CHAPTER 342. CONSUMER LOANS - Texas Statutes

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