| (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."
Cont'd... |
