CHAPTER 302. INTEREST RATES - Texas Statutes

FINANCE CODE

TITLE 4. REGULATION OF INTEREST, LOANS, AND FINANCED TRANSACTIONS

SUBTITLE A. INTEREST

CHAPTER 302. INTEREST RATES

SUBCHAPTER A. USURIOUS INTEREST

Sec. 302.001. CONTRACTING FOR, CHARGING, OR RECEIVING INTEREST

OR TIME PRICE DIFFERENTIAL; USURIOUS INTEREST. (a) A creditor

may contract for, charge, and receive from an obligor interest or

time price differential.

(b) The maximum rate or amount of interest is 10 percent a year

except as otherwise provided by law. A greater rate of interest

than 10 percent a year is usurious unless otherwise provided by

law. All contracts for usurious interest are contrary to public

policy and subject to the appropriate penalty prescribed by

Chapter 305.

(c) To determine the interest rate of a loan under this

subtitle, all interest at any time contracted for shall be

aggregated and amortized using the actuarial method during the

stated term of the loan.

(d) In addition to interest authorized by Subsection (b), a loan

providing for a rate of interest that is 10 percent a year or

less may provide for a delinquency charge on the amount of any

payment in default for a period of not less than 10 days in an

amount not to exceed the greater of five percent of the amount of

the payment or $7.50. The charging of the delinquency charge does

not make the loan subject to Chapter 342 or any other provision

of Subtitle B.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.

1, 1999; Acts 2001, 77th Leg., ch. 916, Sec. 8, eff. Sept. 1,

2001.

Sec. 302.002. ACCRUAL OF INTEREST WHEN NO RATE SPECIFIED. If a

creditor has not agreed with an obligor to charge the obligor any

interest, the creditor may charge and receive from the obligor

legal interest at the rate of six percent a year on the principal

amount of the credit extended beginning on the 30th day after the

date on which the amount is due. If an obligor has agreed to pay

to a creditor any compensation that constitutes interest, the

obligor is considered to have agreed on the rate produced by the

amount of that interest, regardless of whether that rate is

stated in the agreement.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.

1, 1999.

SUBCHAPTER B. OTHER RATES AND PROVISIONS ON LOANS SECURED BY REAL

PROPERTY

Sec. 302.101. DETERMINING RATES OF INTEREST BY SPREADING. (a)

To determine whether a loan secured in any part by an interest in

real property, including a lien, mortgage, or security interest,

is usurious, the interest rate is computed by amortizing or

spreading, using the actuarial method during the stated term of

the loan, all interest at any time contracted for, charged, or

received in connection with the loan.

(b) If a loan described by Subsection (a) is paid in full before

the end of the stated term of the loan and the amount of interest

received for the period that the loan exists exceeds the amount

that produces the maximum rate authorized by law for that period,

the lender shall:

(1) refund the amount of the excess to the borrower; or

(2) credit the amount of the excess against amounts owing under

the loan.

(c) A lender who complies with Subsection (b) is not subject to

any of the penalties provided by law for contracting for,

charging, or receiving interest in excess of the maximum rate

authorized.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.

1, 1999.

Sec. 302.102. PROHIBITION ON PREPAYMENT PENALTY. If the

interest rate on a loan for property that is or is to be the

residential homestead of the borrower is greater than 12 percent

a year, a prepayment penalty may not be collected on the loan

unless the penalty is required by an agency created by federal

law.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.

1, 1999; Acts 1999, 76th Leg., ch. 909, Sec. 2.02, eff. Sept. 1,

1999.

Sec. 302.103. EFFECT OF FEDERAL PREEMPTION ON LATE CHARGES. On

loans subject to 12 U.S.C. Sections 1735f-7 and 1735f-7a, as

amended, any late charges assessed are interest that is included

in computing the amount or rate of interest on the loan and,

therefore, covered by the federal preemption of state interest

rate limitations.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.

1, 1999.

Sec. 302.104. LOAN TO PURCHASE INTEREST IN ENTITY WITH FOREIGN

REAL PROPERTY AS PRINCIPAL ASSET. (a) A loan the proceeds of

which are used primarily to purchase an interest in a trust or

other entity that has as its principal asset real property

located outside the United States is:

(1) not subject to Subtitle B; and

(2) subject to the interest rate limitations of Chapter 303.

(b) For the purpose of determining the interest rate on a loan

to which this section applies, all interest contracted for,

charged, or received shall be amortized, prorated, allocated, and

spread over the full stated term of the loan.

(c) This section does not affect application of a law of this

state governing collateral that may be used to secure a loan to

which this section applies.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.

1, 1999.