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.