By Carona H.B. No. 3071
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the amounts that may be charged and collected in
1-3 connection with a loan or other extension of credit.
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 to read as
1-7 follows:
1-8 Art. 1.01. Definitions. In this Subtitle:
1-9 (a) "Interest" means <is the> compensation <allowed by
1-10 law> for the use, <or> forbearance, or detention of money;
1-11 provided, however, that this definition is subject to Articles
1-12 1.13, 1.14, 1.15, and 1.16 of this Subtitle <this term shall not
1-13 include any time price differential however denominated arising out
1-14 of a credit sale>.
1-15 (b) "Legal interest <Interest>" means <is that>
1-16 interest <which is allowed by law> when an obligor has not agreed
1-17 to pay to a creditor any compensation that constitutes <the parties
1-18 to a contract have not agreed on any particular rate of> interest.
1-19 The term does not include judgment interest.
1-20 (c) "Conventional interest <Interest>" means <is that>
1-21 interest when an obligor has agreed to pay to a creditor any
1-22 compensation that constitutes interest. The term does not include
1-23 judgment interest <which is agreed upon and fixed by the parties to
1-24 a written contract>. For purposes of this Subtitle, a promise by
2-1 an obligor to pay to a creditor any compensation that constitutes
2-2 interest constitutes an agreement by the obligor to pay interest to
2-3 the creditor regardless of whether that agreement is unenforceable
2-4 by the creditor under this Subtitle or any other provision of law.
2-5 If an obligor has agreed to pay to a creditor any compensation that
2-6 constitutes interest, the obligor is considered to have agreed on
2-7 the rate produced by the amount of that interest, whether or not
2-8 that rate is stated in the agreement.
2-9 (d) "Creditor" means a person that loans money or
2-10 otherwise extends credit. The term does not include a judgment
2-11 creditor. <"Usury" is interest in excess of the amount allowed by
2-12 law.>
2-13 (e) "Person" means an individual, partnership,
2-14 corporation, joint venture, limited liability company, trust,
2-15 association, or other <any> legal entity, however organized.
2-16 (f) "Open-end account <Account>" means any account
2-17 created pursuant to<, under> a written contract under which a <the>
2-18 creditor may permit an <the> obligor to make purchases or borrow
2-19 money from time to time, and under which interest or time price
2-20 differential may from time to time be computed on an outstanding
2-21 unpaid balance. The term includes, but is not limited to, accounts
2-22 under agreements described by Section (4), Article 3.15; Section
2-23 (4), Article 4.01; and Chapters 6 and 15 of this Title.
2-24 (g) "Credit card transaction <Card Transaction>" means
2-25 a transaction in which a card is or may be used to debit an
2-26 open-end account in connection with the purchase or lease of goods
2-27 or services or the lending of money, which card is or may be used
3-1 for personal, family, or household use.
3-2 (h) "Merchant discount <Discount>" means any charge,
3-3 fee, discount, compensating balance, or other consideration imposed
3-4 by a creditor on or received directly or indirectly by the creditor
3-5 from any seller or lessor of goods or services in connection with a
3-6 credit card transaction under a lender credit card agreement
3-7 between an obligor <the customer> and the creditor. The term
3-8 includes any consideration whatsoever received by the <a> creditor
3-9 from any person other than the obligor in connection with a credit
3-10 card transaction under a lender credit card agreement between the
3-11 obligor and the creditor. Any such consideration received by a
3-12 subsidiary of the creditor or parent company of the creditor or any
3-13 subsidiary of the creditor's parent company shall be deemed to have
3-14 been received by the creditor <in determining if any such
3-15 consideration has been received by the creditor>.
3-16 (i) "Lender credit card agreement <Credit Card
3-17 Agreement>" means an agreement between a creditor (other than the
3-18 seller or lessor) and an obligor under which credit is or may be
3-19 extended for personal, family, or household use and under which:
3-20 (1) by means of a credit card, the obligor may obtain loans from
3-21 the creditor, which may be advanced by other participating persons,
3-22 and may lease or purchase goods or services from more than one
3-23 participating lessor or seller who honor the creditor's card, and
3-24 the creditor or some other person acting in cooperation with the
3-25 creditor will reimburse the other participating persons, lessors,
3-26 or sellers for the goods or services purchased or leased, and the
3-27 obligor is obligated under his or her agreement with the creditor
4-1 to pay the creditor the amount of such loans or the costs of such
4-2 leases or purchases; (2) the unpaid balance of such loans, leases,
4-3 and purchases and any interest thereon are debited to the obligor's
4-4 account with the creditor under the obligor's agreement with the
4-5 creditor; (3) interest is not precomputed but may be computed on
4-6 the balances of the obligor's account outstanding with the creditor
4-7 from time to time; and (4) the obligor may defer payment of any
4-8 part of the balance. The term includes all agreements for open-end
4-9 accounts authorized or defined under Articles 3.15(4), 4.01(4),
4-10 15.01(k), and 15.01(l) of this Title pursuant to which credit card
4-11 transactions <as defined in Article 1.01(g) of this Title> may be
4-12 made or in connection with which a merchant discount <as defined in
4-13 Article 1.01(h) of this Title> is imposed or received by the
4-14 creditor. The term does not include an open-end account credit
4-15 agreement between a seller or lessor and its own buyer or lessee.
4-16 The term does not include agreements under which the entire balance
4-17 is due and payable in full each month and no interest is charged
4-18 when the obligor pays in accordance with such terms.
4-19 (j) "Affiliate" of an obligor means a person that
4-20 directly or indirectly, through one or more intermediaries,
4-21 controls, is controlled by, or is under common control with the
4-22 obligor. The term "control" means the possession, directly or
4-23 indirectly, of the power to direct or cause the direction of the
4-24 management and policies of a person, whether through the ownership
4-25 of voting securities, by contract, or otherwise.
4-26 (k) "Business entity" means a partnership,
4-27 corporation, joint venture, limited liability company, or other
5-1 business organization or association, however organized.
5-2 (l) "Commercial loan" means a loan that is made
5-3 primarily for business, commercial, investment, agricultural, or
5-4 other similar purposes. The term does not include a loan that is
5-5 made primarily for personal, family, or household use.
5-6 (m) "Contract interest" means conventional interest,
5-7 whether or not denominated as interest, that an obligor has agreed
5-8 to pay to a creditor.
5-9 (n) "Guaranty" means an agreement pursuant to which an
5-10 obligor:
5-11 (1) assumes, guarantees, or otherwise becomes
5-12 primarily or contingently liable for the payment or performance of
5-13 an obligation of another person;
5-14 (2) provides security for the payment or
5-15 performance of an obligation of another person, whether through the
5-16 creation of a lien or security interest or otherwise; or
5-17 (3) agrees to purchase, or to advance
5-18 consideration to purchase, the obligation or any property
5-19 constituting security for the payment or performance of the
5-20 obligation.
5-21 (o) "Judgment creditor" means a person to whom a money
5-22 judgment is payable.
5-23 (p) "Judgment debtor" means a person obligated to pay
5-24 a money judgment.
5-25 (q) "Judgment interest" means interest on a money
5-26 judgment, whether the interest accrues before, on, or after the
5-27 date the judgment is rendered. For purposes of this Subtitle, the
6-1 term "money judgment" includes legal interest or conventional
6-2 interest, if any, that is payable to a judgment creditor pursuant
6-3 to a judgment.
6-4 (r) "Loan" means a loan of money or other extension of
6-5 credit if the obligor has unconditionally agreed to pay the
6-6 creditor the principal amount of the loan or other extension of
6-7 credit. The term does not include a judgement.
6-8 (s) "Obligor" means a person to whom money is loaned
6-9 or credit is otherwise extended. The term does not include:
6-10 (1) a judgment debtor; or
6-11 (2) a surety, guarantor, or similar person.
6-12 (t) "Prepayment premium" means compensation that:
6-13 (1) is or will become due and payable, or was
6-14 paid, by an obligor to a creditor solely as a result of, or as a
6-15 condition to, the payment or maturity of all or a portion of the
6-16 principal amount of a loan before its stated maturity or its
6-17 regularly scheduled date or dates of payment, whether as a result
6-18 of:
6-19 (A) acceleration of maturity on a
6-20 declaration by the creditor or otherwise;
6-21 (B) any election by the obligor to pay all
6-22 or a portion of the principal amount before its stated maturity or
6-23 its regularly scheduled date or dates of payment; or
6-24 (C) the occurrence of a contingency; and
6-25 (2) is not denominated by the creditor as
6-26 principal or interest. The term does not include judgement
6-27 interest.
7-1 (u) "Qualified commercial loan" means:
7-2 (1) a commercial loan in the original principal
7-3 amount of $5,000,000 or more; or
7-4 (2) any renewal or extension of a commercial
7-5 loan in the original principal amount of $5,000,000 or more,
7-6 whether or not the principal amount of the loan at the time of its
7-7 renewal or extension is $5,000,000 or more.
7-8 (v) "Time price differential" means an amount, however
7-9 denominated, that is:
7-10 (1) added to the price at which a seller offers
7-11 to sell services or real or personal property to a purchaser for
7-12 cash payable at the time of sale; and
7-13 (2) paid or payable to the seller by the
7-14 purchaser for the privilege of paying the offered sales price after
7-15 the time of sale.
7-16 SECTION 2. Article 1.02, Title 79, Revised Statutes (Article
7-17 5069-1.02, Vernon's Texas Civil Statutes), is amended to read as
7-18 follows:
7-19 Art. 1.02. CONVENTIONAL INTEREST OR TIME PRICE DIFFERENTIAL
7-20 ALLOWED; MAXIMUM RATE <MAXIMUM RATES> OF CONVENTIONAL INTEREST
7-21 EXCEPT AS OTHERWISE FIXED BY LAW. (a) A creditor may contract
7-22 for, charge, and receive from an obligor conventional interest or a
7-23 time price differential.
7-24 (b) Except as otherwise fixed by law, the maximum rate of
7-25 conventional interest shall be ten percent a year <per annum>. <A
7-26 greater rate of interest than ten percent per annum unless
7-27 otherwise authorized by law shall be deemed usurious. All
8-1 contracts for usury are contrary to public policy and shall be
8-2 subject to the appropriate penalties prescribed in Article 1.06 of
8-3 this Subtitle.>
8-4 SECTION 3. Article 1.03, Title 79, Revised Statutes (Article
8-5 5069-1.03, Vernon's Texas Civil Statutes), is amended to read as
8-6 follows:
8-7 Art. 1.03. LEGAL INTEREST ALLOWED; MAXIMUM RATE OF LEGAL
8-8 INTEREST <APPLICABLE>. (a) Unless a creditor has agreed with an
8-9 obligor not to charge the obligor any interest, the creditor may
8-10 charge and receive from the obligor legal interest on the principal
8-11 amount of the credit extended by the creditor to the obligor.
8-12 (b) The maximum rate of legal <When no specified rate of
8-13 interest is agreed upon by the parties,> interest is fixed at <at
8-14 the rate of> six percent a year <per annum shall be allowed on all
8-15 accounts and contracts ascertaining the sum payable,> commencing on
8-16 the 30th <thirtieth (30th)> day <from and> after the date the
8-17 principal amount first became <time when the sum is> due and
8-18 payable.
8-19 SECTION 4. Article 1.04, Title 79, Revised Statutes (Article
8-20 5069-1.04, Vernon's Texas Civil Statutes), is amended by amending
8-21 the article heading to read as follows:
8-22 Art. 1.04. MAXIMUM <LIMIT ON> RATE OF CONVENTIONAL INTEREST;
8-23 MAXIMUM RATE PRODUCED BY A TIME PRICE DIFFERENTIAL PURSUANT TO
8-24 CERTAIN AGREEMENTS.
8-25 SECTION 5. Articles 1.04(a), (b), (c), and (o), Title 79,
8-26 Revised Statutes (Article 5069-1.04, Vernon's Texas Civil
8-27 Statutes), are amended to read as follows:
9-1 (a) Both (i) the maximum rate of conventional interest and
9-2 (ii) the maximum rate produced by a time price differential
9-3 pursuant to an agreement described in Chapter 6, 6A, or 7 of this
9-4 Title are fixed at <The parties to any written contract may agree
9-5 to and stipulate for any rate of interest, or in an agreement
9-6 described in Chapter 6, 6A, or 7 of this Title, any rate or amount
9-7 of time price differential producing a rate, that does not exceed>:
9-8 (1) an indicated rate ceiling that is the auction
9-9 average rate quoted on a bank discount basis for 26-week treasury
9-10 bills issued by the United States government, as published by the
9-11 Federal Reserve Board, for the week preceding the week in which the
9-12 rate is contracted for, multiplied by two, and rounded to the
9-13 nearest one-quarter of one percent; or, as an alternative,
9-14 (2) an annualized or quarterly ceiling that is the
9-15 average of the computations under Subsection (1) of this section
9-16 and is computed pursuant to Section (d) of this Article.
9-17 (b)(1) If a computation under Section (a)(1), (a)(2), or (c)
9-18 of this Article is less than 18 percent a year, the ceiling under
9-19 that provision is 18 percent a year. If a computation under
9-20 Section (a)(1), (a)(2), or (c) of this Article is more than 24
9-21 percent a year, the ceiling under that provision is 24 percent a
9-22 year.
9-23 (2) Notwithstanding the provisions of Subsection (1)
9-24 of this Section (b), in the case of any qualified commercial loan
9-25 <on any contract under which credit in an amount in excess of
9-26 $250,000 is or is to be extended, or any extension or renewal of
9-27 such a contract, and under which the credit is extended for
10-1 business, commercial, investment, or other similar purpose, but
10-2 excluding any contract that is not for any of those purposes and is
10-3 primarily for personal, family, household, or agricultural use>,
10-4 the 24 percent limitation on the ceilings in Section (b)(1) above
10-5 that is applicable to the computations under Section (a)(1),
10-6 (a)(2), or (c) of this Article shall not apply, and the limitation
10-7 on the ceilings determined by those computations shall be 28
10-8 percent a year.
10-9 (3) References in this Article to the indicated rate
10-10 ceiling, annualized ceiling, quarterly ceiling, or monthly ceiling
10-11 mean such a ceiling as modified by this Section (b).
10-12 (4) Any credit agreement described in Section (a),
10-13 Article 1.11, of this Title is subject to the terms, ceilings, and
10-14 other provisions of that Article and, except as limited by Article
10-15 1.11, to the terms, ceilings, and other provisions of this Article.
10-16 (5) Notwithstanding any other provision of law, on any
10-17 lender credit card agreement in connection with which a merchant
10-18 discount <as defined in Article 1.01(h) of this Title> is imposed
10-19 or received by the creditor, the creditor may not contract for,
10-20 charge, or receive, on any amount owed for any credit card
10-21 transaction, a rate in excess of the ceiling allowed under Article
10-22 15.02(d) of this Title (which ceiling shall be adjusted in
10-23 accordance with Article 15.02(d)) or any other fees or charges
10-24 which are not authorized under Chapter 15 of this Title or which
10-25 are in excess of the amounts authorized under Chapter 15.
10-26 (6) Notwithstanding Article 15.10 of this Title, any
10-27 lender credit card agreement in which the creditor is a bank,
11-1 savings and loan association, or authorized lender under Chapter 3
11-2 of this Title is subject to Chapter 15 of this Title and Article
11-3 15.02(d) thereof.
11-4 (7) If a creditor and an obligor agree that contract
11-5 interest in respect of any qualified commercial loan shall be
11-6 computed on the basis of a 360-day year of twelve 30-day months,
11-7 each rate per year referred to in this Article, in the case of such
11-8 a loan, means a rate per year consisting of 360 days and of twelve
11-9 30-day months.
11-10 (c) A monthly ceiling is available only in variable rate
11-11 contracts, including contracts for open-end accounts, that are not
11-12 made for personal, family, or household use. Subject to Section
11-13 (b) of this Article, the monthly ceiling is the average of all the
11-14 computations under Section (a)(1) of this Article for auctions
11-15 occurring during the preceding calendar month and shall be computed
11-16 by the consumer credit commissioner on the first business day of
11-17 the calendar month in which the rate applies. In contracts for
11-18 which the monthly ceiling is available under this section, if the
11-19 parties agree that the rate is subject to being adjusted on a
11-20 monthly basis in accordance with Section (f) of this Article, they
11-21 may further contract that the rate from time to time in effect may
11-22 not exceed the monthly ceiling from time to time in effect under
11-23 this section, in which event <and> the monthly ceiling from time to
11-24 time in effect is the ceiling on those contracts, instead of any
11-25 ceiling under Section (a) <Article 1.04(a)> of this Article
11-26 <Title>.
11-27 (o)(1) <All other written contracts whatsoever, except those
12-1 otherwise authorized by law, which may in any way, directly or
12-2 indirectly, provide for a greater rate of interest shall be subject
12-3 to the appropriate penalties prescribed in this Subtitle.>
12-4 <(2)> If, in any contract, including one for an
12-5 open-end account, subject to Chapter 4, 5, 6, 6A, 7, or 15 of this
12-6 Title, any person contracts for, charges, or receives a rate or
12-7 amount of interest or time price differential that exceeds the rate
12-8 allowed by that Chapter and the rate allowed by this Article, the
12-9 amount of the penalty for that overcharge shall be determined under
12-10 Chapter 8 of this Title rather than under this Subtitle, and all of
12-11 the provisions of Articles 8.01, 8.02, 8.03, 8.04, 8.05, and 8.06
12-12 of this Title are in effect as to that contract and are applicable
12-13 to this Article as if it were a part of Subtitle 2 of this Title.
12-14 The failure to perform any duty or comply with any prohibition
12-15 required by this Article <1.04>, in a contract entered under
12-16 authority of this Article <1.04>, shall be subject to the penalties
12-17 set out in Article 8.01(b) and shall be subject to such of the
12-18 other provisions of Articles 8.01 through 8.06 which apply to
12-19 failures to perform duties or comply with prohibitions to the same
12-20 extent as if the duties and prohibitions in this Article <1.04>
12-21 were contained in Subtitle 2.
12-22 (2) <(3)> The consumer credit commissioner, subject to
12-23 Section (l), Article 2.01, of this Title, shall enforce Chapters 2,
12-24 3, 4, 5, 6, 6A, 7, 8, 15, and 51 of this Title, as modified by this
12-25 Article and Article 2.08 of this Title, and shall enforce this
12-26 Article as applicable to contracts subject to those Chapters.
12-27 Article 3.08 of this Title is applicable to transactions made by
13-1 licensees pursuant to this Article that otherwise are subject to
13-2 Chapters 4, 5, or 15 of this Title. The provisions of Article 3.12
13-3 of this Title will apply to loans made under authority of this
13-4 Article which are subject to Chapter 4 of this Title. In any
13-5 contracts subject to the Texas Credit Union Act, as amended
13-6 (Article 2461-1.01 et seq., Vernon's Texas Civil Statutes), the
13-7 credit union commissioner shall enforce this Article.
13-8 (3) <(4)> In any contract subject to Chapter 24 of the
13-9 Insurance Code, the State Board of Insurance shall enforce this
13-10 Article.
13-11 SECTION 6. Article 1.05, Title 79, Revised Statutes (Article
13-12 5069-1.05, Vernon's Texas Civil Statutes), is amended to read as
13-13 follows:
13-14 Art. 1.05. JUDGMENT INTEREST IMPOSED; RATES OF JUDGMENT
13-15 INTEREST <RATE OF JUDGMENTS>. (a) <Sec. 1.> All money judgments
13-16 of the courts of this state based on a contract that provides for
13-17 the payment of a <specific> rate of interest earn postjudgment
13-18 interest at a rate equal to the lesser of:
13-19 (1) the rate specified in the contract, which may be a
13-20 variable rate; or
13-21 (2) 18 percent a year.
13-22 (b) <Sec. 2.> Except as provided in Section (a) <1> of this
13-23 Article <article>, all money judgments, together with taxable court
13-24 costs and prejudgment interest (if any), of the courts of this
13-25 state earn postjudgment interest<, compounded annually,> at the
13-26 postjudgment interest rate published by the consumer credit
13-27 commissioner in the Texas Register. The consumer credit
14-1 commissioner shall establish <compute> on the 15th day of each
14-2 month the postjudgment <judgment> interest rate to be so published,
14-3 which shall be <by taking> the auction rate quoted on a discount
14-4 basis for 52-week treasury bills issued by the United States
14-5 government as published by the Federal Reserve Board on the most
14-6 recent date preceding that 15th day; provided, however, <the date
14-7 of computation. The interest rate so computed shall be the
14-8 judgment rate, except> that if the auction rate <so computed> is
14-9 less than 10 percent a year, the postjudgment <judgment> interest
14-10 rate to be so published shall be 10 percent a year, and if the
14-11 auction rate is <it be> more than 20 percent a year, the
14-12 postjudgment <judgment> interest rate to be so published shall be
14-13 20 percent a year. The postjudgment interest rate so established
14-14 on that 15th day <computation date> shall be the postjudgment
14-15 interest rate on money judgments rendered during <for> the next
14-16 calendar month.
14-17 (c)(1) <Sec. 3. (a)> Except as provided by Subsection (3)
14-18 <(c)> of this section, all money judgments earn postjudgment
14-19 interest for the period beginning on the date <day> the judgment is
14-20 rendered and ending on the date <day> the judgment is satisfied.
14-21 Postjudgment interest <Interest> shall be compounded annually.
14-22 (2) <(b)> Each money judgment shall state the rate of
14-23 prejudgment interest (if any) earned, and postjudgment interest to
14-24 be earned, on that judgment.
14-25 (3) <(c)> If a case is appealed and a motion for
14-26 extension of time to file a brief is granted for a party who was a
14-27 claimant <plaintiff at trial>, postjudgment interest does not
15-1 accrue for the period of extension.
15-2 (d) <Sec. 4.> This Article <article> does not apply to a
15-3 judgment that earns interest pursuant to <that is set by> Title 2,
15-4 Tax Code.
15-5 (e) <Sec. 5.> The consumer credit commissioner shall cause
15-6 the postjudgment interest <judgment> rate <of interest> to be
15-7 published in the Texas Register at the same time other rates
15-8 directed by other provisions of this Title to be <calculated are
15-9 caused to be> published by the consumer credit commissioner are so
15-10 published <under other provisions of this code>. The courts of
15-11 this state shall take judicial notice of the postjudgment interest
15-12 <such> rate <as> so published.
15-13 (f)(1) <Sec. 6. (a)> All money judgments of the courts of
15-14 this state <Judgments> in wrongful death, personal injury, and
15-15 property damage cases earn <must include> prejudgment interest.
15-16 Except as provided by Subsections (2), (3) <(b), (c)>, and (4)
15-17 <(d)> of this section, prejudgment interest accrues <on the amount
15-18 of the judgment> during the period beginning on the 180th day after
15-19 the date the defendant receives written notice of a claim or on the
15-20 day the suit is filed, whichever occurs first, and ending on the
15-21 day preceding the date the judgment is rendered.
15-22 (2) <(b)> If a money judgment for a claimant is equal
15-23 to or less than the amount of a settlement offer by the defendant,
15-24 prejudgment interest does not accrue <on the amount of the
15-25 judgment> for the period during which the offer may be accepted.
15-26 (3) <(c)> If a money judgment for a claimant is more
15-27 than the amount of a <the> settlement offer by the defendant,
16-1 prejudgment interest does not accrue <include prejudgment interest>
16-2 on that portion <the amount> of the judgment that is equal to the
16-3 amount of the settlement offer for the period during which the
16-4 offer may be accepted.
16-5 (4) <(d)> In addition to the exceptions provided under
16-6 Subsections (2) <(b)> and (3) <(c)> of this section, the court in
16-7 its discretion may order that prejudgment interest does or does not
16-8 accrue during periods of delay in the trial, taking into
16-9 consideration:
16-10 (A) <(1)> periods of delay caused by a
16-11 defendant; and
16-12 (B) <(2)> periods of delay caused by a claimant.
16-13 (5) <(e)> For <In order for> a settlement offer to
16-14 toll the accrual <running> of prejudgment interest in accordance
16-15 with the provisions of this section, the offer must be communicated
16-16 to a party or that party's <his> attorney or representative in
16-17 writing.
16-18 (6) <(f)> If a settlement offer is made for other than
16-19 <present> cash payable <payment> at the time of settlement,
16-20 prejudgment interest on the amount of the settlement offer is
16-21 computed on the basis of the <cost or> fair market value of the
16-22 settlement offer at the time it is made.
16-23 (7) <(g)> The <rate of> prejudgment interest rate on
16-24 any money judgment shall be the same as the <rate of> postjudgment
16-25 interest rate on that <at the time of> judgment and shall be
16-26 computed as simple interest.
16-27 (g) <Sec. 7.> The <rate of> prejudgment interest rate on any
17-1 money judgment in a condemnation case <cases> shall be the same as
17-2 the <rate of> postjudgment interest rate on that <at the time of>
17-3 judgment and shall be computed as simple interest.
17-4 (h) <Sec. 8.> This Article <article> does not apply to
17-5 interest that accrues on delinquent child support under Section
17-6 14.34, Family Code.
17-7 SECTION 7. Article 1.06, Title 79, Revised Statutes (Article
17-8 5069-1.06, Vernon's Texas Civil Statutes), is amended to read as
17-9 follows:
17-10 Art. 1.06. PENALTIES AND REMEDIES. (a)(1) Subject to
17-11 Sections (f) and (g) of this Article and Articles 1.07 and 1.17 of
17-12 this Subtitle, if a creditor <(1) Any person who contracts for,
17-13 charges or> receives from an obligor contract interest in respect
17-14 of a loan and the amount of the contract interest produces a rate
17-15 in excess of the maximum rate of conventional interest fixed <which
17-16 is greater than the amount authorized> by this Subtitle, the
17-17 creditor <shall> is liable to the obligor for 300 percent of the
17-18 remainder obtained by subtracting:
17-19 (A) the total amount of interest that would have
17-20 been payable to the creditor by the obligor in respect of the loan
17-21 if the obligor had agreed to pay to the creditor interest in a
17-22 total amount that produced a rate equal to the maximum rate of
17-23 conventional interest fixed by this Subtitle; from
17-24 (B) the total amount of contract interest
17-25 received by the creditor from the obligor in respect of that loan;
17-26 provided, however, that if the amount of that liability would be
17-27 less than $2,000, the creditor shall be liable to the obligor for
18-1 20 percent of the principal amount of the loan or for the sum of
18-2 $2,000, whichever is less <forfeit to the obligor three times the
18-3 amount of usurious interest contracted for, charged or received,
18-4 such usurious interest being the amount the total interest
18-5 contracted for, charged, or received exceeds the amount of interest
18-6 allowed by law, and reasonable attorney fees fixed by the court
18-7 except that in no event shall the amount forfeited be less than Two
18-8 Thousand Dollars or twenty percent of the principal, whichever is
18-9 the smaller sum; provided, that there shall be no penalty for any
18-10 usurious interest which results from an accidental and bona fide
18-11 error>.
18-12 (2) The liability provided by Subsection (1) of this
18-13 section is inclusive of any other liabilities of creditors provided
18-14 by common law for contracting for, charging, or receiving
18-15 conventional interest in an amount that produces a rate in excess
18-16 of the maximum rate of conventional interest fixed by this
18-17 Subtitle, including any other liabilities imposed by the courts of
18-18 this state to enforce Section 11, Article XVI, Texas Constitution,
18-19 and a creditor is not subject to those other liabilities <Any
18-20 person who contracts for, charges or receives interest which is in
18-21 excess of double the amount of interest allowed by this Subtitle
18-22 shall forfeit as an additional penalty, all principal as well as
18-23 interest and all other charges and shall pay reasonable attorney
18-24 fees set by the court; provided further that any such person
18-25 violating the provisions of this section shall be guilty of a
18-26 misdemeanor and upon conviction thereof shall be punished by fine
18-27 of not more than One Thousand Dollars. Each contract or
19-1 transaction in violation of this section shall constitute a
19-2 separate offense punishable hereunder>.
19-3 (b)(1) Subject to Sections (f) and (g) of this Article and
19-4 Article 1.17 of this Subtitle, if a creditor charges and receives
19-5 from an obligor legal interest in an amount that produces a rate in
19-6 excess of the maximum rate of legal interest fixed by this
19-7 Subtitle, the creditor is liable to the obligor for 300 percent of
19-8 the remainder obtained by subtracting:
19-9 (A) the total amount of legal interest that
19-10 would have been received by the creditor from the obligor if the
19-11 creditor had charged and received from the obligor legal interest
19-12 in a total amount that produced a rate equal to the maximum rate of
19-13 legal interest fixed by this Subtitle; from
19-14 (B) the total amount of legal interest charged
19-15 and received by the creditor from the obligor;
19-16 provided, however, that if the amount of that liability would be
19-17 less than $2,000, the creditor is liable to the obligor for 20
19-18 percent of the principal amount of the credit extended by the
19-19 creditor to the obligor or for the sum of $2,000, whichever is
19-20 less.
19-21 (2) The liability provided by Subsection (1) of this
19-22 section is inclusive of any other liabilities of creditors provided
19-23 by common law for charging or receiving legal interest in an amount
19-24 that produces a rate in excess of the maximum rate of legal
19-25 interest fixed by this Subtitle, including any other liabilities
19-26 imposed by the courts of this state to enforce Section 11, Article
19-27 XVI, Texas Constitution, and a creditor is not subject to those
20-1 other liabilities.
20-2 (c)(1) Subject to Sections (f) and (g) of this Article and
20-3 Article 1.17 of this Subtitle, if a creditor receives from an
20-4 obligor conventional interest (including, without limitation, any
20-5 prepayment premium that the obligor has not agreed to pay) in an
20-6 amount in excess of the total amount of contract interest, the
20-7 creditor is liable to the obligor for the amount of the excess.
20-8 (2) The liability provided by Subsection (1) of this
20-9 section is inclusive of any other liabilities of creditors provided
20-10 by common law for charging or receiving conventional interest in an
20-11 amount in excess of the total amount of contract interest,
20-12 including any other liabilities imposed by the courts of this state
20-13 to enforce Section 11, Article XVI, Texas Constitution, and a
20-14 creditor is not subject to those other liabilities.
20-15 (d)(1) Subject to Sections (f) and (g) of this Article and
20-16 Article 1.17 of this Subtitle, if a creditor that has agreed with
20-17 an obligor not to charge the obligor any interest charges and
20-18 receives legal interest from the obligor, the creditor is liable to
20-19 the obligor for the amount of the legal interest so charged and
20-20 received or for the total amount of legal interest that would have
20-21 been received by the creditor from the obligor if the creditor had
20-22 charged and received from the obligor legal interest in a total
20-23 amount that produced a rate equal to the maximum rate of legal
20-24 interest fixed by this Subtitle, whichever is less.
20-25 (2) The liability provided by Subsection (1) of this
20-26 section is inclusive of any other liabilities of creditors provided
20-27 by common law for charging or receiving legal interest when the
21-1 creditor has agreed with an obligor not to charge the obligor any
21-2 interest, including any other liabilities imposed by the courts of
21-3 this state to enforce Section 11, Article XVI, Texas Constitution,
21-4 and a creditor is not subject to those other liabilities; provided,
21-5 however, that if a creditor that has agreed with an obligor not to
21-6 charge the obligor any interest charges and receives from the
21-7 obligor legal interest in an amount that produces a rate in excess
21-8 of the maximum rate of legal interest fixed by this Subtitle, the
21-9 creditor is also liable to the obligor as provided by Section
21-10 (b)(1) of this Article.
21-11 (e)(1) Subject to Section (f) of this Article, if a judgment
21-12 creditor receives from a judgment debtor judgment interest in an
21-13 amount that produces a rate in excess of the rate at which the
21-14 judgment earns interest, the judgment creditor is liable to the
21-15 judgment debtor for the remainder obtained by subtracting:
21-16 (A) the total amount of interest earned by the
21-17 judgment; from
21-18 (B) the total amount of judgment interest
21-19 received by the judgment creditor from the judgment debtor.
21-20 (2) The liability provided by Subsection (1) of this
21-21 section is inclusive of any other liabilities of judgment creditors
21-22 provided by common law for contracting for, charging, or receiving
21-23 judgment interest in an amount that produces a rate in excess of
21-24 the rate at which the judgment earns interest or in excess of the
21-25 rate provided by Article 1.05 of this Subtitle, including any other
21-26 liabilities imposed by the courts of this state to enforce Section
21-27 11, Article XVI, Texas Constitution, and a judgment creditor is not
22-1 subject to those other liabilities.
22-2 (3) For purposes of this section, a judgment earns
22-3 interest at the rate stated in the judgment at the time that the
22-4 judgment becomes final and is no longer subject to modification or
22-5 reversal.
22-6 (f)(1) An action to establish liability of a creditor or
22-7 judgment creditor as a result of the creditor's or judgment
22-8 creditor's receipt of interest is barred unless the action is filed
22-9 in a court of competent jurisdiction within four years after the
22-10 date of the receipt.
22-11 (2) Venue in an action to establish liability of a
22-12 creditor or judgment creditor as a result of the creditor's or
22-13 judgment creditor's receipt of interest is in the county in which
22-14 either the creditor or judgment creditor or the obligor or judgment
22-15 debtor resides or maintains its principal place of business in this
22-16 state.
22-17 (3) If a judgment is obtained against a creditor or
22-18 judgment creditor as a result of the creditor's or judgment
22-19 creditor's receipt of interest, the creditor or judgment creditor
22-20 is liable to the obligor or judgment debtor for the obligor's or
22-21 judgment debtor's reasonable attorney's fees, which shall be fixed
22-22 by the court.
22-23 <(3) All such actions brought under this Article shall
22-24 be brought in any court of this State having jurisdiction thereof
22-25 within four years from the date when the usurious charge was
22-26 received or collected in the county of the defendant's residence,
22-27 or in the county where the interest in excess of the amount
23-1 authorized by this Subtitle has been received or collected, or
23-2 where such transaction had been entered into or where the parties
23-3 who paid the interest in excess of the amount authorized by this
23-4 Subtitle resided when such transaction occurred, or where he
23-5 resides.>
23-6 (g)(1) <(4)(A)> A creditor <person> has no liability to an
23-7 obligor under Section (a), (b), (c), or (d) of this Article <for a
23-8 violation of this Subtitle> if:
23-9 (A) <(i)> within 60 days after the date the
23-10 creditor <person> actually discovered a <the> violation of this
23-11 Subtitle the creditor <person> corrects the violation as to the
23-12 obligor by taking whatever actions and by making whatever
23-13 adjustments are necessary to correct the violation, including the
23-14 payment of interest on a refund, if any, at the applicable rate
23-15 provided for in the contract of the parties; and
23-16 (B) <(ii)> the creditor <person> gives written
23-17 notice to the obligor of the violation before the obligor has given
23-18 to the creditor written notice of the violation of this Subtitle or
23-19 has filed an action alleging the violation of this Subtitle.
23-20 (2) <(B)> For the purposes of this section, the term
23-21 "actually discovered" may not be construed, interpreted, or applied
23-22 in a manner that refers to the time or date when, through
23-23 reasonable diligence, an ordinarily prudent person could or should
23-24 have discovered or known as a matter of law or fact of the
23-25 violation in question, but the term shall be construed,
23-26 interpreted, and applied to refer to the time of the discovery of
23-27 the violation in fact. However, the actual discovery of a
24-1 violation in one transaction may constitute actual discovery of the
24-2 same violation in other transactions if the violation actually
24-3 discovered is of such a nature that it would necessarily be
24-4 repeated and would be clearly apparent in the other transactions
24-5 without the necessity of examining all the other transactions. For
24-6 purposes of this Section the giving of written notice shall be
24-7 accomplished by and on the delivery of the notice to the person to
24-8 whom the notice is directed or to the person's duly authorized
24-9 agent or attorney of record. The delivery shall be made in person
24-10 or by United States mail to the address shown on the most recent
24-11 documents in the transaction. Deposit of the notice as registered
24-12 or certified mail in a postage paid, properly addressed wrapper in
24-13 a post office or official depository under the care and custody of
24-14 the United States Postal Service constitutes prima facie evidence
24-15 of the delivery of the notice to the person.
24-16 (3) <(C)> A creditor <person> has no liability to an
24-17 obligor under Section (a), (b), (c), or (d) <for a violation> of
24-18 this Article <Subtitle> if:
24-19 (A) <(i)> before March 1, 1994, the creditor
24-20 <person> corrects the violation as to the obligor by taking
24-21 whatever actions and by making whatever adjustments are necessary
24-22 to correct the violation, including the payment of interest on a
24-23 refund, if any, at the applicable rate provided for in the contract
24-24 of the parties; and
24-25 (B) <(ii)> the creditor <person> gives written
24-26 notice to the obligor of the correction before the obligor has
24-27 given to the creditor written notice of the violation of this
25-1 Subtitle or has filed an action alleging the violation of this
25-2 Subtitle.
25-3 (4) <(5)> The action of a creditor <person> who
25-4 complies with this Section <corrects a violation of this Subtitle
25-5 as provided by Section (4) of this Article> is effective as to all
25-6 creditors <persons> in the same transaction, and those creditors
25-7 <persons> are entitled to the same protection as that provided by
25-8 this Section <(4) of this Article> to the creditor <person> who
25-9 makes the correction.
25-10 (h)(1) For purposes of this Article, unless a creditor and
25-11 an obligor otherwise agree, the maximum rate of conventional
25-12 interest fixed by this Subtitle means the maximum rate of
25-13 conventional interest fixed by this Subtitle in effect at the time
25-14 the obligor agreed to pay interest to the creditor.
25-15 (2) For purposes of this Article, the maximum rate of
25-16 legal interest fixed by this Subtitle means the maximum rate of
25-17 legal interest fixed by this Subtitle in effect at the time the
25-18 creditor charged legal interest to the obligor.
25-19 (i) If an agreement by an obligor provides that the obligor
25-20 shall pay to a creditor an amount of conventional interest that
25-21 produces a rate in excess of the maximum rate of conventional
25-22 interest fixed by this Subtitle, the creditor is not entitled to
25-23 enforce the agreement of the obligor to pay the portion of that
25-24 amount that exceeds the total amount of interest that would have
25-25 been payable if the obligor had agreed to pay interest in a total
25-26 amount that produced a rate equal to the maximum rate of
25-27 conventional interest fixed by this Subtitle; provided, however,
26-1 that this Section may not be construed to impose any liability on a
26-2 creditor that is or was liable to an obligor as provided by Section
26-3 (a)(1) of this Article.
26-4 SECTION 8. Article 1.13, Title 79, Revised Statutes (Article
26-5 5069-1.13, Vernon's Texas Civil Statutes), is amended to read as
26-6 follows:
26-7 Art. 1.13. Certain sums excluded from definition of interest
26-8 with respect to asset-backed securities. (a) In this Article
26-9 <article>:
26-10 (1) "Asset-backed securities" means debt obligations
26-11 or certificates of beneficial ownership that are:
26-12 (A) part of a single issue or single series of
26-13 securities aggregating $1,000,000 or more issuable in one or more
26-14 classes;
26-15 (B) secured by a pledge of or represent an
26-16 undivided ownership interest in one or more financial assets,
26-17 either fixed or revolving, that by their terms convert into cash
26-18 within a finite time period plus any rights or other assets
26-19 designed to assure the servicing or timely distribution of proceeds
26-20 to security holders; and
26-21 (C) issued by a pass-through entity for a
26-22 business, commercial, agricultural, investment, or similar purpose.
26-23 (2) "Pass-through entity" means a business entity
26-24 <corporation, limited liability company>, association, <general
26-25 partnership, registered limited liability partnership, limited
26-26 partnership or business,> grantor or common-law trust under state
26-27 law, or segregated pool of assets under federal tax law that, on
27-1 the date of original issuance of asset-backed securities, does not
27-2 have significant assets other than:
27-3 (A) assets pledged to or held for the benefit of
27-4 holders of the asset-backed securities; or
27-5 (B) assets pledged to or held for the benefit of
27-6 holders of other asset-backed securities issued on an earlier date.
27-7 (b) The <Notwithstanding Article 1.01 of this subtitle, for
27-8 purposes of this title the> term "interest," as used in this
27-9 Subtitle, <excludes> does not include any sums paid or passed
27-10 through, obligated to be paid or to be passed through, or not paid
27-11 as a result of a discounted sale price to the holders of
27-12 asset-backed securities by a pass-through entity, in connection
27-13 with the original issuance or otherwise, regardless of the
27-14 denomination of the sums under the terms of the asset-backed
27-15 securities. <Sums excluded for the definition of interest by this
27-16 article are not subject to Article 1.04 of the subtitle.>
27-17 (c) This Article <article> does not affect or otherwise
27-18 apply to conventional interest<, as defined by Article 1.01 of this
27-19 subtitle,> paid, charged, or received on the ultimate underlying
27-20 assets pledged to or held for the benefit of the holders of
27-21 asset-backed securities.
27-22 SECTION 9. Subtitle 1, Title 79, Revised Statutes (Article
27-23 5069-1.01 et seq., Vernon's Texas Civil Statutes), is amended by
27-24 adding Articles 1.14, 1.15, 1.16, and 1.17 to read as follows:
27-25 Art. 1.14. CERTAIN ITEMS THAT DO NOT CONSTITUTE INTEREST.
27-26 (a) The term "interest," as used in this Subtitle, does not
27-27 include any time price differential. The contracting for,
28-1 charging, or receipt of a time price differential is not regulated
28-2 by this Title, except to the extent regulated by Chapter 6, 6A, or
28-3 7 of this Title.
28-4 (b) In the case of any qualified commercial loan made to a
28-5 business entity, the term "interest," as used in this Subtitle,
28-6 does not include:
28-7 (1) any discount or commission that an obligor has
28-8 paid or agreed to pay to one or more underwriters of securities
28-9 issued by the obligor;
28-10 (2) any option or other right to exchange, redeem, or
28-11 convert all or a portion of the principal amount of the loan, or
28-12 interest on the principal amount, for or into capital stock or
28-13 other equity securities of an obligor or of any affiliate of the
28-14 obligor;
28-15 (3) any option or other right to purchase in any other
28-16 manner capital stock or other equity securities of an obligor or of
28-17 any affiliate of the obligor;
28-18 (4) any option or other right, whether by contract,
28-19 conveyance or otherwise, to participate in or own a share of the
28-20 income, revenues, production, or profits:
28-21 (A) of an obligor or any affiliate of the
28-22 obligor;
28-23 (B) of any segment of the business or operations
28-24 of an obligor or any affiliate of the obligor; or
28-25 (C) derived or to be derived from any interest
28-26 of an obligor or of any affiliate of the obligor in any real or
28-27 personal property, including any proceeds of the sale or other
29-1 disposition of the interest; or
29-2 (5) any compensation realized as a result of the
29-3 receipt, exercise, sale, or other disposition of any option or
29-4 other right described by Subsection (2) or (3) of this Section.
29-5 (c) For purposes of this Article, the terms "security" and
29-6 "equity security" have the meanings assigned to those respective
29-7 terms by the Securities Exchange Act of 1934 (15 U.S.C. Section 78a
29-8 et seq.).
29-9 Art. 1.15. PREPAYMENT PREMIUMS. (a) A creditor may
29-10 contract for, charge, and receive prepayment premiums. An
29-11 agreement to pay a prepayment premium is enforceable in accordance
29-12 with the terms of that agreement.
29-13 (b) The term "interest" used in this Subtitle does not
29-14 include any prepayment premium that an obligor has agreed to pay to
29-15 a creditor.
29-16 (c) This Article does not apply to any loan that is subject
29-17 to Chapter 2, 3, 4, 5, 6, 6A, 7, 8, or 15 of this Title.
29-18 Art. 1.16. GUARANTIES. (a) The term "interest", as used in
29-19 this Subtitle, does not include (1) a guaranty that a creditor
29-20 requires as a condition to making, renewing, or extending a
29-21 qualified commercial loan made to a business entity, and (2) any
29-22 compensation received by the creditor pursuant to the guaranty.
29-23 (b) This Article does not apply to any loan that is subject
29-24 to Chapter 2, 3, 4, 5, 6, 6A, 7, 8, or 15 of this Title.
29-25 Art. 1.17. NO PENALTY FOR AMOUNTS PAYABLE PURSUANT TO A
29-26 FINAL JUDGMENT. A creditor is not liable to an obligor under this
29-27 Subtitle as a result of the receipt by the creditor from the
30-1 obligor of any amount of conventional interest (including any
30-2 prepayment premium that the obligor has not agreed to pay) or any
30-3 amount of legal interest if the amount is payable by the obligor to
30-4 the creditor pursuant to a judgment that has become final and is no
30-5 longer subject to modification or reversal.
30-6 SECTION 10. The change in law made by this Act applies to
30-7 any loan of money, or other extension of credit, made or extended
30-8 before, on, or after the effective date of this Act except that
30-9 this Act does not apply to an action that was filed in a court of
30-10 competent jurisdiction before the effective date of this Act, and
30-11 the prior law is continued in effect solely for the purposes of
30-12 determining the rights and liabilities of the parties to the
30-13 action.
30-14 SECTION 11. This Act takes effect September 1, 1995.
30-15 SECTION 12. The importance of this legislation and the
30-16 crowded condition of the calendars in both houses create an
30-17 emergency and an imperative public necessity that the
30-18 constitutional rule requiring bills to be read on three several
30-19 days in each house be suspended, and this rule is hereby suspended.