| (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 F signature
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) Promise to pay. The model clause for the borrower's
promise to pay reads:
(A) For contracts using the add-on method or 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 unpaid principal balance 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."
(3) Late charge. The late charge model provisions in
this paragraph may be used for loans that are regular transactions
under Texas Finance Code, §342.001(2). At the licensee's option,
the late charge clause may be made applicable only to loans with more
than one installment. As other options, a licensee may include one
of the model late charge clause options, as set out in subparagraphs
(A) and (B) of this paragraph, in both single and multiple installment
loans, so long as the licensee does not collect a default charge on
a single payment loan or omit the late charge clause for loans with
a single repayment. The licensee may use one of the following late
charge model provisions:
(A) Option 1: "If I don't pay all of the 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."; or
(B) Option 2: "If I don't pay all of the payment within
10 days after it is due, you can charge me a late charge. If the amount
financed is less than $100, the late charge will be 5% of the amount
of the installment. If the amount financed is $100 or more, the late
charge will be the greater of $10 or 5% of the amount of the installment."
(4) After maturity interest. The after maturity interest
model clause for contracts using the add-on method or the scheduled
installment earnings method reads: "If I don't pay all I owe by the
date the final payment becomes due, I will pay interest on the amount
that is still unpaid. That interest will be at a rate of 18% per year
and will begin the day after the final payment becomes due."
(5) Prepayment clause. The model prepayment clause
reads:
(A) For contracts using the add-on method or the scheduled
installment earnings method: "I can make a whole payment early."
(B) For contracts using the true daily earnings method:
"I can make any payment early."
(6) Finance charge earnings and refund method.
(A) Add-on method. For contracts using the add-on method,
the model finance charge earnings and refund method clause reads:
"The acquisition charge on this loan will not be refunded if I pay
off early. If I pay all I owe before the beginning of the last monthly
period, I will save part of the installment account handling charge.
You will figure the amount I save by the sum of the periodic balances
method. This method is explained in the Finance Commission rules.
You don't have to refund or credit any amount less than $1.00."
(B) Add-on method for loans of $30 or less. At the
licensee's option, the licensee may include the following model finance
charge and refund method language if the licensee makes loans of $30
or less using the add-on method: "The acquisition charge on this loan
will not be refunded if I pay off early. If this loan is for more
than $30 and I pay all I owe before the beginning of the last monthly
period, I will save part of the installment account handling charge.
You will figure the amount I save by the sum of the periodic balances
method. This method is explained in the Finance Commission rules.
You don't have to refund or credit any amount less than $1.00."
(C) Scheduled installment earnings method. For contracts
using the scheduled installment earnings method, the model finance
charge earnings and refund method clause reads: "The annual rate of
interest is ___%. This interest rate may not be the same as the Annual
Percentage Rate. You figure the interest charge (also called the installment
account handling charge) by applying the scheduled installment earnings
method as defined by the Texas Finance Code to the unpaid principal
balance. At the start of the loan, the unpaid principal balance equals
the Amount Financed. The unpaid principal balance does not include
the acquisition charge, the interest charge, late charges, charges
to extend a payment, or returned check fees. You calculate the Finance
Charge and Total of Payments as if I will make each payment on the
day it is due. You will apply each of my payments in this order: (1)
part of the acquisition charge (figured on a straight-line basis under
Finance Commission rules), (2) late charges, (3) returned check fees,
(4) accrued interest, and (5) the unpaid principal balance. If I pay
off the loan in full early, I may save part of the interest charge.
However, you can still collect the unpaid acquisition charge, and
the acquisition charge will not be refunded. You don't have to refund
or credit any amount less than $1.00."
(D) True daily earnings method. For contracts using
the true daily earnings method, the model finance charge earnings
and refund method clause reads: "The annual rate of interest is ___%.
This interest rate may not be the same as the Annual Percentage Rate.
You figure the interest charge (also called the installment account
handling charge) by applying the true daily earnings method as defined
by the Texas Finance Code to the unpaid principal balance. At the
start of the loan, the unpaid principal balance equals the Amount
Financed. The unpaid principal balance does not include the acquisition
charge, the interest charge, late charges, charges to extend a payment,
or returned check fees. You calculate 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. You will apply
each of my payments in this order: (1) part of the acquisition charge
(figured on a straight-line basis under Finance Commission rules),
(2) late charges, (3) returned check fees, (4) accrued interest, and
(5) the unpaid principal balance. If I pay off the loan in full early,
you can still collect the unpaid acquisition charge, and the acquisition
charge will not be refunded."
(7) Deferment clause. The deferment model clause for
contracts using the add-on method or the scheduled installment earnings
method reads: "If I ask for more time to make any payment and you
agree, I will pay more interest to extend the payment. The extra interest
will be figured under the Finance Commission rules."
(8) Default clause. The model default clause reads:
"If I break any of my promises in this document, you can demand that
I immediately pay all that I owe. You can also do this if you in good
faith believe that I am not going to be willing or able to keep all
of my promises."
(9) Waiver of notice of intent to accelerate and waiver
of notice of acceleration clause. The model waiver of notice of intent
to accelerate and waiver of notice of acceleration clause reads: "I
agree that you don't have to give me notice that you are demanding
or intend to demand immediate payment of all that I owe."
(10) Fee for dishonored check clause. The model clause
specifies the maximum allowable dishonored check fee. The licensee
may always choose a lesser amount. The fee for dishonored check model
clause reads: "I agree to pay you a fee of up to $30 for a returned
check. You can add the fee to the amount I owe or collect it separately."
(11) Signature block. At the licensee's option, a witness
signature block may be added.
(12) Clause describing collateral.
(A) In the Truth in Lending Act disclosure box, the
model clause describing the collateral reads: "You will have a security
interest in the following described collateral ________________."
(B) At the licensee's option, if the promissory note
is unsecured, the licensee may use the following clause: "This note
is unsecured."
(13) Security agreement clause. The model clause setting
out the security agreement in case of default reads: "If I am giving
collateral for this loan, I will see the separate security agreement
for more information and agreements."
(14) Mailing of notice to borrower. The model agreement
regarding the mailing of notices to the borrower reads: "You can mail
any notice to me at my last address in your records. Your duty to
give me notice will be satisfied when you mail it."
(15) Statement of truthful information. The following
clause is sufficient as the borrower's agreement that the information
provided to the licensee is true: "I promise that all information
I gave you is true."
(16) No waiver of lender's rights. The model agreement
regarding the lender's rights reads: "If you don't enforce your rights
every time, you can still enforce them later."
(17) Modifications in writing. The model agreement
requiring any change to be in writing reads: "Any change to this agreement
has to be in writing. Both you and I have to sign it."
(18) Application of law. The model clause regarding
the law to be applied to the contract reads: "Federal law and Texas
law apply to this contract."
(19) Joint liability. The model joint liability agreement
reads: "I will keep all of my promises in this document. If there
is more than one Borrower, each Borrower agrees to keep all of the
promises in the loan document."
(20) Usury savings clause. The model usury savings
clause reads: "I don't have to pay interest or other amounts that
are more than the law allows."
(21) OCCC notice. Under §90.105 of this title
(relating to OCCC Notice), the following required notice must be given
by licensees to let consumers know how to file complaints: "For questions
or complaints about this loan, contact (insert name of lender) at
(insert lender's phone number and, at lender's option, one or more
of the following: mailing address, fax number, website, e-mail address).
The lender is licensed and examined under Texas law by the Office
of Consumer Credit Commissioner (OCCC), a state agency. If a complaint
or question cannot be resolved by contacting the lender, consumers
can contact the OCCC to file a complaint or ask a general credit-related
question. OCCC address: 2601 N. Lamar Blvd., Austin, Texas 78705.
Phone: (800) 538-1579. Fax: (512) 936-7610. Website: occc.texas.gov.
E-mail: consumer.complaints@occc.texas.gov."
(22) Security agreement. The model clause setting out
the security agreement reads: "We are entering into this security
agreement at the same time that we are entering into a loan. In exchange
for the loan referenced above, I agree to the follow terms and conditions:
To secure this loan, I give you a security interest in the collateral.
The collateral includes the property listed below, anything that becomes
attached to it, and all proceeds of the collateral. This security
interest also secures all other debt I owe you now. I understand that
all collateral that I have given to secure loans may also be used
to secure this and any other loans you may make to me. I own the collateral.
I won't sell or transfer it without your written permission. I won't
allow anyone else to have an interest in the collateral except you.
I will keep the collateral at my address shown above. I will promptly
tell you in writing if I change my address. I won't permanently remove
the collateral from Texas unless you give me written permission. I
will timely pay all taxes and license fees on the collateral. I will
keep it in good repair. I won't use the collateral illegally. Any
change to this security agreement has to be in writing. Both you and
I have to sign it. Any default under my agreements with you will be
a default of this security agreement. Federal law and Texas law apply
to this security agreement. If I don't keep any of my promises, you
can take the collateral. You will only take the collateral lawfully
and without a breach of the peace. If you take my collateral, you
will tell me how much I have to pay to get it back. If I don't pay
you to get the collateral back, you can sell it or take other action
allowed by law. You will send me notice at least 10 days before you
sell it. My right to get the collateral back ends when you sell it.
You can use the money you get from selling it to pay amounts the law
allows, and to reduce the amount I owe. If any money is left, you
will pay it to me. If the money from the sale is not enough to pay
all I owe, I must pay the rest of what I owe you plus interest."
(23) Credit reporting. The Fair Credit Reporting Act,
15 U.S.C. §1681s-2(a)(7), generally requires a creditor to provide
a notice to a consumer before furnishing negative information to a
credit bureau. The model clause for credit reporting reads: "You may
report information about my account to credit bureaus. Late payments,
missed payments, or other defaults on my account may be reflected
in my credit report."
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