Words and terms used in this subchapter that are defined in
Texas Finance Code, Chapter 342 have the same meanings as defined
in Chapter 342. The following words and terms, when used in this subchapter,
will have the following meanings, unless the context clearly indicates
otherwise.
(1) Acquisition charge--A charge authorized for making
the cash advance under the authority of Texas Finance Code, §342.252
and §342.259.
(2) Add-on interest--A method for calculating precomputed
interest in which the borrower agrees to pay the total of payments,
which includes both interest and principal, as opposed to agreeing
to pay the principal plus interest as it accrues at a certain rate.
Add-on interest is calculated at the outset of a loan on the cash
advance for the full term, as if the principal did not decline over
the course of the loan. For example, a $1,000 loan with 12 monthly
installments and an add-on interest amount of $8.00 per hundred per
annum would have a total charge of interest of $80 and monthly payments
of $90, yielding an annual percentage rate ("APR") of 14.45%.
(3) Amount financed--The amount calculated in accordance
with Regulation Z, 12 C.F.R. §1026.18(b).
(4) Authorized charge--Any charge authorized by applicable
Texas law to be included in the credit transaction.
(5) Authorized lender--A person who has obtained a
regulated loan license from the Office of Consumer Credit Commissioner,
or a bank, savings bank, savings and loan association, or credit union
doing business under the laws of this state, another state, or the
United States. Banks, savings banks, and savings and loan associations
chartered in other states insured by the Federal Deposit Insurance
Corporation, and credit unions chartered in other states insured through
the National Credit Union Share Insurance Fund are included in this
term. Separate entities that are subsidiaries or affiliates of licensees
or authorized banks, savings banks, savings and loan associations,
or credit unions are not authorized lenders unless they meet the required
elements of the definition of an authorized lender in their own right.
(6) Commissioner--The Consumer Credit Commissioner
of the State of Texas.
(7) Date of consummation--The date of closing or execution
of a loan contract.
(8) Default charge or late charge--The additional interest
charge for late payment on a loan.
(9) Deferment charge--The payment of an additional
interest charge to defer the payment date of a scheduled payment on
a contract.
(10) Dual-interest coverage--Insurance that provides
benefits to both the holder of a loan and the borrower in the event
of a loss of the security covered by the policy. The policy contains
a loss payable clause or endorsement that provides benefits that are
payable at the discretion of the holder.
(11) Installment account handling charge ("IAHC")--An
interest charge authorized for making a loan under Texas Finance Code, §342.252
and §342.259.
(12) Installment loan--Any type of closed-end loan
with multiple scheduled payments.
(13) Interest-bearing loan--A loan in which the borrower
agrees to pay the principal and interest that accrues at a certain
periodic rate.
(14) Licensee--Any person who has been issued a regulated
loan license pursuant to Texas Finance Code, Chapter 342. Another
name for a "regulated loan license" is a "consumer loan license."
(15) Making a loan--The act of making a loan is either
the determination of the credit decision to provide the loan, or the
act of funding the loan or transferring money from the lender to the
borrower. A person whose name appears on the loan documents as the
payee of the note is considered to have "made" the loan.
(16) Negotiating a loan--The process of submitting
and considering offers between a borrower and a lender with the objective
of reaching agreement on the terms of a loan. The act of passing information
between the parties can, by itself, be considered "negotiation" if
it was part of the process of reaching agreement on the terms of a
loan. "Negotiation" involves acts which take place before an agreement
to lend or funding of a loan actually occurs.
(17) OCCC--The Office of Consumer Credit Commissioner
of the State of Texas.
(18) Precomputed loan--A loan in which the borrower
agrees to pay the total of payments that includes both principal and
all anticipated interest through the full term of the loan. If a borrower
prepays a precomputed loan, the borrower is entitled to a rebate of
all unearned interest and unearned charges.
(19) Prepaid interest--Interest paid separately in
cash or by check before or at consummation in a transaction, or withheld
from the proceeds of the credit at any time. Some common terms such
as points, discounts, and origination fees have been used to identify
this charge.
(20) Principal--The capital sum of the debt, including
any interest capitalized and added to the cash advance at the inception
of the loan. Principal is the amount of money which is used, forborne,
or detained and upon which interest is charged. The principal amount
does not include any interest accrued after the inception of the loan,
such as default charges.
(21) Pro rata method--A formula for determining the
amount of unearned interest or other charges, such as insurance, to
be refunded following prepayment or acceleration by applying the amounts
to equal unit periods. The formula for the pro rata method assumes
that interest or other charges are earned in direct proportion to
the time that a loan has been outstanding.
(22) Rebate--A refund of all or part of a precomputed
charge or interest.
(23) Regulated loan--A loan made under the authority
of Texas Finance Code, Chapter 342.
(24) Renewal or refinance--A new loan contract that
includes, in whole or in part, the net balance of one or more existing
loan contracts.
(25) Simple annual rate--The interest rate under the
loan agreement expressed as a percentage rate per year employing the
U.S. rule method.
(26) Sum of the monthly balances or sum of the periodic
balances method--A formula for determining the amount of unearned
interest or other charges to be refunded. The sum of the balances
method is a variant of the rule of 78s. This method provides that
the fraction of the contract interest to be rebated at any given time
in the loan term is the sum of the monthly loan balances for the months
remaining in the originally scheduled loan term divided by the sum
of the monthly balances for all of the months in the scheduled loan
term. For example, for a six-month loan of $600 that is scheduled
to be repaid in $100 monthly installments, the rebate fraction after
two months would be: 400 + 300 + 200 + 100 divided by 600 + 500 +
400 + 300 + 200 + 100 = 1000/2100 = 10/21 = 0.476 (rounded). For any
loan that is paid off in equal installments, the sum of the balances
method and the rule of 78s will provide identical rebates. If, however,
a loan schedule contains unequal payments, and especially where the
debt is retired by a final balloon payment, the rebates under the
two formulas will be different.
(27) Term loan--A loan made repayable in a single payment.
(28) Transacting a loan--Any of the significant events
associated with the lending process through funding, including the
preparation, negotiation and execution of loan documents and the transfer
of money by the lender to the borrower or to a third party on the
borrower's behalf. Transacting a loan also includes the act of arranging
a loan.
(29) United States rule--Ruling of United States Supreme
Court in Story v. Livingston, 38 U.S. (13 Pet.) 359, 371 (1839) that,
in partial payments on a debt, each payment is applied first to interest
and any remainder reduces the principal. Under this rule, accrued
but unpaid interest cannot be added to the principal, and interest
cannot be compounded.
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| Source Note: The provisions of this §83.102 adopted to be effective January 4, 2007, 31 TexReg 10761; amended to be effective November 4, 2010, 35 TexReg 9698; amended to be effective July 10, 2014, 39 TexReg 5142; amended to be effective September 8, 2016, 41 TexReg 6676; amended to be effective November 8, 2018, 43 TexReg 7338 |
