(a) Definition. A deferment means the payment of an
additional interest charge to defer the payment date of a scheduled
payment on a contract. A deferment charge prescribed by this section
may occur in a loan transaction that employs either the precomputed
or the scheduled installment earnings methods of calculation. A separate
deferment charge is not applicable to a loan transaction that employs
the true daily earnings method since an extension of time would be
calculated on elapsed daily charges, and the parties may agree to
modify the terms of the transaction as long as the modification conforms
to the requirements of Texas Finance Code, Chapter 342, Subchapter
G.
(b) Bilateral or mutual deferment. A borrower and a
lender may mutually agree to defer any scheduled installment. There
is no limit on the number of bilateral deferments that can be made
during the time that a loan contract is in effect. Bilateral or mutual
deferments must be agreed upon in writing.
(c) Deferment notice. Each deferment must be recorded
on the account record at the time the deferment is made. A written
notice containing the conditions of the deferment must be provided
to the borrower. The deferment notice must include the name of the
lender, the name of the borrower, the loan number, the date of the
deferment, the installment or installments being deferred, the deferment
period, the amount of the deferment charge, the balance on the account,
and the date and amount of the next installment due. The notice must
be signed by the borrower to indicate the borrower's agreement to
a bilateral deferment.
(d) Computation of deferment charge for regular transaction.
Each deferment charge on a regular loan transaction must be computed
in accordance with the method prescribed by the loan contract. If
the loan contract does not provide for a deferment charge, then no
deferment charge may be assessed or collected. A lender may employ
any of the prescribed computational methods described in this subsection
so long as the computational method employed is consistently utilized
throughout the term of the loan. An authorized lender may calculate
the deferment charge using the balance method or the date method.
(1) Balance method. The balance method is used to determine
the difference between the refund of unearned interest as of the due
date of the last entirely paid installment and the due date of the
next succeeding unpaid installment.
(A) Calculation for deferment before first installment.
The interest for the deferment may be no more than the difference
between the refund that would be required for prepayment in full on
the first installment due date, if it were one month from the date
of the loan, and the total interest charged on the loan, exclusive
of any charge for any additional odd days or an administrative fee.
The deferment charge for the first installment is essentially the
charge for the first month of interest.
(B) Calculation for deferment after first installment.
The first step in determining the deferment charge using the balance
method for any installment after the first installment is to determine
the deferment period.
(i) "Deferment period." The deferment period is the
period from the last entirely paid installment to the "next succeeding
unpaid installment." The deferment period will constitute the deferment
of the "first entirely unpaid installment."
(ii) Determination of "last entirely paid installment."
In order to determine the "last entirely paid installment," first
the remaining precomputed balance must be computed. The determination
of the balance will identify the last entirely paid installment. In
determining the remaining precomputed balance, an authorized lender
must adjust the amount of the remaining precomputed balance for any
amounts relating to any minor payment schedule irregularities or any
add-on insurance premiums or other permissible charges applied to
the precomputed balance after the consummation of the loan. After
determining the remaining precomputed balance, the remaining precomputed
balance must be divided by the regular installment amount. This calculation
will reveal the number of remaining installments to be paid. By determining
the number of remaining installments to be paid, the due date of the
last paid installment may be determined (this must be a wholly unpaid
installment). Texas Finance Code, §342.204(a)(1) only permits
a deferment charge to be assessed on an installment that is completely
unpaid.
(iii) Determination of "next succeeding unpaid installment."
The due date of the next succeeding unpaid installment is the end
of the "deferment period."
(iv) Calculation for deferment charge. The calculation
for the deferment charge is the scheduled interest charge for the
"deferment period."
(v) Example of deferment calculation. The terms of
a precomputed Texas Finance Code, §342.301 loan are as follows:
Date of loan: 09/01/2015; First payment due date: 10/01/2015; Cash
Advance: $2,766.48; Finance Charge: $833.52; Total of Payments: $3,600;
Term: 36 months; Monthly installment: $100; Refunding method: Sum
of the periodic balances; and Annual Percentage Rate: 18%. If an authorized
lender agrees to a deferment roughly six months into the contract
and the remaining precomputed balance is $3,095 (no adjustments are
necessary), to determine the "last entirely paid installment," the
authorized lender must divide the precomputed balance by the regular
installment amount ($3,095 divided by $100 = 30.95). Because the entire
amount of the installment must be unpaid, the result must be rounded
to the next lowest whole number (in this case, 30). For calculation
purposes, there are 30 remaining installments and 6 installments have
been made. In this case, the 7th scheduled installment is being deferred.
The deferment charge is calculated by determining the scheduled interest
charge for the deferment period, or from the last entirely paid installment
to the "first entirely unpaid installment" (the 6th entirely paid
scheduled installment) to the "next succeeding unpaid installment"
(7th scheduled installment). The "next succeeding unpaid installment"
is determined by subtracting one unit period from the "last entirely
paid installment" (30 - 1 = 29). The calculation of the deferment
charge is the difference between the interest refund of the 6th entirely
paid installment (36 - 30) and the 7th first entirely unpaid installment
(36 - 29). This difference would be $37.54. A scheduled installment
earnings refund method would yield a slightly different result of
$36.69.
(2) Date method. The date method determines the deferment
charge by taking the difference between the amount of the refund of
unearned interest as if a full prepayment of the loan occurred as
of the date of the deferment, and the amount of the refund of unearned
interest for a full prepayment of the loan occurred one full month
prior to the date of the deferment.
(e) No deferment when payment applied to account balance.
If a payment has been applied to reduce an account balance, no deferment
of any prior balance or installments may be made. This does not preclude
the collection of a deferment fee previously assessed but not collected.
(f) No deferment when default charge already collected.
No installment may be deferred if a default charge has already been
collected on the account or if a partial payment in any amount has
been credited to any installment. If an amount equal to one whole
installment has already been credited to an account, this entry cannot
be altered in order to credit part of the installment to a deferment
charge.
(g) Missed payment covered by insurance. When any payment
or partial payment is deferred that is later paid by some form of
insurance, such as credit disability insurance, unemployment insurance,
or collateral protection insurance, any prior assessment of additional
interest for deferment must be waived.
(h) Accounting of payment. If a payment is submitted
from which a deferment charge is taken, the excess of the amount necessary
to bring the account current must be applied to the remaining balance
of the loan. However, any difference that exceeds $3 must be returned
to the borrower upon the borrower's request.
(i) Noncompliance. Deferment fees not assessed or collected
in accordance with the requirements of this section are subject to
refund to the borrower. In the event deferment fees are refunded to
the borrower, no rescheduling of the loan contract is permitted.
|
Source Note: The provisions of this §83.704 adopted to be effective November 9, 2006, 31 TexReg 8994; amended to be effective November 4, 2010, 35 TexReg 9698; amended to be effective July 10, 2014, 39 TexReg 5142 |