77R8664 DWS-F
By Thompson H.B. No. 690
Substitute the following for H.B. No. 690:
By Solomons C.S.H.B. No. 690
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to interest charges on certain loans.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 342.201, Finance Code, is amended to read
1-5 as follows:
1-6 Sec. 342.201. MAXIMUM INTEREST CHARGE. (a) A loan contract
1-7 under this chapter that is a regular transaction and is not secured
1-8 by real property may provide for an interest charge on the cash
1-9 advance that does not exceed the amount of add-on interest equal to
1-10 the amount computed for the full term of the contract at an add-on
1-11 interest amount equal to:
1-12 (1) $18 for each $100 per year on the part of the cash
1-13 advance that is less than or equal to the amount computed under
1-14 Subchapter C, Chapter 341, using the reference base amount of $300;
1-15 and
1-16 (2) $8 for each $100 per year on the part of the cash
1-17 advance that is more than the amount computed for Subdivision (1)
1-18 but less than or equal to an amount computed under Subchapter C,
1-19 Chapter 341, using the reference base amount of $2,500.
1-20 (b) For the purpose of Subsection (a):
1-21 (1) when the loan is made an interest charge may be
1-22 computed for the full term of the loan contract;
1-23 (2) if the period before the first installment due
1-24 date includes a part of a month that is longer than 15 days, that
2-1 portion of a month may be considered a full month; and
2-2 (3) if a loan contract provides for precomputed
2-3 interest, the amount of the loan is the total of:
2-4 (A) the cash advance; and
2-5 (B) the amount of precomputed interest.
2-6 (c) A loan contract under this chapter that is an irregular
2-7 transaction and is not secured by real property may provide for an
2-8 interest charge, using any method or formula, that does not exceed
2-9 the amount that, having due regard for the schedule of installment
2-10 payments, would produce the same effective return as allowed under
2-11 this section [Subsection (a)] if the loan were payable in equal
2-12 successive monthly installments beginning one month from the date
2-13 of the contract.
2-14 (d) A loan contract under this chapter that is not secured
2-15 by real property may provide for a rate or amount of interest
2-16 computed using the true daily earnings method or the scheduled
2-17 installment earnings method that does not exceed the alternative
2-18 interest rate as computed under Subchapter A, Chapter 303.
2-19 Interest may accrue on the principal balance and amounts added to
2-20 principal after the date of the loan contract from time to time
2-21 unpaid at the rate provided for by the contract until the date of
2-22 payment in full or demand for payment in full.
2-23 (e) A loan contract under this chapter that is not secured
2-24 by real property may provide for a rate or amount of interest
2-25 computed using the true daily earnings method or the scheduled
2-26 installment earnings method that does not exceed:
2-27 (1) 30 percent a year on that part of the cash advance
3-1 that is less than or equal to the amount computed under Subchapter
3-2 C, Chapter 341, using the reference base amount of $1,250; and
3-3 (2) 24 percent a year on that part of the cash advance
3-4 that is more than the amount computed for Subdivision (1) but less
3-5 than or equal to an amount computed under Subchapter C, Chapter
3-6 341, using the reference base amount of $2,500.
3-7 (f) A loan contract under this subchapter may provide for an
3-8 administrative fee in an amount not to exceed $25 for a loan of
3-9 more than $1,000 or $20 for a loan of $1,000 or less. The
3-10 administrative fee is considered earned when the loan is made or
3-11 refinanced and is not subject to refund. A lender refinancing the
3-12 loan may not contract for or receive an administrative fee for the
3-13 loan more than once in any 180-day period. Fifty cents of each
3-14 administrative fee shall be deposited with the comptroller for use
3-15 in carrying out the finance commission's responsibilities under
3-16 Section 11.305.
3-17 SECTION 2. Section 342.351, Finance Code, is amended to read
3-18 as follows:
3-19 Sec. 342.351. REFUND OF PRECOMPUTED INTEREST: SUM OF THE
3-20 PERIODIC BALANCES [REGULAR TRANSACTION]. (a) This section applies
3-21 to a loan contract that includes precomputed interest authorized
3-22 under Subchapter F or G and that is a regular transaction.
3-23 (b) If the contract is prepaid in full, including payment in
3-24 cash or by a new loan or renewal of the loan, or if the lender
3-25 demands payment in full of the unpaid balance, after the first
3-26 installment due date but before the final installment due date, the
3-27 lender shall refund or credit to the borrower the amount computed
4-1 by:
4-2 (1) dividing the sum of the periodic balances
4-3 scheduled to follow the installment date after the date of the
4-4 prepayment or demand, as appropriate, by the sum of all the
4-5 periodic balances under the schedule of payments set out in the
4-6 loan contract; and
4-7 (2) multiplying the total interest contracted for
4-8 under Section [342.201,] 342.252[,] or 342.301, as appropriate, by
4-9 the result under Subdivision (1).
4-10 (c) If the prepayment in full or demand for payment in full
4-11 occurs before the first installment due date, the lender shall:
4-12 (1) retain an amount computed by:
4-13 (A) dividing 30 into the amount that could be
4-14 retained if the first installment period were one month and the
4-15 loan were prepaid in full on the date the first installment is due;
4-16 and
4-17 (B) multiplying the result under Paragraph (A)
4-18 by the number of days in the period beginning on the date the loan
4-19 was made and ending on the date of the prepayment or demand; and
4-20 (2) refund or credit to the borrower the amount
4-21 computed by subtracting the amount retained under Subdivision (1)
4-22 from the interest contracted for under Section [342.201,]
4-23 342.252[,] or 342.301, as appropriate.
4-24 SECTION 3. The heading to Section 342.352, Finance Code, is
4-25 amended to read as follows:
4-26 Sec. 342.352. REFUND OF PRECOMPUTED INTEREST ON CONTRACT:
4-27 SCHEDULED INSTALLMENT EARNINGS [IRREGULAR TRANSACTION OR TERM OF
5-1 MORE THAN 60 MONTHS].
5-2 SECTION 4. Sections 342.352(a) and (f), Finance Code, are
5-3 amended to read as follows:
5-4 (a) This section applies to a loan contract:
5-5 (1) that includes precomputed interest and to which
5-6 Section 342.351 does not apply; [or]
5-7 (2) that includes interest contracted for under
5-8 Section 342.201; or
5-9 (3) that has a term of more than 60 months.
5-10 (f) For the purposes of this section, the simple annual
5-11 interest rate under a contract is equal to the rate computed under
5-12 the scheduled installment earnings method [that the contract would
5-13 have produced over its full term if, assuming that each scheduled
5-14 payment under the contract is paid on the date due and considering
5-15 the amount of each scheduled installment and the time of each
5-16 scheduled installment period, the rate were applied to the unpaid
5-17 principal amounts determined to be outstanding from time to time
5-18 according to the schedule of payments].
5-19 SECTION 5. Section 342.501(a), Finance Code, is amended to
5-20 read as follows:
5-21 (a) An authorized lender may not induce or permit a person
5-22 or a husband and wife to be directly or indirectly obligated under
5-23 more than one loan contract at any time for the purpose or with the
5-24 effect of obtaining an amount of interest greater than the amount
5-25 of interest otherwise authorized under this chapter for a loan of
5-26 that aggregate amount with a maximum interest charge computed under
5-27 Section 342.201(a), Section 342.201(e), Section 342.252, or any
6-1 combination [both] of those sections.
6-2 SECTION 6. Section 342.508, Finance Code, is amended to read
6-3 as follows:
6-4 Sec. 342.508. MAXIMUM LOAN TERM. A lender may not enter a
6-5 loan contract under Section 342.201(a) or Section 342.201(e) under
6-6 which the borrower agrees to make a scheduled payment of principal
6-7 more than:
6-8 (1) 37 calendar months after the date on which the
6-9 contract is made, if the contract is for a cash advance of $1,500
6-10 or less;
6-11 (2) 49 calendar months after the date on which the
6-12 contract is made, if the contract is for a cash advance of more
6-13 than $1,500 but not more than $3,000; or
6-14 (3) 60 months after the date on which the contract is
6-15 made, if the contract is for a cash advance of more than $3,000.
6-16 SECTION 7. This Act takes effect September 1, 2001.