By Thompson H.B. No. 2934 77R5468 DWS-D A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to a loan secured by a motor vehicle certificate of title. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Chapter 342, Finance Code, is amended by adding 1-5 Subchapter M to read as follows: 1-6 SUBCHAPTER M. MOTOR VEHICLE CERTIFICATE OF TITLE LOANS 1-7 Sec. 342.601. MOTOR VEHICLE CERTIFICATE OF TITLE LOANS 1-8 AUTHORIZED. (a) A motor vehicle certificate of title may be used 1-9 to secure a loan under this chapter if: 1-10 (1) the certificate of title discloses no other 1-11 outstanding liens; and 1-12 (2) all owners shown on the certificate of title sign 1-13 the loan contract. 1-14 (b) While the certificate of title secures the loan the 1-15 lender shall retain possession of the certificate of title and the 1-16 borrower shall retain possession and use of the motor vehicle. 1-17 (c) To the extent of any conflict between this subchapter 1-18 and another provision of this chapter, this subchapter controls. 1-19 This subchapter does not apply to a retail installment transaction 1-20 under Chapter 348 or another loan made to finance the purchase of 1-21 the motor vehicle. 1-22 Sec. 342.602. MAXIMUM TERM AND AMOUNT OF LOAN. (a) A loan 1-23 under this subchapter may not have a term of less than 12 months or 1-24 more than 36 months. 2-1 (b) There is not a limit on the maximum amount of a loan 2-2 under this chapter. 2-3 Sec. 342.603. MAXIMUM INTEREST RATES. A loan under this 2-4 subchapter may provide for a rate of interest that does not exceed: 2-5 (1) six percent a month on the outstanding amount of 2-6 the loan equal to or less than $2,500; 2-7 (2) four percent a month on the outstanding amount of 2-8 the loan greater than $2,500 and equal to or less than $4,000; and 2-9 (3) three percent a month on the outstanding amount of 2-10 the loan greater than $4,000. 2-11 Sec. 342.604. AMOUNTS AUTHORIZED TO BE INCLUDED IN CONTRACT. 2-12 A contract for a loan under this subchapter may include a charge 2-13 for: 2-14 (1) credit life insurance and credit health and 2-15 accident insurance, which may be required by the lender as 2-16 additional security for the loan; 2-17 (2) at the borrower's option, fees for automobile club 2-18 membership; 2-19 (3) an origination fee equal to 10 percent of the 2-20 amount of the loan, not to exceed $50; and 2-21 (4) any fees paid to a governmental agency in 2-22 connection with the loan. 2-23 Sec. 342.605. DEFAULT FEE. (a) A contract for a loan under 2-24 this subchapter may provide for a fee if any part of an installment 2-25 remains unpaid after the 10th day after the date the installment is 2-26 due. 2-27 (b) The fee may not exceed the greater of $10 or five 3-1 percent of the amount of the installment. 3-2 Sec. 342.606. SECURITY INTEREST. (a) The lender on a loan 3-3 under this subchapter has a security interest in the motor vehicle 3-4 covered by the certificate of title. The security interest attaches 3-5 on the date the loan is made and is perfected while the lender 3-6 possesses the certificate of title to the vehicle. 3-7 (b) Except to the extent inconsistent with this subchapter, 3-8 Chapter 9, Business & Commerce Code, applies to the security 3-9 interest. Subchapter F, Chapter 501, Transportation Code, does not 3-10 apply to a security interest under this section. 3-11 (c) If the lender takes possession of the motor vehicle on 3-12 default by the borrower on a loan under this subchapter, the 3-13 borrower is not obligated for any deficiency after application of 3-14 the proceeds of disposition of the motor vehicle to the unpaid 3-15 amount of the debt. 3-16 Sec. 342.607. RETURN OF CERTIFICATE OF TITLE. The lender 3-17 shall promptly return the certificate of title to the borrower when 3-18 the loan is paid in full. 3-19 Sec. 342.608. CREDIT CHECK PROHIBITED. A lender may not 3-20 request a credit report or otherwise investigate the 3-21 creditworthiness of a borrower in connection with a loan under this 3-22 subchapter. 3-23 SECTION 2. This Act takes effect September 1, 2001.