By: Harris, Chris S.B. No. 628
73R3522 CAE-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to a late charge imposed by a creditor for the failure of
1-3 a debtor to make a scheduled payment when due; providing penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Article 1.01, Title 79, Revised Statutes (Article
1-6 5069-1.01, Vernon's Texas Civil Statutes), is amended by amending
1-7 Section (a) and adding Section (j) to read as follows:
1-8 (a) "Interest" is the compensation allowed by law for the
1-9 use or forbearance or detention of money; provided however, this
1-10 term shall not include any time price differential however
1-11 denominated arising out of a credit sale and does not include a
1-12 late charge.
1-13 (j) "Late charge" means a charge imposed by a creditor in
1-14 connection with the failure of a debtor to make scheduled payments
1-15 when due in connection with the use or forbearance or detention of
1-16 money. A late charge does not include:
1-17 (1) an amount that accrues on a daily or other
1-18 periodic basis; or
1-19 (2) an amount assessed for failure to timely pay a
1-20 scheduled payment that is the final maturity of the full principal
1-21 balance of the indebtedness.
1-22 SECTION 2. Subtitle 1, Title 79, Revised Statutes (Article
1-23 5069-1.01 et seq., Vernon's Texas Civil Statutes), is amended by
1-24 adding Article 1.04A to read as follows:
2-1 Art. 1.04A. LATE CHARGES. (a) A creditor may impose a late
2-2 charge only if:
2-3 (1) the debtor agrees in writing in the loan contract
2-4 or a separate document that the creditor may impose the late
2-5 charge;
2-6 (2) the late charge does not exceed five percent of
2-7 the amount of the unpaid payment, including principal, interest,
2-8 and all escrow amounts, and is not assessed unless the payment is
2-9 not paid within a stated period of 10 or more days after the date
2-10 the payment is due; and
2-11 (3) the creditor does not receive interest on accrued
2-12 interest included in the amount of a delinquent payment for any
2-13 period before maturity of the full principal balance of the
2-14 indebtedness if the creditor actually receives a late charge with
2-15 respect to the payment.
2-16 (b) A contract may provide that a creditor may charge or
2-17 receive, at the creditor's option, either:
2-18 (1) interest on the amount of a delinquent payment,
2-19 including interest, before maturity; or
2-20 (2) a late charge for the payment.
2-21 (c) Notwithstanding the charging or receipt of a late
2-22 charge, interest may continue to accrue on the unpaid principal on
2-23 an indebtedness, including unpaid principal included in the amount
2-24 of the delinquent payment.
2-25 (d) A late charge that complies with this article is not
2-26 subject to avoidance as an unreasonable penalty.
2-27 SECTION 3. Article 1.06, Title 79, Revised Statutes (Article
3-1 5069-1.06, Vernon's Texas Civil Statutes), is amended to read as
3-2 follows:
3-3 Art. 1.06. PENALTIES. (1) Any person who contracts for,
3-4 charges or receives interest which is greater than the amount
3-5 authorized by this Subtitle, shall forfeit to the obligor three
3-6 times the amount of usurious interest contracted for, charged or
3-7 received, such usurious interest being the amount the total
3-8 interest contracted for, charged, or received exceeds the amount of
3-9 interest allowed by law, and reasonable attorney fees fixed by the
3-10 court except that in no event shall the amount forfeited be less
3-11 than Two Thousand Dollars or twenty percent of the principal,
3-12 whichever is the smaller sum; provided, that there shall be no
3-13 penalty for any usurious interest which results from an accidental
3-14 and bona fide error.
3-15 (2) Any person who contracts for, charges or receives
3-16 interest which is in excess of double the amount of interest
3-17 allowed by this Subtitle shall forfeit as an additional penalty,
3-18 all principal as well as interest and all other charges and shall
3-19 pay reasonable attorney fees set by the court; provided further
3-20 that any such person violating the provisions of this section shall
3-21 be guilty of a misdemeanor and upon conviction thereof shall be
3-22 punished by fine of not more than One Thousand Dollars. Each
3-23 contract or transaction in violation of this section shall
3-24 constitute a separate offense punishable hereunder.
3-25 (3) A person who charges or receives a late charge that does
3-26 not comply with Article 1.04A of this Title shall forfeit to the
3-27 obligor:
4-1 (A) three times the amount of the improper late charge
4-2 charged or received; and
4-3 (B) reasonable attorney's fees fixed by the court.
4-4 (4) A penalty may not be assessed for a late charge that is
4-5 the result of an accidental and bona fide error.
4-6 (5) All such actions brought under this Article shall be
4-7 brought in any court of this State having jurisdiction thereof
4-8 within four years from the date when the usurious charge was
4-9 received or collected in the county of the defendant's residence,
4-10 or in the county where the interest in excess of the amount
4-11 authorized by this Subtitle has been received or collected, or
4-12 where such transaction had been entered into or where the parties
4-13 who paid the interest in excess of the amount authorized by this
4-14 Subtitle resided when such transaction occurred, or where he
4-15 resides.
4-16 SECTION 4. This Act takes effect September 1, 1993.
4-17 SECTION 5. (a) This Act does not apply to a loan made
4-18 before the effective date of this Act, made pursuant to a
4-19 commitment entered into before the effective date of this Act, or
4-20 to a renewal, extension, or modification of a loan entered into or
4-21 for which a commitment was entered into before the effective date
4-22 of this Act, and the law in effect when the loan or commitment was
4-23 entered into continues in effect for that purpose.
4-24 (b) Notwithstanding Subsection (a) of this section, a debtor
4-25 and a creditor may agree in writing to be subject to this Act on or
4-26 after the effective date of this Act regarding indebtedness created
4-27 before the effective date of this Act.
5-1 (c) Nothing in this Act shall be construed as implying that
5-2 a late charge imposed before the effective date of this Act or
5-3 subsequent to the effective date of this Act regarding indebtedness
5-4 created before the effective date of this Act is in violation of
5-5 Title 79, Revised Statutes (Article 5069-1.01 et seq., Vernon's
5-6 Texas Civil Statutes).
5-7 SECTION 6. The importance of this legislation and the
5-8 crowded condition of the calendars in both houses create an
5-9 emergency and an imperative public necessity that the
5-10 constitutional rule requiring bills to be read on three several
5-11 days in each house be suspended, and this rule is hereby suspended.