The Attorney General of Texas 

April 10, 1981 

MARK WHITE 

Attorney General 

Honorable Carl A. Parker, Chairman 

Senate Committee on Financial 

Institutions 

P. 0. Box UO68 

Austin, Texas 78711 

Opinion No. MW-319 

Re: Whether article XVI, section 

11 of the Texas Constitution 

requires that legislation tying the 

interest rate to a moving index fii 

an absolute maximum rate 

Dear Senator Parker: 

You ask whether article XVI, section ll of the Texas Constitution 

requires that an absolute maximum interest rate be fixed in all cases where 

the authorized rate is tied to a moving index. Article XVI, section 11 

provides in pertinent part: 

The Legislature shall have authority to.. . define 

interest and fix maxmum rates of interest; provided, 

however, in the absence of legislation fixing 

maximum rates of interest all contracts for a greater 

rate of interest gan ten per centum 00%) per annum 

shall be deemed usurious. . . . 

We believe your question is answered by Letter Advisory No. 146 (1977) 

issued by this office. That letter addressed the question of whether the 

legislature could authorize the Finance Commission to establish maximum 

interest rates for small loans. It stated as follows: 

Article 16, section 11 autho&es the LegMature ‘to 

fix’ maximum rates of interest. The word ‘fix’ has a 

variety of meanings, depending upon the context. See 

Gist v. Rackliffe-Gibson Const. Co., 123 S.W. 92I 

[MO. .~~.~~~~~,~ 19091 We ~~~ believe ~~~ the followine definition from 

Webster’s Second International DictLnary states the 

meaning of ‘fix’ as it appears in this constitutional 

provision: 

to set or place definitely; to 

establish;. . . to determine; to 

assign precisely. 

We note that Texas courts have assumed ‘fix’ in this 

provision to be interchangeable with ‘establish.’ See 

- 

p. 1024 
Honorable Carl A. Parker - Page Two (MN- 319) 

Freeman v. Gonzales County Savings & Loan Ass’n, 526 S.W. 2d 

774, 777 (Tex. Civ. App. - Corpus Christi 1975) lafPd, 534 S.W. 

2d 903 (Tex. 197611; Home Savings Ass’n of Dallas County v. 

Crow, 514 SW. 2d 160, 165 (Tex. Civ. App. - Dallas 1974), ati’d, 

522 S.W. 2d 457 (Tex 1975). We believe the Constitz 

authorizes the Legislature to enact statutes establishing a 

precise figure as the maximum interest rate. If it does not 

enact such statutes, or if for other reasons there is no 

legislation fixing maximum interest rates for any class of 

transactions, the Constitution itself fries a ten percent 

maximum. 

In Attorney General Opinion MW-17 (19791, we considered the constitutionality of 

a bill which stated the interest rate as one percent more than the discount rate on 90- 

day commercial paper in effect on the day the loan is made. The bill, however, gave a 

minimum interest rate of 10% and a maximum rate of 12%. We found that the bill 

‘Ifties an absolute maximum rate of interest, in that in no instance may the rate 

exceed 12 percent a year.” We noted that if the legislature wished to ensure the 

validity of the bill, it could draft a severability clause to render the 12 percent 

maximum applicable regardless of the validity of the other provisions. 

It is clear from Attorney General Opinion MW-17 and Letter Advisory No. 146 

that a numerical maximum interest rate must be stated in legislation which attempts 

to set the interest rate. We do not believe that the legislature would in fact fix the 

maximum interest rate if it were to enact a formula permitting the computation of 

maximum interest from economic indicators. Such a statute might permit the 

computation of a precise maximum interest rate at any given time; however, it only 

fixes the interest rate in a relative sense. We believe the constitution requires the 

legislature to fix an absolute maximum interest rate. 

SUMMARY 

Article XVI, section 11 of the Texas Constitution requires 

that legislation fixing the Interest rate state a numerical 

maximum interest rate. 

AMARK WHITE 

Attorney General of Texas 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

RICHARD E. GRAY III 

Executive Assistant Attorney General 
. . 

Honorable Carl A. Parker - Psge Three (MlrJ-319) 

Prepared by Susan L. Garrison 

Assistant Attorney General 

APPROVED: 

OPINION COMMlTTEE 

Susan L. Garrison, Chairman 

Jon Bible 

Rick Gilpin 

ThomasM.Pollan