1-1 By: Averitt (Senate Sponsor - Cain) H.B. No. 2180
1-2 (In the Senate - Received from the House April 22, 1999;
1-3 April 26, 1999, read first time and referred to Committee on
1-4 Economic Development; May 14, 1999, reported adversely, with
1-5 favorable Committee Substitute by the following vote: Yeas 4, Nays
1-6 0; May 14, 1999, sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR H.B. No. 2180 By: Sibley
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to usury and the regulation of lenders.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 ARTICLE 1. AMENDMENTS TO TITLE 79, REVISED STATUTES
1-13 SECTION 1.01. Articles 1B.002(b) and (c), Title 79, Revised
1-14 Statutes (Article 5069-1B.002, Vernon's Texas Civil Statutes), are
1-15 amended to read as follows:
1-16 (b) [These definitions shall be liberally construed to
1-17 accomplish the purposes of this subtitle.]
1-18 [(c)] The finance commission by rule may adopt other
1-19 definitions to accomplish the purposes of this title [subtitle].
1-20 SECTION 1.02. Article 1C.102, Title 79, Revised Statutes
1-21 (Article 5069-1C.102, Vernon's Texas Civil Statutes), is amended to
1-22 read as follows:
1-23 Art. 1C.102. PROHIBITION ON PREPAYMENT [CHARGE OR] PENALTY.
1-24 If the interest rate on a loan for property that is or is to be the
1-25 residential homestead of the borrower is [made at an interest rate
1-26 that is] greater than a rate of 12 percent a year, a prepayment
1-27 [charge or] penalty may not be collected on the loan unless the
1-28 [charge or] penalty is required by an agency created by federal
1-29 law.
1-30 SECTION 1.03. Article 1D.003(c), Title 79, Revised Statutes
1-31 (Article 5069-1D.003, Vernon's Texas Civil Statutes), is amended to
1-32 read as follows:
1-33 (c) In this subchapter [article], "auction rate" means the
1-34 auction average rate quoted on a bank discount basis for 26-week
1-35 treasury bills issued by the United States government, as published
1-36 by the Federal Reserve Board, for the week preceding the week in
1-37 which the weekly rate ceiling is to take effect.
1-38 SECTION 1.04. Article 3A.001, Title 79, Revised Statutes
1-39 (Article 5069-3A.001, Vernon's Texas Civil Statutes), is amended to
1-40 read as follows:
1-41 Art. 3A.001. Definitions. In this chapter:
1-42 (1) "Irregular transaction" means a loan that is
1-43 payable:
1-44 (A) in installments that are not consecutive or
1-45 monthly;
1-46 (B) with installments that are not substantially
1-47 equal in amount; or
1-48 (C) with a first scheduled installment due that
1-49 is not within one month and 15 days after the date of the loan.
1-50 (2) "Regular transaction" means a loan that is
1-51 payable:
1-52 (A) in consecutive monthly installments;
1-53 (B) with installments substantially equal in
1-54 amount; and
1-55 (C) with a first scheduled installment due
1-56 within one month and 15 days after the date of the loan.
1-57 (3) "Regulated loan license" means a consumer loan
1-58 license.
1-59 (4) "Secondary mortgage loan" means a loan that is:
1-60 (A) secured in whole or in part by an interest,
1-61 including a lien or security interest, in real property that is:
1-62 (i) improved by a dwelling designed for
1-63 occupancy by four or fewer families; and
1-64 (ii) subject to one or more liens,
2-1 security interests, prior mortgages, or deeds of trust; and
2-2 (B) not to be repaid before the 91st day after
2-3 the date of the loan.
2-4 SECTION 1.05. Article 3A.002, Title 79, Revised Statutes
2-5 (Article 5069-3A.002, Vernon's Texas Civil Statutes), is amended to
2-6 read as follows:
2-7 Art. 3A.002. Interest Computation Methods. (a) The
2-8 scheduled installment earnings method is a method to compute an
2-9 interest charge by applying a daily rate to the unpaid balance of
2-10 the principal amount [financed] as if all payments will be made
2-11 upon the scheduled installment date. The daily rate is 1/365th of
2-12 the equivalent contract rate. Payments received before or after
2-13 the due date do not cause an adjustment in the amount of the
2-14 scheduled principal reduction.
2-15 (b) The true daily earnings method is a method to compute an
2-16 interest charge by applying a daily rate to the unpaid balance of
2-17 the principal amount [financed]. The daily rate is 1/365th of the
2-18 equivalent contract rate. The earned finance charge is computed by
2-19 multiplying the daily rate of the finance charge by the number of
2-20 days the actual principal balance is outstanding.
2-21 SECTION 1.06. Articles 3A.101(a) and (c), Title 79, Revised
2-22 Statutes (Article 5069-3A.101, Vernon's Texas Civil Statutes), are
2-23 amended to read as follows:
2-24 (a) A person must hold a license issued under this chapter
2-25 to:
2-26 (1) engage in the business of making, transacting, or
2-27 negotiating loans subject to this chapter; or [and]
2-28 (2) contract for, charge, or receive, directly or
2-29 indirectly, in connection with a loan subject to this chapter, a
2-30 charge, including interest, compensation, consideration, or another
2-31 expense, authorized under this chapter that in the aggregate
2-32 exceeds the charges authorized under other law.
2-33 (c) A bank, savings bank, or savings and loan association
2-34 organized under the laws of the United States or under the laws of
2-35 the institution's state of domicile is not required to obtain a
2-36 license under Subsection (a).
2-37 SECTION 1.07. Articles 3A.102(b) and (c), Title 79, Revised
2-38 Statutes (Article 5069-3A.102, Vernon's Texas Civil Statutes), are
2-39 amended to read as follows:
2-40 (b) A person who is required to hold a license under this
2-41 chapter must hold a separate license for each office at which loans
2-42 are made, negotiated, serviced, held, or collected under this
2-43 chapter.
2-44 (c) A license is not required under this chapter for a place
2-45 of business:
2-46 (1) devoted to accounting or other recordkeeping; and
2-47 (2) at which loans are not made, negotiated, serviced,
2-48 held, or collected under this chapter or Chapter 15.
2-49 SECTION 1.08. Article 3A.202(a), Title 79, Revised Statutes
2-50 (Article 5069-3A.202, Vernon's Texas Civil Statutes), is amended to
2-51 read as follows:
2-52 (a) If the commissioner cannot verify that [requires,] an
2-53 applicant for a license under this chapter meets the net assets
2-54 requirement or if the commissioner questions the financial
2-55 responsibility or general fitness of the applicant, the
2-56 commissioner may require the applicant to [shall] file with the
2-57 application a bond that is:
2-58 (1) in an amount not to exceed the total of:
2-59 (A) $50,000 [$5,000] for the first license; and
2-60 (B) $10,000 [$1,000] for each additional
2-61 license;
2-62 (2) satisfactory to the commissioner; and
2-63 (3) issued by a surety company qualified to do
2-64 business as a surety in this state.
2-65 SECTION 1.09. Article 3A.302, Title 79, Revised Statutes
2-66 (Article 5069-3A.302, Vernon's Texas Civil Statutes), is amended to
2-67 read as follows:
2-68 Art. 3A.302. Maximum Charge for Loan With Single Repayment.
2-69 A loan contract that exceeds the maximum cash advance of Article
3-1 3A.401 and that is payable in a single installment may provide for
3-2 an interest charge on the cash advance that does not exceed a rate
3-3 or amount that would produce the same effective return, determined
3-4 as a true daily earnings rate, as allowed under Article 3A.301
3-5 having due consideration for the amount and term of the loan. If a
3-6 loan under this article is prepaid in full, the lender may earn a
3-7 minimum interest charge of $25.
3-8 SECTION 1.10. Article 3A.303(a), Title 79, Revised Statutes
3-9 (Article 5069-3A.303, Vernon's Texas Civil Statutes), is amended to
3-10 read as follows:
3-11 (a) A loan contract that includes precomputed interest or
3-12 uses the scheduled installment earnings method and that is a
3-13 regular transaction may provide for additional interest for default
3-14 if any part of an installment remains unpaid after the 10th day
3-15 after the date on which the installment is due, including Sundays
3-16 and holidays.
3-17 SECTION 1.11. Article 3A.304(a), Title 79, Revised Statutes
3-18 (Article 5069-3A.304, Vernon's Texas Civil Statutes), is amended to
3-19 read as follows:
3-20 (a) On a loan contract that includes precomputed interest or
3-21 uses the scheduled installment earnings method and that is a
3-22 regular transaction, an authorized lender may charge additional
3-23 interest for the deferment of an installment if:
3-24 (1) the entire amount of the installment is unpaid;
3-25 (2) no interest for default has been collected on the
3-26 installment; and
3-27 (3) payment of the installment is deferred for one or
3-28 more full months and the maturity of the contract is extended for a
3-29 corresponding period.
3-30 SECTION 1.12. Article 3A.403, Title 79, Revised Statutes
3-31 (Article 5069-3A.403, Vernon's Texas Civil Statutes), is amended to
3-32 read as follows:
3-33 Art. 3A.403. Maximum Interest Charge for Loan With Single
3-34 Repayment. A loan contract to which Article 3A.401 applies and
3-35 that is payable in a single installment may provide for an
3-36 acquisition charge and an interest charge on the cash advance that
3-37 does not exceed a rate or amount that would produce the same
3-38 effective return, determined as a true daily earnings rate, as
3-39 allowed under Article 3A.402 having due consideration for the
3-40 amount and term of the loan. If a loan that has a term of one
3-41 month or more under this article is prepaid in full, the lender may
3-42 earn a minimum of the acquisition charge and interest charge for
3-43 one month. If a loan under this article has an initial term of
3-44 less than one month, the lender may earn a minimum of the
3-45 acquisition charge and an interest charge that produces the same
3-46 effective return as the installment account handling charge
3-47 computed at a daily rate for the term the loan is outstanding.
3-48 SECTION 1.13. Article 3A, 503(a), Title 79, Revised Statutes
3-49 (Article 5069-3A.503, Vernon's Texas Civil Statutes), is amended to
3-50 read as follows:
3-51 (a) On a secondary mortgage loan that includes precomputed
3-52 interest or uses the scheduled installment earnings method and that
3-53 is a regular transaction, an authorized lender may charge
3-54 additional interest for the deferment of an installment if:
3-55 (1) the entire amount of the installment is unpaid;
3-56 (2) no interest for default has been collected on the
3-57 installment; and
3-58 (3) payment of the installment is deferred for one or
3-59 more full months and the maturity of the contract is extended for a
3-60 corresponding period.
3-61 SECTION 1.14. Article 3A.507, Title 79, Revised Statutes
3-62 (Article 5069-3A.507, Vernon's Texas Civil Statutes), is amended to
3-63 read as follows:
3-64 Art. 3A.507. Amounts Authorized to be Included in Contract.
3-65 A secondary mortgage loan contract may provide for:
3-66 (1) reasonable fees or charges paid to the trustee in
3-67 connection with a deed of trust or similar instrument executed in
3-68 connection with the secondary mortgage loan, including fees for
3-69 enforcing the lien against or posting for sale, selling, or
4-1 releasing the property secured by the deed of trust;
4-2 (2) reasonable fees paid to an attorney who is not an
4-3 employee of the creditor in the collection of a delinquent
4-4 secondary mortgage loan; or
4-5 (3) court costs and fees incurred in the collection of
4-6 the loan or foreclosure of a lien created by the loan[; or]
4-7 [(4) a fee that does not exceed $15 for the return by
4-8 a depository institution of a dishonored check, negotiable order of
4-9 withdrawal, or share draft offered in full or partial payment of a
4-10 secondary mortgage loan].
4-11 SECTION 1.15. Article 3A.508(a), Title 79, Revised Statutes
4-12 (Article 5069-3A.508, Vernon's Texas Civil Statutes), is amended to
4-13 read as follows:
4-14 (a) A lender or a person who is assigned a secondary
4-15 mortgage loan may collect on or before the closing of the loan, or
4-16 include in the principal of the loan:
4-17 (1) reasonable fees for:
4-18 (A) title examination and preparation of an
4-19 abstract of title by:
4-20 (i) an attorney who is not an employee of
4-21 the lender; or
4-22 (ii) a title company or property search
4-23 company authorized to do business in this state; or
4-24 (B) premiums or fees for title insurance or
4-25 title search for the benefit of the mortgagee and, at the
4-26 mortgagor's option, for title insurance or title search for the
4-27 benefit of the mortgagor;
4-28 (2) reasonable fees charged to the lender by an
4-29 attorney who is not a salaried employee of the lender for
4-30 preparation of the loan documents in connection with the mortgage
4-31 loan if the fees are evidenced by a statement for services rendered
4-32 [addressed to the lender];
4-33 (3) charges prescribed by law that are paid to public
4-34 officials for determining the existence of a security interest or
4-35 for perfecting, releasing, or satisfying a security interest;
4-36 (4) reasonable fees for an appraisal of real property
4-37 offered as security for the loan prepared by a licensed or
4-38 certified appraiser who is not a salaried employee of the lender;
4-39 (5) the reasonable cost of a credit report;
4-40 (6) reasonable fees for a survey of real property
4-41 offered as security for the loan prepared by a registered surveyor
4-42 who is not a salaried employee of the lender;
4-43 (7) the premiums received in connection with the sale
4-44 of credit life insurance, credit accident and health insurance, or
4-45 other insurance that protects the mortgagee against default by the
4-46 mortgagor, the benefits of which are applied in whole or in part to
4-47 reduce or extinguish the loan balance; or [and]
4-48 (8) reasonable fees relating to real property offered
4-49 as security for the loan that are incurred to comply with a
4-50 federally mandated program if the collection of the fees or the
4-51 participation in the program is required by a federal agency.
4-52 SECTION 1.16. Articles 3A.701(a) and (b), Title 79, Revised
4-53 Statutes (Article 5069-3A.701, Vernon's Texas Civil Statutes), are
4-54 amended to read as follows:
4-55 (a) On a loan that is subject to Subchapter E with a cash
4-56 advance of $300 or more, a lender may [request or] require a
4-57 borrower to insure tangible personal property offered as security
4-58 for the loan.
4-59 (b) On a secondary mortgage loan, a lender may [request or]
4-60 require a borrower to provide property insurance as security
4-61 against reasonable risks of loss, damage, and destruction.
4-62 SECTION 1.17. Articles 3A.702(a) and (c), Title 79, Revised
4-63 Statutes (Article 5069-3A.702, Vernon's Texas Civil Statutes), are
4-64 amended to read as follows:
4-65 (a) On a loan made under this chapter that is subject to
4-66 Subchapter E with a cash advance of $100 or more, a lender may:
4-67 (1) offer [or request that] a borrower [provide]
4-68 credit life insurance and credit health and accident insurance as
4-69 additional protection for the loan; and
5-1 (2) offer involuntary unemployment insurance to the
5-2 borrower at the time the loan is made.
5-3 (c) On a secondary mortgage loan made under this chapter, a
5-4 lender may [request or] require that a borrower provide credit life
5-5 insurance and credit accident and health insurance as additional
5-6 protection for the loan.
5-7 SECTION 1.18. Article 3A.804, Title 79, Revised Statutes
5-8 (Article 5069-3A.804, Vernon's Texas Civil Statutes), is amended to
5-9 read as follows:
5-10 Art. 3A.804. Return of Instruments to Borrower on Repayment.
5-11 Within a reasonable time after a loan is repaid in full or an
5-12 open-end account is terminated according to the terms of the
5-13 contract, a lender shall cancel and return to a borrower any
5-14 instrument, including a note, assignment, security agreement, or
5-15 mortgage[, or pledged property] that:
5-16 (1) secured the loan; and
5-17 (2) does not secure another indebtedness of the
5-18 borrower to the lender.
5-19 SECTION 1.19. Article 3A.852, Title 79, Revised Statutes
5-20 (Article 5069-3A.852, Vernon's Texas Civil Statutes), is amended by
5-21 amending Subsection (b) and adding Subsection (c) to read as
5-22 follows:
5-23 (b) On a loan subject to Subchapter E or a secondary
5-24 mortgage loan subject to Subchapter G a lender may assess and
5-25 collect from the borrower an amount incurred by the lender for:
5-26 (1) court costs;
5-27 (2) attorney's fees assessed by a court, in addition
5-28 to those provided for in Article 3A.507;
5-29 (3) a fee authorized by law for filing, recording, or
5-30 releasing in a public office a security for a loan;
5-31 (4) a reasonable amount spent for repossessing,
5-32 storing, preparing for sale, or selling any security;
5-33 (5) a fee for recording a lien on or transferring a
5-34 certificate of title to a motor vehicle offered as security for a
5-35 loan made under this chapter; or
5-36 (6) a premium or an identifiable charge received in
5-37 connection with the sale of insurance authorized under this
5-38 chapter.
5-39 (c) On a loan subject to this chapter a lender may assess
5-40 and collect a fee that does not exceed the amount prescribed by
5-41 Chapter 617, Acts of the 68th Legislature, Regular Session, 1983
5-42 (Article 9022, Vernon's Texas Civil Statutes), for the return by a
5-43 depository institution of a dishonored check, negotiable order of
5-44 withdrawal, or share draft offered in full or partial payment of a
5-45 loan.
5-46 ARTICLE 2. AMENDMENTS TO FINANCE CODE
5-47 SECTION 2.01. Sections 301.002(b) and (c), Finance Code, are
5-48 amended to read as follows:
5-49 (b) [These definitions shall be liberally construed to
5-50 accomplish the purposes of this subtitle.]
5-51 [(c)] The Finance Commission of Texas by rule may adopt
5-52 other definitions to accomplish the purposes of this title
5-53 [subtitle].
5-54 SECTION 2.02. Section 302.102, Finance Code, is amended to
5-55 read as follows:
5-56 Sec. 302.102. PROHIBITION ON PREPAYMENT PENALTY. If the
5-57 interest rate on a loan for property that is or is to be the
5-58 residential homestead of the borrower is greater than 12 percent a
5-59 year, a prepayment penalty may not be collected on the loan unless
5-60 the penalty is required by an agency created by federal law.
5-61 SECTION 2.03. Section 303.003(c), Finance Code, is amended
5-62 to read as follows:
5-63 (c) In this subchapter [section], "auction rate" means the
5-64 auction average rate quoted on a bank discount basis for 26-week
5-65 treasury bills issued by the United States government, as published
5-66 by the Federal Reserve Board, for the week preceding the week in
5-67 which the weekly rate ceiling is to take effect.
5-68 SECTION 2.04. Section 342.001, Finance Code, is amended to
5-69 read as follows:
6-1 Sec. 342.001. DEFINITIONS. In this chapter:
6-2 (1) "Irregular transaction" means a loan:
6-3 (A) that is payable in installments that are not
6-4 consecutive, monthly, and substantially equal in amount; or
6-5 (B) the first scheduled installment of which is
6-6 due later than one month and 15 days after the date of the loan.
6-7 (2) "Regular transaction" means a loan:
6-8 (A) that is payable in installments that are
6-9 consecutive, monthly, and substantially equal in amount; and
6-10 (B) the first scheduled installment of which is
6-11 due within one month and 15 days after the date of the loan.
6-12 (3) "Regulated loan license" means a consumer loan
6-13 license.
6-14 (4) "Secondary mortgage loan" means a loan that is:
6-15 (A) secured in whole or in part by an interest,
6-16 including a lien or security interest, in real property that is:
6-17 (i) improved by a dwelling designed for
6-18 occupancy by four or fewer families; and
6-19 (ii) subject to one or more liens,
6-20 security interests, prior mortgages, or deeds of trust; and
6-21 (B) not to be repaid before the 91st day after
6-22 the date of the loan.
6-23 SECTION 2.05. Sections 342.002(a) and (b), Finance Code, are
6-24 amended to read as follows:
6-25 (a) The scheduled installment earnings method is a method to
6-26 compute an interest charge by applying a daily rate to the unpaid
6-27 balance of the principal amount [financed] as if each payment will
6-28 be made on its scheduled installment date. A payment received
6-29 before or after the due date does not affect the amount of the
6-30 scheduled principal reduction.
6-31 (b) The true daily earnings method is a method to compute an
6-32 interest charge by applying a daily rate to the unpaid balance of
6-33 the principal amount [financed]. The earned finance charge is
6-34 computed by multiplying the daily rate by the number of days the
6-35 principal balance is outstanding.
6-36 SECTION 2.06. Sections 342.051(a) and (c), Finance Code, are
6-37 amended to read as follows:
6-38 (a) A person must hold a license issued under this chapter
6-39 to:
6-40 (1) engage in the business of making, transacting, or
6-41 negotiating loans subject to this chapter; or [and]
6-42 (2) contract for, charge, or receive, directly or
6-43 indirectly, in connection with a loan subject to this chapter, a
6-44 charge, including interest, compensation, consideration, or another
6-45 expense, authorized under this chapter that in the aggregate
6-46 exceeds the charges authorized under other law.
6-47 (c) A person is not required to obtain a license under
6-48 Subsection (a) if the person is:
6-49 (1) a bank, savings bank, or savings and loan
6-50 association organized under the laws of the United States or under
6-51 the laws of the institution's state of domicile; or
6-52 (2) subject to Chapter 24, Insurance Code.
6-53 SECTION 2.07. Sections 342.052(b) and (c), Finance Code, are
6-54 amended to read as follows:
6-55 (b) A person who is required to hold a license under this
6-56 chapter must hold a separate license for each office at which loans
6-57 are made, negotiated, serviced, held, or collected under this
6-58 chapter.
6-59 (c) A license is not required under this chapter for a place
6-60 of business:
6-61 (1) devoted to accounting or other recordkeeping; and
6-62 (2) at which loans are not made, negotiated, serviced,
6-63 held, or collected under this chapter or Chapter 346.
6-64 SECTION 2.08. Section 342.102(a), Finance Code, is amended
6-65 to read as follows:
6-66 (a) If the commissioner requires, an applicant for a license
6-67 under this chapter shall file with the application a bond that is:
6-68 (1) in an amount not to exceed the total of:
6-69 (A) $50,000 [$5,000] for the first license; and
7-1 (B) $10,000 [$1,000] for each additional
7-2 license;
7-3 (2) satisfactory to the commissioner; and
7-4 (3) issued by a surety company qualified to do
7-5 business as a surety in this state.
7-6 SECTION 2.09. Section 342.202, Finance Code, is amended to
7-7 read as follows:
7-8 Sec. 342.202. MAXIMUM CHARGE FOR LOAN WITH SINGLE REPAYMENT.
7-9 A loan contract that exceeds the maximum cash advance under Section
7-10 342.251 and that is payable in a single installment may provide for
7-11 an interest charge on the cash advance that does not exceed a rate
7-12 or amount that would produce the same effective return, determined
7-13 as a true daily earnings rate, as allowed under Section 342.201
7-14 considering the amount and term of the loan. If a loan under this
7-15 section is prepaid in full, the lender may earn a minimum interest
7-16 charge of $25.
7-17 SECTION 2.10. Section 324.203(a), Finance Code, is amended
7-18 to read as follows:
7-19 (a) A loan contract that includes precomputed interest or
7-20 uses the scheduled installment earnings method and that is a
7-21 regular transaction may provide for additional interest for default
7-22 if any part of an installment remains unpaid after the 10th day
7-23 after the date on which the installment is due, including Sundays
7-24 and holidays.
7-25 SECTION 2.11. Section 342.204(a), Finance Code, is amended
7-26 to read as follows:
7-27 (a) On a loan contract that includes precomputed interest or
7-28 uses the scheduled installment earnings method and that is a
7-29 regular transaction, an authorized lender may charge additional
7-30 interest for the deferment of an installment if:
7-31 (1) the entire amount of the installment is unpaid;
7-32 (2) no interest for default has been collected on the
7-33 installment; and
7-34 (3) payment of the installment is deferred for one or
7-35 more full months and the maturity of the contract is extended for a
7-36 corresponding period.
7-37 SECTION 2.12. Section 342.253, Finance Code, is amended to
7-38 read as follows:
7-39 Sec. 342.253. MAXIMUM INTEREST CHARGE FOR LOAN WITH SINGLE
7-40 REPAYMENT. A loan contract to which Section 342.251 applies and
7-41 that is payable in a single installment may provide for an
7-42 acquisition charge and an interest charge on the cash advance that
7-43 does not exceed a rate or amount that would produce the same
7-44 effective return, determined as a true daily earnings rate, as
7-45 allowed under Section 342.252 considering the amount and term of
7-46 the loan. If a loan that has a term in excess of one month under
7-47 this section is prepaid in full, the lender may earn a minimum of
7-48 the acquisition charge and interest charge for one month. If a
7-49 loan under this section has an initial term of less than one month,
7-50 the lender may earn a minimum of the acquisition charge and an
7-51 interest charge that produces the same effective return as the
7-52 installment account handling charge computed at a daily rate for
7-53 the term the loan is outstanding.
7-54 SECTION 2.13. Section 342.303(a), Finance Code, is amended
7-55 to read as follows:
7-56 (a) On a secondary mortgage loan that includes precomputed
7-57 interest or uses the scheduled installment earnings method and that
7-58 is a regular transaction, an authorized lender may charge
7-59 additional interest for the deferment of an installment if:
7-60 (1) the entire amount of the installment is unpaid;
7-61 (2) no interest for default has been collected on the
7-62 installment; and
7-63 (3) payment of the installment is deferred for one or
7-64 more full months and the maturity of the contract is extended for a
7-65 corresponding period.
7-66 SECTION 2.14. Section 342.307, Finance Code, is amended to
7-67 read as follows:
7-68 Sec. 342.307. AMOUNTS AUTHORIZED TO BE INCLUDED IN CONTRACT.
7-69 A secondary mortgage loan contract may provide for:
8-1 (1) reasonable fees or charges paid to the trustee in
8-2 connection with a deed of trust or similar instrument executed in
8-3 connection with the secondary mortgage loan, including fees for
8-4 enforcing the lien against or posting for sale, selling, or
8-5 releasing the property secured by the deed of trust;
8-6 (2) reasonable fees paid to an attorney who is not an
8-7 employee of the creditor in the collection of a delinquent
8-8 secondary mortgage loan; or
8-9 (3) court costs and fees incurred in the collection of
8-10 the loan or foreclosure of a lien created by the loan[; and]
8-11 [(4) a fee that does not exceed $15 for the return by
8-12 a depository institution of a dishonored check, negotiable order of
8-13 withdrawal, or share draft offered in full or partial payment of a
8-14 secondary mortgage loan].
8-15 SECTION 2.15. Section 342.308(a), Finance Code, is amended
8-16 to read as follows:
8-17 (a) A lender or a person who is assigned a secondary
8-18 mortgage loan may collect on or before the closing of the loan, or
8-19 include in the principal of the loan:
8-20 (1) reasonable fees for:
8-21 (A) title examination and preparation of an
8-22 abstract of title by:
8-23 (i) an attorney who is not an employee of
8-24 the lender; or
8-25 (ii) a title company or property search
8-26 company authorized to do business in this state; or
8-27 (B) premiums or fees for title insurance or
8-28 title search for the benefit of the mortgagee and, at the
8-29 mortgagor's option, for title insurance or title search for the
8-30 benefit of the mortgagor;
8-31 (2) reasonable fees charged to the lender by an
8-32 attorney who is not a salaried employee of the lender for
8-33 preparation of the loan documents in connection with the mortgage
8-34 loan if the fees are evidenced by a statement for services rendered
8-35 [addressed to the lender];
8-36 (3) charges prescribed by law that are paid to public
8-37 officials for determining the existence of a security interest or
8-38 for perfecting, releasing, or satisfying a security interest;
8-39 (4) reasonable fees for an appraisal of real property
8-40 offered as security for the loan prepared by a licensed or
8-41 certified appraiser who is not a salaried employee of the lender;
8-42 (5) the reasonable cost of a credit report;
8-43 (6) reasonable fees for a survey of real property
8-44 offered as security for the loan prepared by a registered surveyor
8-45 who is not a salaried employee of the lender;
8-46 (7) the premiums received in connection with the sale
8-47 of credit life insurance, credit accident and health insurance, or
8-48 other insurance that protects the mortgagee against default by the
8-49 mortgagor, the benefits of which are applied in whole or in part to
8-50 reduce or extinguish the loan balance; or [and]
8-51 (8) reasonable fees relating to real property offered
8-52 as security for the loan that are incurred to comply with a
8-53 federally mandated program if the collection of the fees or the
8-54 participation in the program is required by a federal agency.
8-55 SECTION 2.16. Sections 342.401(a) and (b), Finance Code, are
8-56 amended to read as follows:
8-57 (a) On a loan that is subject to Subchapter E with a cash
8-58 advance of $300 or more, a lender may [request or] require a
8-59 borrower to insure tangible personal property offered as security
8-60 for the loan.
8-61 (b) On a secondary mortgage loan, a lender may [request or]
8-62 require a borrower to provide property insurance as security
8-63 against reasonable risks of loss, damage, and destruction.
8-64 SECTION 2.17. Sections 342.402(a) and (c), Finance Code, are
8-65 amended to read as follows:
8-66 (a) On a loan made under this chapter that is subject to
8-67 Subchapter E with a cash advance of $100 or more, a lender may:
8-68 (1) offer [or request that] a borrower [provide]
8-69 credit life insurance and credit health and accident insurance as
9-1 additional protection for the loan; and
9-2 (2) offer involuntary unemployment insurance to the
9-3 borrower at the time the loan is made.
9-4 (c) On a secondary mortgage loan made under this chapter, a
9-5 lender may [request or] require that a borrower provide credit life
9-6 insurance and credit accident and health insurance as additional
9-7 protection for the loan.
9-8 SECTION 2.18. Section 342.454, Finance Code, is amended to
9-9 read as follows:
9-10 Sec. 342.454. RETURN OF INSTRUMENTS TO BORROWER ON
9-11 REPAYMENT. Within a reasonable time after a loan is repaid in full
9-12 or an open-end account is terminated according to the terms of the
9-13 contract, a lender shall cancel and return to a borrower any
9-14 instrument, including a note, assignment, security agreement, or
9-15 mortgage[, or pledged property] that:
9-16 (1) secured the loan; and
9-17 (2) does not secure another indebtedness of the
9-18 borrower to the lender.
9-19 SECTION 2.19. Section 342.502, Finance Code, is amended by
9-20 amending Subsection (b) and adding Subsection (d) to read as
9-21 follows:
9-22 (b) On a loan subject to Subchapter E or a secondary
9-23 mortgage loan subject to Subchapter G a lender may assess and
9-24 collect from the borrower:
9-25 (1) an amount incurred by the lender for:
9-26 (A) court costs;
9-27 (B) attorney's fees assessed by a court, in
9-28 addition to those provided by Section 342.307;
9-29 (C) a fee authorized by law for filing,
9-30 recording, or releasing in a public office a security for a loan;
9-31 (D) a reasonable amount spent for repossessing,
9-32 storing, preparing for sale, or selling any security;
9-33 (E) a fee for recording a lien on or
9-34 transferring a certificate of title to a motor vehicle offered as
9-35 security for a loan made under this chapter; or
9-36 (F) a premium or an identifiable charge received
9-37 in connection with the sale of insurance authorized under this
9-38 chapter; and
9-39 (2) an administrative fee, subject to Subsection (c),
9-40 in an amount not to exceed:
9-41 (A) $25 for a loan of more than $1,000; or
9-42 (B) $10 for a loan of $1,000 or less.
9-43 (d) On a loan subject to this chapter a lender may assess
9-44 and collect a fee that does not exceed the amount prescribed by
9-45 Chapter 617, Acts of the 68th Legislature, Regular Session, 1983
9-46 (Article 9022, Vernon's Texas Civil Statutes), for the return by a
9-47 depository institution of a dishonored check, negotiable order of
9-48 withdrawal, or share draft offered in full or partial payment of a
9-49 loan.
9-50 SECTION 2.20. Section 348.301, Finance Code, is amended to
9-51 read as follows:
9-52 Sec. 348.301. AUTHORITY TO ACQUIRE. A person may acquire a
9-53 retail installment contract or an outstanding balance under a
9-54 contract from another person on the terms, including the price, to
9-55 which they agree. Notwithstanding any other applicable law of this
9-56 state, no person acquiring or assigning a retail installment
9-57 contract, or any balance under a contract, has any duty to disclose
9-58 to any other person the terms on which a contract or balance under
9-59 a contract is acquired, including any discount or difference
9-60 between the rates, charges or balance under the contract and the
9-61 rates, charges or balance acquired.
9-62 ARTICLE 3. EFFECTIVE DATE; EMERGENCY
9-63 SECTION 3.01. (a) Except as provided by Subsections (b),
9-64 (c) and (d), this Act takes effect September 1, 1999.
9-65 (b) Article 1 of this Act takes effect only if the Act of
9-66 the 76th Legislature, Regular Session, 1999, relating to
9-67 nonsubstantive additions and corrections in enacted codes does not
9-68 take effect.
9-69 (c) Article 2 of this Act takes effect only if the Act of
10-1 the 76th Legislature, Regular Session, 1999, relating to
10-2 nonsubstantive additions and corrections in enacted codes takes
10-3 effect.
10-4 (d) The changes made by Section 2.20 of this Act take effect
10-5 immediately, and shall apply to any civil action pending on or
10-6 after the date of enactment.
10-7 SECTION 3.02. The importance of this legislation and the
10-8 crowded condition of the calendars in both houses create an
10-9 emergency and an imperative public necessity that the
10-10 constitutional rule requiring bills to be read on three several
10-11 days in each house be suspended, and this rule is hereby suspended,
10-12 and that this Act take effect and be in force according to its
10-13 terms, and it is so enacted.
10-14 * * * * *