Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 5 - OFFICE OF CONSUMER CREDIT COMMISSIONER › Chapter 90 - CHAPTER 342, PLAIN LANGUAGE CONTRACT PROVISIONS › Subchapter B - SECURED CONSUMER INSTALLMENT LOANS (SUBCHAPTER E) › Section 90.203 - Model Clauses

Current through Reg. 49, No. 28; July 12, 2024
(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 E secured consumer installment 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) Itemization of
				  amount financed box. Two model clauses for the itemization of amount financed
				  are presented in this paragraph. One is for use when the licensee finances an
				  administrative fee. The other is for use when the administrative fee is paid in
				  cash by the borrower. A licensee may delete portions applicable to any
				  insurance premiums that are not financed and may also delete other inapplicable
				  portions. The model clause options regarding the itemization of the amount
				  financed read:
(A) For use when the
				  administrative fee is financed:
Attached
					 Graphic
(B) For
				  use when the administrative fee is paid in cash:
Attached
					 Graphic
(3) Promise to pay. The model clause for the
				  borrower's promise to pay reads:
(A) For
				  contracts using 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 cash
				  advance 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."
(4) Late charge. At the licensee's option,
				  the late charge provision may be made applicable to loans with more than one
				  installment. Alternatively, a licensee may omit the late charge provision for
				  loans with a single repayment. The late charge model clause reads: "If I don't
				  pay all of a 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."
(5) After maturity interest. The after
				  maturity interest model clause for contracts using the scheduled installment
				  earnings method reads: "If I don't pay all I owe when the final payment becomes
				  due, I will pay interest on the amount that is still unpaid. That interest will
				  be the higher rate of 18% per year or the maximum rate allowed by law. That
				  interest will begin the day after the final payment becomes due."
(6) Prepayment clause. The model prepayment
				  clause options read:
(A) For contracts using
				  the scheduled installment earnings method: "I can make a whole payment early.
				  Unless you agree otherwise in writing, I may not skip payments. If I make a
				  payment early, my next payment will still be due as scheduled."
(B) For contracts using the true daily
				  earnings method: "I can make any payment early. Unless you agree otherwise in
				  writing, I may not skip payments. If I make a payment early, my next payment
				  will still be due as scheduled."
(7) Finance charge earnings and refund
				  method. The model finance charge earnings and refund method clauses include
				  rate bracket amounts that are updated annually in the Texas Credit Letter. The
				  model finance charge earnings and refund method clause options read:
(A) For contracts using the add-on interest
				  method and the scheduled installment earnings method, Texas Finance Code,
				  §
												RSA
				  342.201(a):
(i) For use when the administrative fee is
				  paid in cash or is not included in the cash advance on which interest is
				  computed:
Attached Graphic
(ii) For use when the
				  administrative fee is financed:
Attached Graphic
(B) For contracts using
				  the scheduled installment earnings method, Texas Finance Code, §
												RSA
				  342.201(d):
(i) For use when the administrative fee is
				  paid in cash or is not included in the principal balance on which interest is
				  computed: "The annual rate of interest is ___%. This interest rate may not be
				  the same as the Annual Percentage Rate. You figure the Finance Charge by
				  applying the scheduled installment earnings method as defined by the Texas
				  Finance Code to the unpaid cash advance. The unpaid cash advance does not
				  include the administrative fee, late charges, and returned check charges. If I
				  prepay my loan in full before the final payment is due, I may save a portion of
				  the Finance Charge. I will not get a refund if the refund would be less than
				  $1.00. You base the Finance Charge and Total of Payments as if I will make each
				  payment on the day it is due. My final payment may be larger or smaller than my
				  regular payment."
(ii) For use when
				  the administrative fee is financed: "The cash advance is $____. The annual rate
				  of interest is ___%. This interest rate may not be the same as the Annual
				  Percentage Rate. You figure the Finance Charge by applying the scheduled
				  installment earnings method as defined by the Texas Finance Code to the unpaid
				  cash advance. The unpaid cash advance includes the administrative fee, but does
				  not include late charges and returned check charges. If I prepay my loan in
				  full before the final payment is due, I may save a portion of the Finance
				  Charge. I will not get a refund if the refund would be less than $1.00. You
				  base the Finance Charge and Total of Payments as if I will make each payment on
				  the day it is due. My final payment may be larger or smaller than my regular
				  payment."
(C) For
				  contracts using the scheduled installment earnings method, Texas Finance Code,
				  §
												RSA
				  342.201(e):
(i) For use when the interest charge is
				  computed by applying a daily rate to brackets under Texas Finance Code, §
													RSA
				  342.201(e-1)(1), and the
				  administrative fee is paid in cash or is not included in the cash advance on
				  which interest is computed:
Attached Graphic
(ii) For use when the interest
				  charge is computed by applying a daily rate to the brackets under Texas Finance
				  Code, §342.201(e-1)(1), and the administrative fee is financed:
Attached Graphic
(iii) For use when the interest
				  charge is computed as a single equivalent daily rate under Texas Finance Code,
				  §
													RSA
				  342.201(e-1)(2), and the
				  administrative fee is paid in cash or is not included in the cash advance on
				  which interest is computed: "The annual rate of interest is ___%. The interest
				  rate is computed by applying a single equivalent daily rate under the Texas
				  Finance Code. This interest rate may not be the same as the Annual Percentage
				  Rate. You figure the Finance Charge by applying the scheduled installment
				  earnings method as defined by the Texas Finance Code to the unpaid cash
				  advance. The unpaid cash advance does not include the administrative fee, late
				  charges, and returned check charges. If I prepay my loan in full before the
				  final payment is due, I may save a portion of the Finance Charge. I will not
				  get a refund if the refund would be less than $1.00. You base the Finance
				  Charge and Total of Payments as if I will make each payment on the day it is
				  due. My final payment may be larger or smaller than my regular
				  payment."
(iv) For use when the
				  interest charge is computed as a single equivalent daily rate under Texas
				  Finance Code, §
													RSA
				  342.201(e-1)(2), and the
				  administrative fee is financed: "The cash advance is $____. The annual rate of
				  interest is ___%. The interest rate is computed by applying a single equivalent
				  daily rate under the Texas Finance Code. This interest rate may not be the same
				  as the Annual Percentage Rate. You figure the Finance Charge by applying the
				  scheduled installment earnings method as defined by the Texas Finance Code to
				  the unpaid cash advance. The unpaid cash advance includes the administrative
				  fee, but does not include late charges and returned check charges. If I prepay
				  my loan in full before the final payment is due, I may save a portion of the
				  Finance Charge. I will not get a refund if the refund would be less than $1.00.
				  You base the Finance Charge and Total of Payments as if I will make each
				  payment on the day it is due. My final payment may be larger or smaller than my
				  regular payment."
(D) For
				  contracts using the true daily earnings method, Texas Finance Code, §
												RSA
				  342.201(d):
(i) For use when the administrative fee is
				  paid in cash or is not included in the principal balance on which interest is
				  computed: "The annual rate of interest is _____%. This interest rate may not be
				  the same as the Annual Percentage Rate. You figure the Finance Charge by
				  applying the true daily earnings method as defined by the Texas Finance Code to
				  the unpaid portion of the cash advance. You base 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. My final payment may be larger or smaller than my
				  regular payment."
(ii) For use when
				  the administrative fee is financed: "The cash advance is $____. The annual rate
				  of interest is _____%. This interest rate may not be the same as the Annual
				  Percentage Rate. You figure the Finance Charge by applying the true daily
				  earnings method as defined by the Texas Finance Code to the unpaid portion of
				  the cash advance. You base 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. My final payment may be larger or smaller than my regular
				  payment."
(E) For
				  contracts using the true daily earnings method, Texas Finance Code, §
												RSA
				  342.201(e):
(i) For use when the interest charge is
				  computed by applying a daily rate to the brackets under Texas Finance Code,
				  §
													RSA
				  342.201(e-1)(1), and the
				  administrative fee is paid in cash or is not included in the cash advance on
				  which interest is computed:
Attached Graphic
(ii) For use when the interest
				  charge is computed by applying a daily rate to the brackets under Texas Finance
				  Code, §342.201(e-1)(1), and the administrative fee is financed:
Attached Graphic
(iii) For use when the interest
				  charge is computed as a single equivalent daily rate under Texas Finance Code,
				  §
													RSA
				  342.201(e-1)(2), and the
				  administrative fee is paid in cash or is not included in the cash advance on
				  which interest is computed: "The annual rate of interest is _____%. The
				  interest rate is computed by applying a single equivalent daily rate under the
				  Texas Finance Code. This interest rate may not be the same as the Annual
				  Percentage Rate. You figure the Finance Charge by applying the true daily
				  earnings method as defined by the Texas Finance Code to the unpaid portion of
				  the cash advance. You base 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. My final payment may be larger or smaller than my regular
				  payment."
(iv) For use when the
				  interest charge is computed as a single equivalent daily rate under Texas
				  Finance Code, §
													RSA
				  342.201(e-1)(2), and the
				  administrative fee is financed: "The cash advance is $____. The annual rate of
				  interest is _____%. The interest rate is computed by applying a single
				  equivalent daily rate under the Texas Finance Code. This interest rate may not
				  be the same as the Annual Percentage Rate. You figure the Finance Charge by
				  applying the true daily earnings method as defined by the Texas Finance Code to
				  the unpaid portion of the cash advance. You base 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. My final payment may be larger or smaller than my
				  regular payment."
(8) Deferment clause. The deferment model
				  clause reads:
(A) "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."
(B) Optional language for
				  unilateral deferment(s): "You may extend one or more of my payments without my
				  permission. You have to wait six months to do it again."
(9) Fee for dishonored check clause. The
				  model clause specifies the maximum allowable dishonored check fee. A 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."
(10) Default clause. The model default clause
				  reads: "I will be in default if: I do not timely make a payment; I break any
				  promise I made in this agreement; I allow a judgment to be entered against me
				  or the collateral; I sell, lease, or dispose of the collateral; I use the
				  collateral for an illegal purpose; or you believe in good faith that I am not
				  going to keep any of my promises. If there is more than one Borrower, each
				  Borrower agrees to keep all of the promises in the loan documents."
(11) Property insurance disclosure box. The
				  model provision for the disclosure of property insurance reads:
Attached
					 Graphic
(12)
				  Credit insurance disclosure box. The model provision for the disclosure of
				  credit insurance reads:
Attached
					 Graphic
(13)
				  Mailing of notices 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."
(14) 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."
(15) Waiver of notice of intent to accelerate
				  and waiver of notice of acceleration clause. The waiver of notice of intent to
				  accelerate and waiver of notice of acceleration clause reads: "If I am in
				  default, you may require me to repay the entire unpaid principal balance, and
				  any accrued interest at once. You don't have to give me notice that you are
				  demanding or intend to demand immediate payment of all that I owe."
(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) Collection expenses clause. The model
				  provision relating to the collection of expenses if default occurs reads: "If
				  this debt is referred to an attorney for collection, I will pay any attorney
				  fees set by the court plus court costs."
(18) Joint liability clause. The model joint
				  liability clause reads: "I understand that you may seek payment from only me
				  without first looking to any other Borrower."
(19) 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."
(20)
				  Savings clause. The model savings clause reads: "If any part of this contract
				  is declared invalid, the rest of the contract remains valid."
(21) Final agreement and modifications in
				  writing. For loan agreements exceeding $50,000, this notice must be boldfaced,
				  capitalized, underlined, or otherwise set out from the surrounding written
				  material to be conspicuous. The model agreement requiring any change to be in
				  writing reads: "This written loan agreement is the final agreement between you
				  and me and may not be changed by prior, current, or future oral agreements
				  between you and me. There are no oral agreements between you and me relating to
				  this loan agreement. Any change to this agreement must be in writing. Both you
				  and I have to sign written agreements."
(22) Security agreement clause. The model
				  clause for the security agreement reads: "If I am giving collateral for this
				  loan, I will see the separate security agreement for more information and
				  agreements."
(23) Application of
				  law. The model agreement regarding the law to be applied to the contract reads:
				  "Federal law and Texas law apply to this contract."
(24) OCCC notice. Under §
											RSA 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."
(25) Clause describing collateral. 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
				  ________________."
(26) Clause
				  relating to prepayment. In the Truth in Lending Act disclosure box, the model
				  clause options for prepayment read:
(A) For
				  contracts using the scheduled installment earnings method: "Prepayment: If I
				  pay off early, I may be entitled to a refund of part of the Finance Charge and
				  I will not have to pay a penalty."
(B) For contracts using the true daily
				  earnings method: "Prepayment: If I pay off early, I will not have to pay a
				  penalty."
(27) Security
				  agreement. If the loan is secured, a separate security agreement should be
				  used.
(A) The model clause stating the
				  secured nature of the agreement reads: "To secure this loan, I give you a
				  security interest in the collateral. The collateral includes the property
				  listed below, improvements and attachments to the property, insurance refunds,
				  and proceeds."
(B) Prohibition on
				  transfer and collateral free of encumbrance. The model agreement keeping the
				  collateral free from encumbrance and against transferring it reads: "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."
(C) Location and restrictions
				  on movement or relocation of collateral. The model agreement regarding the
				  location of the collateral reads: "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."
(D) Upkeep and use of
				  collateral. The model agreement regarding the upkeep and use of the collateral
				  reads: "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."
(E) Modifications in writing. The model
				  agreement regarding changes made to the security agreement reads: "Any change
				  to this security agreement has to be in writing. Both you and I have to sign
				  it."
(F) Any default is a default
				  of the security agreement. The model agreement in the security agreement
				  regarding defaults reads: "Any default under my agreements with you will be a
				  default of this security agreement."
(G) Default clause. The model clause setting
				  out the security agreement in case of default reads: "If there is a default,
				  you can take the collateral. You will only do this 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."
(28) Credit reporting. The Fair Credit
				  Reporting Act,
				  RSA
				  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."