| (a) Generally. These model clauses are the plain language
rendition of contract clauses that have typically been stated in technical
legal terms. Nothing in this regulation prohibits a contract from
including provisions that provide more favorable results for the borrower
than those that would result from the use of a model clause.
(b) Model clauses for a Chapter 342, Subchapter E secured
consumer installment loan contract.
(1) Pronoun designation of parties. The model clauses
refer to the Borrower as "I" or "me." The Lender is referred to as
"you" or "your."
(2) Itemization of amount financed box. Two model clauses
for the itemization of amount financed are presented in this paragraph.
One is for use when the licensee finances an administrative fee. The
other is for use when the administrative fee is paid in cash by the
borrower. A licensee may delete portions applicable to any insurance
premiums that are not financed and may also delete other inapplicable
portions. The model clause options regarding the itemization of the
amount financed read:
(A) For use when the administrative fee is financed:
Attached Graphic
(B) For use when the administrative fee is paid in
cash:
Attached Graphic
(3) Promise to pay. The model clause for the borrower's
promise to pay reads:
(A) For contracts using the scheduled installment earnings
method: "I promise to pay the Total of Payments to the order of you,
the Lender. I will make the payments at your address above. I will
make the payments on the dates and in the amounts shown in the Payment
Schedule."
(B) For contracts using the true daily earnings method:
"I promise to pay the cash advance plus the accrued interest to the
order of you, the Lender. I will make the payments at your address
above. I will make the payments on the dates and in the amounts shown
in the Payment Schedule."
(4) Late charge. At the licensee's option, the late
charge provision may be made applicable to loans with more than one
installment. Alternatively, a licensee may omit the late charge provision
for loans with a single repayment. The late charge model clause reads:
"If I don't pay all of a payment within 10 days after it is due, you
can charge me a late charge. The late charge will be 5% of the scheduled
payment."
(5) After maturity interest. The after maturity interest
model clause for contracts using the scheduled installment earnings
method reads: "If I don't pay all I owe when the final payment becomes
due, I will pay interest on the amount that is still unpaid. That
interest will be the higher rate of 18% per year or the maximum rate
allowed by law. That interest will begin the day after the final payment
becomes due."
(6) Prepayment clause. The model prepayment clause
options read:
(A) For contracts using the scheduled installment earnings
method: "I can make a whole payment early. Unless you agree otherwise
in writing, I may not skip payments. If I make a payment early, my
next payment will still be due as scheduled."
(B) For contracts using the true daily earnings method:
"I can make any payment early. Unless you agree otherwise in writing,
I may not skip payments. If I make a payment early, my next payment
will still be due as scheduled."
(7) Finance charge earnings and refund method. The
model finance charge earnings and refund method clauses include rate
bracket amounts that are updated annually in the Texas Credit Letter.
The model finance charge earnings and refund method clause options
read:
(A) For contracts using the add-on interest method
and the scheduled installment earnings method, Texas Finance Code, §342.201(a):
(i) For use when the administrative fee is paid in
cash or is not included in the cash advance on which interest is computed:
Attached Graphic
(ii) For use when the administrative fee is financed:
Attached Graphic
(B) For contracts using the scheduled installment earnings
method, Texas Finance Code, §342.201(d):
(i) For use when the administrative fee is paid in
cash or is not included in the principal balance on which interest
is computed: "The annual rate of interest is ___%. This interest rate
may not be the same as the Annual Percentage Rate. You figure the
Finance Charge by applying the scheduled installment earnings method
as defined by the Texas Finance Code to the unpaid cash advance. The
unpaid cash advance does not include the administrative fee, late
charges, and returned check charges. If I prepay my loan in full before
the final payment is due, I may save a portion of the Finance Charge.
I will not get a refund if the refund would be less than $1.00. You
base the Finance Charge and Total of Payments as if I will make each
payment on the day it is due. My final payment may be larger or smaller
than my regular payment."
(ii) For use when the administrative fee is financed:
"The cash advance is $____. The annual rate of interest is ___%. This
interest rate may not be the same as the Annual Percentage Rate. You
figure the Finance Charge by applying the scheduled installment earnings
method as defined by the Texas Finance Code to the unpaid cash advance.
The unpaid cash advance includes the administrative fee, but does
not include late charges and returned check charges. If I prepay my
loan in full before the final payment is due, I may save a portion
of the Finance Charge. I will not get a refund if the refund would
be less than $1.00. You base the Finance Charge and Total of Payments
as if I will make each payment on the day it is due. My final payment
may be larger or smaller than my regular payment."
(C) For contracts using the scheduled installment earnings
method, Texas Finance Code, §342.201(e):
(i) For use when the interest charge is computed by
applying a daily rate to brackets under Texas Finance Code, §342.201(e-1)(1),
and the administrative fee is paid in cash or is not included in the
cash advance on which interest is computed:
Attached Graphic
(ii) For use when the interest charge is computed by
applying a daily rate to the brackets under Texas Finance Code, §342.201(e-1)(1),
and the administrative fee is financed:
Attached Graphic
(iii) For use when the interest charge is computed
as a single equivalent daily rate under Texas Finance Code, §342.201(e-1)(2),
and the administrative fee is paid in cash or is not included in the
cash advance on which interest is computed: "The annual rate of interest
is ___%. The interest rate is computed by applying a single equivalent
daily rate under the Texas Finance Code. This interest rate may not
be the same as the Annual Percentage Rate. You figure the Finance
Charge by applying the scheduled installment earnings method as defined
by the Texas Finance Code to the unpaid cash advance. The unpaid cash
advance does not include the administrative fee, late charges, and
returned check charges. If I prepay my loan in full before the final
payment is due, I may save a portion of the Finance Charge. I will
not get a refund if the refund would be less than $1.00. You base
the Finance Charge and Total of Payments as if I will make each payment
on the day it is due. My final payment may be larger or smaller than
my regular payment."
(iv) For use when the interest charge is computed as
a single equivalent daily rate under Texas Finance Code, §342.201(e-1)(2),
and the administrative fee is financed: " The cash advance is $____.
The annual rate of interest is ___%. The interest rate is computed
by applying a single equivalent daily rate under the Texas Finance
Code. This interest rate may not be the same as the Annual Percentage
Rate. You figure the Finance Charge by applying the scheduled installment
earnings method as defined by the Texas Finance Code to the unpaid
cash advance. The unpaid cash advance includes the administrative
fee, but does not include late charges and returned check charges.
If I prepay my loan in full before the final payment is due, I may
save a portion of the Finance Charge. I will not get a refund if the
refund would be less than $1.00. You base the Finance Charge and Total
of Payments as if I will make each payment on the day it is due. My
final payment may be larger or smaller than my regular payment."
(D) For contracts using the true daily earnings method,
Texas Finance Code, §342.201(d):
(i) For use when the administrative fee is paid in
cash or is not included in the principal balance on which interest
is computed: "The annual rate of interest is _____%. This interest
rate may not be the same as the Annual Percentage Rate. You figure
the Finance Charge by applying the true daily earnings method as defined
by the Texas Finance Code to the unpaid portion of the cash advance.
You base the Finance Charge and Total of Payments as if I will make
each payment on the day it is due. You will apply payments on the
date they are received. This may result in a different Finance Charge
or Total of Payments. My final payment may be larger or smaller Cont'd... |
