Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 5 - OFFICE OF CONSUMER CREDIT COMMISSIONER › Chapter 84 - MOTOR VEHICLE INSTALLMENT SALES › Subchapter B - RETAIL INSTALLMENT CONTRACT › Section 84.202 - Default Charge

Current through Reg. 49, No. 28; July 12, 2024
(a) Definition. A
				  default charge is the additional charge for a late payment on a contract. The
				  term default charge is synonymous with the term delinquency charge as contained
				  in Texas Finance Code, §
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				  348.107.
(b) Precomputed regular payment contract
				  using sum of the periodic balances method. For a regular payment contract
				  employing the add-on method and the refunding method of the sum of the periodic
				  balances, a holder may assess, charge, and collect a default charge not to
				  exceed 5% of the scheduled payment or a default charge on the past due amount
				  computed at the maximum daily rate authorized for the contract from the due
				  date to the date that the past due amount is paid.
(c) Scheduled installment earnings method.
				  For a regular or an irregular payment contract employing the scheduled
				  installment earnings method, a holder may assess, charge, and collect a default
				  charge not to exceed 5% of the scheduled payment and a default charge on the
				  past due amount computed at the maximum daily rate authorized for the contract
				  from the due date to the date that the past due amount is paid.
(d) True daily earnings method. For a regular
				  payment contract or an irregular payment contract employing the true daily
				  earnings method, a holder may assess, charge, and collect a default charge not
				  to exceed 5% of the scheduled payment and a default charge on the past due
				  amount computed at the maximum daily rate authorized for the contract from the
				  due date to the date that the past due amount is paid. The default charge
				  authorized under this subsection is in addition to the contractual time price
				  differential charge earned on the principal balance subject to a finance
				  charge.
(e) Contract required. No
				  default charge may be assessed, imposed, charged, or collected unless
				  contracted for in writing by the parties.
(f) Default period. A default charge may not
				  be assessed until after the 15th day after the installment due date. For
				  example, if the installment due date is the 1st of the month, a default charge
				  may not be assessed until the 17th of the month.
(g) Pyramiding prohibited. An authorized
				  lender seeking to assess additional interest for default on a retail
				  installment sales contract under Texas Finance Code, Chapter 348 must comply
				  with the prohibition on the pyramiding of late charges set forth in the Federal
				  Trade Commission Credit Practices Rule at
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				  444.4.
(h) Default charge on final installment
				  balloon payment. If the retail buyer does not exercise the option to refinance
				  the balloon payment as permitted by Texas Finance Code, §
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				  348.123, a default charge is allowed on the
				  balloon payment.
(i) Default charge
				  on deferred downpayment. A default charge under Texas Finance Code, §
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				  348.107 is not allowed on a deferred
				  downpayment.