By: Carona  S.B. No. 1251
         (In the Senate - Filed March 6, 2013; March 13, 2013, read
  first time and referred to Committee on Business and Commerce;
  March 28, 2013, reported adversely, with favorable Committee
  Substitute by the following vote:  Yeas 9, Nays 0; March 28, 2013,
  sent to printer.)
 
  COMMITTEE SUBSTITUTE FOR S.B. No. 1251 By:  Carona
 
 
A BILL TO BE ENTITLED
 
AN ACT
 
  relating to authorized charges and terms for certain consumer
  loans.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 342.002, Finance Code, is amended by
  adding Subsection (d) to read as follows:
         (d)  Interest under the scheduled installment earnings
  method or true daily earnings method may not be compounded.
         SECTION 2.  The heading to Section 342.201, Finance Code, is
  amended to read as follows:
         Sec. 342.201.  MAXIMUM INTEREST CHARGE AND ADMINISTRATIVE
  FEE.
         SECTION 3.  Section 342.201, Finance Code, is amended by
  amending Subsection (f) and adding Subsection (g) to read as
  follows:
         (f)  A loan contract under this subchapter may provide for an
  administrative fee in an amount not to exceed the lesser of five
  percent of the total amount financed or $100 [$25 for a loan of more
  than $1,000 or $20 for a loan of $1,000 or less].  The
  administrative fee is considered earned when the loan is made or
  refinanced and is not subject to refund. An administrative fee is
  not interest. A lender refinancing the loan may not contract for or
  receive an administrative fee for the loan more than once in any
  180-day period, except that if the loan has an interest charge
  authorized by Subsection (e) the lender may not contract for or
  receive the administrative fee more than once in any 365-day
  period.  One dollar of each administrative fee may be deposited with
  the comptroller for use in carrying out the finance commission's
  responsibilities under Section 11.3055.
         (g)  The finance commission by rule may prescribe a
  reasonable amount of an administrative fee for a loan contract
  under this subchapter that is greater than the amount authorized by
  this section for the amount of the loan.
         SECTION 4.  Section 342.252, Finance Code, is amended to
  read as follows:
         Sec. 342.252.  ALTERNATE CHARGES [INTEREST CHARGE].
  (a)  Instead of the charges authorized by Section 342.201, a loan
  contract may provide for:
               (1)  on a cash advance of less than $30, an acquisition
  charge that is not more than $1 for each $5 of the cash advance;
               (2)  on a cash advance equal to or more than $30 but not
  more than $100:
                     (A)  an acquisition charge that is not more than
  the amount equal to one-tenth of the amount of the cash advance; and
                     (B)  an installment account handling charge that
  is not more than:
                           (i)  $3 a month if the cash advance is not
  more than $35;
                           (ii)  $3.50 a month if the cash advance is
  more than $35 but not more than $70; or
                           (iii)  $4 a month if the cash advance is more
  than $70; or
               (3)  on a cash advance of more than $100:
                     (A)  an acquisition charge that is not more than
  10 percent of the amount of the cash advance [$10]; and
                     (B)  an installment account handling charge that
  is not more than the ratio of $4 a month for each $100 of cash
  advance.
         (b)  For an acquisition charge authorized by this
  subchapter, the finance commission by rule may prescribe a
  reasonable amount for an acquisition charge that is greater than
  the maximum amount authorized by the applicable section of this
  subchapter for the amount of the cash advance.
         (c)  An acquisition charge under this subchapter is not
  interest.
         SECTION 5.  Section 342.255, Finance Code, is amended to
  read as follows:
         Sec. 342.255.  MAXIMUM LOAN TERM. The maximum scheduled 
  term of a loan made under this subchapter is:
               (1)  for a loan of $100 or less, the lesser of:
                     (A)  one month for each multiple of $10 of cash
  advance; or
                     (B)  six months; and
               (2)  for a loan of more than $100, one month for each
  multiple of $20 of cash advance.
         SECTION 6.  Section 342.257, Finance Code, is amended to
  read as follows:
         Sec. 342.257.  DEFAULT CHARGE; DEFERMENT OF PAYMENT. The
  provisions of Subchapter E relating to additional interest for
  default and additional interest for the deferment of installments
  apply to a loan made under this subchapter.  Provided, that on a
  loan contract in which the cash advance is $100 or more, instead of
  additional interest for default under Subchapter E, the contract
  may provide for a delinquency charge if any part of an installment
  remains unpaid after the 10th day after the date on which the
  installment is due, including Sundays and holidays.  The
  delinquency charge on a loan with a cash advance of $100 or more may
  not exceed the greater of $20 [$10] or five cents for each $1 of the
  delinquent installment.
         SECTION 7.  Subsection (a), Section 342.259, Finance Code,
  is amended to read as follows:
         (a)  Instead of the charges authorized by Sections 342.201
  and 342.252, a loan made under this subchapter with a maximum cash
  advance computed under Subchapter C, Chapter 341, using a reference
  base amount that is more than $100 but not more than $200, may
  provide for:
               (1)  an acquisition charge that is not more than 10
  percent of the amount of the cash advance [$10]; and
               (2)  an installment account handling charge that is not
  more than the ratio of $4 a month for each $100 of cash advance.
         SECTION 8.  Subsection (a), Section 342.352, Finance Code,
  is amended to read as follows:
         (a)  This section applies to a loan contract:
               (1)  that includes precomputed interest and to which
  Section 342.351 does not apply;
               (2)  that includes interest contracted for under
  Section 342.201 or 342.260; or
               (3)  that has a term of more than 60 months.
         SECTION 9.  Subchapter F, Chapter 342, Finance Code, is
  amended by adding Section 342.260 to read as follows:
         Sec. 342.260.  ALTERNATE INTEREST CHARGE COMPUTATION
  METHODS. (a)  A loan contract under this subchapter may provide
  for an interest charge computed using the true daily earnings
  method or the scheduled installment earnings method that does not
  exceed the equivalent rate or effective return of the installment
  account handling charge for the original scheduled term of the
  loan.
         (b)  The principal balance of a loan contract authorized by
  this section may not include the acquisition charge, installment
  account handling charge, default charges, or deferment charges or
  the return check fees authorized by Section 3.506, Business &
  Commerce Code.
         (c)  Interest may accrue on the principal balance from time
  to time unpaid at the rate provided for by the contract until the
  date of payment in full or demand for payment in full.
         (d)  A payment on a loan contract authorized by this section
  shall be applied to the borrower's account in the following order
  or, at the lender's option, under another method of applying a
  payment that is more favorable to the borrower:
               (1)  the straight line allocation of the acquisition
  charge using the original scheduled term of the loan based on the
  proportional scheduled payment that was paid or scheduled to be
  paid;
               (2)  default charges authorized by Section 342.257;
               (3)  return check fees authorized by Section 3.506,
  Business & Commerce Code;
               (4)  any other charges authorized by this subchapter;
               (5)  accrued interest authorized by this section; and
               (6)  principal.
         SECTION 10.  The changes in law made by this Act apply only
  to a loan made on or after the effective date of this Act.  A loan
  made before the effective date of this Act is governed by the law in
  effect on the date the loan was made, and the former law is
  continued in effect for that purpose.
         SECTION 11.  This Act takes effect September 1, 2013.
 
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