By Eiland, Gutierrez, Heflin, Giddings, Cuellar H.B. No. 1277
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of certain open-end credit agreements.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Article 15.02, Title 79, Revised Statutes
1-5 (Article 5069-15.02, Vernon's Texas Civil Statutes), is amended to
1-6 read as follows:
1-7 Art. 15.02. MAXIMUM RATES OF INTEREST. (a) [A creditor may
1-8 charge and collect interest on an account either]
1-9 [(1)(i) on that portion of the average daily balance
1-10 not above $1,500 at an annual rate not above 18 percent; and (ii)
1-11 on that portion of the average daily balance above $1,500 and not
1-12 above $2,500 at an annual rate not above 12 percent; and (iii) on
1-13 that portion of the average daily balance above $2,500 at an annual
1-14 rate not above 10 percent; or]
1-15 [(2) on the entire average daily balance at the annual
1-16 rate of 14.4 percent.]
1-17 [(b)] A creditor may charge one-twelfth of the applicable
1-18 annual rate under Section (c) [(a)] of Article 15.02 of this
1-19 chapter in any billing cycle on the average daily balance of an
1-20 account during such billing cycle[, if billing cycles may be
1-21 considered equal under Article 15.01(e) of this chapter].
1-22 (b) [(c)] The maximum interest which may be contracted for
1-23 and collected under this article may be computed by a method other
1-24 than the average daily balance method as defined in this chapter if
2-1 the amount of interest computed by the other method will not exceed
2-2 the amount of interest computed under such average daily balance
2-3 method.
2-4 (c) [(d)] Notwithstanding Article 1.04 of this Title or any
2-5 other provision of law, on any open-end account authorized under
2-6 Article 3.15(4), 4.01(4), 15.01(k), or 15.01(l) of this Title,
2-7 pursuant to which credit card transactions as defined in Article
2-8 1.01(g) of this Title may be made or in connection with which
2-9 account a merchant discount as defined in Article 1.01(h) of this
2-10 Title is imposed or received by the creditor, the rate of interest
2-11 from time to time in effect on such account [is subject to and] may
2-12 not exceed 18 percent per year [the quarterly ceiling from time to
2-13 time in effect as computed pursuant to Article 1.04 of this Title
2-14 and as further limited by this section, and the ceiling on such
2-15 account is subject to quarterly adjustment, which adjustment shall
2-16 be made at the option of the creditor either on the quarterly
2-17 calendar dates set out in Article 1.04(d) of this Title or on the
2-18 first day of the first billing cycle of an account immediately
2-19 following said quarterly calendar dates. If a computation of the
2-20 quarterly ceiling under Article 1.04(a)(2) of this Title is more
2-21 than 22 percent per annum, the ceiling under this provision shall
2-22 be 22 percent per annum. If the computation under Article
2-23 1.04(a)(2) of this Title is less than 14 percent per annum, the
2-24 ceiling under this provision shall be 14 percent per annum].
2-25 Notwithstanding any other provision of this Title, a creditor
2-26 charging a rate limited by this section shall not be required to
2-27 disclose any decreases which may from time to time occur in the
3-1 rate on its account.
3-2 (d) A creditor may charge and collect from the customer in
3-3 connection with an account subject to this chapter:
3-4 (1) an annual fee not to exceed:
3-5 (A) $50 per year on an account with a credit
3-6 limit of $5,000 or less;
3-7 (B) $75 per year on an account with a credit
3-8 limit of more than $5,000 and not more than $25,000; or
3-9 (C) $125 per year on an account with a credit
3-10 limit of more than $25,000;
3-11 (2) a late charge not to exceed five percent of the
3-12 amount of an unpaid payment or $15, whichever is less, that is
3-13 assessed if the payment is not paid within a stated period of 15 or
3-14 more days after the date on which the payment is due;
3-15 (3) a cash advance charge not to exceed two percent of
3-16 the amount of the cash advance or $2, whichever is greater;
3-17 (4) a reasonable processing fee for the return of a
3-18 dishonored check in the amount and manner prescribed by Chapter
3-19 617, Acts of the 68th Legislature, Regular Session, 1983 (Article
3-20 9022, Vernon's Texas Civil Statutes); and
3-21 (5) a fee for exceeding the credit limit of an account
3-22 not to exceed five percent of the amount that exceeds the credit
3-23 limit or $15, whichever is greater.
3-24 (e) A creditor may not charge, contract for, or receive
3-25 interest on fees authorized under this article. [Except as
3-26 provided in Section (d) of this Article, as an alternative to the
3-27 rates authorized by Section (a) of this Article, the parties may
4-1 agree to any rate not exceeding a rate authorized by Article 1.04
4-2 of this Title.]
4-3 (f) No fees shall be charged to or collected from the
4-4 customer in connection with an account subject to this chapter
4-5 unless authorized by statute.
4-6 SECTION 2. Chapter 15, Title 79, Revised Statutes (Article
4-7 5069-15.01 et seq., Vernon's Texas Civil Statutes), is amended by
4-8 adding Articles 15.12-15.14 to read as follows:
4-9 Art. 15.12. VARIATION IN PERIODIC PERCENTAGE RATE. (a) If
4-10 the arrangement governing the account so provides, the periodic
4-11 percentage rate of interest or finance charges under the account
4-12 may vary in accordance with an index that is made readily available
4-13 to and verifiable by the customer and is beyond the control of the
4-14 creditor.
4-15 (b) The periodic percentage rate, as varied, shall be made
4-16 applicable only to indebtedness incurred on or after the effective
4-17 date of the variation.
4-18 (c) The periodic percentage rate, as varied, shall not
4-19 exceed the maximum rate permitted under Article 15.02 of this
4-20 chapter.
4-21 Art. 15.13. NOTICE OF VARIATION IN PERIODIC PERCENTAGE RATE.
4-22 (a) Not later than the 30th day before the date on which the
4-23 revision becomes effective, a creditor that revises a percentage
4-24 interest rate or an index, formula, or provision used to compute
4-25 the interest rate under Article 15.12 of this chapter shall
4-26 disclose in a written notice to the customer:
4-27 (1) the new interest rate or new index, formula, or
5-1 provision that will be used to compute the interest rate on the
5-2 customer's account;
5-3 (2) the date on which the new interest rate becomes
5-4 effective or the date on which the creditor begins using the new
5-5 index, formula, or provision to compute the interest rate on the
5-6 customer's account;
5-7 (3) the period for which the new rate or new index,
5-8 formula, or provision is effective;
5-9 (4) the customer's rights relating to an interest rate
5-10 change on an account and the procedures for asserting those rights
5-11 under Section (c) of this Article; and
5-12 (5) the address to which the customer may send
5-13 notification to the creditor that the customer elects not to
5-14 continue the open-end account.
5-15 (b) If a revision by the creditor to the interest rate or
5-16 index, formula, or provision used to compute the interest rate
5-17 results in an increased percentage interest rate on the customer's
5-18 account, the notice required under Section (a) of this Article must
5-19 contain the following statement printed in not less than 10-point
5-20 type:
5-21 "YOU MAY TERMINATE THIS AGREEMENT IF YOU DO NOT WANT TO PAY
5-22 THE NEW INTEREST RATE."
5-23 (c) A creditor shall include with a notice required under
5-24 Section (a) of this Article a form on which the customer may
5-25 indicate whether or not the customer will continue the open-end
5-26 account with the creditor by checking or marking an appropriate box
5-27 or completing a form with a similar method of indication. The form
6-1 may be included on a portion of the account statement that is to be
6-2 returned to the creditor or may be separate from the account
6-3 statement.
6-4 (d) To terminate an open-end account, a customer must send
6-5 to the creditor not later than the 45th day after the date on which
6-6 the notice required under Section (a) of this Article is mailed
6-7 written notice that the customer elects to terminate the account.
6-8 (e) A customer who elects to discontinue an account in
6-9 accordance with this Article is entitled to pay the remaining
6-10 balance on the account at the interest rate and over the period in
6-11 effect before the proposed revision and at the minimum payment
6-12 terms in effect before the revision unless the customer agrees in
6-13 writing to new payment terms. A creditor may not accelerate the
6-14 balance due on an open-end account because the customer has
6-15 discontinued the use of the account.
6-16 Art. 15.14. ACCOUNT CONNECTED WITH DEMAND DEPOSIT ACCOUNT.
6-17 (a) If an account is offered and extended by a creditor that is a
6-18 depository institution in connection with a demand deposit account
6-19 or other transaction account maintained by the customer with the
6-20 creditor under an arrangement in which the creditor agrees to honor
6-21 checks, drafts, or other debits to the account by making extensions
6-22 of credit to the customer under the account, any charges
6-23 customarily imposed by the creditor under the terms governing that
6-24 demand deposit or other transaction account in the absence of any
6-25 associated arrangement with respect to an account subject to the
6-26 requirements of this chapter may continue to be imposed on that
6-27 demand deposit or other transaction account without specific
7-1 reference or incorporation in the arrangement governing the
7-2 account.
7-3 (b) The account charges referred to by Section (a) of this
7-4 Article include:
7-5 (1) check charges;
7-6 (2) monthly maintenance charges;
7-7 (3) checkbook charges;
7-8 (4) charges for checks drawn in excess of an available
7-9 line of credit; and
7-10 (5) similar charges.
7-11 (c) The amount of any charge imposed on a demand deposit or
7-12 other transaction account described by Section (a) of this Article
7-13 may be charged to the account under the arrangement as a loan and
7-14 may be included in the outstanding unpaid indebtedness under the
7-15 terms of the arrangement governing the account, to the extent the
7-16 balance in the demand deposit or other transaction account is
7-17 insufficient to pay the charge.
7-18 SECTION 3. Chapter 15, Title 79, Revised Statutes (Article
7-19 5069-15.01 et seq., Vernon's Texas Civil Statutes), is amended by
7-20 adding Article 15.15 to read as follows:
7-21 Art. 15.15. APPLICATION OF PAYMENT. Notwithstanding any
7-22 other provision of law, a payment made by a customer toward the
7-23 balance of an account shall be applied by the creditor to repayment
7-24 of loan or purchase transactions posted to the customer's account
7-25 in the order in which the transactions are posted to the account
7-26 regardless of the type of transaction.
7-27 SECTION 4. Article 1.04, Title 79, Revised Statutes (Article
8-1 5069-1.04, Vernon's Texas Civil Statutes), is amended by adding
8-2 Subsection (s) to read as follows:
8-3 (s) This Article does not apply to a credit card transaction
8-4 or other open-end account that is subject to Chapter 15 of this
8-5 Title.
8-6 SECTION 5. Article 1.11(d), Title 79, Revised Statutes
8-7 (Article 5069-1.11, Vernon's Texas Civil Statutes), is amended to
8-8 read as follows:
8-9 (d) Notwithstanding Section (a) of this article or any other
8-10 provision of law, a seller or lessor may sell open-end account
8-11 credit agreements between such seller or lessor and its customers
8-12 or any balances thereunder to a purchaser who purchases a
8-13 substantial portion of such seller's or lessor's open-end account
8-14 credit agreements or any balances thereunder, at such terms,
8-15 conditions, and price as may be agreed, in accordance with Article
8-16 6.07 of this title, and any charges, fees, and discounts on such
8-17 sales and purchases shall not be deemed to be a merchant discount
8-18 or to disqualify such credit agreements or any balances thereunder
8-19 from being subject to a ceiling in Article 1.04 of this title as
8-20 modified by Section (c) of this article or from coverage by this
8-21 article, or to subject such accounts to the limitations of Article
8-22 15.02(c) [(d)] of this title.
8-23 SECTION 6. This Act applies only to an open-end account
8-24 credit agreement that is entered into, amended, or renewed on or
8-25 after the effective date of this Act.
8-26 SECTION 7. Section 1 of this Act, increasing maximum rates
8-27 of interest, applies only to credit card operations that are
9-1 located in this state at the time the interest rates are increased
9-2 by the financial institution operating the credit card operation.
9-3 SECTION 8. The importance of this legislation and the
9-4 crowded condition of the calendars in both houses create an
9-5 emergency and an imperative public necessity that the
9-6 constitutional rule requiring bills to be read on three several
9-7 days in each house be suspended, and this rule is hereby suspended,
9-8 and that this Act take effect and be in force from and after its
9-9 passage, and it is so enacted.