By: Harris of Tarrant S.B. No. 628
A BILL TO BE ENTITLED
AN ACT
1-1 relating to a late charge imposed by a creditor for the failure of
1-2 a debtor to make a scheduled payment when due; providing penalties.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Article 1.01, Title 79, Revised Statutes (Article
1-5 5069-1.01, Vernon's Texas Civil Statutes), is amended by amending
1-6 Section (a) and adding Sections (j) and (k) to read as follows:
1-7 (a) "Interest" is the compensation allowed by law for the
1-8 use or forbearance or detention of money; provided however, this
1-9 term shall not include any time price differential however
1-10 denominated arising out of a credit sale and does not include a
1-11 late charge or any charge for delinquent payment imposed in
1-12 connection with the sale or lease of services or goods which are
1-13 sold or leased at rates or charges which are, in whole or in part,
1-14 fixed, limited, approved, or subject to oversight by a local,
1-15 state, or federal governmental entity if the charge for delinquent
1-16 payment is disclosed in writing on or with the billing statements
1-17 for the services or goods.
1-18 (j) "Late charge" means a charge imposed by a creditor in
1-19 connection with the failure of a debtor to make scheduled payments
1-20 when due in connection with the use or forbearance or detention of
1-21 money. A late charge does not include:
1-22 (1) an amount that accrues on a daily or other
1-23 periodic basis;
1-24 (2) an amount assessed for failure to timely pay a
2-1 scheduled payment that is the final maturity of the full principal
2-2 balance of the indebtedness; or
2-3 (3) a late charge or any charge for delinquent payment
2-4 imposed in connection with the sale or lease of services or goods
2-5 which are sold or leased at rates or charges which are, in whole or
2-6 in part, fixed, limited, approved, or subject to oversight by a
2-7 local, state, or federal governmental entity if the charge for
2-8 delinquent payment is disclosed in writing on or with the billing
2-9 statements for the services or goods.
2-10 (k) "Creditor" means a person that loans money or otherwise
2-11 extends credit, provided that the term shall not include a judgment
2-12 creditor.
2-13 SECTION 2. Subtitle 1, Title 79, Revised Statutes (Article
2-14 5069-1.01 et seq., Vernon's Texas Civil Statutes), is amended by
2-15 adding Article 1.04A to read as follows:
2-16 Art. 1.04A. LATE CHARGES. (a) A creditor may impose a late
2-17 charge only if:
2-18 (1) the debtor agrees in writing in the loan contract
2-19 or a separate document that the creditor may impose the late
2-20 charge;
2-21 (2) the late charge does not exceed five percent of
2-22 the amount of the unpaid payment, including principal, interest,
2-23 and all escrow amounts, and is not assessed unless the payment is
2-24 not paid within a stated period of 10 or more days after the date
2-25 the payment is due; and
2-26 (3) the creditor does not receive interest on accrued
2-27 interest included in the amount of a delinquent payment for any
3-1 period before maturity of the full principal balance of the
3-2 indebtedness if the creditor actually receives a late charge with
3-3 respect to the payment.
3-4 (b) A contract may provide that a creditor may charge or
3-5 receive, at the creditor's option, either:
3-6 (1) interest on the amount of a delinquent payment,
3-7 including interest, before maturity; or
3-8 (2) a late charge for the payment.
3-9 (c) Notwithstanding the charging or receipt of a late
3-10 charge, interest may continue to accrue on the unpaid principal on
3-11 an indebtedness, including unpaid principal included in the amount
3-12 of the delinquent payment.
3-13 (d) A late charge that complies with this article is not
3-14 subject to avoidance as an unreasonable penalty.
3-15 SECTION 3. Article 1.06, Title 79, Revised Statutes (Article
3-16 5069-1.06, Vernon's Texas Civil Statutes), is amended to read as
3-17 follows:
3-18 Art. 1.06. PENALTIES. (1) Any person who contracts for,
3-19 charges or receives interest which is greater than the amount
3-20 authorized by this Subtitle, shall forfeit to the obligor three
3-21 times the amount of usurious interest contracted for, charged or
3-22 received, such usurious interest being the amount the total
3-23 interest contracted for, charged, or received exceeds the amount of
3-24 interest allowed by law, and reasonable attorney fees fixed by the
3-25 court except that in no event shall the amount forfeited be less
3-26 than Two Thousand Dollars or twenty percent of the principal,
3-27 whichever is the smaller sum; provided, that there shall be no
4-1 penalty for any usurious interest which results from an accidental
4-2 and bona fide error.
4-3 (2) Any person who contracts for, charges or receives
4-4 interest which is in excess of double the amount of interest
4-5 allowed by this Subtitle shall forfeit as an additional penalty,
4-6 all principal as well as interest and all other charges and shall
4-7 pay reasonable attorney fees set by the court; provided further
4-8 that any such person violating the provisions of this section shall
4-9 be guilty of a misdemeanor and upon conviction thereof shall be
4-10 punished by fine of not more than One Thousand Dollars. Each
4-11 contract or transaction in violation of this section shall
4-12 constitute a separate offense punishable hereunder.
4-13 (3) A person who charges or receives a late charge that does
4-14 not comply with Article 1.04A of this Title shall forfeit to the
4-15 obligor:
4-16 (A) three times the amount of the improper late charge
4-17 charged or received; and
4-18 (B) reasonable attorney fees fixed by the court.
4-19 (4) A penalty may not be assessed for a late charge that is
4-20 the result of an accidental and bona fide error.
4-21 (5) All such actions brought under this Article shall be
4-22 brought in any court of this State having jurisdiction thereof
4-23 within four years from the date when the usurious charge was
4-24 received or collected in the county of the defendant's residence,
4-25 or in the county where the interest in excess of the amount
4-26 authorized by this Subtitle has been received or collected, or
4-27 where such transaction had been entered into or where the parties
5-1 who paid the interest in excess of the amount authorized by this
5-2 Subtitle resided when such transaction occurred, or where he
5-3 resides.
5-4 SECTION 4. This Act takes effect September 1, 1993.
5-5 SECTION 5. (a) This Act does not apply to a loan made
5-6 before the effective date of this Act, made pursuant to a
5-7 commitment entered into before the effective date of this Act, or
5-8 to a renewal, extension, or modification of a loan entered into or
5-9 for which a commitment was entered into before the effective date
5-10 of this Act, and the law in effect when the loan or commitment was
5-11 entered into continues in effect for that purpose.
5-12 (b) Notwithstanding Subsection (a) of this section, a debtor
5-13 and a creditor may agree in writing to be subject to this Act on or
5-14 after the effective date of this Act regarding indebtedness created
5-15 before the effective date of this Act.
5-16 (c) Nothing in this Act shall be construed as implying that
5-17 a late charge imposed before the effective date of this Act or
5-18 subsequent to the effective date of this Act regarding indebtedness
5-19 created before the effective date of this Act is in violation of
5-20 Title 79, Revised Statutes (Article 5069-1.01 et seq., Vernon's
5-21 Texas Civil Statutes).
5-22 SECTION 6. The importance of this legislation and the
5-23 crowded condition of the calendars in both houses create an
5-24 emergency and an imperative public necessity that the
5-25 constitutional rule requiring bills to be read on three several
5-26 days in each house be suspended, and this rule is hereby suspended.