CHAPTER 342. CONSUMER LOANS
FINANCE CODE
TITLE 4. REGULATION OF INTEREST, LOANS, AND FINANCED TRANSACTIONS
SUBTITLE B. LOANS AND FINANCED TRANSACTIONS
CHAPTER 342. CONSUMER LOANS
SUBCHAPTER A. GENERAL PROVISIONS; APPLICABILITY OF CHAPTER
Sec. 342.001. DEFINITIONS. In this chapter:
(1) "Irregular transaction" means a loan:
(A) that is payable in installments that are not consecutive,
monthly, and substantially equal in amount; or
(B) the first scheduled installment of which is due later than
one month and 15 days after the date of the loan.
(2) "Regular transaction" means a loan:
(A) that is payable in installments that are consecutive,
monthly, and substantially equal in amount; and
(B) the first scheduled installment of which is due within one
month and 15 days after the date of the loan.
(3) "Regulated loan license" means a consumer loan license.
(4) "Secondary mortgage loan" means a loan that is:
(A) secured in whole or in part by an interest, including a lien
or security interest, in real property that is:
(i) improved by a dwelling designed for occupancy by four or
fewer families; and
(ii) subject to one or more liens, security interests, prior
mortgages, or deeds of trust; and
(B) not to be repaid before the 91st day after the date of the
loan.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.04, eff. Sept. 1,
1999.
Sec. 342.002. INTEREST COMPUTATION METHODS. (a) The scheduled
installment earnings method is a method to compute an interest
charge by applying a daily rate to the unpaid balance of the
principal amount as if each payment will be made on its scheduled
installment date. A payment received before or after the due date
does not affect the amount of the scheduled principal reduction.
(b) The true daily earnings method is a method to compute an
interest charge by applying a daily rate to the unpaid balance of
the principal amount. The earned finance charge is computed by
multiplying the daily rate by the number of days the principal
balance is outstanding.
(c) For the purposes of Subsections (a) and (b), the daily rate
is 1/365th of the equivalent contract rate.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.05, eff. Sept. 1,
1999.
Sec. 342.003. PURCHASE FROM MORTGAGEE. For the purposes of this
chapter, a purchase from a mortgagee of an interest in a
secondary mortgage loan that was made to secure that loan is
treated as if it were a secondary mortgage loan.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.004. CONSTITUTIONAL INTEREST; EXEMPTION FOR LOAN WITH
INTEREST RATE OF 10 PERCENT OR LESS. (a) Except as otherwise
fixed by law, the maximum rate of interest is 10 percent a year.
(b) A loan providing for a rate of interest that is 10 percent a
year or less is not subject to this chapter.
(c) A loan described by Section 302.001(d) may provide for a
delinquency charge as provided by that section without being
subject to this chapter or any other provision of this subtitle.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 916, Sec. 10, eff.
Sept. 1, 2001.
Sec. 342.005. APPLICABILITY OF CHAPTER. Except as provided by
Sections 302.001(d) and 342.004(c), a loan is subject to this
chapter if the loan:
(1) provides for interest in excess of 10 percent a year;
(2) is extended primarily for personal, family, or household
use;
(3) is made by a person engaged in the business of making,
arranging, or negotiating those types of loans; and
(4) either:
(A) is not secured by a lien on real property; or
(B) is described by Section 342.001(4), 342.301, or 342.456 and
is predominantly payable in monthly installments.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 916, Sec. 11, eff.
Sept. 1, 2001; Acts 2001, 77th Leg., ch. 1235, Sec. 12, eff.
Sept. 1, 2001.
Sec. 342.006. EXEMPTION FOR CERTAIN SECONDARY MORTGAGE LOANS.
This chapter does not apply to a secondary mortgage loan made by
a seller of property to secure all or part of the unpaid purchase
price.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.007. DEFERRED PRESENTMENT TRANSACTION. The finance
commission shall adopt rules providing for the regulation of
deferred presentment transactions.
Added by Acts 2001, 77th Leg., ch. 1235, Sec. 13, eff. Sept. 1,
2001.
Sec. 342.008. ATTEMPT TO EVADE LAW. A person who is a party to
a deferred presentment transaction may not evade the application
of this subtitle or a rule adopted under this subchapter by use
of any device, subterfuge, or pretense. Characterization of a
required fee as a purchase of a good or service in connection
with a deferred presentment transaction is a device, subterfuge,
or pretense for the purposes of this section.
Added by Acts 2001, 77th Leg., ch. 1235, Sec. 13, eff. Sept. 1,
2001.
Sec. 342.009. RETURN OF PROPERTY IN SALE-LEASEBACK TRANSACTION.
The seller in a sale-leaseback agreement may terminate the
agreement at any time by returning the property to the buyer in
substantially the same condition as when the agreement was
entered, less reasonable wear. On return of the property the
seller is liable only for rental and other allowed charges under
the agreement accruing before the date of the return.
Added by Acts 2001, 77th Leg., ch. 1235, Sec. 13, eff. Sept. 1,
2001.
SUBCHAPTER B. AUTHORIZED ACTIVITIES; LICENSE
Sec. 342.051. LICENSE REQUIRED. (a) A person must hold a
license issued under this chapter to:
(1) engage in the business of making, transacting, or
negotiating loans subject to this chapter; or
(2) contract for, charge, or receive, directly or indirectly, in
connection with a loan subject to this chapter, a charge,
including interest, compensation, consideration, or another
expense, authorized under this chapter that in the aggregate
exceeds the charges authorized under other law.
(b) A person may not use any device, subterfuge, or pretense to
evade the application of this section.
(c) A person is not required to obtain a license under
Subsection (a) if the person is:
(1) a bank, savings bank, or savings and loan association
organized under the laws of the United States or under the laws
of the institution's state of domicile; or
(2) subject to Chapter 651, Insurance Code.
(d) An insurance agent licensed under Subchapter B, C, D, or E,
Chapter 4051, Insurance Code, is not required to obtain a license
to negotiate or arrange a loan on behalf of a bank, savings bank,
or savings and loan association provided that the insurance agent
or the bank, savings bank, or savings and loan association does
not make the provision of insurance a condition to apply for or
obtain a loan or service from the bank, savings bank, or savings
and loan association.
(e) An electronic return originator who is an authorized
Internal Revenue Service e-file provider is not required to
obtain a license to make, negotiate, or transact a loan that is
based on a person's federal income tax refund on behalf of a
bank, savings bank, savings and loan association, or credit
union.
(f) A mortgage broker licensed under Chapter 156 is not required
to obtain a license under this chapter to make, negotiate, or
transact a mortgage loan, as defined by Chapter 156.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999. Amended by Acts 1999, 76th Leg., ch. 909, Sec. 2.06,
eff. Sept. 1, 1999; Acts 2001, 77th Leg., ch. 604, Sec. 1, eff.
Sept. 1, 2001.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 11.116, eff. September 1, 2005.
Acts 2007, 80th Leg., R.S., Ch.
905, Sec. 13, eff. September 1, 2007.
Sec. 342.0515. RESIDENTIAL MORTGAGE LOAN ORIGINATOR ACTIVITIES.
(a) In this section, "Nationwide Mortgage Licensing System and
Registry" and "residential mortgage loan originator" have the
meanings assigned by Section 180.002.
(b) Unless exempt under Section 180.003, an individual who acts
as a residential mortgage loan originator in the making,
transacting, or negotiating of a loan subject to this chapter
must:
(1) be individually licensed to engage in that activity under
this chapter;
(2) be enrolled with the Nationwide Mortgage Licensing System
and Registry as required by Section 180.052; and
(3) comply with other applicable requirements of Chapter 180 and
rules adopted under that chapter.
(c) The finance commission shall adopt rules establishing
procedures for issuing, renewing, and enforcing an individual
license under this section. In adopting rules under this
subsection, the finance commission shall ensure that:
(1) the minimum eligibility requirements for issuance of an
individual license are the same as the requirements of Section
180.055;
(2) the minimum eligibility requirements for renewal of an
individual license are the same as the requirements of Section
180.059; and
(3) the applicant pays:
(A) an investigation fee in a reasonable amount determined by
the commissioner; and
(B) an annual license fee in an amount determined as provided by
Section 14.107.
(d) The finance commission may adopt rules under this chapter as
required to carry out the intentions of the federal Secure and
Fair Enforcement for Mortgage Licensing Act of 2008 (Pub. L. No.
110-289).
Added by Acts 2009, 81st Leg., R.S., Ch.
1104, Sec. 10, eff. June 19, 2009.
Sec. 342.052. ISSUANCE OF MORE THAN ONE LICENSE FOR A PERSON.
(a) The commissioner may issue more than one license to a person
on compliance with this chapter for each license.
(b) A person who is required to hold a license under this
chapter must hold a separate license for each office at which
loans are made, negotiated, serviced, held, or collected under
this chapter.
(c) A license is not required under this chapter for a place of
business:
(1) devoted to accounting or other recordkeeping; and
(2) at which loans are not made, negotiated, serviced, held, or
collected under this chapter or Chapter 346.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999. Amended by Acts 1999, 76th Leg., ch. 909, Sec. 2.07,
eff. Sept. 1, 1999.
Sec. 342.053. AREA OF BUSINESS; LOANS BY MAIL. (a) A lender is
not limited to making loans to residents of the community in
which the office for which the license or other authority is
granted.
(b) A lender may make, negotiate, arrange, and collect loans by
mail from a licensed office.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
SUBCHAPTER C. APPLICATION FOR AND ISSUANCE OF LICENSE
Sec. 342.101. APPLICATION REQUIREMENTS. (a) The application
for a license under this chapter must:
(1) be under oath;
(2) give the approximate location from which business is to be
conducted;
(3) identify the business's principal parties in interest; and
(4) contain other relevant information that the commissioner
requires for the findings required under Section 342.104.
(b) On the filing of one or more license applications, the
applicant shall pay to the commissioner an investigation fee of
$200.
(c) On the filing of each license application, the applicant
shall pay to the commissioner for the license's year of issuance
a license fee in an amount determined as provided by Section
14.107.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 2001, 77th Leg., ch. 1235, Sec. 14, eff. Sept. 1,
2001.
Sec. 342.102. BOND. (a) If the commissioner requires, an
applicant for a license under this chapter shall file with the
application a bond that is:
(1) in an amount not to exceed the total of:
(A) $50,000 for the first license; and
(B) $10,000 for each additional license;
(2) satisfactory to the commissioner; and
(3) issued by a surety company qualified to do business as a
surety in this state.
(b) The bond must be in favor of this state for the use of this
state and the use of a person who has a cause of action under
this chapter against the license holder.
(c) The bond must be conditioned on:
(1) the license holder's faithful performance under this chapter
and rules adopted under this chapter; and
(2) the payment of all amounts that become due to the state or
another person under this chapter during the calendar year for
which the bond is given.
(d) The aggregate liability of a surety to all persons damaged
by the license holder's violation of this chapter may not exceed
the amount of the bond.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.08, eff. Sept. 1,
1999.
Sec. 342.103. INVESTIGATION OF APPLICATION. On the filing of an
application and, if required, a bond, and on payment of the
required fees, the commissioner shall conduct an investigation to
determine whether to issue the license.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.104. APPROVAL OR DENIAL OF APPLICATION. (a) The
commissioner shall approve the application and issue to the
applicant a license to make loans under this chapter if the
commissioner finds that:
(1) the financial responsibility, experience, character, and
general fitness of the applicant are sufficient to:
(A) command the confidence of the public; and
(B) warrant the belief that the business will be operated
lawfully and fairly, within the purposes of this chapter; and
(2) the applicant has net assets of at least $25,000 available
for the operation of the business.
(b) If the commissioner does not find the eligibility
requirements of Subsection (a), the commissioner shall notify the
applicant.
(c) If an applicant requests a hearing on the application not
later than the 30th day after the date of notification under
Subsection (b), the applicant is entitled to a hearing not later
than the 60th day after the date of the request.
(d) The commissioner shall approve or deny the application not
later than the 60th day after the date of the filing of a
completed application with payment of the required fees, or if a
hearing is held, after the date of the completion of the hearing
on the application. The commissioner and the applicant may agree
to a later date in writing.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.105. DISPOSITION OF FEES ON DENIAL OF APPLICATION. If
the commissioner denies the application, the commissioner shall
retain the investigation fee and shall return to the applicant
the license fee submitted with the application.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
SUBCHAPTER D. LICENSE
Sec. 342.151. NAME AND PLACE ON LICENSE. (a) A license must
state:
(1) the name of the license holder; and
(2) the address of the office from which the business is to be
conducted.
(b) A license holder may not conduct business under this chapter
under a name or at a place of business in this state other than
the name or office stated on the license.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.152. LICENSE DISPLAY. A license holder shall display a
license at the place of business provided on the license.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.153. MINIMUM ASSETS FOR LICENSE. (a) Except as
provided by Subsection (b) or (c), a license holder shall
maintain for each office for which a license is held net assets
of at least $25,000 that are used or readily available for use in
conducting the business of that office.
(b) A license holder who held a license under the Texas
Regulatory Loan Act and was issued a license to make loans under
that chapter as provided by Section 4, Chapter 274, Acts of the
60th Legislature, Regular Session, 1967, shall maintain for the
office for which that license is held net assets of at least
$15,000 that are used or readily available for use in conducting
the business of that office.
(c) A license holder who paid the pawnbroker's occupational tax
for 1967 and was issued a license to make loans under that
chapter as provided by Section 4, Chapter 274, Acts of the 60th
Legislature, Regular Session, 1967, is exempt from the minimum
assets requirement of Subsection (a) for the office for which
that license is held.
(d) If a license holder holds a license to which Subsection (b)
or (c) applies and subsequently transfers the license to another
person, the minimum assets required under Subsection (a) shall
apply to the license and the subsequent license holder.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.154. ANNUAL LICENSE FEE. Not later than December 1, a
license holder shall pay to the commissioner for each license
held an annual fee for the year beginning the next January 1, in
an amount determined as provided by Section 14.107.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 2001, 77th Leg., ch. 1235, Sec. 15, eff. Sept. 1,
2001.
Sec. 342.155. EXPIRATION OF LICENSE ON FAILURE TO PAY ANNUAL
FEE. If the annual fee for a license is not paid before the 16th
day after the date on which the written notice of delinquency of
payment has been given to the license holder, the license expires
on the later of:
(1) that day; or
(2) December 31 of the last year for which an annual fee was
paid.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.156. LICENSE SUSPENSION OR REVOCATION. After notice
and a hearing the commissioner may suspend or revoke a license if
the commissioner finds that:
(1) the license holder failed to pay the annual license fee, an
examination fee, an investigation fee, or another charge imposed
by the commissioner under this chapter;
(2) the license holder, knowingly or without the exercise of due
care, violated this chapter or a rule adopted or order issued
under this chapter;
(3) a fact or condition exists that, if it had existed or had
been known to exist at the time of the original application for
the license, clearly would have justified the commissioner's
denial of the application; or
(4) the license holder has failed to ensure that an individual
acting as a residential mortgage loan originator, as defined by
Section 180.002, in the making, transacting, or negotiating of a
loan subject to this chapter is licensed under this chapter in
accordance with Section 342.0515.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
1104, Sec. 11, eff. June 19, 2009.
Sec. 342.157. CORPORATE CHARTER FORFEITURE. (a) A license
holder who violates this chapter is subject to revocation of the
holder's license and, if the license holder is a corporation,
forfeiture of its charter.
(b) When the attorney general is notified of a violation of this
chapter and revocation of a license, the attorney general shall
file suit in a district court in Travis County, if the license
holder is a corporation, for forfeiture of the license holder's
charter.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.158. LICENSE SUSPENSION OR REVOCATION FILED WITH PUBLIC
RECORDS. The decision of the commissioner on the suspension or
revocation of a license and the evidence considered by the
commissioner in making the decision shall be filed in the public
records of the commissioner.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.159. REINSTATEMENT OF SUSPENDED LICENSE; ISSUANCE OF
NEW LICENSE AFTER REVOCATION. The commissioner may reinstate a
suspended license or issue a new license on application to a
person whose license has been revoked if at the time of the
reinstatement or issuance no fact or condition exists that
clearly would have justified the commissioner's denial of an
original application for the license.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.160. SURRENDER OF LICENSE. A license holder may
surrender a license issued under this chapter by delivering to
the commissioner:
(1) the license; and
(2) a written notice of the license's surrender.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.161. EFFECT OF LICENSE SUSPENSION, REVOCATION, OR
SURRENDER. (a) The suspension, revocation, or surrender of a
license issued under this chapter does not affect the obligation
of a contract between the license holder and a debtor entered
into before the revocation, suspension, or surrender.
(b) Surrender of a license does not affect the license holder's
civil or criminal liability for an act committed before
surrender.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.162. MOVING AN OFFICE. (a) A license holder shall
give written notice to the commissioner before the 30th day
preceding the date the license holder moves an office from the
location provided on the license.
(b) The commissioner shall amend a license holder's license
accordingly.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.163. TRANSFER OR ASSIGNMENT OF LICENSE. A license may
be transferred or assigned only with the approval of the
commissioner.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
SUBCHAPTER E. INTEREST CHARGES ON NON-REAL PROPERTY LOANS
Sec. 342.201. MAXIMUM INTEREST CHARGE. (a) A loan contract
under this chapter that is a regular transaction and is not
secured by real property may provide for an interest charge on
the cash advance that does not exceed the amount of add-on
interest equal to the amount computed for the full term of the
contract at an add-on interest amount equal to:
(1) $18 for each $100 per year on the part of the cash advance
that is less than or equal to the amount computed under
Subchapter C, Chapter 341, using the reference base amount of
$300; and
(2) $8 for each $100 per year on the part of the cash advance
that is more than the amount computed for Subdivision (1) but
less than or equal to an amount computed under Subchapter C,
Chapter 341, using the reference base amount of $2,500.
(b) For the purpose of Subsection (a):
(1) when the loan is made an interest charge may be computed for
the full term of the loan contract;
(2) if the period before the first installment due date includes
a part of a month that is longer than 15 days, that portion of a
month may be considered a full month; and
(3) if a loan contract provides for precomputed interest, the
amount of the loan is the total of:
(A) the cash advance; and
(B) the amount of precomputed interest.
(c) A loan contract under this chapter that is an irregular
transaction and is not secured by real property may provide for
an interest charge, using any method or formula, that does not
exceed the amount that, having due regard for the schedule of
installment payments, would produce the same effective return as
allowed under this section if the loan were payable in equal
successive monthly installments beginning one month from the date
of the contract.
(d) A loan contract under this chapter that is not secured by
real property may provide for a rate or amount of interest
computed using the true daily earnings method or the scheduled
installment earnings method that does not exceed the alternative
interest rate as computed under Subchapter A, Chapter 303.
Interest may accrue on the principal balance and amounts added to
principal after the date of the loan contract 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.
(e) A loan contract under this chapter that is not secured by
real property may provide for a rate or amount of interest
computed using the true daily earnings method or the scheduled
installment earnings method that does not exceed:
(1) 30 percent a year on that part of the cash advance that is
less than or equal to the amount computed under Subchapter C,
Chapter 341, using the reference base amount of $500;
(2) 24 percent a year on that part of the cash advance that is
more than the amount computed for Subdivision (1) but less than
or equal to an amount computed under Subchapter C, Chapter 341,
using the reference base amount of $1,050; and
(3) 18 percent a year on that part of the cash advance that is
more than the amount computed for Subdivision (2) but less than
or equal to an amount computed under Subchapter C, Chapter 341,
using the reference base amount of $2,500.
(f) A loan contract under this subchapter may provide for an
administrative fee in an amount not to exceed $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. 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.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 935, Sec. 2.01, eff. Sept. 1,
1999; Acts 2001, 77th Leg., ch. 916, Sec. 1, eff. Sept. 1, 2001;
Acts 2003, 78th Leg., ch. 211, Sec. 2.03(a), eff. June 16, 2003.
Sec. 342.202. MAXIMUM CHARGE FOR LOAN WITH SINGLE REPAYMENT. A
loan contract that exceeds the maximum cash advance under Section
342.251 and that is payable in a single installment may provide
for an interest charge on the cash advance that does not exceed a
rate or amount that would produce the same effective return,
determined as a true daily earnings rate, as allowed under
Section 342.201 considering the amount and term of the loan. If a
loan under this section is prepaid in full, the lender may earn a
minimum interest charge of $25.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.09, eff. Sept. 1,
1999.
Sec. 342.203. ADDITIONAL INTEREST FOR DEFAULT: REGULAR
TRANSACTION. (a) A loan contract that includes precomputed
interest or uses the scheduled installment earnings method and
that is a regular transaction may provide for additional interest
for default 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.
(b) A loan contract that uses the scheduled installment earnings
method and that is a regular transaction may provide for
additional interest for default 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.
(c) A loan contract that includes simple interest and that is a
regular transaction may provide for additional interest for
default 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.
(d) The additional interest may not exceed five cents for each
$1 of a scheduled installment.
(e) Interest under this section may not be collected more than
once on the same installment.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.10, eff. Sept. 1,
1999; Acts 1999, 76th Leg., ch. 934, Sec. 2.01, eff. Sept. 1,
1999.
Sec. 342.204. ADDITIONAL INTEREST FOR INSTALLMENT DEFERMENT:
REGULAR TRANSACTION. (a) On a loan contract that includes
precomputed interest or uses the scheduled installment earnings
method and that is a regular transaction, an authorized lender
may charge additional interest for the deferment of an
installment if:
(1) the entire amount of the installment is unpaid;
(2) no interest for default has been collected on the
installment; and
(3) payment of the installment is deferred for one or more full
months and the maturity of the contract is extended for a
corresponding period.
(b) The interest for deferment under Subsection (a) may not
exceed the amount computed by:
(1) taking the difference between the refund that would be
required for prepayment in full as of the date of deferment and
the refund that would be required for prepayment in full one
month before the date of deferment; and
(2) multiplying the results under Subdivision (1) by the number
of months in the deferment period.
(c) The amount of interest applicable to each deferred balance
or installment period occurring after a deferment period remains
the amount applicable to that balance or period under the
original loan contract.
(d) If a loan is prepaid in full during the deferment period,
the borrower shall receive, in addition to the refund required
under Subchapter H, a pro rata refund of that part of the
interest for deferment applicable to the number of full months
remaining in the deferment period on the payment date.
(e) For the purposes of this section, a deferment period is the
period during which a payment is not required or made because of
the deferment and begins on the day after the due date of the
scheduled installment that precedes the first installment being
deferred.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.11, eff. Sept. 1,
1999.
Sec. 342.205. COLLECTION OF DEFAULT OR DEFERMENT INTEREST.
Interest for default under Section 342.203 or for installment
deferment under Section 342.204 may be collected when it accrues
or at any time after it accrues.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.206. ADDITIONAL INTEREST FOR DEFAULT: IRREGULAR
TRANSACTION. (a) A loan contract that includes precomputed
interest and that is an irregular transaction may provide for
additional interest for default using the true daily earnings
method for the period from the maturity date of an installment
until the date the installment is paid. The rate of the
additional interest may not exceed the maximum contract interest
rate.
(b) A loan contract that includes simple interest and that is an
irregular transaction may provide for additional interest for
default 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 additional interest may not
exceed five cents for each $1 of a scheduled installment.
Interest under this subsection may not be collected more than
once on the same installment.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 934, Sec. 2.02, eff. Sept. 1,
1999.
SUBCHAPTER F. ALTERNATE CHARGES FOR CERTAIN LOANS
Sec. 342.251. MAXIMUM CASH ADVANCE. The maximum cash advance of
a loan made under this subchapter is an amount computed under
Subchapter C, Chapter 341, using the reference base amount of
$100, except that for loans that are subject to Section 342.259
the reference base amount is $200.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.22, eff. September 1, 2005.
Sec. 342.252. ALTERNATE INTEREST CHARGE. 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; and
(B) an installment account handling charge that is not more than
the ratio of $4 a month for each $100 of cash advance.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.253. MAXIMUM INTEREST CHARGE FOR LOAN WITH SINGLE
REPAYMENT. A loan contract to which Section 342.251 applies and
that is payable in a single installment may provide for an
acquisition charge and an interest charge on the cash advance
that does not exceed a rate or amount that would produce the same
effective return, determined as a true daily earnings rate, as
allowed under Section 342.252 considering the amount and term of
the loan. If a loan that has a term in excess of one month under
this section is prepaid in full, the lender may earn a minimum of
the acquisition charge and interest charge for one month. If a
loan under this section has an initial term of less than one
month, the lender may earn a minimum of the acquisition charge
and an interest charge that produces the same effective return as
the installment account handling charge computed at a daily rate
for the term the loan is outstanding.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.12, eff. Sept. 1,
1999.
Sec. 342.254. NO OTHER CHARGES AUTHORIZED. (a) On a loan made
under this subchapter a lender may not contract for, charge, or
receive an amount unless this subchapter authorizes the amount to
be charged.
(b) An insurance charge is not authorized on a loan made under
this subchapter.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.255. MAXIMUM LOAN TERM. The maximum 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.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.256. REFUND. (a) An acquisition charge authorized
under Section 342.252(1), (2), or (3) is considered to be earned
at the time a loan is made and is not subject to refund.
(b) On the prepayment of a loan with a cash advance of $30 or
more, the installment account handling charge authorized under
Section 342.252(2) or (3) is subject to refund in accordance with
Subchapter H.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 189, Sec. 1, eff.
Sept. 1, 2001.
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 $10 or five cents for each $1
of the delinquent installment.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.23, eff. September 1, 2005.
Sec. 342.258. SCHEDULES FOR WEEKLY, BIWEEKLY, OR SEMIMONTHLY
INSTALLMENTS. The commissioner may prepare schedules that may be
used by an authorized lender for the repayment of a loan made
under this subchapter by weekly, biweekly, or semimonthly
installments.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.259. LOANS WITH LARGER ADVANCES. (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; and
(2) an installment account handling charge that is not more than
the ratio of $4 a month for each $100 of cash advance.
(b) An acquisition charge under this section is considered to be
earned at the time a loan is made and is not subject to refund.
On the prepayment of a loan that is subject to this section, the
installment account handling charge is subject to refund in
accordance with Subchapter H.
(c) Except as provided by this section, provisions of this
chapter applicable to a loan that is subject to Section 342.252
also apply to a loan that is subject to this section.
Added by Acts 2005, 79th Leg., Ch.
1018, Sec. 2.24, eff. September 1, 2005.
SUBCHAPTER G. INTEREST AND OTHER CHARGES ON SECONDARY MORTGAGE
LOANS
Sec. 342.301. MAXIMUM INTEREST CHARGE. (a) A secondary
mortgage loan that is a regular transaction may provide for an
interest charge on the cash advance that is precomputed and that
does not exceed a rate or amount that would produce the same
effective return as allowed under Subchapter A, Chapter 303.
(b) For the purpose of Subsection (a):
(1) when the loan is made an interest charge may be computed for
the full term of the loan contract;
(2) if the period before the first installment due date includes
a part of a month that is longer than 15 days, that portion of a
month may be considered a full month; and
(3) if a loan contract provides for precomputed interest, the
amount of the loan is the total of:
(A) the cash advance; and
(B) the amount of precomputed interest.
(c) A secondary mortgage loan may provide for a rate or amount
of interest calculated using the true daily earnings method or
the scheduled installment earnings method that does not exceed
the alternative rate ceiling in Subchapter A, Chapter 303.
Interest may accrue on the principal balance and amounts added to
principal after the date of the loan contract 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. An interest charge
under this subsection may not be precomputed.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.302. ADDITIONAL INTEREST FOR DEFAULT: REGULAR
TRANSACTION OR TRANSACTION INCLUDING SIMPLE INTEREST. (a) A
secondary mortgage loan that includes precomputed interest and
that is a regular transaction may provide for additional interest
for default 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.
(b) A secondary mortgage loan contract that uses the scheduled
installment earnings method and that is a regular transaction may
provide for additional interest for default 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.
(c) The additional interest for default under this section may
not exceed five cents for each $1 of a scheduled installment.
(d) Interest under this section may not be collected more than
once on the same installment.
(e) A secondary mortgage loan that includes simple interest may
provide for additional interest for default 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.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 2003, 78th Leg., ch. 27, Sec. 1, 2, eff. May 12,
2003.
Sec. 342.303. ADDITIONAL INTEREST FOR INSTALLMENT DEFERMENT:
REGULAR TRANSACTIONS. (a) On a secondary mortgage loan that
includes precomputed interest or uses the scheduled installment
earnings method and that is a regular transaction, an authorized
lender may charge additional interest for the deferment of an
installment if:
(1) the entire amount of the installment is unpaid;
(2) no interest for default has been collected on the
installment; and
(3) payment of the installment is deferred for one or more full
months and the maturity of the contract is extended for a
corresponding period.
(b) The interest for deferment under Subsection (a) may not
exceed the amount computed by:
(1) taking the difference between the refund that would be
required for prepayment in full as of the date of deferment and
the refund that would be required for prepayment in full one
month before the date of deferment; and
(2) multiplying the results under Subdivision (1) by the number
of months in the deferment period.
(c) The amount of interest applicable to each deferred balance
or installment period occurring after a deferment period remains
the amount applicable to that balance or period under the
original loan contract.
(d) If a loan is prepaid in full during the deferment period,
the borrower shall receive, in addition to the refund required
under Subchapter H, a pro rata refund of that part of the
interest for deferment applicable to the number of full months
remaining in the deferment period on the payment date.
(e) For the purposes of this section, a deferment period is the
period during which a payment is not required or made because of
the deferment and begins on the day after the due date of the
scheduled installment that precedes the first installment being
deferred.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.13, eff. Sept. 1,
1999.
Sec. 342.304. COLLECTION OF DEFAULT OR DEFERMENT INTEREST.
Interest for default under Section 342.302 or for installment
deferment under Section 342.303 may be collected when it accrues
or at any time after it accrues.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.305. ADDITIONAL INTEREST FOR DEFAULT: IRREGULAR
TRANSACTION. A secondary mortgage loan that includes precomputed
interest and that is an irregular transaction may provide for
additional interest for default using the true daily earnings
method for the period from the maturity date of an installment
until the date the installment is paid. The rate of the
additional interest may not exceed the maximum contract interest
rate.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.306. DATE OF FIRST SCHEDULED INSTALLMENT. On a
secondary mortgage loan made under this chapter the due date of
the first installment may not be scheduled later than three
months after the date of the loan.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.307. AMOUNTS AUTHORIZED TO BE INCLUDED IN CONTRACT. A
secondary mortgage loan contract may provide for:
(1) reasonable fees or charges paid to the trustee in connection
with a deed of trust or similar instrument executed in connection
with the secondary mortgage loan, including fees for enforcing
the lien against or posting for sale, selling, or releasing the
property secured by the deed of trust;
(2) reasonable fees paid to an attorney who is not an employee
of the creditor in the collection of a delinquent secondary
mortgage loan; or
(3) court costs and fees incurred in the collection of the loan
or foreclosure of a lien created by the loan.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.14, eff. Sept. 1,
1999.
Sec. 342.308. AMOUNTS AUTHORIZED TO BE COLLECTED OR ADDED TO
LOAN. (a) A lender or a person who is assigned a secondary
mortgage loan may collect on or before the closing of the loan,
or include in the principal of the loan:
(1) reasonable fees for:
(A) title examination and preparation of an abstract of title
by:
(i) an attorney who is not an employee of the lender; or
(ii) a title company or property search company authorized to do
business in this state; or
(B) premiums or fees for title insurance or title search for the
benefit of the mortgagee and, at the mortgagor's option, for
title insurance or title search for the benefit of the mortgagor;
(2) reasonable fees charged to the lender by an attorney who is
not a salaried employee of the lender for preparation of the loan
documents in connection with the mortgage loan if the fees are
evidenced by a statement for services rendered;
(3) charges prescribed by law that are paid to public officials
for determining the existence of a security interest or for
perfecting, releasing, or satisfying a security interest;
(4) reasonable fees for an appraisal of real property offered as
security for the loan prepared by an appraiser who is not a
salaried employee of the lender;
(5) the reasonable cost of a credit report;
(6) reasonable fees for a survey of real property offered as
security for the loan prepared by a registered surveyor who is
not a salaried employee of the lender;
(7) the premiums received in connection with the sale of credit
life insurance, credit accident and health insurance, or other
insurance that protects the mortgagee against default by the
mortgagor, the benefits of which are applied in whole or in part
to reduce or extinguish the loan balance; or
(8) reasonable fees relating to real property offered as
security for the loan that are incurred to comply with a
federally mandated program if the collection of the fees or the
participation in the program is required by a federal agency; and
(9) an administrative fee, subject to Subsection (c), in an
amount not to exceed $25 for a loan of more than $1,000 or $20
for a loan of $1,000 or less.
(b) Premiums for property insurance that conform with Section
342.401 may be added to the loan contract.
(c) An administrative fee under Subsection (a)(9) is considered
earned when the loan is made or refinanced and is not subject to
refund. 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. Fifty cents of each administrative fee may be
deposited with the comptroller for use in carrying out the
finance commission's responsibilities under Section 11.3055.
(d) Costs that conform to Section 342.4021(a) may be added to
the loan contract.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999. Amended by Acts 1999, 76th Leg., ch. 909, Sec. 2.15,
eff. Sept. 1, 1999, Acts 1999, 76th Leg., ch. 935, Sec. 2.02,
eff. Sept. 1, 1999; Acts 2003, 78th Leg., ch. 211, Sec. 2.03(b),
eff. June 16, 2003; Acts 2003, 78th Leg., ch. 1265, Sec. 1, eff.
June 20, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.21, eff. September 1, 2005.
SUBCHAPTER H. REFUND OF PRECOMPUTED INTEREST
Sec. 342.351. REFUND OF PRECOMPUTED INTEREST: SUM OF THE
PERIODIC BALANCES. (a) This section applies to a loan contract
that includes precomputed interest authorized under Subchapter F
or G and that is a regular transaction.
(b) If the contract is prepaid in full, including payment in
cash or by a new loan or renewal of the loan, or if the lender
demands payment in full of the unpaid balance, after the first
installment due date but before the final installment due date,
the lender shall refund or credit to the borrower the amount
computed by:
(1) dividing the sum of the periodic balances scheduled to
follow the installment date after the date of the prepayment or
demand, as appropriate, by the sum of all the periodic balances
under the schedule of payments set out in the loan contract; and
(2) multiplying the total interest contracted for under Section
342.252 or 342.301, as appropriate, by the result under
Subdivision (1).
(c) If the prepayment in full or demand for payment in full
occurs before the first installment due date, the lender shall:
(1) retain an amount computed by:
(A) dividing 30 into the amount that could be retained if the
first installment period were one month and the loan were prepaid
in full on the date the first installment is due; and
(B) multiplying the result under Paragraph (A) by the number of
days in the period beginning on the date the loan was made and
ending on the date of the prepayment or demand; and
(2) refund or credit to the borrower the amount computed by
subtracting the amount retained under Subdivision (1) from the
interest contracted for under Section 342.252 or 342.301, as
appropriate.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 916, Sec. 2, eff.
Sept. 1, 2001.
Sec. 342.352. REFUND OF PRECOMPUTED INTEREST ON CONTRACT:
SCHEDULED INSTALLMENT EARNINGS. (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
(3) that has a term of more than 60 months.
(b) If the contract is prepaid in full, including payment in
cash or by a new loan or renewal of the loan, or if the lender
demands payment in full of the unpaid balance before final
maturity of the contract, the lender earns interest for the
period beginning on the date of the loan and ending on the date
of the prepayment or demand, as applicable, an amount that does
not exceed the amount allowed by Subsection (f) using the simple
annual interest rate under the contract.
(c) If prepayment in full or demand for payment in full occurs
during an installment period, the lender may retain, in addition
to interest that accrued during any elapsed installment periods,
an amount computed by:
(1) multiplying the simple annual interest rate under the
contract by the unpaid principal balance of the loan determined
according to the schedule of payments to be outstanding on the
preceding installment due date;
(2) dividing 365 into the product under Subdivision (1); and
(3) multiplying the number of days in the period beginning on
the day after the installment due date and ending on the date of
the prepayment or demand, as appropriate, by the result obtained
under Subdivision (2).
(d) The lender may also earn interest on an addition to
principal, or other permissible charges, added to the loan after
the date of the loan contract, accruing at the simple annual
interest rate under the contract from the date of the addition
until the date paid or the date the lender demands payment in
full of the total unpaid balance under the loan contract.
(e) The lender shall refund or credit to the borrower the amount
computed by subtracting the total amount retained under
Subsections (b), (c), and (d) from the total amount of interest
contracted for and precomputed in the amount of the loan.
(f) For the purposes of this section, the simple annual interest
rate under a contract is equal to the rate computed under the
scheduled installment earnings method.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 916, Sec. 3, eff.
Sept. 1, 2001; Acts 2001, 77th Leg., ch. 916, Sec. 4, eff. Sept.
1, 2001.
Sec. 342.353. NO REFUND ON PARTIAL PREPAYMENT OR OF AMOUNT LESS
THAN $1. A refund is not required under this subchapter for a
partial prepayment or if the amount to be refunded is less than
$1.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
SUBCHAPTER I. INSURANCE
Sec. 342.401. REQUIRED PROPERTY INSURANCE. (a) On a loan that
is subject to Subchapter E with a cash advance of $300 or more, a
lender may require a borrower to insure tangible personal
property offered as security for the loan.
(b) On a secondary mortgage loan, a lender may require a
borrower to provide property insurance as security against
reasonable risks of loss, damage, and destruction.
(c) The insurance coverage and the premiums or charges for the
coverage must bear a reasonable relationship to:
(1) the amount, term, and conditions of the loan;
(2) the value of the collateral; and
(3) the existing hazards or risk of loss, damage, or
destruction.
(d) The insurance may not:
(1) cover unusual or exceptional risks; or
(2) provide coverage not ordinarily included in policies issued
to the general public.
(e) A creditor may not require the purchase of duplicate
property insurance if the creditor has knowledge that the
borrower:
(1) has valid and collectible insurance covering the property;
and
(2) has provided a loss payable endorsement sufficient to
protect the creditor.
(f) For purposes of determining the knowledge required under
Subsection (e), a creditor may rely on a written consent to
purchase insurance in which the borrower is given the opportunity
to disclose the existence of other coverage.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.16, eff. Sept. 1,
1999.
Sec. 342.402. CREDIT LIFE INSURANCE, CREDIT HEALTH AND ACCIDENT
INSURANCE, OR INVOLUNTARY UNEMPLOYMENT INSURANCE. (a) On a loan
made under this chapter that is subject to Subchapter E with a
cash advance of $100 or more, a lender may:
(1) offer a borrower credit life insurance and credit health and
accident insurance as additional protection for the loan; and
(2) offer involuntary unemployment insurance to the borrower at
the time the loan is made.
(b) A lender may not require that the borrower accept or provide
the insurance described by Subsection (a).
(c) On a secondary mortgage loan made under this chapter, a
lender may require that a borrower provide credit life insurance
and credit accident and health insurance as additional protection
for the loan.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.17, eff. Sept. 1,
1999.
Sec. 342.4021. AGREEMENTS REGARDING DEBT SUSPENSION, DEBT
CANCELLATION, AND GAP WAIVER. (a) In connection with a loan
made under this chapter that is subject to Section 342.201(d) or
342.301(c), a lender may offer to the borrower a debt suspension
agreement or debt cancellation agreement under similar terms and
conditions as such an agreement may be offered by a bank or
savings association.
(b) In connection with a loan made under this chapter that is
subject to Section 342.201(d) and that is secured by a motor
vehicle, a lender may offer to the borrower at the time the loan
is made a gap waiver agreement.
(c) A lender may not require that a borrower accept or provide
an agreement or contract under Subsection (a) or (b).
(d) In addition to other disclosures required by state or
federal law and before offering an agreement or contract
authorized by this section, the lender shall provide to the
borrower a notice separate from the loan documents stating that
the borrower is not required to accept or provide the agreement
or contract to obtain the loan.
(e) The amount charged for a product authorized by Subsection
(a) or (b) must be reasonable.
Added by Acts 2003, 78th Leg., ch. 1265, Sec. 2, eff. June 20,
2003.
Sec. 342.403. MAXIMUM AMOUNT OF INSURANCE COVERAGE. (a) At any
time the total amount of the policies of credit life insurance in
force on one borrower on one loan contract may not exceed the
greater of:
(1) the total amount repayable under the loan contract if the
loan is an irregular transaction; or
(2) the greater of the scheduled or actual amount of unpaid
indebtedness if the loan is a regular transaction.
(b) At any time the total amount of the policies of credit
accident and health insurance or involuntary unemployment
insurance in force on one borrower on one loan contract may not
exceed the total amount repayable under the loan contract, and
the amount of each periodic indemnity payment may not exceed the
scheduled periodic installment payment on the loan.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.404. INSURANCE NOTICE. (a) If insurance is required
on a loan made under this chapter, the lender shall give to the
borrower written notice that clearly and conspicuously states
that:
(1) insurance is required in connection with the loan; and
(2) the borrower as an option may furnish the required insurance
coverage through an insurance policy that is in existence and
that is owned or controlled by the borrower or an insurance
policy obtained from an insurance company authorized to do
business in this state.
(b) If insurance requested or required on a loan made under this
chapter is sold or obtained by a lender at a premium or rate of
charge that is not fixed or approved by the commissioner of
insurance, the lender shall notify the borrower of that fact. If
notice is required under Subsection (a), the lender shall include
that fact in the notice required by Subsection (a).
(c) A notice required under this section may be:
(1) a separate writing delivered with the loan contract; or
(2) a part of the loan contract.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.405. INSURANCE MAY BE FURNISHED BY BORROWER. (a) If
insurance is required on a loan made under this chapter, the
borrower may furnish the insurance coverage through an insurance
policy that is in existence and that is owned or controlled by
the borrower or an insurance policy obtained by the borrower from
an insurance company authorized to do business in this state.
(b) If insurance is required on a loan made under this chapter
and the insurance is sold or obtained by the lender at a premium
or rate of charge that is not fixed or approved by the
commissioner of insurance, the borrower has the option of
furnishing the required insurance under this section at any time
before the sixth day after the date of the loan.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.19(a), eff. Sept.
1, 1999.
Sec. 342.406. BORROWER'S FAILURE TO PROVIDE REQUIRED INSURANCE.
(a) If a borrower fails to obtain or maintain insurance coverage
required under a loan contract or requests the lender to obtain
that coverage, the lender may obtain substitute insurance
coverage that is substantially equivalent to or more limited than
the coverage originally required.
(b) If a loan is subject to Subchapter E, the lender may obtain
insurance to cover only the interest of the lender as a secured
party if the borrower does not request that the borrower's
interest be covered.
(c) Insurance obtained under this section must comply with