The following words and terms, when used in this chapter, will
have the following meanings, unless the context clearly indicates
otherwise:
(1) Accrual method--A method to compute a finance charge
and apply the finance charge to the unpaid principal balance. Both
the true daily earnings method and the scheduled installment earnings
method are accrual methods.
(2) Add-on method--A method for calculating a precomputed
time price differential charge in which the retail buyer agrees to
pay the total of payments. The total of payments includes both the
principal balance of the contract and the time price differential
charge. The add-on time price differential charge is calculated at
the inception of the contract on the principal balance for the full
term, as if the principal balance of the contract did not decline
over the term of the contract.
(3) Commercial vehicle--A motor vehicle that is not
used primarily for personal, family, or household use and has the
same meaning as defined by Texas Finance Code, §353.001.
(4) Contract rate--The annual time price differential
rate that may be stated in a retail installment sales contract, and
that accrues or is assessed against the principal balance that is
subject to a finance charge for the term of the contract. The contract
rate cannot exceed the daily rate converted to an annualized rate.
(5) Creditor--The seller or any subsequent holder or
assignee of the retail installment sales contract.
(6) Daily rate--The rate authorized under Texas Finance
Code, §348.105, or the simple rate equivalent of the rate applicable
to the contract under Texas Finance Code, §348.104, computed
on a daily basis using a 365-day calendar year.
(7) Default charge or late charge--The additional charge
for a late payment on a contract.
(8) Deferment charge--A charge to defer the payment
date of a scheduled payment on a contract.
(9) Holder--Holder includes retail sellers as well
as any person who subsequently purchases, acquires, or otherwise receives
the retail installment sales contract. All holders are creditors.
(10) Irregular payment contract--A contract:
(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 contract.
(11) Licensee--Any person who has been issued a motor
vehicle sales finance license pursuant to Texas Finance Code, Chapter
348.
(12) OCCC--The Office of Consumer Credit Commissioner
of the State of Texas.
(13) Ordinary vehicle--A motor vehicle that is used
primarily for personal, family, or household use.
(14) Principal balance subject to finance charge--The
principal balance used in the determination or calculation of the
time price differential charge.
(A) Sales tax advanced transaction--In a sales tax
advanced transaction, the principal balance subject to a finance charge
is computed by:
(i) adding:
(I) the cash price of the vehicle;
(II) the amount of the authorized itemized charges;
(III) sales tax;
(IV) an authorized and properly disclosed documentary
fee;
(V) an amount authorized under Texas Finance Code, §348.404(b);
and
(ii) subtracting from the results under clause (i)
of this subparagraph the amount of the retail buyer's down payment
in money, goods, or both.
(B) Sales tax deferred transaction--In a sales tax
deferred transaction, the principal balance subject to a finance charge
does not include the deferred sales tax. The principal balance subject
to a finance charge is computed by:
(i) adding:
(I) the cash price of the vehicle (excluding sales
tax);
(II) the amount of the authorized itemized charges
(excluding sales tax);
(III) an authorized and properly disclosed documentary
fee;
(IV) an amount authorized under Texas Finance Code, §348.404(b);
and
(ii) subtracting from the results under clause (i)
of this subparagraph the amount of the retail buyer's down payment
in money, goods, or both.
(15) Regular payment contract--Any contract that is
not an irregular payment contract.
(16) Scheduled installment earnings method--The scheduled
installment earnings method is a method to compute the finance charge
by applying a daily rate to the unpaid principal balance 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 balance. Under this
method, a finance charge refund is calculated by deducting the earned
finance charges from the total finance charges. If prepayment in full
or demand for payment in full occurs between payment due dates, a
daily rate equal to 1/365th of the annual rate is multiplied by the
unpaid principal balance. The result is then multiplied by the actual
number of days from the date of the previous scheduled installment
through the date of prepayment or demand for payment in full to determine
earned finance charges for the abbreviated period. In addition to
the earned finance charges calculated in this paragraph, the creditor
may also earn a $25 acquisition fee so long as the total of the earned
finance charges and the acquisition fee do not exceed the finance
charge disclosed in the contract. The creditor is not required to
refund unearned finance charges if the refund is less than $1.00.
The scheduled installment earnings method may be used with either
an irregular payment contract or a regular payment contract. The computation
of finance charges must comply with the U.S. Rule as defined in paragraph
(22) of this section.
(17) Sales tax advanced transaction--A retail installment
sales transaction in which a retail seller remits the entire amount
of the sales tax to the appropriate taxing authority within 20 working
days of the sale.
(18) Sales tax deferred transaction--A retail installment
sales transaction in which a retail seller or a qualified related
finance company collects sales tax from the retail buyer and remits
the tax under Texas Tax Code, §152.047 to the Texas Comptroller
of Public Accounts.
(19) Seller--The seller of the motor vehicle. This
term is synonymous with the term "retail seller."
(20) Sum of the periodic balances method (Rule of 78s).
(A) Under this method, the finance charge refund is
calculated as follows:
(i) Subtract an acquisition fee not greater than $25
from the total finance charge.
(ii) Multiply the amount computed in clause (i) of
this subparagraph by the refund percentage computed below. The result
is the finance charge refund.
(iii) Compute the refund percentage by:
(I) Computing the sum of the unpaid monthly balances
under the contract's schedule of payments beginning:
(-a-) On the first day, after the date of the prepayment
or demand for payment in full; that is, the date of a month that corresponds
to the date of the month that the first installment is due under the
contract; or
(-b-) If the prepayment or demand for payment in full
is made before the first installment date under the contract, one
month after the date of the second scheduled payment of the contract
occurring after the prepayment or demand;
(II) Dividing the result in subclause (I) of this clause
by the sum of all of the monthly balances under the contract's schedule
of payments.
(B) The creditor is not required to give a finance
charge refund if it would be less than $1.00.
(C) The sum of the periodic balances method may not
be used with an irregular payment contract.
(21) True daily earnings method--The true daily earnings
method is a method to compute the finance charge by applying a daily
rate to the unpaid principal balance. The daily rate is 1/365th of
the equivalent contract rate. The earned finance charge is computed
by multiplying the daily rate of the finance charge by the number
of days the actual unpaid principal balance is outstanding. Payments
are credited as of the time received; therefore, payments received
prior to the scheduled installment date result in a greater reduction
of the unpaid principal balance than the scheduled reduction, and
payments received after the scheduled installment date result in less
than the scheduled reduction of the unpaid principal balance. The
computation of finance charges must comply with the U.S. Rule as defined
in paragraph (22) of this section.
(22) U.S. Rule--The ruling of the 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 finance
charge and any remainder reduces the principal. Under this rule, accrued
but unpaid finance charge cannot be added to the principal and interest
cannot be compounded. The U.S. Rule is described in Regulation Z,
12 C.F.R. Part 226, Appendix J, and 12 C.F.R. Part 1026, Appendix
J.
(23) Vehicle--A motor vehicle as defined by Texas Finance
Code, §348.001(4).
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| Source Note: The provisions of this §84.102 adopted to be effective May 8, 2008, 33 TexReg 3572; amended to be effective November 5, 2009, 34 TexReg 7602; amended to be effective September 8, 2011, 36 TexReg 5670; amended to be effective November 8, 2012, 37 TexReg 8780; amended to be effective November 5, 2015, 40 TexReg 7624; amended to be effective May 5, 2016, 41 TexReg 3120 |
