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(22) Effect of early and late payments. For contracts
using the true daily earnings method, the model clause reads: "You
based the Finance Charge, Total of Payments, and Total Sale Price
as if all payments were made as scheduled. If I do not timely make
all my payments in at least the correct amount, I will have to pay
more Finance Charge and my last payment will be more than my final
scheduled payment. If I make scheduled payments early, my Finance
Charge will be reduced (less). If I make my scheduled payments late,
my Finance Charge will increase."
(23) Interest on matured amount. For contracts using
the scheduled installment earnings method or the sum of the periodic
balances method, the model provision for interest on any matured amount
at any rate permitted by law reads: "If I don't pay all I owe when
the final payment becomes due, or I do not pay all I owe if you demand
payment in full under this contract, I will pay an interest charge
on the amount that is still unpaid. That interest charge will be the
higher rate of 18% per year or the maximum rate allowed by law, if
that rate is higher. The interest charge for this amount will begin
the day after the final payment becomes due." In this provision, the
maximum rate allowed by law refers to the rate found in Texas Finance
Code, Chapter 303.
(24) Balloon payments. If the contract has a balloon
payment, the creditor must include a provision in the contract that
allows the buyer to refinance the balloon payment over time. The provision
must comply with Texas Finance Code, §348.123. The model provision
for defining the balloon payment reads: "A balloon payment is a scheduled
payment more than twice the amount of the average of my scheduled
payments, other than the downpayment, that are due before the balloon
payment."
(A) Paying the balloon payment. If a retail installment
contract contains a balloon payment that is the final payment, the
contract must also provide the right for the retail buyer to pay the
balloon payment. The model provision for paying the amount of the
final scheduled balloon payment reads: "I can pay all I owe when the
balloon payment is due and keep my motor vehicle."
(B) Balloon payment alternatives. If the retail installment
contract contains the right for a retail buyer to refinance a balloon
installment, the contract provision to refinance the installment must
comply with either clause (i) or (ii) of this subparagraph. A contract
under clause (ii) of this subparagraph must also contain the right
of the retail buyer to sell the motor vehicle back to the holder or
the retail seller.
(i) The model clause to describe a buyer's right to
refinance a balloon installment under Texas Finance Code, §348.123(a),
when applicable reads: "If I buy the motor vehicle primarily for personal,
family, or household use, I can enter into a new written agreement
to refinance the balloon payment when due without a refinancing fee.
If I refinance the balloon payment, my periodic payments will not
be larger or more often than the payments in this contract. The annual
percentage rate in the new agreement will not be more than the Annual
Percentage Rate in this contract. This provision does not apply if
my Payment Schedule has been adjusted to my seasonal or irregular
income."
(ii) If the contract contains a balloon payment and
the seller intends Texas Finance Code, §348.123(b)(5) to apply
to the contract:
(I) Special right to refinance balloon payment under
Texas Finance Code, §348.123(b)(5)(B)(iii). The model clause
reads: "I can enter into a new agreement to refinance my last installment
if I am not in default. I can refinance at an annual percentage rate
up to 5 points greater than the Annual Percentage Rate shown in this
contract. The rate will not be more than applicable law allows. The
new agreement will allow me to refinance the last installment for
at least 24 months with equal monthly payments. You and I can also
agree to refinance the last installment over another time period or
on a different payment schedule."
(II) Repurchase option. If the contract includes a
balloon payment, the creditor must draft a provision addressing the
repurchase option.
(25) Agreement to keep motor vehicle insured. The model
clause regarding agreement to keep the motor vehicle insured reads:
"I agree to have physical damage insurance covering loss or damage
to the motor vehicle for the term of this contract. The insurance
must cover your interest in the vehicle. The insurer must be authorized
to do business in Texas." The creditor may include one or both of
the following optional provisions:
(A) "The insurance must include collision coverage
and either comprehensive or fire, theft, and combined additional coverage."
(B) "The maximum deductible is $________."
(26) Creditor's right to purchase required insurance
if buyer fails to keep motor vehicle insured. The model clause regarding
agreement to allow the creditor to purchase required insurance if
the buyer fails to keep the motor vehicle insured reads: "If I fail
to give you proof that I have insurance, you may buy physical damage
insurance. You may buy insurance that covers my interest and your
interest in the motor vehicle, or you may buy insurance that covers
your interest only. I will pay the premium for the insurance and a
finance charge at the contract rate. If you obtain collateral protection
insurance, you will mail notice to my last known address shown in
your file."
(27) Physical damage insurance proceeds. The model
clause regarding physical damage insurance proceeds reads: "I must
use physical damage insurance proceeds to repair the motor vehicle,
unless you agree otherwise in writing. However, if the motor vehicle
is a total loss, I must use the insurance proceeds to pay what I owe
you. I agree that you can use any proceeds from insurance to repair
the motor vehicle, or you may reduce what I owe under this contract.
If you apply insurance proceeds to the amount I owe, they will be
applied to my payments in the reverse order of when they are due.
If my insurance on the motor vehicle or credit insurance doesn't pay
all I owe, I must pay what is still owed. Once all amounts owed under
this contract are paid, any remaining proceeds will be paid to me."
(28) Returned insurance premiums and service contract
charges. The contract may authorize a creditor to apply charges returned
to the creditor for canceled insurance, service contract, and extended
warranty charges to the buyer's obligation under the agreement as
permitted by law, regardless of whether or not the buyer is in default
under the contract.
(A) The model clause for contracts using the true daily
earnings method reads: "If you get a refund on insurance or service
contracts, or other contracts included in the cash price, you will
subtract it from what I owe. Once all amounts owed under this contract
are paid, any remaining refunds will be paid to me."
(B) For contracts using the scheduled installment earnings
or sum of the periodic balances methods, the creditor may substitute
the following clause: "If you get a refund of insurance or service
contract charges, you will apply it and the unearned finance charges
on it in the reverse order of the payments to as many of my payments
as it will cover. Once all amounts owed under this contract are paid,
any remaining refunds will be paid to me."
(29) Application of credits. The model clause regarding
application of credits reads: "Any credit that reduces my debt will
apply to my payments in the reverse order of when they are due, unless
you decide to apply it to another part of my debt. The amount of the
credit and all finance charge or interest on the credit will be applied
to my payments in the reverse order of my payments."
(30) Transfer of rights. The seller does not have a
duty to disclose the terms on which a contract or a balance under
a contract is acquired, including any discount or difference between
the rates, charges, or balance under the contract and the rates, charges,
or balance acquired as provided by Texas Finance Code, §348.301.
The model clause regarding transfer of rights reads: "You may transfer
this contract to another person. That person will then have all your
rights, privileges, and remedies."
(31) Grant of security interest in collateral. The
model clause regarding a description of a security interest granted
in a typical motor vehicle installment sale reads:
Attached Graphic
(32) Agreements regarding use and transfer of motor
vehicle. The contract may contain a provision prohibiting a buyer
from transferring any interest in the motor vehicle without the creditor's
written permission, requiring the buyer to notify the seller of change
of address, or prohibiting the removal of the motor vehicle from Texas.
The transfer fee limitation establishes the maximum fee that a creditor
could contract for, charge, or collect for transferring the buyer's
equity in the motor vehicle to another party. If desired, a creditor
may amend the model provision to reflect a lower transfer fee amount.
The model clause concerning agreements regarding the use and transfer
of the motor vehicle reads: "I will not sell or transfer the Cont'd... |
