# 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 ofinterest 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 ofinterest which may be charged by state chartered credit unions on first mortgage real estate loans. Article 16, section 11ofthe Texas Constitution sets outthe basic Texas usury law. Itprovides. in pertinent part:

The Legislature shall have authority to classify loans and lenders, license and regulate lenders, define interest and fix maximum rates ofinterest: provided, however, in the absence oflegislation fixing maximum rates ofinterest all contracts for agreater 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 ofinterest shall be ten percent per annum. A greater rate ofinterest 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 often percent to beusurious, but permit statutory

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

exceptions. The Credit Union Act provides such an exception for “credit unions” as defined byarticle 2461- 1. V. T.C.S.:

No loan shall bear aninterest rate in excess of one percent per month onthe unpaid monthly balance. V. T.C.S., art. 2461-15(e). ByActs 1973, 63rd Leg., ch. 440. sec. 6, p. 1217. there was deleted from article 2461-15 ofthe Texas Credit Union Act a provision which first appeared in 1969when 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 onloans secured by‘a mortgage on real estate. Prior to the insertion ofthe above language inthe 1969 Credit Union Act, credit unions had apparently been authorized to charge rmpercent per month ontheunpaid balance offirst mortgage loans. The Legislature recognized this inthe title ofActs 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

ofcredit unions; reducing the interest to be charged onloans secured by real estate: repealing certain laws; and declaring an emergency. (Emphasis added) Also see, V. T.C.S., art. 5069-2.05 ofthe 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 ahigher~rate ofinterest for real estate loans. The Legislature must have intended that real estate loans made by credit unions once again were tobe subject tothe article 2461-15(e) maximum rate ofone percent per month ofthe unpaid monthly balance.

p. 2663. ’

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

SUMMARY One percent per month on theunpaid monthly balance is the maximum rate ofinterest 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

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