| (a) Scope. This section applies only to a loan made
under Texas Finance Code, Chapter 342, Subchapter F.
(b) Definitions. In this section, the following terms
have the following meanings:
(1) Cash advance--Has the meaning provided by Texas
Finance Code, §341.001(3).
(2) Irregular transaction--Has the meaning provided
by Texas Finance Code, §342.001(1).
(3) Month--Has the meaning provided by Texas Finance
Code, §341.002(a).
(4) Regular transaction--Has the meaning provided by
Texas Finance Code, §342.001(2).
(5) Scheduled installment earnings method--Has the
meaning provided by Texas Finance Code, §342.002(a).
(6) True daily earnings method--Has the meaning provided
by Texas Finance Code, §342.002(b).
(c) Cash advance or principal balance. The cash advance
or principal balance of a loan contract under this section may not
include the acquisition charge, installment account handling charge,
default charges, deferment charges, or the return check fees authorized
by Texas Business and Commerce Code, §3.506.
(d) Maximum term of loan.
(1) Generally. The maximum term of a loan under this
section may not exceed the equivalent monthly term provided by Texas
Finance Code, §342.255.
(2) Calculation of maximum term.
(A) Subchapter F loans $100 or less. For a loan with
a cash advance of $100 or less, the maximum term of a loan is the
lesser of:
(i) one month for each multiple of $10 of cash advance;
or
(ii) six months.
(B) Subchapter F loans more than $100. For a loan with
a cash advance more than $100, one month for each multiple of $20
of cash advance, rounded down to the lower integer.
(C) Examples.
(i) If the cash advance of the loan is $55, the maximum
term of the loan is 5 months ($55 ÷ $10 = 5.5 rounded down
to 5).
(ii) If the cash advance of the loan is $115, the maximum
term of the loan is 5 months ($115 ÷ $20 = 5.75 rounded down
to 5).
(e) Maximum installment account handling charge for
loan contract using the add-on method.
(1) Generally. On a regular transaction using the sum
of the periodic balances method, a loan contract may provide for an
installment account handing charge computed using an add-on rate that
does not exceed the add-on rates authorized under Texas Finance Code, §342.252
or §342.259. The installment account handling charge is based
upon the cash advance of the loan and the term of the loan.
(2) Calculation of maximum installment account handling
charge.
(A) Base installment account handling charge.
(i) For a cash advance equal to or more than $30 but
not more than $100, the maximum installment account handling charge
is:
(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
but not more than $100.
(ii) For a cash advance that is more than $100 but
not more than the maximum cash advance determined under Texas Finance
Code, §342.251, the maximum installment account handling charge
is the ratio of $4 a month for each $100 of the cash advance.
(B) Odd days interest. For a regular transaction using
the precomputed add-on rates, an authorized lender may not assess,
charge, or collect any interest (installment account handling charge)
for the odd days. In this subparagraph, "odd days" means a number
of days determined under the method described by §83.502(b)(1)
or (2) of this title (relating to Treatment of Periods Less than a
Full Month Before the First Installment Date).
(f) Maximum installment account handling charge for
loan contract using the scheduled installment earnings method or the
true daily earnings method.
(1) Generally. On a regular transaction or irregular
transaction, a loan contract may provide for an installment account
handling charge computed using the scheduled installment earnings
method or the true daily earnings method. The installment account
handling charge may not exceed the equivalent rate or effective return
of the installment account handling charge for the original scheduled
term of the loan.
(2) Scheduled installment earnings method. For a loan
contract using the scheduled installment earnings method, the maximum
installment account handling charge is computed by applying a daily
rate to the unpaid principal balance as defined by this section, 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 reduction in the unpaid principal. The computation
of the installment account handling charge must comply with the United
States rule as defined by §83.102(29) of this title (relating
to Definitions).
(3) True daily earnings method. For a loan contract
using the true daily earnings method, the maximum installment account
handling charge is computed by applying a daily rate to the unpaid
principal balance as defined by this section. The computation of the
installment account handling charge must comply with the United States
rule as defined by §83.102(29) of this title. The earned installment
account handling charge is computed as follows:
(A) multiplying the unpaid principal balance by the
daily rate; and
(B) multiplying the results of subparagraph (A) of
this paragraph by the number of days the actual unpaid principal balance
is outstanding.
(4) Maximum effective rate. The maximum effective rates
for loan contracts using the scheduled installment earnings method
or the true daily earnings method are presented in the following figure.
Attached Graphic
(5) Maximum daily rate. After taking into consideration
the maximum term of the loan found under subsection (d) of this section,
the daily rate for a loan contract using the scheduled installment
earnings method or true daily earnings method is the lower of:
(A) 1/365 of the equivalent contract rate shown on
the loan contract; or
(B) 1/365 of the maximum effective rate contained in
Figure: 7 TAC §83.606(f)(4) for the equivalent monthly period.
(6) Effective rate for regular transactions and irregular
transactions.
(A) Regular transaction. For a regular transaction
using the scheduled installment earnings method or true daily earnings
method, the effective rate may not exceed the maximum effective rate
contained in Figure: 7 TAC §83.606(f)(4) for the equivalent monthly
period excluding any odd days.
(B) Irregular transaction. For an irregular transaction
using the scheduled installment earnings method or true daily earnings
method, the maximum effective rate is determined by taking the closest
monthly effective rate assuming the loan contract was payable in substantially
equal successive monthly installments beginning one month from the
date of the loan.
(i) The closest monthly period is determined as follows:
(I) counting the number of days from the date of the
loan to the originally scheduled maturity date;
(II) dividing the results of subclause (I) of this
clause by 365;
(III) multiplying the results of subclause (II) of
this clause by 12.
(ii) If the results of clause (i) of this subparagraph
are .5333 or more between the two monthly periods, the closest monthly
period is rounded up to the next monthly period. For example, if the
closest monthly period is determined to be 14.5333 months, the maximum
annualized daily rate is the effective rate for 15 months.
(iii) If the results of clause (i) of this subparagraph
are less than .5333 between the two monthly periods, the closest monthly
period is rounded down to the next monthly period. For example, if
the closest monthly period is determined to be 14.50 months, the maximum
annualized daily rate is the effective rate for 14 months.
(g) Prepaid interest in the form of points. Prepaid
interest in the form of points is not permitted for a Subchapter F
loan contract.
(h) Disclosure of finance charge under Truth in Lending
Act. In disclosing the finance charge and determining the annual percentage
rate for disclosure purposes under the Truth in Lending Act, 15 U.S.C. §§1601
- 1667f, the acquisition charge and installment account handling charge
must be considered finance charges.
(i) Application of payment.
Cont'd... |
