THEA'ITORNEYGENERAT~ 

OF TEXAS 

AUS-~IN. T-s 787ll 

May 2, 1975 

The Honorable John P. Pareons 

Commissioner 

Texas Credit Union Department 

1106 Clayton Lane, Suite 206-East 

Austin, Texas 78723 

Opinion No. H- 599 

Re: Maximum rate of interest 

which may be charged by 

state chartered credit 

unions on first mortgage 

Dear Mr. Parsons: real estate loans 

You have requested our opinion regarding the maximum rate of interest 

which may be charged by state chartered credit unions on first mortgage 

real estate loans. 

Article 16, section 11 of the Texas Constitution sets out the basic Texas 

usury law. It provides. in pertinent part: 

The Legislature shall have authority to classify loans 

and lenders, license and regulate lenders, define 

interest and fix maximum rates of interest: provided, 

however, in the absence of legislation fixing maximum 

rates of interest all contracts for a greater rate of 

interest than ten per centum (10%) per annum shall be 

deemed usurious: provided, further, that in contracts 

where no rate,of interest is agreed upon, the rate shall 

not exceed six per cent-urn (6%) per annum. 

Article 5069-l. 02. V. T. C. S., implements this constitutional provision: 

Except as otherwise fixed by law, the maximum rate 

of interest shall be ten percent per annum. A greater 

rate of interest than ten percent per annum unless 

otherwise authorized by law shall be deemed usurious. _ 

. . . 

Both article 5069-L 02 and the constitutional provision declare any annual 

percentage rate in excess of ten percent to be usurious, but permit statutory 

p. 2662 
The Honorable John P. Parsons, page 2 (H- 599) 

exceptions. The Credit Union Act provides such an exception for “credit 

unions” as defined by article 2461- 1. V. T. C. S. : 

No loan shall bear an interest rate in excess of one 

percent per month on the unpaid monthly balance. 

V. T.C.S., art. 2461-15(e). 

By Acts 1973, 63rd Leg., ch. 440. sec. 6, p. 1217. there was deleted 

from article 2461-15 of the Texas Credit Union Act a provision which first 

appeared in 1969 when the new Texas Credit Union Act, (V. T. C. S., art. 2461-L 

et seq. ) replaced the former credit union statute. (V. T. C. S., art. 2462). The 

deleted provision read: 

(i) No credit union may charge more than ten 

percent simple interest on loans secured by‘a 

mortgage on real estate. 

Prior to the insertion of the above language in the 1969 Credit Union Act, 

credit unions had apparently been authorized to charge rm percent per month 

on the unpaid balance of first mortgage loans. The Legislature recognized 

this in the title of Acts 1969, 61st Leg., R. S., ch. 186, p. 540, which replaced 

the old credit union statute with the new Texas Credit Union Act. The title 

read: 

An Act relating to the organization and regulation 

of credit unions; reducing the interest to be charged 

on loans secured by real estate: repealing certain 

laws; and declaring an emergency. (Emphasis added) 

Also see, V. T. C. S., art. 5069-2.05 of the Texas Consumer Code enacted in 

1967, and the former V. T.C.S., art. 2462, sec. 5. 

We are thus compelled to conclude that the deletion of the reference to real 

estate loans by the 1973 amendment restored to credit unions their authority 

to charge a higher~rate of interest for real estate loans. The Legislature 

must have intended that real estate loans made by credit unions once again 

were to be subject to the article 2461-15(e) maximum rate of one percent per 

month of the unpaid monthly balance. 

p. 2663 
. ’ 

The Honorable John P. Parsons, page 3 (H- 599) 

SUMMARY 

One percent per month on the unpaid monthly 

balance is the maximum rate of interest which 

may be charged by state chartered credit unions 

on first mortgage real estate loans. 

Very truly yours, 

Attorney General of Texas 

APPROVED: 

DAVID M. KENDALL, First Assistant 

C. ROBERT HEATH, Chairman 

Opinion Committee 

p. 2664