Law:Title 4. Regulation Of Interest, Loans, And Financed Transactions (Texas)

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Subtitle A. Interest

Contents

Chapter 301. General Provisions

Section  301.001.  Short Title.

This title may be cited as the Texas Credit Title.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept. 1, 1999.



Section  301.002.  Definitions.

(a) In this subtitle:

(1)  "Contract interest" means interest that an obligor has paid or agreed to pay to a creditor under a written contract of the parties. The term does not include judgment interest.

(2)  "Credit card transaction" means a transaction for personal, family, or household use in which a credit card, plate, coupon book, or credit card cash advance check may be used or is used to debit an open-end account in connection with:

(A)  a purchase or lease of goods or services; or

(B)  a loan of money.

(3)  "Creditor" means a person who loans money or otherwise extends credit. The term does not include a judgment creditor.

(4)  "Interest" means compensation for the use, forbearance, or detention of money.  The term does not include time price differential, regardless of how it is denominated.  The term does not include compensation or other amounts that are determined or stated by this code or other applicable law not to constitute interest or that are permitted to be contracted for, charged, or received in addition to interest in connection with an extension of credit.

(5)  "Judgment creditor" means a person to whom a money judgment is payable.

(6)  "Judgment debtor" means a person obligated to pay a money judgment.

(7)  "Judgment interest" means interest on a money judgment, whether the interest accrues before, on, or after the date the judgment is rendered.

(8)  "Legal interest" means interest charged or received in the absence of any agreement by an obligor to pay contract interest. The term does not include judgment interest.

(9)  "Lender credit card agreement":

(A)  means an agreement between a creditor and an obligor that provides that:

(i)  the obligor, by means of a credit card transaction for personal, family, or household use, may:

(a)  obtain loans from the creditor directly or through other participating persons; and

(b)  lease or purchase goods or services from more than one participating lessor or seller who honors the creditor's credit card;

(ii)  the creditor or another person acting in cooperation with the creditor is to reimburse the participating persons, lessors, or sellers for the loans or the goods or services purchased or leased;

(iii)  the obligor is to pay the creditor the amount of the loan or cost of the lease or purchase;

(iv)  the unpaid balance of the loan, lease, or purchase and interest on that unpaid balance are debited to the obligor's account under the agreement;

(v)  interest may be computed on the balances of the obligor's account but is not precomputed; and

(vi)  the obligor and the creditor may agree that payment of part of the balance may be deferred;

(B)  includes an agreement under Section 342.455 or Section 346.003(b) or (c) for an open-end account under which credit card transactions may be made or a merchant discount may be taken; and

(C)  does not include:

(i)  an agreement, including an open-end account credit agreement, between a seller and a buyer or between a lessor and a lessee; or

(ii)  an agreement under which:

(a)  the entire balance is due in full each month; and

(b)  no interest is charged if the obligor pays the entire balance each month.

(10)  "Loan" means an advance of money that is made to or on behalf of an obligor, the principal amount of which the obligor has an obligation to pay the creditor. The term does not include a judgment.

(11)  "Merchant discount" means the consideration, including a fee, charge, discount, or compensating balance, that a creditor requires, or that a creditor, subsidiary, or parent company of the creditor, or subsidiary of the creditor's parent company, receives directly or indirectly from a person other than the obligor in connection with a credit card transaction under a lender credit card agreement between the obligor and the creditor. The term does not include consideration received by a creditor from the obligor in connection with the credit card transaction.

(12)  "Money judgment" means a judgment for money. For purposes of this subtitle, the term includes legal interest or contract interest, if any, that is payable to a judgment creditor under a judgment.

(13)  "Obligor" means a person to whom money is loaned or credit is otherwise extended. The term does not include:

(A)  a judgment debtor; or

(B)  a surety, guarantor, or similar person.

(14)  "Open-end account":

(A)  means an account under a written contract between a creditor and an obligor in connection with which:

(i)  the creditor reasonably contemplates repeated transactions and the obligor is authorized to make purchases or borrow money;

(ii)  interest or time price differential may be charged from time to time on an outstanding unpaid balance; and

(iii)  the amount of credit that may be extended during the term of the account is generally made available to the extent that any outstanding balance is repaid; and

(B)  includes an account under an agreement described by Section 342.455 or Chapter 345 or 346.

(15)  "Prepayment penalty" means consideration agreed on and contracted for a discharge of a loan, other than a loan governed by Chapter 306, before its maturity or a regularly scheduled date of payment, as a result of an obligor's election to pay all of the principal amount before its stated maturity or a regularly scheduled date of payment.

(16)  "Time price differential" means an amount, however denominated or expressed, that is:

(A)  added to the price at which a seller offers to sell services or property to a purchaser for cash payable at the time of sale; and

(B)  paid or payable to the seller by the purchaser for the privilege of paying the offered sales price after the time of sale.

(17)  "Usurious interest" means interest that exceeds the applicable maximum amount allowed by law.

(b)  The Finance Commission of Texas by rule may adopt other definitions to accomplish the purposes of this title.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept. 1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.01, eff. Sept. 1, 1999.

Amended by:

Acts 2005, 79th Leg., Ch. 1018, Sec. 2.01, eff. September 1, 2005.

Chapter 302. Interest Rates

Subchapter A. Usurious Interest

Section  302.001.  Contracting For, Charging, Or Receiving Interest Or Time Price Differential; Usurious Interest.

(a) A creditor may contract for, charge, and receive from an obligor interest or time price differential.

(b)  The maximum rate or amount of interest is 10 percent a year except as otherwise provided by law. A greater rate of interest than 10 percent a year is usurious unless otherwise provided by law. All contracts for usurious interest are contrary to public policy and subject to the appropriate penalty prescribed by Chapter 305.

(c)  To determine the interest rate of a loan under this subtitle, all interest at any time contracted for shall be aggregated and amortized using the actuarial method during the stated term of the loan.

(d)  In addition to interest authorized by Subsection (b), a loan providing for a rate of interest that is 10 percent a year or less may provide for a delinquency charge on the amount of any payment in default for a period of not less than 10 days in an amount not to exceed the greater of five percent of the amount of the payment or $7.50. The charging of the delinquency charge does not make the loan subject to Chapter 342 or any other provision of Subtitle B.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept. 1, 1999; Acts 2001, 77th Leg., ch. 916, Sec. 8, eff. Sept. 1, 2001.



Section  302.002.  Accrual Of Interest When No Rate Specified.

If a creditor has not agreed with an obligor to charge the obligor any interest, the creditor may charge and receive from the obligor legal interest at the rate of six percent a year on the principal amount of the credit extended beginning on the 30th day after the date on which the amount is due. If an obligor has agreed to pay to a creditor any compensation that constitutes interest, the obligor is considered to have agreed on the rate produced by the amount of that interest, regardless of whether that rate is stated in the agreement.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept. 1, 1999.



Subchapter B. Other Rates And Provisions On Loans Secured By Real Property

Section  302.101.  Determining Rates Of Interest By Spreading.

(a) To determine whether a loan secured in any part by an interest in real property, including a lien, mortgage, or security interest, is usurious, the interest rate is computed by amortizing or spreading, using the actuarial method during the stated term of the loan, all interest at any time contracted for, charged, or received in connection with the loan.

(b)  If a loan described by Subsection (a) is paid in full before the end of the stated term of the loan and the amount of interest received for the period that the loan exists exceeds the amount that produces the maximum rate authorized by law for that period, the lender shall:

(1)  refund the amount of the excess to the borrower; or

(2)  credit the amount of the excess against amounts owing under the loan.

(c)  A lender who complies with Subsection (b) is not subject to any of the penalties provided by law for contracting for, charging, or receiving interest in excess of the maximum rate authorized.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept. 1, 1999.



Section  302.102.  Prohibition On Prepayment Penalty.

If the interest rate on a loan for property that is or is to be the residential homestead of the borrower is greater than 12 percent a year, a prepayment penalty may not be collected on the loan unless the penalty is required by an agency created by federal law.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept. 1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.02, eff. Sept. 1, 1999.



Section  302.103.  Effect Of Federal Preemption On Late Charges. On

loans subject to 12 U.S.C. Sections 1735f-7 and 1735f-7a, as amended, any late charges assessed are interest that is included in computing the amount or rate of interest on the loan and, therefore, covered by the federal preemption of state interest rate limitations.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept. 1, 1999.



Section  302.104.  Loan To Purchase Interest In Entity With Foreign Real Property As Principal Asset.

(a) A loan the proceeds of which are used primarily to purchase an interest in a trust or other entity that has as its principal asset real property located outside the United States is:

(1)  not subject to Subtitle B; and

(2)  subject to the interest rate limitations of Chapter 303.

(b)  For the purpose of determining the interest rate on a loan to which this section applies, all interest contracted for, charged, or received shall be amortized, prorated, allocated, and spread over the full stated term of the loan.

(c)  This section does not affect application of a law of this state governing collateral that may be used to secure a loan to which this section applies.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept. 1, 1999.


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