1-1 By: Carona S.B. No. 272
1-2 (In the Senate - Filed January 17, 2001; January 22, 2001,
1-3 read first time and referred to Committee on Business and Commerce;
1-4 February 26, 2001, reported favorably; March 6, 2001, recommitted
1-5 to Committee on Business and Commerce; March 15, 2001, reported
1-6 adversely, with favorable Committee Substitute by the following
1-7 vote: Yeas 5, Nays 1; March 15, 2001, sent to printer.)
1-8 COMMITTEE SUBSTITUTE FOR S.B. No. 272 By: Carona
1-9 A BILL TO BE ENTITLED
1-10 AN ACT
1-11 relating to interest charges on certain loans.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Section 342.201, Finance Code, is amended to read
1-14 as follows:
1-15 Sec. 342.201. MAXIMUM INTEREST CHARGE. (a) A loan contract
1-16 under this chapter that is a regular transaction and is not secured
1-17 by real property may provide for an interest charge on the cash
1-18 advance that does not exceed the amount of add-on interest equal to
1-19 the amount computed for the full term of the contract at an add-on
1-20 interest amount equal to:
1-21 (1) $18 for each $100 per year on the part of the cash
1-22 advance that is less than or equal to the amount computed under
1-23 Subchapter C, Chapter 341, using the reference base amount of $300;
1-24 and
1-25 (2) $8 for each $100 per year on the part of the cash
1-26 advance that is more than the amount computed for Subdivision (1)
1-27 but less than or equal to an amount computed under Subchapter C,
1-28 Chapter 341, using the reference base amount of $2,500.
1-29 (b) For the purpose of Subsection (a):
1-30 (1) when the loan is made an interest charge may be
1-31 computed for the full term of the loan contract;
1-32 (2) if the period before the first installment due
1-33 date includes a part of a month that is longer than 15 days, that
1-34 portion of a month may be considered a full month; and
1-35 (3) if a loan contract provides for precomputed
1-36 interest, the amount of the loan is the total of:
1-37 (A) the cash advance; and
1-38 (B) the amount of precomputed interest.
1-39 (c) A loan contract under this chapter that is an irregular
1-40 transaction and is not secured by real property may provide for an
1-41 interest charge, using any method or formula, that does not exceed
1-42 the amount that, having due regard for the schedule of installment
1-43 payments, would produce the same effective return as allowed under
1-44 this section [Subsection (a)] if the loan were payable in equal
1-45 successive monthly installments beginning one month from the date
1-46 of the contract.
1-47 (d) A loan contract under this chapter that is not secured
1-48 by real property may provide for a rate or amount of interest
1-49 computed using the true daily earnings method or the scheduled
1-50 installment earnings method that does not exceed the alternative
1-51 interest rate as computed under Subchapter A, Chapter 303.
1-52 Interest may accrue on the principal balance and amounts added to
1-53 principal after the date of the loan contract from time to time
1-54 unpaid at the rate provided for by the contract until the date of
1-55 payment in full or demand for payment in full.
1-56 (e) A loan contract under this chapter that is not secured
1-57 by real property may provide for a rate or amount of interest
1-58 computed using the true daily earnings method or the scheduled
1-59 installment earnings method that does not exceed:
1-60 (1) 30 percent a year on that part of the cash advance
1-61 that is less than or equal to the amount computed under Subchapter
1-62 C, Chapter 341, using the reference base amount of $1,250; and
1-63 (2) 24 percent a year on that part of the cash advance
1-64 that is more than the amount computed for Subdivision (1) but less
2-1 than or equal to an amount computed under Subchapter C, Chapter
2-2 341, using the reference base amount of $2,500.
2-3 (f) A loan contract under this subchapter may provide for an
2-4 administrative fee in an amount not to exceed $25 for a loan of
2-5 more than $1,000 or $20 for a loan of $1,000 or less. The
2-6 administrative fee is considered earned when the loan is made or
2-7 refinanced and is not subject to refund. A lender refinancing the
2-8 loan may not contract for or receive an administrative fee for the
2-9 loan more than once in any 180-day period. Fifty cents of each
2-10 administrative fee shall be deposited with the comptroller for use
2-11 in carrying out the finance commission's responsibilities under
2-12 Section 11.305.
2-13 SECTION 2. Section 342.351, Finance Code, is amended to read
2-14 as follows:
2-15 Sec. 342.351. REFUND OF PRECOMPUTED INTEREST: SUM OF THE
2-16 PERIODIC BALANCES [REGULAR TRANSACTION]. (a) This section applies
2-17 to a loan contract that includes precomputed interest authorized
2-18 under Subchapter F or G and that is a regular transaction.
2-19 (b) If the contract is prepaid in full, including payment in
2-20 cash or by a new loan or renewal of the loan, or if the lender
2-21 demands payment in full of the unpaid balance, after the first
2-22 installment due date but before the final installment due date, the
2-23 lender shall refund or credit to the borrower the amount computed
2-24 by:
2-25 (1) dividing the sum of the periodic balances
2-26 scheduled to follow the installment date after the date of the
2-27 prepayment or demand, as appropriate, by the sum of all the
2-28 periodic balances under the schedule of payments set out in the
2-29 loan contract; and
2-30 (2) multiplying the total interest contracted for
2-31 under Section [342.201,] 342.252[,] or 342.301, as appropriate, by
2-32 the result under Subdivision (1).
2-33 (c) If the prepayment in full or demand for payment in full
2-34 occurs before the first installment due date, the lender shall:
2-35 (1) retain an amount computed by:
2-36 (A) dividing 30 into the amount that could be
2-37 retained if the first installment period were one month and the
2-38 loan were prepaid in full on the date the first installment is due;
2-39 and
2-40 (B) multiplying the result under Paragraph (A)
2-41 by the number of days in the period beginning on the date the loan
2-42 was made and ending on the date of the prepayment or demand; and
2-43 (2) refund or credit to the borrower the amount
2-44 computed by subtracting the amount retained under Subdivision (1)
2-45 from the interest contracted for under Section [342.201,]
2-46 342.252[,] or 342.301, as appropriate.
2-47 SECTION 3. The heading to Section 342.352, Finance Code, is
2-48 amended to read as follows:
2-49 Sec. 342.352. REFUND OF PRECOMPUTED INTEREST ON CONTRACT:
2-50 SCHEDULED INSTALLMENT EARNINGS [IRREGULAR TRANSACTION OR TERM OF
2-51 MORE THAN 60 MONTHS].
2-52 SECTION 4. Subsections (a) and (f), Section 342.352, Finance
2-53 Code, are amended to read as follows:
2-54 (a) This section applies to a loan contract:
2-55 (1) that includes precomputed interest and to which
2-56 Section 342.351 does not apply; [or]
2-57 (2) that includes interest contracted for under
2-58 Section 342.201; or
2-59 (3) that has a term of more than 60 months.
2-60 (f) For the purposes of this section, the simple annual
2-61 interest rate under a contract is equal to the rate computed under
2-62 the scheduled installment earnings method [that the contract would
2-63 have produced over its full term if, assuming that each scheduled
2-64 payment under the contract is paid on the date due and considering
2-65 the amount of each scheduled installment and the time of each
2-66 scheduled installment period, the rate were applied to the unpaid
2-67 principal amounts determined to be outstanding from time to time
2-68 according to the schedule of payments].
2-69 SECTION 5. Subsection (a), Section 342.501, Finance Code, is
3-1 amended to read as follows:
3-2 (a) An authorized lender may not induce or permit a person
3-3 or a husband and wife to be directly or indirectly obligated under
3-4 more than one loan contract at any time for the purpose or with the
3-5 effect of obtaining an amount of interest greater than the amount
3-6 of interest otherwise authorized under this chapter for a loan of
3-7 that aggregate amount with a maximum interest charge computed under
3-8 Section 342.201(a), Section 342.201(e), Section 342.252, or any
3-9 combination [both] of those sections.
3-10 SECTION 6. Section 342.508, Finance Code, is amended to read
3-11 as follows:
3-12 Sec. 342.508. MAXIMUM LOAN TERM. A lender may not enter a
3-13 loan contract under Section 342.201(a) or Section 342.201(e) under
3-14 which the borrower agrees to make a scheduled payment of principal
3-15 more than:
3-16 (1) 37 calendar months after the date on which the
3-17 contract is made, if the contract is for a cash advance of $1,500
3-18 or less;
3-19 (2) 49 calendar months after the date on which the
3-20 contract is made, if the contract is for a cash advance of more
3-21 than $1,500 but not more than $3,000; or
3-22 (3) 60 months after the date on which the contract is
3-23 made, if the contract is for a cash advance of more than $3,000.
3-24 SECTION 7. This Act takes effect September 1, 2001.
3-25 * * * * *