were reported by five or less companies.
9
Includes all regulated lender submissions. The number of mortgage companies reporting is smaller.
13 | P a g e
Consumer Loans: Personal/Secured Loans (342-E)
Overview
In 2022, 995,604 personal/secured loans were issued under Chapter 342-E. These loans offer higher advance
amounts and lower annual interest rates compared to signature and small installment loans. The cost to refinance
these obligations is also typically lower than alternative products. Collateral for 342-E loans is not required; however,
lenders may choose to request security from borrowers. Loan applications are normally processed and closed on the
same day. Subchapter E loans are typically more affordable than subchapter F loans or payday loans. Lenders are
typically
located in business districts and suburban areas. An increasing amount of loans are offered online.
Type of Customer
Borrowers of consumer loans made under Chapter 342-E typically have better credit profiles than
unsecured/signature loan borrowers. A 342-E borrower will need sufficient disposable income to demonstrate to
the lender they can afford the loan.
Typical Rates
The maximum allowable rates for Chapter 342-E loans are determined in statute and depend on the amount loaned.
Some borrowers may receive a lower-than-maximum interest rate and the lender may offer additional products
and services such as credit insurance or automobile club memberships. Fees common with these loans are filing liens
(perfecting a security interest) and prepaid administrative fees.
Allowable Charges
Interest Rates: typically 18% - 30%
A prepaid Administrative Fee of up to $100 may be included
A late charge of 5% of the missed payment may be assessed 10 days after the due date
$30 fee for dishonored payments by check
Loan Terms
No maximum loan amount (if the rate is 18% or less). General Purpose loans average around
$5,000.
Loan term can be 60 months or more
Typically, no more than one outstanding loan per borrower per company
Prepayment allowed and interest is normally calculated on a simple annual basis
Default
Borrowers with secured loans risk losing their personal property, motor vehicle, or other security to the lender. The
lender or third- party debt collector may pursue the remaining deficiency balance after the collateral has been
disposed of or the entire remaining balance of unsecured loans. A lender may file suit against the borrower, and
most report the repayment history to consumer reporting agencies. A borrower may also face attorney fees,
repossession fees, and court costs added to the loan balance.
Alternatives
Chapter 342-E borrowers could potentially qualify for more traditional and lower cost methods of credit such as:
credit cards for purchases or cash advances; personal loans from credit unions and community banks; loans from
online peer-to-peer lending platforms, or home equity loans.
14 | P a g e
Consumer Loans: Signature/Small Installment Loans (342-F)
Overview
In 2022, 2,440,161 small installment loans averaging $780 were issued under Chapter 342-F. Due to the higher-cost
nature of these loans the cash advance amounts are limited by law. Borrowers can obtain Chapter 342-F loans with
minimal to no security or credit references. Lenders may require collateral such as personal property, including
holding a vehicle title; however, lenders rarely file liens (or perfect a security interest) as the costs of filing such
liens
cannot be recouped from the consumer.
The industry is very homogeneous: storefronts of different companies may be clustered within a specific region or
location, and different lenders may have common borrowers. Lenders depend on repeat business and many
customers end up refinancing their loans several times.
Small installment lenders are located in high-traffic areas such as strip malls. Some lenders may offer loans through
the mail where the offer in the form of a live check can be accepted and cashed outside of a store. In most cases,
borrowers can expect to receive their funds the same day they apply. Loan proceeds are typically provided by check.
Type of Customer
Small Consumer loans made under Chapter 342-F rates are available to customers with below-average credit scores.
A Chapter 342-F borrower needs employment income or some other source of a steady income in order to qualify for
the loan, and the borrower must be able to repay the loan and all other known obligations concurrently.
Typical Rates
The maximum allowable rates for Chapter 342-F loans are determined by statute. Most lenders charge the maximum
interest rates (installment account handling charge), but some may compete with a lower acquisition charge. The
current maximum rates are as follows:
Allowable Charges
Fee structure for loans > $100:
APR 80% - 113%
10% non-refundable Acquisition Charge (limited to $100)
$4 per $100/month Installment Account Handling Charge
A late charge of $10 or 5% of the scheduled installment (whichever is greater) is typically
assessed 10 days after the due date
$30 fee for dishonored payment by check
Loan Terms
Maximum loan amount: $1,700*
Limited loan terms. Usually 9 - 24 months
Typically, no more than one outstanding loan per borrower per company
Prepayment is allowed (without penalty) and interest is normally calculated on a simple or
precomputed basis
*Finance charge brackets and maximum effective rates as of July 1, 2023. Loan ceilings adjust each July 1 based upon the Consumer
Price Index.
15 | Page
Default
Borrowers utilizing secured loans risk losing their personal property, motor vehicle, or other security to the lender.
The lender or third-party debt collector may pursue the remaining deficiency balance after the collateral has been
disposed of or the entire remaining outstanding balance of unsecured loans. A lender may file suit against the
borrower or repossess the collateral, and some lenders report the repayment history to consumer reporting
agencies.
Alternatives
Small consumer loan borrowers may run into eligibility issues with other credit products. Possible alternatives are
pawn loans, credit card advances, and payday loans.
Factors Affecting Consumer Loans
The amount a consumer may borrow is limited on a 342-F loan. The 2023 loan ceiling is $1,700, reflecting an increase
in the Consumer Price Index (CPI) from December 2021 to December 2022. During periods of low inflation, the loan
ceiling has not changed. For the three consecutive years of 2014-2016, the loan ceiling remained at $1,340. Other
than automatic increases in the CPI, the 79
th
Texas Legislature doubled the reference base effective 9/1/2005.
The CPI adjustment has resulted in
the maximum 342-F loan amount
increasing 6.25% in the past year.
An analysis of Transunion credit
data found that the average balance
of all new unsecured personal loans
increased 14.4% nationwide from
Q1 2022 to Q1 2023
. (Transunion,
2023)
$510
$540
$1,080
$1,340$1,340
$1,480
$1,700
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
2003
2004
2005
9/1/2005*
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
342-F Max Loan Amounts
16 | Page
Regulated Lender Consolidated Volume Report for
Calendar Year 2022
Loans Made
Number
of Loans Dollar Value of Loans
Chapter 342-E
995,604
$5,367,220,173
Chapter 342-F
2,440,161 $1,902,459,872
Chapter 342 G – Secondary Mortgages
10
Home Equity Loans – 1st Lien
6,462
$1,619,641,517
Home Equity Loans – 2nd Lien
7
Chapter 346 – Revolving Credit Accounts
14,753
$93,547,787
Chapter 348 – Motor Vehicle Sales Finance
346,805
$12,976,091,591
Chapter 345 – Retail Installment Sales/Contracts
4,618,045 $1,244,198,853
Chapter 347 Loans – Manufactured Housing
3,145
$346,378,876
Number of Companies Reporting: 806
10
Volume below reportable activity
17 | Page
Property Tax Loans (351)
Overview
In 2022, 6,346 property tax loans averaging $14,526 were made under Chapter 351 on residential properties. With
the consent of the property owner, a property tax lender is allowed to transfer and assume the special lien generated
by taxing units of the property by paying delinquent taxes. The special lien retains its superior lien position (e.g.
priority position in front of a purchase mortgage) after transfer and is foreclosable.
The industry relies on direct mail solicitation, web search results, and repeat customers for its business. Property
owner information is generally public record and can be used in mail solicitations; however, specific advertisement
rules in 7 Texas Administrative Code §89.208 apply. Property Tax Loans on residential properties must be closed by
licensed residential mortgage loan originators.
Type of Customer
Property owners 65 and older claiming a homestead exemption on the property may defer their property taxes and
are not eligible for a property tax loan. Property tax loan borrowers either own their house without a mortgage or
have at least one mortgage but do not escrow their taxes.
Typical Rates
The maximum allowable rates for Chapter 351 loans are determined by statute. The average rate is lower than the
maximum interest rate of 18%. Lenders can also charge closing costs associated with the review and preparation of
loan documents.
Allowable Charges
Interest Rate of 18% or less:
General Closing Cost limit of $900
Additional Closing Costs of $100 per additional parcel of real property
Reasonable fee if required to repair a title defect
A late charge of 5% of the scheduled installment assessed 10 days after the due date
Additional fees paid to attorneys for foreclosure and bankruptcy actions can be substantial
Loan Terms
Maximum loan amount is based on the definition of Funds Advanced in Texas Tax Code §32.06 and is
limited to items on the tax receipt, fees to record the lien, and closing costs
Loan terms vary from one year to several years
Notification to any pre-existing lienholders required after transfer and after 90 days of delinquency
Prepayment is allowed (without penalty on homestead property) and loans that become
delinquent by 90+ days are often paid by the borrower’s pre-existing mortgage company
18 | P a g e
Default
Similar to a mortgage or home equity loan, borrowers risk foreclosure for non-payment. After a foreclosure sale, the
original residential property owner has a right to redeem by paying 125 percent of the foreclosure sale price during
the first year of the redemption period or 150 percent of the foreclosure sale price during the second year of the
redemption period with cash or cash equivalent funds.
Alternatives
1. Taxing Unit Payment Plan for Residence Homesteads
11
2. Credit Card with a low-interest rate
3. Home Equity Loan
4. Other options may be offered by individual County Tax Collectors or Texas Tax Code Chapter 31 (some options may
have eligibility requirements)
Factors Affecting
Property Tax Loans
Texas has the sixth highest
property tax burden in the United
States. An analysis of 2020 tax
payment data concluded that the
median taxes on a median-priced
Texas home produced an
effective tax rate of 1.66%. (Fritts,
2023) High tax rates on property
and increasing property values
would generally raise the cost of
home ownership through
increasing taxes.
Increased property values represent unrealized gains to Texans maintaining residency. Texas property values have
seen a dramatic increase over the last 10 years (Texas Real
Estate Research Center - Texas A&M University, 2023) largely
outpacing both real and nominal wages. (US. Census Bureau,
2022)
Homestead exemptions are an important tool in mitigating
the rise in taxes as they limit assessed value increases from
year to year and exempt a portion of the property’s taxable
value. Texas voters have amended the Texas Constitution four times in the last 26 years increasing the homestead
exemption. Important public policy decisions affecting taxes on homesteads, property owners on fixed incomes
(aged 65 and older, disabled, surviving spouses), and payment options at the tax office all impact the amount of
taxes owed and the demand for property tax loans.
11
Texas Tax Code §33.02
Year Homestead Exemption
< 1997
$5,000
1997
$15,000
2015
$25,000
2022
$40,000
2023
$100,000
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Texas Home Prices and Nominal
Family Income
Median Sales Price for January of the Year
Nominal Median Family Income Texas
19 | P a g e
Property Tax
L
e
nding
Consolidated Volume
R
e
po
r
t
Calendar Year
2022
Loans Made Statistics
Residential Non-Residential Total
Number of Loans 6,346 1,192 7,538
Amount of Loans $92,185,081 $73,847,388 $166,032,469
Average Loan Amount $14,526 $61,953 $22,026
Total Closing Costs $5,266,412 $2,083,811 $7,350,223
Average Closing Costs $830 $1,748 $975
Average Interest Rate 12.99% 11.76%
Total Volume Statistics
Number of Loans Receivable 24,506
Amount of Loans Receivable $500,679,742
Number of Loans 90+ Delinquent 5,131
Amount of Loans 90+ Delinquent $128,915,838
Number of Foreclosures
193
Amount of Foreclosures $9,964,692
Number of Companies Reporting: 67
Data as of 6/20/2023
20 | P a g e
Credit Access Businesses (Payday and Title Loans) Chapter 393
Overview
Credit access businesses (CABs) obtain credit for a consumer from an independent third-party lender in the form of
a deferred presentment transaction or a motor vehicle title loan, more commonly referred to as “payday loans” or
“title loans.” In Texas, the actual third-party lender is not licensed; rather, the credit access business that serves as
the broker is the licensee in this regulated industry.
Credit access businesses charge a fee to the consumer for obtaining a third-party loan. Fees are usually calculated
as
a percentage of the loan amount, either paid at the inception of the loan or accrued daily while the loan is
outstanding. All payments are made directly to the CAB, and the borrower will generally not have any direct contact
with the lender. The CAB provides the borrower with a check for the proceeds issued from the lender’s account.
Borrowers can obtain these loans in high-traffic areas and increasingly online.
Type of Customer
Payday loan customers need an active bank account and lenders will advance money to the consumer based on the
expectation that money is regularly deposited in that bank account. Title loan customers are required to have an
unencumbered motor vehicle title to offer as security. Both types of customers could have anywhere from average
to poor credit scores and choose these loans out of convenience or eligibility reasons.
Typical Rates
The majority of the loan cost is not capped. Fees charged to borrowers by the CAB typically depend on the amount
of the loan and the length of the term. CAB agreement terms are limited to 180 days or less. The entire loan may be
due in a matter of days, or the loan may be due over several equal payments. Refinancing or renewing payday and
title loans is very common and can add to the cost.
Allowable Charges
Fees charged by broker are uncapped (lender interest is 10% or less)
APR can exceed 400%
Late charge is 5% of payment or $7.50 (whichever greater). Late charges may be assessed 10
days after the due date.
Filing fees and non-sufficient fund fees
Consumer may have the option to purchase insurance or motor club memberships
Loan Terms
No maximum loan amount (typically $400 - $1,200)
Loan terms range from 3 - 180 days
Entire amount may be due in a single payment
Prepayment allowed (without penalty) but fees may be non-refundable
21 | P a g e
Default
Borrowers utilizing title loans risk losing their motor vehicle to the lender or to the CAB. The loan is usually
guaranteed by the CAB and the borrower will be pursued for the deficiency balance. Creditors may file suit against
the borrower for non-payment and some may report the repayment history to consumer reporting agencies. A
borrower may also face attorney fees, repossession fees, and court costs added to the loan balance.
The prevalence of motor vehicle
repossessions in the CAB industry is
reported by quarter and has typically
totaled 8,000 to 12,000. However, total
repossessions in Q1 2020 peaked at
about 13,100. This number then fell
significantly in Q2 2020 as creditors
worked with borrowers at the height of
the coronavirus pandemic. Many people
lost their jobs; however federal stimulus
and loan forbearance played a large role
in limiting Q2 repossessions. Since the
beginning of the pandemic, total
repossessions have fluctuated from
quarter to quarter, and repossessions as
a percent of active title loans have
continued to remain higher than
historical norms. Since borrowers may
obtain multiple loans throughout the year the repossession rate reflects the likeliness on a transaction basis not a
borrower basis.
Alternatives
Payday and title loan borrowers generally pay a high rate for their credit and may run into eligibility issues with other
products. Possible alternatives are pawn loans, small installment loans, employer loans, or other competitive small-
dollar loan products sometimes offered by credit unions or nonprofit organizations.
Data Limitations
The reported loans made have decreased in this industry since 2019 and factors specific to industry are likely a bigger
cause than the COVID pandemic. CABs are a specific subset of a broader classification of businesses registered as
Credit Service Organizations (CSOs) with the Texas Secretary of State. In 2019, the Attorney General of Texas opined
that CSOs that are not CABs can still arrange extensions of credit for consumers so long as they are not deferred
presentment transactions
12
or motor vehicle title loans. (Attorney General of Texas, 2019) CSOs which are not CABs
might not: (1) obtain OCCC licenses, (2) receive OCCC compliance exams and (3) report transaction data to the OCCC.
Additionally, the transaction itself has evolved from a predominantly single payment loan with multiple renewals to
one installment loan with the term and renewal equivalent to multiple loans.
12
See Texas Finance Code §341.001(6) for definition
13,113
7.50%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Repossessions
Total Percentage of Active Title Loans
22 | P a g e
Credit Access Business (CAB) Annual Data Report, CY 2022
Data contained within the below summary represents aggregated statewide annual data reported by credit access
businesses
(CABs) as of 3/15/2023. The OCCC reviewed the data for reasonableness. The OCCC continues to receive
amended or corrected
data submissions and periodic revisions are published when significant. The OCCC will request
verification from the licensee of any data that is found to be questionable or unreasonable.
Title 7, Section 83.5001 of the Texas Administrative Code requires CABs to file annual data reports with the Office of
Consumer Credit Commissioner (OCCC) identifying loan activity associated with:
•
single and installment deferred presentment (payday) loans, and
•
single and installment auto title loans.
Data Limitations
Data provided by reporting CABs reflects location-level activity for the identified year. Each licensed location is
treated
as an individual reporting unit. If data was compiled from individual customers, it could produce different
results.
The data presented in the following summary represents CAB submissions via electronic and manual reporting (including
any corrected data) of annual activity as of March 15, 2023.
Item
#
Item Description
Single Payment
Deferred
Presentment
Transactions
Installment
Deferred
Presentment
Transactions
Single Payment
Auto Title
Loans
Installment
Title Loans
1
Number of extensions of consumer
credit paid in full or otherwise closed
for reduced payoff during 2022 that
did not refinance.
177,002 834,160 13,930 41,191
2
Number of refinances of extensions of consumer credit before paid in full or otherwise closed for reduced
payoff in the report year.
13
2A
Refinancing 1 time
43,446
54,682
1,753
6,212
2B
Refinancing 2-4 times
54,161
31,309
9,378
9,190
2C
Refinancing 5-6 times
6,027
3,144
3,734
1,116
2D
Refinancing 7-10 times
3,381
1,781
4,258
837
2E
Refinancing more than 10 times
2,342
1,074
7,243
624
3
Total amount of CAB fees charged by
the CAB on all CAB contracts during
2022.
$71,190,940 $1,235,423,411
$203,008,710 $276,572,253
4
Total number of extensions of
consumer credit or refinances where
the CAB repaid the third-party lender
under a contractual obligation,
guaranty, or letter of credit.
90,402 751,793 95,447 51,546
(Table continued on next page)
13
Item 2 collects information on the number of times a loan was refinanced before it was ultimately paid off. Data includes all loans paid out in the calendar
year that had been refinanced prior to being paid in full, regardless of when the loan was originated.
23 | P a g e
Item
#
Item Description
Single Payment
Deferred
Presentment
Transactions
Installment
Deferred
Presentment
Transactions
Single Payment
Auto Title
Loans
Installment
Title Loans
5
Number of consumers for whom the CAB
obtained or assisted in obtaining an
extension of consumer credit during
2022.
124,839 1,177,720 75,392 84,372
6
Total number of new extensions of consumer credit during the report year for each of the following loan
ranges (cash advance amounts).
6A
$0 - $250
82,333
286,905
8,895
3,008
6B
$251 - $500
116,641
480,416
19,774
14,513
6C
$501 - $750
43,299
234,111
14,273
11,966
6D
$751 - $1000
33,037
215,431
18,691
15,739
6E
$1001 - $1500
18,116
116,990
19,766
17,732
6F
$1501 - $2000
5,415
31,789
13,563
11,986
6G
$2,001 - $2,500
7
12,372
7,707
7,627
6H
$2,501 - $3,000
6
4,060
7,118
5,540
6I
$3,001 - $5,000
0
401
10,344
9,306
6J
$5,001 - $7,500
0
4
4,047
2,350
6K
Over $7,500
0
0
2,858
1,395
7
Total dollar amount of new extensions of consumer credit during the report year for each of the following
loan ranges.
7A
$0 - $250
$14,669,075
$45,793,819
$1,415,401
$555,559
7B
$251 - $500
$45,091,277
$199,894,505
$8,031,924
$6,057,396
7C
$501 - $750
$27,000,797
$149,223,619
$9,075,406
$7,572,740
7D
$751 - $1000
$30,334,558
$195,374,535
$17,298,015
$14,567,372
7E
$1001 - $1500
$23,306,659
$147,140,556
$25,626,151
$22,656,335
7F
$1501 - $2000
$9,988,419
$58,586,784
$24,891,795
$21,779,436
7G
$2,001 - $2,500
$16,080
$29,225,904
$17,845,424
$17,460,568
7H
$2,501 - $3,000
$16,996
$11,726,448
$20,401,493
$15,698,853
7I
$3,001 - $5,000
$0
$1,390,130
$40,770,126
$37,020,048
7J
$5,001 - $7,500
$0
$24,851
$24,551,256
$14,006,685
7K
Over $7,500
$0
$0
$26,687,706
$14,073,505
8
Total number of refinances on
extensions of consumer credit
originated in 2022.
191,453 211,428 185,983 41,167
9
Total dollar amount of extensions of
consumer credit for 2022.
$150,423,930 $838,381,133 $216,594,713 $171,448,507
10
Total dollar amount of refinances for
2022.
$148,522,821 $341,692,690 $530,001,711 $120,886,860
Number of locations reporting activity 431 545 681 570
Total Number of Companies Reporting: 1,652
24 | P a g e
Pawn Loans (371)
Overview
A pawnshop offers short-term credit to customers (pledgors) who pledge their tangible personal property as
collateral for a cash advance. This is the only type of consumer loan that involves a possessory interest where the
pledgor relinquishes use of the security during the life of the loan.
Most pawnshops are storefronts in high-traffic areas. Depending on the wait in the pawnshop, the
customer
could expect to receive the cash proceeds in a matter of minutes.
Type of Customer
A pawn loan is strictly an asset-backed loan and no credit application is required. The pledgor is not required to have
a job or the ability to repay the loan. The only eligibility requirements are:
1.
Age 18 or over
2.
Proper form of Identification
3.
Legal right to possess and pledge the goods
Typical Rates
The maximum allowable rates for pawn loans are determined by statute. Most pawnshops charge the maximum
rates with occasional promotional offers. The current maximum rates are as follows:
Allowable
240% for loans up to $255
Charges*
180% for loans up to $1,700
30% for loans for up to $2,550
12% for loans up to $21,250
Loan Terms
Cannot exceed one month
Minimum additional 30-day grace period
May be renewed or extended
No personal liability for pledgor
*Finance charge brackets and maximum effective rates as of July 1, 2023. Rates adjust each July 1 based upon the Consumer Price
Index.
25 | P a g e
Default
To reclaim possession of the pledged goods the pledgor must repay the entire loan. If the customer does not redeem
pledged items at the end of the loan term those items may then become part of the pawnshop’s inventory and are
offered for sale to the public. In the event of forfeiture, the pledgor has no further obligations and the pawnshop is
prohibited from seeking a deficiency, filing suit, or reporting the default of the loan on the pledgor’s credit history.
Alternatives
Generally, pawn loans have the least restrictive eligibility and almost anyone could choose to become a customer.
The most direct alternative would be selling the secured goods to a pawnshop, a consignment shop, or a private
party. If the customer qualifies, a small consumer loan (342-F) secured by personal property could be less expensive.
Factors Affecting the Pawn Loan Amount
From 2020 to 2022 the number of Texas pawn
loans rose 11% and the amount loaned rose 29%.
Two factors stand out for the increase in pawn
loan demand: (1) The recovery from the Covid-
19 pandemic and subsequent end to many
economic relief programs, and (2) Price increases
of around 15% through inflation (CPI-W) (Social
Security Administration, 2023) from December
2020 through December 2022. Although loan
activity remains lower than pre-pandimic levles.
In Texas, there are additional factors affecting
the amount loaned on items due to the
allowable rate structure. When prices rise consumers may seek to borrow more and in the case of a pawn loan their
collateral for the loan could also be worth
more. Pawn rates are tied to the amount
loaned on each pawn ticket and the overall
rates decrease when predetermined loan
amount are exceeded. Those loan amounts
are computed every year according to
inflation and have risen approximately 15%
from 2021 to 2023. The
One Month Pawn
Service Charge graph (at right) illustrates three examples of similar loan amounts and how the pawn service charge
declines after the loan amount surpasses the next rate threshold. The hypothetical decision on how much to loan
on an item is influenced by the maximum interest that a pawnbroker can earn. The largest difference is seen at the
rate ceiling between 15% (180% APR) and 2.5% (30% APR) per month which currently occurs at $1,700. Despite the
fact that the consumer desires a larger loan, the consumer may be artificially limited to a loan size due to the
structure of the pawn service charge rate brackets.
Example Item Loan Amount 1 Month Interest Earned
Power Tools
$225
$45
$260
$39
Gold Jewelry
$1,500
$225
$1,750
$44
Motorcycle
$2,250
$56
$2,600
$26
$45
$39
$225
$44
$56
$26
$0
$50
$100
$150
$200
$250
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$225 $260 $1,500 $1,750 $2,250 $2,600
One Month Pawn Service Charge
Loan Amount 1 Month Interest Earned
240% limit
180% limit
30% limit
26 | P a g e
Paw
n Industry Consolidated Volume Report by Calendar Year
Loans Made
Number of Loans Dollar Value of Loans Average Loan
2022
5,752,850 $982,305,520 $171
2021
5,041,993 $875,583,904 $174
2020
5,174,572 $761,250,480 $147
Loans Outstanding
Nu
mber of Loans Dollar Value of Loans Average Loan
2022
1,265,258 $282,908,435 $224
2021
1,277,783 $252,223,573 $197
2020
1,258,157 $221,982,276 $176
Number of Companies Reporting in CY 2022: 1,352
Number of Companies Reporting in CY 2021: 1,382
Number of Companies Reporting in CY 2020: 1,374
27 | P a g e
Motor Vehicle Sales Finance (348)
Overview
Many motor vehicle dealers offer financing directly at their dealership. These retail installment transactions involve
two parties: (1) a retail seller and (2) a retail buyer. The retail installment contract is either immediately assigned to
a separate holder or serviced by the selling dealer.
Franchised dealers are authorized to sell new cars and maintain an affiliation with a specific auto manufacturer.
Financing arranged through a franchised dealership is usually assigned to a captive finance company of the
manufacturer or an independent acceptance company. These dealers are usually found on frontage roads of major
highways.
Independent dealers exclusively sell used cars. Financing is often in-house or referred to as “buy-here pay-here.”
Size and location vary but many are very small businesses located throughout cities and towns.
Type of Customer
Franchised and independent dealers attract customers based on their type of inventory. A franchised customer is in
the market for a new or certified pre-owned car, has disposable income to cover monthly payments, and has an
average to great credit score. There is usually more underwriting involved at a dealer that assigns contracts than one
that collects payments themselves. Buyers at franchised dealerships can often negotiate lower rates, sometimes as
low as 0%. Independent dealers often do not perform credit checks and rely on current income or down payment
affordability to underwrite the transaction.
Typical Rates
The maximum allowable rates for motor vehicle sales finance are determined by statute as add-on rates (e.g. $15
of finance charge per $100 financed per year). Most dealerships convert the add-on rates to equivalent rates that
depend on term of the contract and age of the vehicle. The current maximum rates are as follows:
Maximum
Rates
18% for New Cars
~ 18% for cars one to two years old
~ 22% for cars three to four years old
~ 26% for cars five years and older
Example
Other Charges
5% late fee for payments more than 15 days late
Actual government official fees for taxes, title, license, inspection
Reasonable Documentary Fee (normally $150)
Ancillary products may be purchased
Out-of-pocket expenses are required the for repossession of the vehicle
28 | P a g e
Default
A buyer risks repossession for late payment, failing to maintain insurance, filing for bankruptcy, or any other
provisions of default as listed in the contract. In addition to losing the vehicle, a repossession can negatively impact
a consumer’s credit history. The buyer might be required to pay the entire amount owed and not just the past due
amount to redeem their vehicle.
Initial delinquencies generally rise
during times of economic stress.
After the recovery of the “great
recession”, auto financing that was
30+ days delinquent remained
relatively stable. According to the
most recent data (Q3 2023), new
delinquencies have risen 118 basis
points since Q3 of 2022. Vehicle
prices have increased substantially
in the past couple of years and
remain elevated despite rising
interest rates. The higher costs of
vehicles are causing many
Americans to struggle to make loan
payments.
Alternatives
Traditional car shopping advice is for perspective buyers to first obtain pre-approval of financing through their bank
or credit union and bring that with them to the dealership. After negotiating a sale price for the car at the dealership
then financing should be discussed. If the dealership can offer better financing terms than the consumer obtained
from their financial institution, they could make a reasoned decision on how they wish to finance the vehicle.
Unique supply issues during the pandemic upended the traditional advice. Several consumers reported that dealers
would not sell them vehicles unless they obtained financing through the dealership (Wheeler, 2022). During this
period, demand exceeded supply and dealers could select buyers that benefited them through (1) quicker timing of
funding, (2) less paperwork, and (3) receiving financing incentives. The car supply challenges of 2020-2022 was a
unique period but the impacts on consumer choice in obtaining financing should be considered.
Source: New York Fed Consumer Credit Panel/Equifax
Source: New York Fed Consumer Credit Panel/Equifax
0
2
4
6
8
10
12
Transition into Delinquency (30+)
29 | P a g e
Motor Vehicle Sales Industry Data
The OCCC does not currently collect annual report
data from motor vehicle sales finance dealers who
hold a chapter 348 license. Industry monitoring is
primarily completed through examinations,
stakeholder meetings, and changes in license levels.
The highest licensing levels used to occur in the third
fiscal quarter of every year and renewals occurred in
the fourth fiscal quarter. There is an anticipated drop
regarding companies that have closed and do not
renew their license. Starting in 2020, renewals were
moved to the first quarter of the year and now the
highest levels should be in Q4 of each fiscal year. The
chart shows the peak licensing levels for the last five
years. License volumes were steadily increasing before
the COVID-19 pandemic but have been on a slight downward trend ever since.
National Trends
United States motor vehicle sales increased from 2009 to 2016, but rising vehicle prices may have capped consumer
enthusiasm in the ensuing years. Seasonally adjusted sales stagnated from 2016 through 2019, with figures hovering
around the 17-18 million vehicles range. In 2020, supply chain disruptions significantly impacted total vehicle sales.
Today, total vehicle sales are on a steady upward trend to gradually reach pre-pandemic levels.
Prices of both new and used vehicles today are significantly elevated above historical norms. Additionally, interest
rates have risen as the Fed attempts to combat inflation. Although the combination of higher auto loan amounts
and higher interest rates was expected to curb demand, many citizens need a vehicle to work and thus were forced
to take on this greater financial burden.
9,537
9,963
9,684
9,644
9,339
8,000
8,200
8,400
8,600
8,800
9,000
9,200
9,400
9,600
9,800
10,000
10,200
2019 2020 2021 2022 2023
Motor Vehicle Sales Finance
(License Volumes)
30 | P a g e
Average Auto Loan Amount
The average auto loan amount
increased to $14,844 in 2023 Q3. Over
the last decade, the average auto loan
balance has increased $5,157. General
inflation of the dollar over time and
longer-term loans have contributed to
this jump. This average represents the
average amount that a person has left
to pay on an auto loan, not the amount
of a brand-new loan.
(Federal Reserve Bank of New York,
2023)
Motor Vehicle Sales
Motor vehicle sales steadily increased
following the great recession before
stalling around 2015. Covid-related
supply chain disruptions had a great
effect on the number of motor vehicle
sales in the first year following the
pandemic. Today motor vehicle sales
are climbing back to their pre-pandemic
trends despite larger average auto
loans and higher interest rates.
0
2
4
6
8
10
12
14
16
18
20
Millions of Vehicles
Total Light Vehicle Sales
$8,000
$9,000
$10,000
$11,000
$12,000
$13,000
$14,000
$15,000
$16,000
2005
2010
2015
2020
Average Auto Loan Balance
31 | P a g e
Interest Rates for New Cars
Bank rates dipped following the recession but had
been rising for the last few years. Rates peaked in
2019 before decreasing during the COVID-19
pandemic. These low-interest rates coupled with
severe inventory shortages caused the price of
vehicles to increase. Today, despite the supply-
chain issues of the pandemic being largely
neutralized and interest rates sitting at just under
8%, car prices remain high. (Board of Governors of
the Federal Reserve System, 2023)
Current Outlook of Motor Vehicle Sales
Recessions tend to depress sales of motor vehicles like many other household purchases. The “great recession” of
2008 also impacted credit markets causing a dramatic decrease in new car sales. (Kellogg Insight, 2016) The current
economic conditions present their own challenges for car sales.
Wholesale used-vehicle prices (on a mix,
mileage, and seasonally adjusted basis)
decreased 2.3% in October from
September. The Manheim Used Vehicle
Value Index dropped to 209.4, down 4.0%
from a year ago. (Manheim, 2023) Car
prices are still elevated far above historical
norms and are likely to remain elevated for
the foreseeable future, but the downward
trend emerging from the data suggests
that used cars prices are stabilizing.
4
5
6
7
8
9
2017 2018 2019 2020 2021 2022 2023
Interest Rate
Interest Rates for New Cars
Commercial Bank Rates - New Car Loans (60 month)
Commercial Bank Rates - New Car Loans (72 month)
Finance Companies - New Car Loans
32 | P a g e
Emergency or Unexpected Credit – Purpose and Amount
Since 2013, the Federal Reserve has conducted surveys on likelihood that an American adult could pay for an
unexpected $400 expense with cash or its equivalents. In 2021, a record high number (68%) reported they could
cover the expense with cash or its equivalents. However, a year later the survey found consumers were doing
noticeably worse, with only 63% reporting they would be able to cover a $400 expense and 18% saying the largest
expense they could cover was less than $100 with current savings. (Board of Governors of the Federal Reserve
System)
Lending Club Corporation in partnership with PYMTS conducted a similar survey and concluded that the static $400
metric used by the Federal Reserve was not relevant for the types of expenses consumers face today. (PYMNTS and
LendingClub Collaboration, 2022) Their survey found that the average emergency expense is roughly $1,400 with car
repairs being the most common.
Type of Expense
14
Frequency of Expense
Average Cost
Car repairs 30% $1,008
Health-related occurrences 21.40% $1,361
House-related issues and relocating 19.40% $2,042
Unexpected high bills or taxes 6.90% $1,852
Kids or grandkids-related expenses 5.30% $1,742
Vet or pet-related expenses 4.30% $1,070
Loaned money to relatives 0.80% $1,051
Other expenses 11.80% $1,536
Weighted average emergency expense
$1,446
14
Based on consumers who reported an emergency expense in the preceding three months of the 2022 PYMNTS.com “New Reality Check: The
Paycheck to Paycheck Report” survey.
33 | P a g e
Installment Loan Comparisons – Examples of Pricing and Restrictions
The OCCC licenses four types of installment loans a consumer might turn to in the case of an unexpected
$1,000 - $2000 expense.
FEATURES
342-E 342-F CAB Payday CAB Title
Loan Terms
Average Loan Amount $5,391 $780 $624 $1,634
Typical Term in Months 36-60 12-24 5 5
Typical APR
15
18%-32% 82%-98% 411% 369%
Direct Comparisons (cab loans are limited to 180 days
and those loan terms are unusual for 342-F and 342-E)
Hypothetical Loan Amount $1,700 $1,700 $1,700 $1,700
Hypothetical Term 5 5 5 5
Monthly Payment $386 $428 $756 $708
Total Finance Charge $230 $440 $2,078 $1,838
Consumer Protections
Ability to Repay Analysis Required
Prepayment Penalty Prohibition
Additional Fees limited
Refund of Unearned Finance
Charge Required
Contracts are Required to be
Written in Plain Language
Eligible to Military
16
No Other Fees or Products Allowed
(e.g. credit insurance)
15
CAB APR is estimated from fees reported to the OCCC in 2023 Q2 Data reports.
16
10 U.S. Code §987 restricts loan terms to members of the military including a “all-in” APR limit of 36%. Not all 342-E loans are eligible but are the
most likely option.
34 | P a g e
Emerging Products and Innovation
The OCCC is monitoring several emerging financial products. These products contain possible benefits and expanded
access to customers but also possess some regulatory uncertainty. If the products or providers don’t perform then
the customer risks having few options for corrective assistance.
A 2023 Government Accountability Office (GAO) report highlighted several innovative products that market to
underserved and unbanked populations. The report highlighted potential benefits such as lower costs and increased
access compared to alternatives such as payday loans. Highlighted risks include a lack of full transparency related to
product fees and features. Additional risks to banking partners (an integral source upon which many innovative
products rely) are due to fair lending concerns, lack of FDIC insurance for fintech deposit accounts, 3
rd
party fraud
and anti-money laundering compliance.
The GAO issued a recommendation to the Consumer Financial Protection Bureau (CFPB) that additional Truth in
Lending Act guidance is needed to further define “credit” in relation to Earned Wage Access (EWA) providers. (United
States Government Acountability Office, 2023) In 2020, the CFPB issued an advisory opinion that one specific EWA
product was not an extension of credit. A coalition of 96 consumer advocates sent a letter to the CFPB in October
2021 asking them to review the issue and regulate the EWA industry, especially products that charge a fee. (National
Consumer Law Center, 2021) On June 30, 2022, the CFPB rescinded its approval of the special “regulatory sandbox”
treatment of a particular EWA company. Innovation in financial services promises to offer many benefits in relation
to availability, pricing, and service. Regulatory clarification is important to ensure a fair marketplace and proper
consumer protection safeguards.
35 | P a g e
Financial Education
The OCCC supports and promotes financial education throughout the state to encourage and empower Texans to
achieve financial capability. The OCCC partners with many organizations throughout the state to host, participate,
and assist with financial education programs. During Fiscal Year 2023, the OCCC participated in 24 financial education
events where 1052 people received direct educational services.
The OCCC administers the Texas Financial Education Endowment (TFEE) Grant. TFEE supports statewide financial
capability and consumer credit building activities and programs. The endowment is funded through assessments on
each credit access business and is administered by the Finance Commission of Texas.
The 2022-2023 TFEE grant cycle is currently in progress. For this grant cycle, the Finance Commission awarded
$409,000 in aggregate awards to 12 organizations. As of June 2023, approximately $343,000 has been disbursed to
grant award recipients.
The 2024-2025 TFEE grant cycle begins on January 1, 2024. Fifty-two applications were received for the upcoming
grant cycle, requesting nearly $4 million in funding. To guide the TFEE application and funding recommendations,
the agency coordinates a Grant Advisory Committee (GAC). The role of the GAC is to evaluate grant applications
objectively and transparently, then make recommendations to the Finance Commission. The GAC considers several
factors in determining TFEE grant award recipients, including TFEE priorities, geographic areas, unique and
underserved populations, and application scores. In October of 2023, the Finance Commission awarded 10
organizations an aggregate amount of $735,700 for the upcoming grant cycle.
Managing Credit
A customer’s credit limit and the interest rate they pay is often dependent on their credit score. Credit scores can
change due to the source of data used, the company calculating the score, or the day the score was retrieved.
Generally, the score is based on the following factors (Consumer Financial Protection Bureau, 2022):
What makes up your credit score?
Bill Paying History Current Unpaid Debt
Number and Type of Loan
Accounts
Length of Time Loan Accounts Have
Been Open
How Much Available Credit is
Being Used
New Applications for Credit
Debt Sent to Collections Foreclosure Bankruptcy
Since certain negative marks on a credit report like bankruptcy can affect a credit score for up to 10 years it is
important for consumers to stay vigilant in maintaining a positive credit history. (Experian, 2022)
Check your credit report every year for accuracy at annualcreditreport.com
36 | P a g e
Distribution of Licensed Locations by Zip Code
It is common for similar business lines to cluster together (e.g. Car Dealers, Restaurants, Furniture Stores,
Pharmacies) (Becher, 2012). The linear correlation of different license types located within zip codes is presented
below. Using the Pearson Product-Moment Correlation (based on all Texas zip codes with at least one license type)
the correlation of any two license types produces a value between -1 and 1. A value near zero indicates there is no
correlation, while a value of positive 1 indicates that two variables move in a linear fashion (Lund Research Ltd,
2019)(For example, a zip code that contains the most credit access businesses would also contain the most 342-F
lenders).
License
Type
348
351
371
393
342-E
342-F
342-
G/A6
348
1.00
351
0.04
1.00
371
0.56
0.03
1.00
393
0.47
0.00
0.56
1.00
342-E
0.46
0.05
0.42
0.55
1.00
342-F
0.40
-0.02
0.48
0.57
0.39
1.00
342-G/A6
0.04
0.05
0.05
0.05
0.10
0.04
1.00
Excluding motor vehicle sales finance licenses, the industries that share the
largest positive correlation are located near credit access businesses. Those
include 393 (credit access businesses) with 342-F (small installment lenders),
and 371 (pawnshops), and 342-E (large installment lenders).
Zip codes that contain the most OCCC licenses
The distribution of active and inactive licensed locations in the top 30 zip codes (ranked by total number of
licenses) is provided in the next table. The table shows the number of licensed locations with their primary business
designation.
They are ordered from left to right: Motor Vehicle Sales Finance (348), Property Tax Loans (351), Pawn
Loans (371), Credit Access Businesses (393), Personal Installment Loans (342-E), Small Consumer Loans (342-F), and
real property related Secondary Mortgage Loans (342-G) & Home Equity Loans (A6). Data is valid as of 11/06/2023.
The US Census Bureau’s American Community Survey obtained demographic information about each zip code with
estimates derived from US census data. (US Census Bureau, 2022) Estimated population and median household
income are presented by zip code.
Industries and
Correlations
393 and 342-F (0.57)
393 and 371 (0.56)
393 and 342-E (0.55)
37 | P a g e
Zip
Populat
ion
Median
Household
Income
Location
348
351
371
393
342-E
342-F
342-
G/A6
Grand
Total
1
78501
60,855
$43,679
McAllen
71
1
9
15
6
30
0
132
2
78521
88,791
$35,318
Brownsville
78
0
9
8
4
18
1
118
3
79915
36,505
$32,259
El Paso
92
0
5
3
5
9
0
114
4
77037
18,106
$42,731
N-Houston/Adeline
98
0
6
3
4
2
0
113
5
75211
75,213
$50,368
SW Dallas
98
0
3
4
5
3
0
113
6
75217
87,767
$44,384
SE Dallas
92
0
7
3
3
2
0
107
7
75229
32,924
$107,886
NW Dallas
101
1
2
0
1
0
0
105
8
78572
76,645
$48,288
McAllen
62
0
4
8
7
21
0
102
9
76011
21,701
$45,224
Arlington
70
0
22
4
2
2
0
100
10
75050
43,422
$64,435
Grand Prairie
81
0
4
3
0
2
0
90
11
78577
79,128
$39,490
Pharr
60
1
5
3
1
18
1
89
12
78041
46,751
$55,311
Laredo
48
0
5
9
4
14
0
80
13
78550
54,486
$41,961
Harlingen
30
0
5
12
5
26
0
78
14
77063
39,855
$44,745
West Houston
63
0
5
4
1
0
0
73
15
78415
41,583
$49,255
South Corpus Christi
41
0
7
4
1
19
0
72
16
75041
31,451
$58,945
NE Dallas
63
0
4
0
3
2
0
72
17
78221
41,964
$51,115
South San Antonio
26
0
6
8
5
26
0
71
18
78852
56,746
$45,029
Eagle Pass
41
0
4
2
3
20
0
70
19
78520
60,592
$42,484
Brownsville
32
0
7
2
5
22
0
68
20
78201
45,767
$38,363
San Antonio
22
0
7
7
3
28
0
67
21
77074
39,088
$42,599
San Antonio
60
0
2
1
2
1
1
67
22
76117
32,438
$48,522
NE Fort Worth
55
0
6
2
2
1
0
66
23
77055
43,780
$64,277
West Houston
48
0
7
3
3
4
0
65
24
77587
16,381
$51,000
Spring Branch
Houston
55
0
3
2
3
1
0
64
25
78043
45,703
$50,190
New Braunfels
36
0
6
4
4
14
0
64
26
78212
27,020
$52,783
Laredo
53
2
6
0
0
2
0
63
27
78130
84,510
$73,662
City of South
Houston
35
0
7
7
4
10
0
63
28
75901
28,979
$52,531
El Paso
41
0
4
10
1
7
0
63
29
79925
38,947
$49,391
N Houston
44
0
5
3
5
6
0
63
30
75702
28,236
$44,648
Tyler
33
0
8
6
1
14
0
62
Top 30 Zip Totals
1,729
5
180
140
93
324
3
2,474
Remainder of Texas
7,495
74
1,294
1,291
803
1,696
62
12,715
Out of State
316
8
8
51
298
168
158
1,007
All Licenses
9,540
87
1,482
1,482
1,194
2,188
223
16,196
38 | P a g e
In addition to the top 30 zip codes based on total licenses, the remaining zip codes that were “category leaders” (had
the most licenses for a specific type) are included. These additional category leaders have the most installment
lender, mortgage, and property tax licenses.
Median
342- Total
Zip Population Household Location 348 351 371 393 342-E 342-F
G/A6 by Zip
Income
342-E “In-State” Category Leader
76014 32,460 $55,764 Arlington 20 0 0 0 12 1 0 33
342-G/A-6 "In-State" Category Leader
75067 67,837 $68,923 Lewisville 15 0 5 6 3 4 8 41
351 Category Leader
78731 26,506 $92,641 NW Austin 0 13 0 0 0 0 0 13
For comparison, zip codes were selected by certain demographic data. The following zip codes reflect the highest
and lowest median household income (zip codes with more than 1,000 houses) and the highest population.
Median
342- Total by
Zip Population Household Location 348 351 371 393 342-E 342-F
G/A6 Zip
Income
Highest Median Income with over 1,000 Households
76092 31,276 $240,694 Southlake 1 0 0 0 0 0 0 1
Lowest Median Income with over 1,000 Households
79901 8,518 $13,510 El Paso 8 0 3 0 0 22 0 33
Highest Population
77494 129,165 $137,275 Katy 11 0 1 1 2 0 0 15
39 | P a g e
National Credit Trends
Overview
The October 2023 Senior Loan Officer Opinion Survey indicates that there have been changes in standards, terms, and
demand for bank loans to businesses and households in the third quarter of 2023. For business loans, there are reports
of tighter standards and weaker demand for commercial and industrial loans; this trend is reflected throughout
commercial real estate loan categories. In terms of household loans, lending standards tightened for all categories of
residential real estate (RRE) loans and (HELOCs), with weaker demand for loans across both categories. Credit card,
auto, and other consumer loans also saw tightened standards and diminished demand. (Board of Governors of the
Federal Reserve System, 2023)
Credit Card Balances
In the early stages of the pandemic,
Americans were hesitant to rely on credit
card debt. There was a spike in the
personal savings rate during that period
most likely attributable to federal
stimulus and consumers anticipating an
economic recession, which led to a
significant dip in the amount of credit card
loans. This year total credit card debt has
risen back to the trend line established
before 2020. It should be noted that the
current rate that credit card debt is
increasing faster than in previous years,
despite the previously mentioned survey
showing a decrease in demand for credit
card loans. (Federal Reserve Bank of St.
Louis, 2023)
$500
$550
$600
$650
$700
$750
$800
$850
$900
$950
Billions of Dollars
Consumer Loans: Credit Cards and
Other Revolving Plans
40 | P a g e
Personal Savings
The personal savings rate as a
percentage of disposable
income decreased to 4%
September 2023; this is below
the decade’s average of 6%.
While a lower savings rate can
mean that consumers feel
more confident about the
economy’s future, the
decrease in real wages
combined with an increase in
interest rates have made
economists concerned that
consumers (out of necessity
rather than choice) are saving
less. (Dickler, 2023)
Total Debt Balance
The total debt balance dipped from
2009-2013 but has steadily
increased over the past decade. In
2023, rising interest rates have
significantly impacted this upward
trend. Total household debt rose
4.8% year-over-year (YoY) in Q3
2023, compared to an 8.2% YoY
increase in Q3 2022. This increase
in household debt is being driven
primarily by rising mortgage and
auto debt. (Federal Reserve Bank
of New York, 2023)
0
2
4
6
8
10
12
14
16
18
20
Trillions of Dollars
Total Debt Balance
Mortgage HE Revolving Auto Loan Credit Card Student Loan Other
0%
5%
10%
15%
20%
25%
30%
35%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Personal Savings Rate (Seasonally Adjusted)
41 | P a g e
Real GDP
Real GDP growth is another lagging
indicator that does not predict future
economic performance, but it
demonstrates how well the US economy
has performed in the lookback period. As
evidenced in the graph, real GDP typically
grows roughly 2-3% each quarter. Q2 of
2023 showed a higher GDP growth of
nearly 5% as the US economic output
climbs out of the dip caused by the 2020
pandemic. (Federal Reserve Bank of St.
Louis, 2023)
Mortgage Rates
Mortgage rates have been in a
gradual decline for the past 10 years,
with many fluctuations occurring
along the way. Mortgage rates fell to
historic lows during the pandemic,
but over the past two years rates
have steeply increased due to
inflationary pressure. As of the end
of Q3 2023, the average rate for a
30-year mortgage is 7.31%. Despite
this rate increase, average home
prices remain elevated. (Freddie
Mac, 2023)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
30-Year Fixed Rate Mortgage Average in
the United States
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Real GDP, Compounded Annual Rate of
Change, Seasonally Adjusted Annual
Rate
42 | P a g e
Housing Starts
Housing starts (the number of new houses
begun during a particular period of time) is a
good leading indicator because it shows how
real estate developers feel about consumer
spending habits in the near future. A rise in
this number can be a sign of increasing
confidence in the nation’s future
development. Housing starts have increased
steadily since the great recession, but were
turbulent during the onset of the Covid
pandemic. Housing starts have been
declining after peaking in mid-2022. This
decline is likely responsible (at least in part)
for why home prices remaining high in the
face of rising interest rates.
(Federal Reserve Bank of St. Louis, 2023)
Consumer Confidence Index
The Consumer Confidence Index (CCI) steadily
rose in the decade following the 2008 housing
crisis. In 2019, the CCI faltered amid concerns
about tariffs and weakening economies elsewhere
in the world; however, the index was still trending
upward in the long term. In this index, a number
above 100 signals a boost in consumer confidence
toward the economic situation which could
portend more spending and less saving in the next
12 months. Inversely, values below 100 indicate a
pessimistic attitude towards future developments
in the economy, possibly resulting in a tendency
to save more and consume less. The index has
dropped 6% YoY amid the previously mentioned
high inflation and rising interest rates. (OCED, 2023)
USA (2023), OECD (2023), Consumer confidence index (CCI) (indicator). doi:
10.1787/46434d78-en (Accessed on 28 November 2023)
90
92
94
96
98
100
102
104
Consumer Confidence Index
0
500
1000
1500
2000
2500
Thousands of Units
Housing Units Started
43 | P a g e
Economic Reports and Forecasts: State of Texas
Overview
The state’s unemployment rate currently appears to be flat at around 4%. The number of initial unemployment relief
claims filed this year is 12.4% higher than the number of initial claims filed last year. Overall, Texas’s economic activity
appears strong relative to the nation but there are some indications the economy is slowing. Employment is growing
modestly with slower growth in manufacturing and no growth in the service sector. Weekly unemployment claims
are rising and high mortgage rates continue to weigh down the housing sector. Texas positive export growth is
beneficial as the exports of the rest of the nation excluding Texas are contracting (Federal Reserve Bank of Dallas,
2023).
Texas economy dashboard (October 2023)
Job growth
(annualized)
July–Oct. '23
Unemployment
rate
Avg. hourly
earnings
Avg. hourly earnings
growth y/y
2.7% 4.1% $32.07 5.2%
Texas Business-Cycle Index
The Texas Business Cycle Index attempts
to forecast the strength of economic
expansion or retraction. After a two-year
recovery period from the dip in 2020, the
Texas Business Cycle appears to have
returned to positive momentum. (Federal
Reserve Bank of Dallas, 2023)
250
270
290
310
330
350
370
390
410
430
450
Texas Business-Cycle Index
44 | P a g e
Reporting Requirements
The report has been prepared in response to and fulfills certain constitutional, statutory, and administrative
regulation requirements.
17
Texas Finance Code, Sec. 11.305. Research
(a) The consumer credit commissioner shall establish a program to address alternatives to high-cost lending
in this state. The program shall:
(1) study and report on high-cost lending, including the availability, quality, and prices of financial
services offered in this state to individual consumers in this state; and
(2) evaluate alternatives to high-cost lending and the practices of business entities in this state that
provide financial services to individual consumers in this state.
(b) The program may:
(1) apply for and receive public and private grants and gifts to conduct the research authorized by
this section;
(2) contract with public and private entities to carry out studies and analyses under this section;
(3) provide funding for pilot programs, and
(4) make grants to nonprofit institutions working to provide alternatives to high-cost loans.
(c) Not later than December 1 of each year, the consumer credit commissioner shall provide to the
legislature a report detailing its findings and making recommendations to improve the availability, quality,
and prices of financial services.
17
Sec.50(s), Art XVI, Texas Constitution
Texas Finance Code §351.164
Texas Finance Code §342.559
7 Texas Administrative Code §85.502
45 | P a g e
Works Cited
Attorney General of Texas. (2019, November 1). Opinion No. KP-0277. Retrieved from Texas Attorney
General: https://www.texasattorneygeneral.gov/sites/default/files/opinion-
files/opinion/2019/kp-0277.pdf
Bank Rate. (2023, November 21). Current Home Equity Interest Rates. Retrieved from bankrate.com:
https://www.bankrate.com/finance/home-equity/current-interest-rates.aspx
Becher, J. (2012, May 21). Why Gas Stations are so Clsoe to Each Other. Retrieved from Forbes:
https://www.forbes.com/sites/sap/2012/05/21/why-gas-stations-are-so-close-to-each-
other/#24683b935827
Board of Governors of the Federal Reserve System. (2023, October 28). Consumer Credit - G.19.
Retrieved from Federal Reserve: https://www.federalreserve.gov/releases/G19/current/g19.pdf
Board of Governors of the Federal Reserve System. (2023, May). Economic Well Being of U.S. Households
(SHED) in 2022. Retrieved from https://www.federalreserve.gov/publications/files/2022-report-
economic-well-being-us-households-202305.pdf
Board of Governors of the Federal Reserve System. (2023, November 17). FAQs. Retrieved from
https://www.federalreserve.gov/faqs/credit_12846.htm
Board of Governors of the Federal Reserve System. (2023, November 16). Senior Loan Officer Opinion
Survey on Bank Lending Practices. Retrieved from Federal Reserve:
https://www.federalreserve.gov/data/sloos/sloos-202310.htm
Cameron, J. (2022, December). In Times Like These, It's Good to be a Bank. Retrieved from Sratmor
Group: https://www.stratmorgroup.com/in-times-like-these-its-good-to-be-a-bank/
Chen, L., & Elliehausen, G. (2020, August 12). The Cost Structure of Consumer Finance Companies and Its
Implications for Interest Rates: Evidence from the Federal Reserve Board's 2015 Survey of
Finance Companies. Retrieved from Board of Governors of the Federal Reserve System:
https://www.federalreserve.gov/econres/notes/feds-notes/the-cost-structure-of-consumer-
finance-companies-and-its-implications-for-interest-rates-20200812.html
Consumer Financial Protection Bureau. (2022, October 17). What is a credit score? Retrieved from
Consumer Financial Protection Bereau: https://www.consumerfinance.gov/ask-cfpb/what-is-a-
credit-score-en-315/
Dickler, J. (2023, October 3). Savings rate for Americans is falling. ‘I’m concerned,’ top economist says.
Retrieved from CNBC: https://www.cnbc.com/2023/10/03/americans-are-saving-less-in-2023-
im-concerned-top-economist-says.html
Experian. (2022). How to Improve your Credit Score. Retrieved from Experian:
https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/improve-
credit-score/
Federal Financial Institutions Examination Council. (2022, June 16). FFIEC Announces Availability of 2021
Data on Mortgage Lending. Retrieved from FFIEC: https://www.ffiec.gov/press/pr061622.htm
Federal Reserve Bank of Dallas. (2023, November 16). Texas Business-Cycle Index. Retrieved from
Regional Economic Data: https://www.dallasfed.org/research/econdata/coini.aspx
Federal Reserve Bank of Dallas. (2023, November 16). Texas Business-Cycle Index. Retrieved from
Regional Economic Data: https://www.dallasfed.org/research/econdata/coini.aspx
Federal Reserve Bank of Dallas. (2023, November 27). Texas Economic Indicators. Retrieved from
dallasfed: https://www.dallasfed.org/research/indicators/tei/2023/tei2311
Federal Reserve Bank of New York. (2022, November 17). Household Debt and Credit Report. Retrieved
from https://www.newyorkfed.org/microeconomics/hhdc
Federal Reserve Bank of New York. (2023, November 20). Consumers Exepect Further Decline in Credit
Applications and Rise in Rejection Rates. Retrieved from
46 | P a g e
https://www.newyorkfed.org/newsevents/news/research/2023/20231120
Federal Reserve Bank of New York. (2023, November 16). Quarterly Report on Household Debt and
Credit. Retrieved from Federal Reserve Bank of New York Research and Statistics Group:
https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2023q
3.pdf
Federal Reserve Bank of New York. (2023, November 28). Quarterly Report on Household Debt and
Credit. Retrieved from Federal Reserve Bank of New York Research and Statistics Group:
https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2023
Q3
Federal Reserve Bank of St. Louis. (2023, 10 28). Consumer Loans: Credit Cards and Other Revolving
Plans, All Commercial Banks. Retrieved from fred.stlouisfed.org:
https://fred.stlouisfed.org/series/CCLACBW027SBOG
Federal Reserve Bank of St. Louis. (2023, November 17). Fred Graph Observations Federal Funds
Effective Rate, Percent. Retrieved from Federal Reserve Bank of St. Louis:
https://fred.stlouisfed.org
Federal Reserve Bank of St. Louis. (2023, November 15). Housing Starts: Total: New Privately Owned
Housing Units Started. Retrieved from FRED Economic Data:
https://fred.stlouisfed.org/series/HOUST
Federal Reserve Bank of St. Louis. (2023, November 14). Real Gross Domestic Product. Retrieved from
FRED Economic Data: https://fred.stlouisfed.org/series/GDPC1#0
Freddie Mac. (2023, November 14). Mortgage Rates. Retrieved from Freddie Mac:
http://www.freddiemac.com/pmms/
FreddieMac. (2023, August 17). Economic, Housing and Mortgage Market Outlook – August 2023.
Retrieved from FreddieMac: https://www.freddiemac.com/research/forecast/20230817-
economic-housing-and-mortgage-market-outlook-august-2023
Fritts, J. (2023, September 13). Where Do People Pay the Most in Property Taxes? Retrieved from Tax
Foundation: https://taxfoundation.org/data/all/state/property-taxes-by-state-county-2022/
Garon, T., Braga, B., Oglesby-Neal, A., & Martire, N. (2023). The Effects of APR Caps and Consumer
Protections on Revolving Loans. Urban Institute, Wealth and Financial Well-Being, 2,12.
Haig Partners. (2022, October 27). 2022_Q2_HaigReport. Retrieved from haigpartners.com:
http://haigpartners.com/wp-content/uploads/2022/05/2022_Q2_HaigReport_DIGITAL.pdf
Haughwout, A., Donghoon, L., Mangrum, D., Scalley, J., & van der Klaauw, W. (2023, May 15). Liberty
Street Economics. Retrieved from Federal Reserve Bank of New York:
https://libertystreeteconomics.newyorkfed.org/2023/05/the-great-pandemic-mortgage-
refinance-boom/
Kellogg Insight. (2016, April 4). Why did Car Prices Drop so Dramatically during the Financial Crisis.
Retrieved from Kellogg School of Management at Northwestern University:
https://insight.kellogg.northwestern.edu/article/was-the-government-bailout-of-car-financers-
necessary
Lund Research Ltd. (2019, October 10). Perason Product-Moment Correlation. Retrieved from Laerd
Statistics: https://statistics.laerd.com/statistical-guides/pearson-correlation-coefficient-
statistical-guide.php
Manheim. (2023, November 13). Used Vehicle Value Index. Retrieved from Manheim:
https://publish.manheim.com/en/services/consulting/used-vehicle-value-index.html
Milstein, E., & Wessel, D. (2021, December 17). What did the Fed do in responswe to the COVID-19
crisis? Retrieved from Brookings: https://www.brookings.edu/articles/fed-response-to-covid19/
National Consumer Law Center. (2021, October 12). Coalition Comments Urging CFPB to Rescind Earned
Wage Access Advisory Opinion and Sandbox Approval. Retrieved November 11, 2021, from
47 | P a g e
nclc.org: https://www.nclc.org/images/pdf/banking_and_payment_systems/fintech/CFPB-EWA-
letter-coalition-FINAL2.pdf
OCED. (2023, November 15). Consumer confidence index (CCI). Retrieved from OCED:
https://data.oecd.org/leadind/consumer-confidence-index-cci.htm
PYMNTS and LendingClub Collaboration. (2022, September). New Reality Check: The Paycheck-To-
Paycheck Report. Retrieved from https://www.pymnts.com/wp-
content/uploads/2022/08/PYMNTS-New-Reality-Check-August-September-2022.pdf
Social Security Administration. (2023, October 27). CPI For Urban Wage Earners And Clerical Workers.
Retrieved from https://www.ssa.gov/oact/STATS/cpiw.html
Texas Real Estate Research Center - Texas A&M University. (2023, November 13). Housing Activity for
Texas. Retrieved from Texas Housing Activity - Texas Real Estate Research Center:
https://www.recenter.tamu.edu/data/housing-activity/#!/activity/State/Texas
The Conference Board. (2023, November 15). The Conference Board Economic Forecast for the US
Economy. Retrieved from The Conference Board: https://www.conference-
board.org/publications/pdf/index.cfm?brandingURL=us-
forecast#:~:text=In%20the%20second%20half%20of,rates%20to%20near%204%20percent.
Transunion. (2023, November). Consumer Pulse Study. Retrieved from Transunion:
https://www.transunion.com/report/consumer-pulse/q4-2023
Transunion. (2023, May 11). Q1 2023 TransUnion Credit Industry Insights Report. Retrieved from
https://newsroom.transunion.com/q1-2023-ciir/
U.S. Bureau of Labor Statistics. (2023, November 17). Consunmer Price Index or All Urban Consumers: All
Items in US City Average (CPIAUCSL). Retrieved from retrieved from FRED, Federal Reserve Bank
of St. Louis: https://fred.stlouisfed.org/series/CPIAUCSL
United States Government Acountability Office. (2023). Financial Technology - GAO-23-105536.
US Census Bureau. (2022, 03 17). American Community Survey (ACS). Retrieved from census.gov:
https://www.census.gov/newsroom/press-kits/2021/acs-5-year.html
US. Census Bureau. (2022, November 7). Real Medium Houshold Income in Texas. Retrieved from
Federal Reserve Bank of St Louis: https://fred.stlouisfed.org/series/MEHOINUSTXA672N
Vandenbrink, D. C. (1982). The Effects of Usury Ceilings. Federal Reserve Bank of Chicago, Economic
Perspectives, 6 Midyear, 44-55.
