CHAPTER 305. PENALTIES AND REMEDIES - Texas Statutes

FINANCE CODE

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

SUBTITLE A. INTEREST

CHAPTER 305. PENALTIES AND REMEDIES

SUBCHAPTER A. CIVIL LIABILITY; CRIMINAL PENALTY

Sec. 305.001. LIABILITY FOR USURIOUS INTEREST. (a) A creditor

who contracts for, charges, or receives interest that is greater

than the amount authorized by this subtitle in connection with a

transaction for personal, family, or household use is liable to

the obligor for an amount that is equal to the greater of:

(1) three times the amount computed by subtracting the amount of

interest allowed by law from the total amount of interest

contracted for, charged, or received; or

(2) $2,000 or 20 percent of the amount of the principal,

whichever is less.

(a-1) A creditor who contracts for or receives interest that is

greater than the amount authorized by this subtitle in connection

with a commercial transaction is liable to the obligor for an

amount that is equal to three times the amount computed by

subtracting the amount of interest allowed by law from the total

amount of interest contracted for or received.

(b) This section applies only to a contract or transaction

subject to this subtitle.

(c) A creditor who charges or receives interest in excess of the

amount contracted for, but not in excess of the maximum amount

authorized by law, is not subject to penalties for usurious

interest but may be liable for other remedies and relief as

provided by law.

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

1, 1999.

Amended by:

Acts 2005, 79th Leg., Ch.

1018, Sec. 2.05, eff. September 1, 2005.

Sec. 305.002. ADDITIONAL LIABILITY FOR MORE THAN TWICE

AUTHORIZED RATE OF INTEREST. (a) In addition to the amount

determined under Section 305.001, a creditor who charges and

receives interest that is greater than twice the amount

authorized by this subtitle is liable to the obligor for:

(1) the principal amount on which the interest is charged and

received; and

(2) the interest and all other amounts charged and received.

(b) This section applies only to a contract or transaction for

personal, family, or household use subject to this subtitle.

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

1, 1999.

Amended by:

Acts 2005, 79th Leg., Ch.

1018, Sec. 2.06, eff. September 1, 2005.

Sec. 305.003. LIABILITY FOR USURIOUS LEGAL INTEREST. (a) A

creditor who charges or receives legal interest that is greater

than the amount authorized by this subtitle is liable to the

obligor for an amount that is equal to the greater of:

(1) three times the amount computed by subtracting the amount of

legal interest allowed by law from the total amount of interest

charged or received; or

(2) $2,000 or 20 percent of the amount of the principal,

whichever is less.

(b) This section applies only to a transaction subject to this

subtitle.

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

1, 1999.

Sec. 305.004. ADDITIONAL LIABILITY FOR MORE THAN TWICE

AUTHORIZED RATE OF LEGAL INTEREST. (a) In addition to the

amount determined under Section 305.003, a creditor who charges

and receives legal interest that is greater than twice the amount

authorized by this subtitle is liable to the obligor for:

(1) the principal amount on which the interest is charged and

received; and

(2) the interest and all other amounts charged and received.

(b) This section applies only to a transaction subject to this

subtitle.

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

1, 1999.

Sec. 305.005. ATTORNEY'S FEES. A creditor who is liable under

Section 305.001 or 305.003 is also liable to the obligor for

reasonable attorney's fees set by the court.

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

1, 1999.

Sec. 305.006. LIMITATION ON FILING SUIT. (a) An action under

this chapter must be brought within four years after the date on

which the usurious interest was contracted for, charged, or

received. The action must be brought in the county in which:

(1) the transaction was entered into;

(2) the usurious interest was charged or received;

(3) the creditor resides at the time of the cause of action, if

the creditor is an individual;

(4) the creditor maintains its principal office, if the creditor

is not an individual; or

(5) the obligor resides at the time of the accrual of the cause

of action.

(b) Not later than the 61st day before the date an obligor files

a suit seeking penalties for a transaction in which a creditor

has contracted for, charged, or received usurious interest, the

obligor shall give the creditor written notice stating in

reasonable detail the nature and amount of the violation.

(c) A creditor who receives a notice under this section may

correct the violation as provided by Section 305.103 during the

period beginning on the date the notice is received and ending on

the 60th day after that date. A creditor who corrects a violation

as provided by this section is not liable to an obligor for the

violation.

(d) With respect to a defendant filing a counterclaim action

alleging usurious interest in an original action by the creditor,

the defendant shall provide notice complying with Subsection (b)

at the time of filing the counterclaim and, on application of the

creditor to the court, the action is subject to abatement for a

period of 60 days from the date of the court order. During the

abatement period the creditor may correct a violation. As part

of the correction of the violation, the creditor shall offer to

pay the obligor's reasonable attorney's fees as determined by the

court based on the hours reasonably expended by the obligor's

counsel with regard to the alleged violation before the

abatement. A creditor who corrects a violation as provided by

this subsection is not liable to an obligor for the violation.

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

1, 1999.

Amended by:

Acts 2005, 79th Leg., Ch.

1018, Sec. 2.07, eff. September 1, 2005.

Sec. 305.007. PENALTIES EXCLUSIVE. The penalties provided by

this chapter are the only penalties for violation of this

subtitle for contracting for, charging, or receiving interest in

an amount that produces a rate in excess of the maximum rate

allowed by law. Common law penalties do not apply.

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

1, 1999.

Sec. 305.008. CRIMINAL PENALTY. (a) A person commits an

offense if the person contracts for, charges, or receives

interest on a transaction for personal, family, or household use

that is greater than twice the amount authorized by this

subtitle.

(b) An offense under this section is a misdemeanor punishable by

a fine of not more than $1,000.

(c) Each contract or transaction that violates this section is a

separate offense.

(d) This section applies only to a contract or transaction

subject to this subtitle.

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

1, 1999.

SUBCHAPTER B. EXCEPTION FROM LIABILITY

Sec. 305.101. ACCIDENTAL AND BONA FIDE ERROR. A creditor is not

subject to penalty under this chapter for any usurious interest

that results from an accidental and bona fide error.

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

1, 1999.

Sec. 305.102. LEGAL INTEREST DURING INTEREST-FREE PERIOD. A

person is not liable to an obligor solely because the person

charges or receives legal interest before the 30th day after the

date on which the debt is due.

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

1, 1999.

Sec. 305.103. CORRECTION OF VIOLATION. (a) A creditor is not

liable to an obligor for a violation of this subtitle if:

(1) not later than the 60th day after the date the creditor

actually discovered the violation, the creditor corrects the

violation as to that obligor by taking any necessary action and

making any necessary adjustment, including the payment of

interest on a refund, if any, at the applicable rate provided for

in the contract of the parties; and

(2) the creditor gives written notice to the obligor of the

violation before the obligor gives written notice of the

violation or files an action alleging the violation.

(b) For the purposes of Subsection (a), a violation is actually

discovered at the time of the discovery of the violation in fact

and not at the time when an ordinarily prudent person, through

reasonable diligence, could or should have discovered or known of

the violation. Actual discovery of a violation in one transaction

may constitute actual discovery of the same violation in other

transactions if the violation is of such a nature that it would

necessarily be repeated and would be clearly apparent in the

other transactions without the necessity of examining all the

other transactions.

(c) For purposes of Subsection (a), written notice is given when

the notice is delivered to the person or to the person's

authorized agent or attorney of record personally, by telecopier,

or by United States mail to the address shown on the most recent

documents in the transaction. Deposit of the notice as registered

or certified mail in a postage paid, properly addressed wrapper

in a post office or official depository under the care and

custody of the United States Postal Service is prima facie

evidence of the delivery of the notice to the person to whom the

notice is addressed.

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

1, 1999.

Sec. 305.104. CORRECTION EXCEPTION AVAILABLE TO ALL SIMILARLY

SITUATED. If in a single transaction more than one creditor may

be liable for a violation of this subtitle, compliance with

Section 305.103 by any of those creditors entitles each to the

same protection provided by that section.

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

1, 1999.

Sec. 305.105. AMOUNTS PAYABLE PURSUANT TO A FINAL JUDGMENT. A

creditor is not liable to an obligor for a violation of this

subtitle if the creditor receives interest that has been awarded

pursuant to a final judgment that is no longer subject to

modification or reversal.

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

1, 1999.