By Gutierrez H.B. No. 2487
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to certain fees that may be charged on a consumer credit
1-3 contract.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Article 5.02, Title 79, Revised Statutes (Article
1-6 5069-5.02, Vernon's Texas Civil Statutes), is amended to read as
1-7 follows:
1-8 (1) Any person authorized to do business under the
1-9 provisions of this Chapter may contract for and receive on any
1-10 secondary mortgage loan made under the authority of this Chapter
1-11 repayable in consecutive monthly installments, substantially equal
1-12 in amount, an add-on interest charge of Eight Dollars per One
1-13 Hundred Dollars per annum for the full term of the loan contract,
1-14 or as an alternative thereto, any rate or amount authorized by
1-15 Article 1.04 of this Title, as amended. Notwithstanding the
1-16 foregoing, any secondary mortgage loan described in this Section
1-17 may provide for the establishment of the first scheduled
1-18 installment due date beyond one month from the date of the loan but
1-19 not beyond one month plus fifteen days from the date of the loan.
1-20 (2) Interest authorized in Section (1) of this Article
1-21 shall be computed on the cash advance at the time the loan is made
1-22 for the full term of the loan contract notwithstanding the
1-23 requirement of the loan contract for payment in substantially equal
2-1 regular monthly installments and shall be computed on the basis of
2-2 a full month for any fractional period in excess of fifteen days.
2-3 Precomputed interest authorized by Section (1) of this Article
2-4 shall be added to the cash advance and said sum shall be the amount
2-5 of the loan.
2-6 (3) An authorized lender may arrange a secondary
2-7 mortgage loan which provides for repayment in other than
2-8 substantially equal installment amounts and/or provides that the
2-9 first monthly installment is not scheduled to be repayable within
2-10 one month plus fifteen days from the date of the loan. However,
2-11 the first installment due date of a secondary mortgage loan made
2-12 under the authority of this Section shall not be scheduled to be
2-13 repaid later than three months from the date of the loan. On any
2-14 loan made under the authority of this Section, the lender may
2-15 contract for, charge, or receive interest charges at a simple
2-16 annual rate not in excess of a rate, considering the entire term of
2-17 the loan, permitted in Section (1) of this Article. The interest
2-18 contracted for, charged, or received shall not be precomputed but
2-19 shall be accrued and earned by applying the simple annual interest
2-20 rate under the loan contract to the principal balance, including
2-21 additions to principal subsequent to the loan contract, from time
2-22 to time unpaid until the date of payment in full or demand for
2-23 payment in full.
2-24 (4) Notwithstanding any other provisions of this
2-25 Chapter, a borrower and a lender may enter into a written agreement
3-1 pursuant to which one or more loans or advances to or for the
3-2 account of the borrower shall be made from time to time. The
3-3 agreement shall contain the date of the agreement and the name and
3-4 address of each borrower and of the lender and shall be signed by
3-5 the parties. A copy of the agreement shall be delivered to the
3-6 borrower. The agreement may provide for a maximum loan charge on
3-7 the unpaid principal amounts from time to time outstanding not in
3-8 excess of a rate producing an interest yield equivalent to that
3-9 which would be permitted on a similar loan made under Section (1)
3-10 of this Article. The Commissioner shall prescribe monthly rates of
3-11 charge which produce an interest yield equal to the add-on rate
3-12 permitted under Section (1) of this Article on a loan of the same
3-13 amount. The loan agreement shall clearly set forth, if a charge
3-14 for insurance is to be included in the contract, a simple statement
3-15 of the amount of such charge or the method by which it will be
3-16 calculated.
3-17 (5) On any loan contract which includes precomputed
3-18 interest, and is payable in substantially equal successive monthly
3-19 installments, additional interest for default, if contracted for,
3-20 may equal but shall not exceed Five Cents for each One Dollar of
3-21 any scheduled installment when any portion of such installment
3-22 continues unpaid for ten days or more following the date such
3-23 payment is due, including Sundays and holidays. Interest for such
3-24 default shall not be collected more than once on the same
3-25 installment. If the payment date of each wholly unpaid
4-1 installment, on which no interest for default has been collected is
4-2 deferred as of an installment date for one or more full months and
4-3 the maturity of the contract is extended for a corresponding period
4-4 of time, the lender may charge and collect additional interest for
4-5 such deferment. The interest for such deferment may be equal to
4-6 the difference between the refund which would be required for
4-7 prepayment in full as of the date of deferment and the refund which
4-8 would be required for prepayment in full as of one month prior to
4-9 such date multiplied by the number of months in the deferment
4-10 period as defined below. The portion of the interest contracted
4-11 for under Section (1) of this Article applicable to each deferred
4-12 balance and installment period following a deferment period shall
4-13 remain the same as that applicable to such balance and period under
4-14 the original contract of loan. If a loan is prepaid in full during
4-15 the deferment period defined below, the borrower shall receive, in
4-16 addition to the refund required under Section (6) of this Article,
4-17 a pro-rata refund of that portion of the interest for deferment
4-18 applicable to any unexpired full month or months of such period.
4-19 The deferment period is that period beginning with the day
4-20 following the due date of the scheduled installment preceding the
4-21 first installment being deferred, and during which no payment is
4-22 made or required by reason of such deferment. The interest for
4-23 default or interest for deferment may be collected at the time of
4-24 its accrual, or at any time thereafter.
4-25 (6)(i) When any loan contract payable in not more than
5-1 sixty substantially equal successive monthly installments beginning
5-2 within one month plus fifteen days after the date of the contract
5-3 and containing precomputed interest is prepaid in full by cash, a
5-4 new loan, renewal, or otherwise, or when the lender demands payment
5-5 in full of the unpaid balance, after the first installment due date
5-6 but before the final installment due date, the lender shall refund
5-7 or credit the borrower with an amount which shall be as great a
5-8 proportion of the total interest contracted for under Section (1)
5-9 of this Article as the sum of the periodic balances scheduled to
5-10 follow the installment date after the date of prepayment in full or
5-11 demand for payment in full bears to the sum of all the periodic
5-12 time balances under the schedule of payments set out in the loan
5-13 contract. If such prepayment in full or demand for payment in full
5-14 occurs before the first installment due date the lender shall
5-15 retain for each elapsed day from date the loan was made,
5-16 one-thirtieth of the portion of the interest which could be
5-17 retained if the first installment period were one month and the
5-18 loan were prepaid in full on the first installment period due date
5-19 and the interest contracted for under Section (1) of this Article
5-20 in excess of such amount shall be refunded or credited to the
5-21 borrower.
5-22 (ii) When any loan contract which includes
5-23 precomputed interest and is payable in more than sixty
5-24 substantially equal successive monthly installments beginning
5-25 within one month plus fifteen days after the date of the contract
6-1 is prepaid in full by cash, a new loan, renewal, or otherwise, or
6-2 if the lender demands payment in full of the unpaid balance before
6-3 the final installment due date, the lender shall retain earned
6-4 interest for the period from the date of the loan to the date of
6-5 prepayment in full or demand for payment in full in an amount not
6-6 to exceed that which would accrue at the simple annual interest
6-7 rate which the loan contract would have produced over its full term
6-8 if each scheduled payment had been paid on the date due when
6-9 applied to the unpaid principal amounts determined to be
6-10 outstanding from time to time according to the schedule of payments
6-11 having due regard for the amount of each scheduled installment and
6-12 the time of each scheduled installment period. In the event
6-13 prepayment in full or demand for payment in full occurs on a date
6-14 during an installment period, the lender, in addition to interest
6-15 earnings for the installment period or periods that have elapsed,
6-16 may retain for each day elapsed from the immediately preceding
6-17 installment due date to the date of prepayment in full or demand
6-18 for payment in full an interest charge produced by applying the
6-19 simple annual interest rate under the contract as heretofore
6-20 described to the unpaid principal balance of the loan determined to
6-21 be outstanding according to the schedule of payments as of the
6-22 immediately preceding installment due date and dividing that
6-23 product by three hundred sixty-five. All interest contracted for
6-24 and precomputed in the amount of loan in excess of the interest
6-25 authorized to be retained by this subsection shall be refunded or
7-1 credited to the borrower.
7-2 The lender may also retain earned interest
7-3 on any additions to principal or other permissible charges added to
7-4 the loan subsequent to the date of the loan contract, at the simple
7-5 annual interest rate as described above, from the date such
7-6 additions are made until paid or until demand for payment in full
7-7 of the total unpaid balance under the loan contract is made by the
7-8 lender.
7-9 If the loan contract does not contain
7-10 precomputed interest, then interest may be earned on the principal
7-11 balance, including additions to principal subsequent to the loan
7-12 contract, from time to time unpaid, at the rate contracted for,
7-13 until the date of payment in full or demand for payment in full.
7-14 (iii) No refund shall be required for
7-15 partial prepayments and no refund of less than One Dollar need be
7-16 made.
7-17 (7) In addition to the authorized charges provided in
7-18 this Chapter no further or other charge or amount whatsoever shall
7-19 be directly, or indirectly, charged, contracted for, or received.
7-20 This includes (but is not limited by) all charges such as fees,
7-21 compensation, bonuses, commissions, brokerage, discounts, expenses
7-22 and every other charge of any nature whatsoever, whether of the
7-23 types listed herein or not. Without limitation of the foregoing,
7-24 such charges may be any form of costs or compensation whether
7-25 contracted for or not, received by the lender, or any other person,
8-1 in connection with (a) the investigating, arranging, negotiation,
8-2 procuring, guaranteeing, making, servicing, collecting or enforcing
8-3 of a loan; or (b) for the forbearance of money, credit, goods or
8-4 things in action; or (c) for any other service or services
8-5 performed or offered. A secondary mortgage loan lender or an
8-6 assignee of a secondary mortgage loan may collect on or before the
8-7 closing of a loan, or include in the principal of the secondary
8-8 mortgage loan, the following:
8-9 (A) reasonable fees for title examination and
8-10 preparation of an abstract of title by an attorney not an employee
8-11 of the lender, or a title company or property search company
8-12 authorized to do business in this State; or premiums or fees for
8-13 title insurance or title search for the benefit of the mortgagee,
8-14 and, at mortgagor's option, title insurance or title search for the
8-15 benefit of the mortgagor;
8-16 (B) reasonable fees charged to the lender by an
8-17 attorney, provided the attorney is not a salaried employee of the
8-18 lender, for preparation of the loan documents in connection with
8-19 the mortgage loan, if the fees are evidenced by a statement for
8-20 services rendered addressed to the lender;
8-21 (C) charges prescribed by law that are or will
8-22 be paid to public officials for determining the existence of and
8-23 for perfecting, releasing, and satisfying a security interest;
8-24 (D) reasonable fees for an appraisal of real
8-25 property offered as security for the loan prepared by a certified
9-1 appraiser who is not an employee of the lender;
9-2 (E) reasonable cost of any credit report;
9-3 (F) reasonable fees for a survey of real
9-4 property offered as security for the loan prepared by a registered
9-5 surveyor who is not a salaried employee of the lender; <and>
9-6 (G) the premiums received in connection with the
9-7 sale of credit life insurance, credit accident and health
9-8 insurance, and insurance which protects the mortgagee in the event
9-9 of default by the mortgagor, the benefits of which go in whole or
9-10 in part to reduce or extinguish the loan balance. Premiums for
9-11 property insurance written in conformity with Section (2) of
9-12 Article 5.03 of this Title may be added to the loan contract<.>;
9-13 and
9-14 (H) reasonable fees which are incurred in
9-15 connection with the real property offered as security for the loan
9-16 in order to comply with federally mandated programs where such
9-17 collection or participation is required by an agency created by
9-18 federal law.
9-19 In addition, the contract for a secondary
9-20 mortgage loan may provide for:
9-21 (A) reasonable fees or charges paid to the
9-22 trustee in connection with a deed of trust or similar instrument
9-23 executed in connection with the secondary mortgage loan, including
9-24 but not limited to fees for enforcing the lien, posting for sale,
9-25 selling, or releasing the property secured by the deed of trust;
10-1 (B) reasonable fees paid to an attorney who is
10-2 not an employee of the creditor in the collection of a delinquent
10-3 secondary mortgage loan and any court costs and fees incurred in
10-4 the collection of, or foreclosure of, any lien created by the loan;
10-5 (C) a fee of Fifteen Dollars or less for the
10-6 return by a depository institution of a dishonored check,
10-7 negotiable order of withdrawal, or share draft offered in full or
10-8 partial payment of a secondary mortgage loan.
10-9 (8) Notwithstanding any other provision of this
10-10 Chapter, a borrower and a lender may enter into a written agreement
10-11 under which the terms and conditions of a loan contract under this
10-12 Chapter are modified, extended, amended, restated, or rescheduled.
10-13 The agreement must contain the date of the agreement and the name
10-14 and address of each borrower and the lender, and must be signed by
10-15 the parties. A copy of the agreement shall be delivered to the
10-16 borrower.
10-17 SECTION 2. This Act takes effect September 1, 1995.
10-18 SECTION 3. The importance of this legislation and the
10-19 crowded condition of the calendars in both houses create an
10-20 emergency and an imperative public necessity that the
10-21 constitutional rule requiring bills to be read on three several
10-22 days in each house be suspended, and this rule is hereby suspended.