Document Systems, Inc. ("DSI") is in the process of creating the disclosure forms required by Texas House Bill 1547 (H.B. 1547) in accordance with proposed rules and regulations of the Texas Office of Consumer Credit Commissioner ("OCCC"). You may recall that our May, 2005 issue of The Compliance Wizard, we introduced H.B. 1547 to our readers in an article entitled TX Legislature Proposes Amendmenr to "Plain Language" Statute Involving Consumer Loan Contracts. H.B. 1547, which amends Texas Finance Code Section 341.502, passed and becomes effective on September 1, 2005.

Under Finance Code Section 341.502(a-1), if the terms of a secondary mortgage loan transaction under Chapter 342 or a home equity loan regulated by the Texas Office of Consumer Credit Commissioner ("OCCC") (namely, secondary mortgage loans and home equity loans having an interest rate greater than 10%) were negotiated in the Spanish language, a summary of the loan terms must be given to the debtor in a form identical to the disclosures required by 12 C.F.R. Section 226.18 (i.e., the "Truth-In-Lending" ("TIL") and "Itemization of Amount" disclosures).

Fortunately, the OCCC will make compliance with H.B. 1547 relatively easy. The OCCC has advised DSI's Compliance Department that proposed Rules 7 Texas Administrative Code ("TAC") Sections 1.1251 through 1.1256 ("Proposed Rules"), containing the forms required by Section 341.502(a-1), have been submitted for approval to the Texas Finance Commission, the OCCC's oversight body. The Proposed Rules are designed to interpret and implement the amendments contained in Finance Code Section 341.502(a-1). The Proposed Rules are contained in the meeting packet that the OCCC submitted to the Finance Commission and which the Finance Commission will consider at its next meeting on August 29, 2005. Click here to view the Proposed Rules, see Pages 89 through 102 of the meeting packet.

The disclosure form contained in Figure: 7 TAC Section 1.1253(a)(4) of the Proposed Rules will be required for secondary mortgage loan transactions and home equity loans regulated by the OCCC, which are both governed under Chapter 342, Subchapter G of the Texas Finance Code. Although the Proposed Rules do not require the Spanish version of the Itemization of Amount Financed contained in Figure: 7 TAC 1.1253(a)(3)(B) for loan transactions governed under Chapter 342, Subchapter G, the creditor could use this form when loan terms are negotiated in Spanish.

The OCCC has further advised DSI's Compliance Department that it will post 7 TAC Sections 1.1251 through 1.1256 on its website, www.occc.state.tx.us, after the Finance Commission has agreed that the Proposed Rules may be submitted to the Texas Register for possible adoption and comment.

The Proposed Rules make the following points with regard to the requirements of amended Section 341.502:

• Compliance with the Proposed Rules will be deemed compliance with H.B. 1547, which becomes effective September 1, 2005, until the Proposed Rules are approved and adopted.
• While the forms prescribed in the Proposed Rules may be used, a creditor may use its own Spanish disclosures.
• If a creditor chooses to use its own Spanish disclosure forms, these forms do not need to be submitted to the OCCC.
• The requirement that disclosures under Section 341.502(a-1) be made in Spanish applies only to loans. As retail installment transactions under Chapter 348 are not loans, a creditor under Chapter 348 may, but need not, comply with Section 341.502(a) and the Proposed Rules.
• Spanish versions of the disclosures required under 12 C.F.R. Section 226.18 are required only if any of the following credit terms are given in Spanish: (1) amount financed; (2) finance charge; (3) annual percentage rate ("APR"); (4) the amount of any payment or schedule of payments; (5) total payments; or (6) security interest.
• Section 1.1254 of the Proposed Rules provides that certain items on the disclosures required by Section 341.502(a-1), such as names and addresses of individuals and words or expressions not having a generally accepted Spanish translation, do not have to be translated from English to Spanish.
• The borrower does not need to sign the disclosures required by Section 341.502(a-1).
• Inapplicable provisions of the disclosure and the English translations therein may be omitted from the Spanish version of the TIL disclosure for secondary mortgage loan transactions and home equity loans.
• The English versions of the loan agreement and disclosures required by 12 C.F.R. Section 226.18 will be the "legal document and determine the rights and obligations of the parties."

Pending the Texas Finance Commission's approval of the Proposed Rules, DSI will layout and program the forms required by Section 341.502(a-1) for secondary mortgage loan transactions and home equity loans, using Figure: 7 TAC Section 1.1253(a)(4). Although not required by the Proposed Rules for these transactions, DSI will also layout and program Figure: 7 TAC 1.1253(a)(3)(B), the Spanish version of the Itemization of Amount Financed. If there are changes to any one of these forms in the approved version of the Proposed Rules, DSI will make the appropriate changes to these forms at that time.

Melanie A. Feliciano is Assistant General Counsel of Document Systems, Inc. and a member of its Compliance Department.