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 5 - INTEREST CHARGES ON LOANS › Section 83.505 - Deferment

Current through Reg. 49, No. 28; July 12, 2024
(a) Definition. A
					 deferment means the payment of an additional interest charge to defer the
					 payment date of a scheduled payment on a contract. A deferment charge
					 prescribed by this section may only occur in loan transactions that employ
					 either the precomputed or the scheduled installment earnings methods of
					 calculation.
(b) Unilateral
					 deferment. A deferment may be made solely by the lender if the full amount of
					 any installment remains in default for one month or more after its due date.
					 The note or similar loan agreement must contain a provision allowing the
					 unilateral deferment. Only one unilateral deferment may be made during any one
					 six-month period while the loan contract is in effect. Any deferment documented
					 on the account record will be considered to be unilateral in the absence of
					 proof or documentation of a mutual or bilateral deferment.
(c) Bilateral or mutual deferment. A borrower
					 and a lender may mutually agree to defer any scheduled installment. There is no
					 limit on the number of bilateral deferments that can be made during the time
					 that a loan contract is in effect. Bilateral deferments must be agreed upon in
					 writing.
(d) Deferment notice. Each
					 deferment must be recorded on the account record at the time the deferment is
					 made. A written notice containing the conditions of the deferment must be
					 provided to the borrower. The deferment notice must include the name of the
					 lender, the name of the borrower, the loan number, the date of the deferment,
					 the installment or installments being deferred, the deferment period, the
					 amount of the deferment charge, the balance on the account, and the date and
					 amount of the next installment due. The notice must be signed by the borrower
					 to indicate the borrower's agreement to a bilateral deferment.
(e) Computation of deferment charge for
					 regular transaction. Each deferment charge on a regular loan transaction must
					 be computed in accordance with the method prescribed by the loan contract. If
					 the loan contract does not provide for a deferment charge, then no deferment
					 charge may be assessed or collected. A lender may employ any of the prescribed
					 computational methods described in this subsection so long as the computational
					 method employed is consistently utilized throughout the term of the loan. An
					 authorized lender may calculate the deferment charge using the balance method
					 or the date method.
(1) Balance method. The
					 balance method is used to determine the difference between the refund of
					 unearned interest as of the due date of the last entirely paid installment and
					 the due date of the next succeeding unpaid installment.
(A) Calculation for deferment before first
					 installment. The interest for the deferment may be no more than the difference
					 between the refund that would be required for prepayment in full on the first
					 installment due date, if it were one month from the date of the loan, and the
					 total interest charged on the loan, exclusive of any charge for any additional
					 odd days or an administrative fee. The deferment charge for the first
					 installment is essentially the charge for the first month of
					 interest.
(B) Calculation for
					 deferment after first installment. The first step in determining the deferment
					 charge using the balance method for any installment after the first installment
					 is to determine the deferment period.
(i)
					 "Deferment period." The deferment period is the period from the last entirely
					 paid installment to the "next succeeding unpaid installment." The deferment
					 period will constitute the deferment of the "first entirely unpaid
					 installment."
(ii) Determination of
					 "last entirely paid installment." In order to determine the "last entirely paid
					 installment," first the remaining precomputed balance must be computed. The
					 determination of the balance will identify the last entirely paid installment.
					 In determining the remaining precomputed balance, an authorized lender must
					 adjust the amount of the remaining precomputed balance for any amounts relating
					 to any minor payment schedule irregularities or any add-on insurance premiums
					 or other permissible charges applied to the precomputed balance after the
					 consummation of the loan. After determining the remaining precomputed balance,
					 the remaining precomputed balance must be divided by the regular installment
					 amount. This calculation will reveal the number of remaining installments to be
					 paid. By determining the number of remaining installments to be paid, the due
					 date of the last paid installment may be determined (this must be a wholly
					 unpaid installment). Texas Finance Code, § 342.204(a)(1) only permits a
					 deferment charge to be assessed on an installment that is completely
					 unpaid.
(iii) Determination of
					 "next succeeding unpaid installment." The due date of the next succeeding
					 unpaid installment is the end of the "deferment period."
(iv) Calculation for deferment charge. The
					 calculation for the deferment charge is the scheduled interest charge for the
					 "deferment period."
(v) Example of
					 deferment calculation. The terms of a precomputed Texas Finance Code, §
					 342.201(e) loan are as follows: Date of loan: 09/01/2015; First installment due
					 date: 10/01/2015; Cash Advance: $2,356.21; Finance Charge (no administrative
					 fee): $1,243.79; Total of Payments: $3,600; Term: 36 months; Regular
					 installment amount: $100; Refunding method: Scheduled installment earnings
					 method; and Annual Percentage Rate: 30%. If an authorized lender agrees to a
					 deferment roughly six months into the contract and the remaining precomputed
					 balance is $3,095 (no adjustments are necessary), to determine the "last
					 entirely paid installment," the authorized lender must divide the precomputed
					 balance by the regular installment amount ($3,095 divided by $100 = 30.95).
					 Because the entire amount of the installment must be unpaid, the result must be
					 rounded to the next lowest whole number (in this case, 30). For calculation
					 purposes, there are 30 remaining installments and 6 installments have been
					 made. In this case, the 7th scheduled installment is being deferred. The
					 deferment charge is calculated by determining the scheduled interest charge for
					 the deferment period, or from the last entirely paid installment to the "first
					 entirely unpaid installment" (the 6th entirely paid scheduled installment) to
					 the "next succeeding unpaid installment" (7th scheduled installment). The "next
					 succeeding unpaid installment" is determined by subtracting one unit period
					 from the "last entirely paid installment" (30 - 1 = 29). The calculation of the
					 deferment charge is the difference between the interest refund of the 6th
					 entirely paid installment (36 - 30) and the 7th first entirely unpaid
					 installment (36 - 29). This difference would be $53.28.