Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 5 - OFFICE OF CONSUMER CREDIT COMMISSIONER › Chapter 90 - CHAPTER 342, PLAIN LANGUAGE CONTRACT PROVISIONS › Subchapter C - SIGNATURE LOANS (SUBCHAPTER F) › Section 90.303 - 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 F signature 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) Promise to
				  pay. The model clause for the borrower's promise to pay reads:
(A) For contracts using the add-on method or
				  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 unpaid
				  principal balance 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."
(3) Late charge. The late charge model
				  provisions in this paragraph may be used for loans that are regular
				  transactions under Texas Finance Code, §
											RSA
				  342.001(2). At the
				  licensee's option, the late charge clause may be made applicable only to loans
				  with more than one installment. As other options, a licensee may include one of
				  the model late charge clause options, as set out in subparagraphs (A) and (B)
				  of this paragraph, in both single and multiple installment loans, so long as
				  the licensee does not collect a default charge on a single payment loan or omit
				  the late charge clause for loans with a single repayment. The licensee may use
				  one of the following late charge model provisions:
(A) Option 1: "If I don't pay all of the
				  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."; or
(B) Option 2: "If I don't pay all of the
				  payment within 10 days after it is due, you can charge me a late charge. If the
				  amount financed is less than $100, the late charge will be 5% of the amount of
				  the installment. If the amount financed is $100 or more, the late charge will
				  be the greater of $10 or 5% of the amount of the installment."
(4) After maturity interest. The
				  after maturity interest model clause for contracts using the add-on method or
				  the scheduled installment earnings method reads: "If I don't pay all I owe by
				  the date the final payment becomes due, I will pay interest on the amount that
				  is still unpaid. That interest will be at a rate of 18% per year and will begin
				  the day after the final payment becomes due."
(5) Prepayment clause. The model prepayment
				  clause reads:
(A) For contracts using the
				  add-on method or the scheduled installment earnings method: "I can make a whole
				  payment early."
(B) For contracts
				  using the true daily earnings method: "I can make any payment early."
(6) Finance charge earnings and
				  refund method.
(A) Add-on method. For
				  contracts using the add-on method, the model finance charge earnings and refund
				  method clause reads: "The acquisition charge on this loan will not be refunded
				  if I pay off early. If I pay all I owe before the beginning of the last monthly
				  period, I will save part of the installment account handling charge. You will
				  figure the amount I save by the sum of the periodic balances method. This
				  method is explained in the Finance Commission rules. You don't have to refund
				  or credit any amount less than $1.00."
(B) Add-on method for loans of $30 or less.
				  At the licensee's option, the licensee may include the following model finance
				  charge and refund method language if the licensee makes loans of $30 or less
				  using the add-on method: "The acquisition charge on this loan will not be
				  refunded if I pay off early. If this loan is for more than $30 and I pay all I
				  owe before the beginning of the last monthly period, I will save part of the
				  installment account handling charge. You will figure the amount I save by the
				  sum of the periodic balances method. This method is explained in the Finance
				  Commission rules. You don't have to refund or credit any amount less than
				  $1.00."
(C) Scheduled installment
				  earnings method. For contracts using the scheduled installment earnings method,
				  the model finance charge earnings and refund method clause reads: "The annual
				  rate of interest is ___%. This interest rate may not be the same as the Annual
				  Percentage Rate. You figure the interest charge (also called the installment
				  account handling charge) by applying the scheduled installment earnings method
				  as defined by the Texas Finance Code to the unpaid principal balance. At the
				  start of the loan, the unpaid principal balance equals the Amount Financed. The
				  unpaid principal balance does not include the acquisition charge, the interest
				  charge, late charges, charges to extend a payment, or returned check fees. You
				  calculate the Finance Charge and Total of Payments as if I will make each
				  payment on the day it is due. You will apply each of my payments in this order:
(1) part of the acquisition charge (figured
				  on a straight-line basis under Finance Commission rules),
(2) late charges,
(3) returned check fees,
(4) accrued interest, and
(5) the unpaid principal balance. If I pay
				  off the loan in full early, I may save part of the interest charge. However,
				  you can still collect the unpaid acquisition charge, and the acquisition charge
				  will not be refunded. You don't have to refund or credit any amount less than
				  $1.00."
(D) True daily
				  earnings method. For contracts using the true daily earnings method, the model
				  finance charge earnings and refund method clause reads: "The annual rate of
				  interest is ___%. This interest rate may not be the same as the Annual
				  Percentage Rate. You figure the interest charge (also called the installment
				  account handling charge) by applying the true daily earnings method as defined
				  by the Texas Finance Code to the unpaid principal balance. At the start of the
				  loan, the unpaid principal balance equals the Amount Financed. The unpaid
				  principal balance does not include the acquisition charge, the interest charge,
				  late charges, charges to extend a payment, or returned check fees. You
				  calculate 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.
				  You will apply each of my payments in this order:
(1) part of the acquisition charge (figured
				  on a straight-line basis under Finance Commission rules),
(2) late charges,
(3) returned check fees,
(4)  accrued interest, and
(5) the unpaid principal balance. If I pay
				  off the loan in full early, you can still collect the unpaid acquisition
				  charge, and the acquisition charge will not be refunded."
(7) Deferment clause. The
				  deferment model clause for contracts using the add-on method or the scheduled
				  installment earnings method reads: "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."
(8) Default clause. The model default clause
				  reads: "If I break any of my promises in this document, you can demand that I
				  immediately pay all that I owe. You can also do this if you in good faith
				  believe that I am not going to be willing or able to keep all of my
				  promises."
(9) Waiver of notice of
				  intent to accelerate and waiver of notice of acceleration clause. The model
				  waiver of notice of intent to accelerate and waiver of notice of acceleration
				  clause reads: "I agree that you don't have to give me notice that you are
				  demanding or intend to demand immediate payment of all that I owe."
(10) Fee for dishonored check clause. The
				  model clause specifies the maximum allowable dishonored check fee. The 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."
(11) Signature block. At the licensee's
				  option, a witness signature block may be added.
(12) Clause describing collateral.
(A) 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
				  ________________."
(B) At the
				  licensee's option, if the promissory note is unsecured, the licensee may use
				  the following clause: "This note is unsecured."
(13) Security agreement clause. The model
				  clause setting out the security agreement in case of default reads: "If I am
				  giving collateral for this loan, I will see the separate security agreement for
				  more information and agreements."
(14) Mailing of notice 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."
(15) 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."
(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) Modifications in writing. The model
				  agreement requiring any change to be in writing reads: "Any change to this
				  agreement has to be in writing. Both you and I have to sign it."
(18) Application of law. The model clause
				  regarding the law to be applied to the contract reads: "Federal law and Texas
				  law apply to this contract."
(19)
				  Joint liability. The model joint liability agreement reads: "I will keep all of
				  my promises in this document. If there is more than one Borrower, each Borrower
				  agrees to keep all of the promises in the loan document."
(20) 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."
(21)
				  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."
(22) Security agreement. The model clause
				  setting out the security agreement reads: "We are entering into this security
				  agreement at the same time that we are entering into a loan. In exchange for
				  the loan referenced above, I agree to the follow terms and conditions: To
				  secure this loan, I give you a security interest in the collateral. The
				  collateral includes the property listed below, anything that becomes attached
				  to it, and all proceeds of the collateral. This security interest also secures
				  all other debt I owe you now. I understand that all collateral that I have
				  given to secure loans may also be used to secure this and any other loans you
				  may make to me. 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. 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. 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. Any change to this security
				  agreement has to be in writing. Both you and I have to sign it. Any default
				  under my agreements with you will be a default of this security agreement.
				  Federal law and Texas law apply to this security agreement. If I don't keep any
				  of my promises, you can take the collateral. You will only take the collateral
				  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."
(23) 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."