Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 5 - OFFICE OF CONSUMER CREDIT COMMISSIONER › Chapter 83 - REGULATED LENDERS AND CREDIT ACCESS BUSINESSES › Subchapter A - RULES FOR REGULATED LENDERS › Division 1 - GENERAL PROVISIONS › Section 83.102 - Definitions

Current through Reg. 49, No. 28; July 12, 2024
Words and terms used in this subchapter that are defined
						in Texas Finance Code, Chapter 342 have the same meanings as defined in Chapter
						342. The following words and terms, when used in this subchapter, will have the
						following meanings, unless the context clearly indicates otherwise.
(1) Acquisition charge--A charge authorized
					 for making the cash advance under the authority of Texas Finance Code, §
					 342.252 and § 342.259.
(2)
					 Add-on interest--A method for calculating precomputed interest in which the
					 borrower agrees to pay the total of payments, which includes both interest and
					 principal, as opposed to agreeing to pay the principal plus interest as it
					 accrues at a certain rate. Add-on interest is calculated at the outset of a
					 loan on the cash advance for the full term, as if the principal did not decline
					 over the course of the loan. For example, a $1,000 loan with 12 monthly
					 installments and an add-on interest amount of $8.00 per hundred per annum would
					 have a total charge of interest of $80 and monthly payments of $90, yielding an
					 annual percentage rate ("APR") of 14.45%.
(3) Amount financed--The amount calculated in
					 accordance with Regulation Z,
					 RSA
					 1026.18(b).
(4) Authorized charge--Any charge authorized
					 by applicable Texas law to be included in the credit transaction.
(5) Authorized lender--A person who has
					 obtained a regulated loan license from the Office of Consumer Credit
					 Commissioner, or a bank, savings bank, savings and loan association, or credit
					 union doing business under the laws of this state, another state, or the United
					 States. Banks, savings banks, and savings and loan associations chartered in
					 other states insured by the Federal Deposit Insurance Corporation, and credit
					 unions chartered in other states insured through the National Credit Union
					 Share Insurance Fund are included in this term. Separate entities that are
					 subsidiaries or affiliates of licensees or authorized banks, savings banks,
					 savings and loan associations, or credit unions are not authorized lenders
					 unless they meet the required elements of the definition of an authorized
					 lender in their own right.
(6)
					 Commissioner--The Consumer Credit Commissioner of the State of Texas.
(7) Date of consummation--The date of closing
					 or execution of a loan contract.
(8) Default charge or late charge--The
					 additional interest charge for late payment on a loan.
(9) Deferment charge--The payment of an
					 additional interest charge to defer the payment date of a scheduled payment on
					 a contract.
(10) Dual-interest
					 coverage--Insurance that provides benefits to both the holder of a loan and the
					 borrower in the event of a loss of the security covered by the policy. The
					 policy contains a loss payable clause or endorsement that provides benefits
					 that are payable at the discretion of the holder.
(11) Installment account handling charge
					 ("IAHC")--An interest charge authorized for making a loan under Texas Finance
					 Code, § 342.252 and § 342.259.
(12) Installment loan--Any type of closed-end
					 loan with multiple scheduled payments.
(13) Interest-bearing loan--A loan in which
					 the borrower agrees to pay the principal and interest that accrues at a certain
					 periodic rate.
(14) Licensee--Any
					 person who has been issued a regulated loan license pursuant to Texas Finance
					 Code, Chapter 342. Another name for a "regulated loan license" is a "consumer
					 loan license."
(15) Making a
					 loan--The act of making a loan is either the determination of the credit
					 decision to provide the loan, or the act of funding the loan or transferring
					 money from the lender to the borrower. A person whose name appears on the loan
					 documents as the payee of the note is considered to have "made" the
					 loan.
(16) Negotiating a loan--The
					 process of submitting and considering offers between a borrower and a lender
					 with the objective of reaching agreement on the terms of a loan. The act of
					 passing information between the parties can, by itself, be considered
					 "negotiation" if it was part of the process of reaching agreement on the terms
					 of a loan. "Negotiation" involves acts which take place before an agreement to
					 lend or funding of a loan actually occurs.
(17) OCCC--The Office of Consumer Credit
					 Commissioner of the State of Texas.
(18) Precomputed loan--A loan in which the
					 borrower agrees to pay the total of payments that includes both principal and
					 all anticipated interest through the full term of the loan. If a borrower
					 prepays a precomputed loan, the borrower is entitled to a rebate of all
					 unearned interest and unearned charges.
(19) Prepaid interest--Interest paid
					 separately in cash or by check before or at consummation in a transaction, or
					 withheld from the proceeds of the credit at any time. Some common terms such as
					 points, discounts, and origination fees have been used to identify this
					 charge.
(20) Principal--The capital
					 sum of the debt, including any interest capitalized and added to the cash
					 advance at the inception of the loan. Principal is the amount of money which is
					 used, forborne, or detained and upon which interest is charged. The principal
					 amount does not include any interest accrued after the inception of the loan,
					 such as default charges.
(21) Pro
					 rata method--A formula for determining the amount of unearned interest or other
					 charges, such as insurance, to be refunded following prepayment or acceleration
					 by applying the amounts to equal unit periods. The formula for the pro rata
					 method assumes that interest or other charges are earned in direct proportion
					 to the time that a loan has been outstanding.
(22) Rebate--A refund of all or part of a
					 precomputed charge or interest.
(23) Regulated loan--A loan made under the
					 authority of Texas Finance Code, Chapter 342.
(24) Renewal or refinance--A new loan
					 contract that includes, in whole or in part, the net balance of one or more
					 existing loan contracts.
(25)
					 Simple annual rate--The interest rate under the loan agreement expressed as a
					 percentage rate per year employing the U.S. rule method.
(26) Sum of the monthly balances or sum of
					 the periodic balances method--A formula for determining the amount of unearned
					 interest or other charges to be refunded. The sum of the balances method is a
					 variant of the rule of 78s. This method provides that the fraction of the
					 contract interest to be rebated at any given time in the loan term is the sum
					 of the monthly loan balances for the months remaining in the originally
					 scheduled loan term divided by the sum of the monthly balances for all of the
					 months in the scheduled loan term. For example, for a six-month loan of $600
					 that is scheduled to be repaid in $100 monthly installments, the rebate
					 fraction after two months would be: 400 + 300 + 200 + 100 divided by 600 + 500
					 + 400 + 300 + 200 + 100 = 1000/2100 = 10/21 = 0.476 (rounded). For any loan
					 that is paid off in equal installments, the sum of the balances method and the
					 rule of 78s will provide identical rebates. If, however, a loan schedule
					 contains unequal payments, and especially where the debt is retired by a final
					 balloon payment, the rebates under the two formulas will be
					 different.
(27) Term loan--A loan
					 made repayable in a single payment.
(28) Transacting a loan--Any of the
					 significant events associated with the lending process through funding,
					 including the preparation, negotiation and execution of loan documents and the
					 transfer of money by the lender to the borrower or to a third party on the
					 borrower's behalf. Transacting a loan also includes the act of arranging a
					 loan.
(29) United States
					 rule--Ruling of United States Supreme Court in Story v. Livingston, 38 U.S. (13
					 Pet.) 359, 371 (1839) that, in partial payments on a debt, each payment is
					 applied first to interest and any remainder reduces the principal. Under this
					 rule, accrued but unpaid interest cannot be added to the principal, and
					 interest cannot be compounded.