State Codes and Statutes
Statutes > Texas > Finance-code > Title-4-regulation-of-interest-loans-and-financed-transactions > Chapter-306-commercial-transactions
FINANCE CODE
TITLE 4. REGULATION OF INTEREST, LOANS, AND FINANCED TRANSACTIONS
SUBTITLE A. INTEREST
CHAPTER 306. COMMERCIAL TRANSACTIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 306.001. DEFINITIONS. In this chapter:
(1) "Account purchase transaction" means an agreement under
which a person engaged in a commercial enterprise sells accounts,
instruments, documents, or chattel paper subject to this subtitle
at a discount, regardless of whether the person has a repurchase
obligation related to the transaction.
(2) "Affiliate of an obligor" means a person who directly or
indirectly, or through one or more intermediaries or other
entities, owns an interest in, controls, is controlled by, or is
under common control with the obligor, or a person in which the
obligor directly or indirectly, or through one or more
intermediaries or other entities, owns an interest. In this
subdivision "control" means the possession, directly or
indirectly, or with one or more other persons, of the power to
direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by
contract, or otherwise.
(3) "Asset-backed securities" means debt obligations or
certificates of beneficial ownership that:
(A) are a part of a single issue or single series of securities
in an aggregate of $1 million or more and issuable in one or more
classes;
(B) are secured by a pledge of, or represent an undivided
ownership interest in:
(i) one or more fixed or revolving financial assets that by
their terms convert into cash within a definite period; and
(ii) rights or other assets designed to assure the servicing or
timely distribution of proceeds to security holders; and
(C) are issued for a business, commercial, agricultural,
investment, or similar purpose by a pass-through entity.
(4) "Business entity" means a partnership, corporation, joint
venture, limited liability company, or other business
organization or business association, however organized.
(5) "Commercial loan" means a loan that is made primarily for
business, commercial, investment, agricultural, or similar
purposes. The term does not include a loan made primarily for
personal, family, or household use.
(6) "Guaranty" means an agreement under which a person:
(A) assumes, guarantees, or otherwise becomes primarily or
contingently liable for the payment or performance of an
obligation of another person;
(B) provides security, by creation of a lien or security
interest or otherwise, for the payment or performance of an
obligation of another person; or
(C) agrees to purchase or to advance consideration to purchase
an obligation of another person or property that is security for
the payment or performance of the obligation.
(7) "Pass-through entity" means a business entity, association,
grantor or common-law trust under state law, or segregated pool
of assets under federal tax law that, on the date of original
issuance of asset-backed securities, does not have significant
assets other than:
(A) assets pledged to or held for the benefit of holders of the
asset-backed securities; or
(B) assets pledged to or held for the benefit of holders of
other asset-backed securities previously issued.
(8) "Prepayment premium" means compensation paid by or that is
or will become due from an obligor to a creditor solely as a
result or condition of the payment or maturity of all or a
portion of the principal amount of a loan before its stated
maturity or a regularly scheduled date of payment, as a result of
the obligor's election to pay all or a portion of the principal
amount before its stated maturity or a regularly scheduled date
of payment.
(9) "Qualified commercial loan":
(A) means:
(i) a commercial loan in which one or more persons as part of
the same transaction lends, advances, borrows, or receives, or is
obligated to lend or advance or entitled to borrow or receive,
money or credit with an aggregate value of:
(a) $3 million or more if the commercial loan is secured by real
property; or
(b) $250,000 or more if the commercial loan is not secured by
real property and, if the aggregate value of the commercial loan
is less than $500,000, the loan documents contain a written
certification from the borrower that:
(1) the borrower has been advised by the lender to seek the
advice of an attorney and an accountant in connection with the
commercial loan; and
(2) the borrower has had the opportunity to seek the advice of
an attorney and accountant of the borrower's choice in connection
with the commercial loan; and
(ii) a renewal or extension of a commercial loan described by
Paragraph (A), regardless of the principal amount of the loan at
the time of the renewal or extension; and
(B) does not include a commercial loan made for the purpose of
financing a business licensed by the Motor Vehicle Board of the
Texas Department of Motor Vehicles under Section 2301.251(a),
Occupations Code.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999. Amended by Acts 1999, 76th Leg., ch. 531, Sec. 2, eff.
Sept. 1, 1999; Acts 1999, 76th Leg., ch. 994, Sec. 2, eff. Sept.
1, 1999; Acts 2003, 78th Leg., ch. 1276, Sec. 14A.772, eff. Sept.
1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.08, eff. September 1, 2005.
Acts 2009, 81st Leg., R.S., Ch.
933, Sec. 3D.01, eff. September 1, 2009.
Sec. 306.002. INTEREST; APPLICATION OF OTHER PROVISIONS OF
SUBTITLE. (a) A creditor may contract for, charge, and receive
from an obligor on a commercial loan a rate or amount of interest
that does not exceed the applicable ceilings computed in
accordance with Chapter 303.
(b) All other applicable provisions, remedies, and penalties of
this subtitle apply to a commercial loan unless this chapter
expressly provides otherwise.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.003. COMPUTATION OF TERM. A creditor and an obligor
may agree to compute the term and rate of a commercial loan based
on a 360-day year consisting of 12 30-day months. For purposes of
this chapter, each rate ceiling expressed as a rate per year may
mean a rate per year consisting of 360 days and of 12 30-day
months.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.004. DETERMINING RATES OF INTEREST BY SPREADING. (a)
To determine whether a commercial loan is usurious, the interest
rate is computed by amortizing or spreading, using the actuarial
method during the stated term of the loan, all interest at any
time contracted for, charged, or received in connection with the
loan.
(b) If a commercial loan is paid in full before the end of the
stated term of the loan and the amount of interest received for
the period that the loan exists exceeds the amount that produces
the maximum rate authorized by law for that period, the lender
shall:
(1) refund the amount of the excess to the borrower; or
(2) credit the amount of the excess against amounts owing under
the loan.
(c) A lender who complies with Subsection (b) is not subject to
any of the penalties provided by law for contracting for,
charging, or receiving interest in excess of the maximum rate
authorized.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.005. PREPAYMENT PREMIUMS AND SIMILAR AMOUNTS. With
respect to a loan subject to this chapter, a creditor and an
obligor may agree to a prepayment premium, make-whole premium, or
similar fee or charge, whether payable in the event of voluntary
prepayment, involuntary prepayment, acceleration of maturity, or
other cause that involves premature termination of the loan, and
those amounts do not constitute interest.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.12, eff. September 1, 2005.
Sec. 306.006. CERTAIN AUTHORIZED CHARGES ON COMMERCIAL LOANS.
In addition to the interest authorized by this chapter, the
parties to a commercial loan may agree and stipulate for:
(1) a delinquency charge on the amount of any installment or
other amount in default for a period of not less than 10 days in
an amount not to exceed five percent of the total amount of the
installment; and
(2) a returned check fee in an amount that does not exceed the
maximum fee authorized in Section 3.506, Business & Commerce
Code, on any check, draft, order, or other instrument or form of
remittance that is returned unpaid or dishonored for any reason.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.13, eff. September 1, 2005.
Sec. 306.007. GUARANTY, ASSUMPTION, PAYMENT, OR OTHER AGREEMENT.
With respect to a commercial loan, an obligor may be required to
assume, pay, or provide a guaranty of another person's existing
or future obligation as a condition of the obligor's own use,
forbearance, or detention of money. The amount of the other
person's obligation required to be assumed, paid, or guaranteed
does not constitute interest with respect to any obligation of
the obligor.
Added by Acts 2005, 79th Leg., Ch.
1018, Sec. 2.14, eff. September 1, 2005.
SUBCHAPTER B. PROVISIONS RELATING TO SPECIFIC TYPES OF COMMERCIAL
LOANS OR TRANSACTIONS
Sec. 306.101. QUALIFIED COMMERCIAL LOAN. (a) The parties to a
qualified commercial loan agreement may contract for a rate or
amount of interest that does not exceed the applicable rate
ceiling.
(b) The parties to a qualified commercial loan agreement may
contract for the following charges:
(1) a discount or commission that an obligor has paid or agreed
to pay to one or more underwriters of securities issued by the
obligor;
(2) an option or right to exchange, redeem, or convert all or a
portion of the principal amount of the loan, or interest on the
principal amount, for or into capital stock or other equity
securities of an obligor or of an affiliate of an obligor;
(3) an option or right to purchase capital stock or other equity
securities of an obligor or of an affiliate of an obligor;
(4) an option or other right created by contract, conveyance, or
otherwise, to participate in or own a share of the income,
revenues, production, or profits:
(A) of an obligor or of an affiliate of an obligor;
(B) of any segment of the business or operations of an obligor
or of an affiliate of an obligor; or
(C) derived or to be derived from ownership rights of an obligor
or of an affiliate of an obligor in property, including any
proceeds of the sale or other disposition of ownership rights; or
(5) compensation realized as a result of the receipt, exercise,
sale, or other disposition of an option or other right described
by this subsection.
(c) A charge under Subsection (b) is not interest.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.102. ASSET-BACKED SECURITIES TRANSACTION. An amount
that is paid, passed through, or obligated to be paid or to be
passed through in connection with asset-backed securities or that
is not paid as a result of a discounted sale price to the holders
of asset-backed securities by a pass-through entity is not
interest. This section does not affect interest that is agreed on
and fixed by the parties to a written contract and paid, charged,
or received on the ultimate underlying assets pledged to or held
for the benefit of holders of asset-backed securities.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.103. ACCOUNT PURCHASE TRANSACTION. (a) An amount of a
discount in, or charged under, an account purchase transaction is
not interest.
(b) For the purposes of this chapter, the parties'
characterization of an account purchase transaction as a purchase
is conclusive that the account purchase transaction is not a
transaction for the use, forbearance, or detention of money.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
State Codes and Statutes
Statutes > Texas > Finance-code > Title-4-regulation-of-interest-loans-and-financed-transactions > Chapter-306-commercial-transactions
FINANCE CODE
TITLE 4. REGULATION OF INTEREST, LOANS, AND FINANCED TRANSACTIONS
SUBTITLE A. INTEREST
CHAPTER 306. COMMERCIAL TRANSACTIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 306.001. DEFINITIONS. In this chapter:
(1) "Account purchase transaction" means an agreement under
which a person engaged in a commercial enterprise sells accounts,
instruments, documents, or chattel paper subject to this subtitle
at a discount, regardless of whether the person has a repurchase
obligation related to the transaction.
(2) "Affiliate of an obligor" means a person who directly or
indirectly, or through one or more intermediaries or other
entities, owns an interest in, controls, is controlled by, or is
under common control with the obligor, or a person in which the
obligor directly or indirectly, or through one or more
intermediaries or other entities, owns an interest. In this
subdivision "control" means the possession, directly or
indirectly, or with one or more other persons, of the power to
direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by
contract, or otherwise.
(3) "Asset-backed securities" means debt obligations or
certificates of beneficial ownership that:
(A) are a part of a single issue or single series of securities
in an aggregate of $1 million or more and issuable in one or more
classes;
(B) are secured by a pledge of, or represent an undivided
ownership interest in:
(i) one or more fixed or revolving financial assets that by
their terms convert into cash within a definite period; and
(ii) rights or other assets designed to assure the servicing or
timely distribution of proceeds to security holders; and
(C) are issued for a business, commercial, agricultural,
investment, or similar purpose by a pass-through entity.
(4) "Business entity" means a partnership, corporation, joint
venture, limited liability company, or other business
organization or business association, however organized.
(5) "Commercial loan" means a loan that is made primarily for
business, commercial, investment, agricultural, or similar
purposes. The term does not include a loan made primarily for
personal, family, or household use.
(6) "Guaranty" means an agreement under which a person:
(A) assumes, guarantees, or otherwise becomes primarily or
contingently liable for the payment or performance of an
obligation of another person;
(B) provides security, by creation of a lien or security
interest or otherwise, for the payment or performance of an
obligation of another person; or
(C) agrees to purchase or to advance consideration to purchase
an obligation of another person or property that is security for
the payment or performance of the obligation.
(7) "Pass-through entity" means a business entity, association,
grantor or common-law trust under state law, or segregated pool
of assets under federal tax law that, on the date of original
issuance of asset-backed securities, does not have significant
assets other than:
(A) assets pledged to or held for the benefit of holders of the
asset-backed securities; or
(B) assets pledged to or held for the benefit of holders of
other asset-backed securities previously issued.
(8) "Prepayment premium" means compensation paid by or that is
or will become due from an obligor to a creditor solely as a
result or condition of the payment or maturity of all or a
portion of the principal amount of a loan before its stated
maturity or a regularly scheduled date of payment, as a result of
the obligor's election to pay all or a portion of the principal
amount before its stated maturity or a regularly scheduled date
of payment.
(9) "Qualified commercial loan":
(A) means:
(i) a commercial loan in which one or more persons as part of
the same transaction lends, advances, borrows, or receives, or is
obligated to lend or advance or entitled to borrow or receive,
money or credit with an aggregate value of:
(a) $3 million or more if the commercial loan is secured by real
property; or
(b) $250,000 or more if the commercial loan is not secured by
real property and, if the aggregate value of the commercial loan
is less than $500,000, the loan documents contain a written
certification from the borrower that:
(1) the borrower has been advised by the lender to seek the
advice of an attorney and an accountant in connection with the
commercial loan; and
(2) the borrower has had the opportunity to seek the advice of
an attorney and accountant of the borrower's choice in connection
with the commercial loan; and
(ii) a renewal or extension of a commercial loan described by
Paragraph (A), regardless of the principal amount of the loan at
the time of the renewal or extension; and
(B) does not include a commercial loan made for the purpose of
financing a business licensed by the Motor Vehicle Board of the
Texas Department of Motor Vehicles under Section 2301.251(a),
Occupations Code.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999. Amended by Acts 1999, 76th Leg., ch. 531, Sec. 2, eff.
Sept. 1, 1999; Acts 1999, 76th Leg., ch. 994, Sec. 2, eff. Sept.
1, 1999; Acts 2003, 78th Leg., ch. 1276, Sec. 14A.772, eff. Sept.
1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.08, eff. September 1, 2005.
Acts 2009, 81st Leg., R.S., Ch.
933, Sec. 3D.01, eff. September 1, 2009.
Sec. 306.002. INTEREST; APPLICATION OF OTHER PROVISIONS OF
SUBTITLE. (a) A creditor may contract for, charge, and receive
from an obligor on a commercial loan a rate or amount of interest
that does not exceed the applicable ceilings computed in
accordance with Chapter 303.
(b) All other applicable provisions, remedies, and penalties of
this subtitle apply to a commercial loan unless this chapter
expressly provides otherwise.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.003. COMPUTATION OF TERM. A creditor and an obligor
may agree to compute the term and rate of a commercial loan based
on a 360-day year consisting of 12 30-day months. For purposes of
this chapter, each rate ceiling expressed as a rate per year may
mean a rate per year consisting of 360 days and of 12 30-day
months.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.004. DETERMINING RATES OF INTEREST BY SPREADING. (a)
To determine whether a commercial loan is usurious, the interest
rate is computed by amortizing or spreading, using the actuarial
method during the stated term of the loan, all interest at any
time contracted for, charged, or received in connection with the
loan.
(b) If a commercial loan is paid in full before the end of the
stated term of the loan and the amount of interest received for
the period that the loan exists exceeds the amount that produces
the maximum rate authorized by law for that period, the lender
shall:
(1) refund the amount of the excess to the borrower; or
(2) credit the amount of the excess against amounts owing under
the loan.
(c) A lender who complies with Subsection (b) is not subject to
any of the penalties provided by law for contracting for,
charging, or receiving interest in excess of the maximum rate
authorized.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.005. PREPAYMENT PREMIUMS AND SIMILAR AMOUNTS. With
respect to a loan subject to this chapter, a creditor and an
obligor may agree to a prepayment premium, make-whole premium, or
similar fee or charge, whether payable in the event of voluntary
prepayment, involuntary prepayment, acceleration of maturity, or
other cause that involves premature termination of the loan, and
those amounts do not constitute interest.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.12, eff. September 1, 2005.
Sec. 306.006. CERTAIN AUTHORIZED CHARGES ON COMMERCIAL LOANS.
In addition to the interest authorized by this chapter, the
parties to a commercial loan may agree and stipulate for:
(1) a delinquency charge on the amount of any installment or
other amount in default for a period of not less than 10 days in
an amount not to exceed five percent of the total amount of the
installment; and
(2) a returned check fee in an amount that does not exceed the
maximum fee authorized in Section 3.506, Business & Commerce
Code, on any check, draft, order, or other instrument or form of
remittance that is returned unpaid or dishonored for any reason.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.13, eff. September 1, 2005.
Sec. 306.007. GUARANTY, ASSUMPTION, PAYMENT, OR OTHER AGREEMENT.
With respect to a commercial loan, an obligor may be required to
assume, pay, or provide a guaranty of another person's existing
or future obligation as a condition of the obligor's own use,
forbearance, or detention of money. The amount of the other
person's obligation required to be assumed, paid, or guaranteed
does not constitute interest with respect to any obligation of
the obligor.
Added by Acts 2005, 79th Leg., Ch.
1018, Sec. 2.14, eff. September 1, 2005.
SUBCHAPTER B. PROVISIONS RELATING TO SPECIFIC TYPES OF COMMERCIAL
LOANS OR TRANSACTIONS
Sec. 306.101. QUALIFIED COMMERCIAL LOAN. (a) The parties to a
qualified commercial loan agreement may contract for a rate or
amount of interest that does not exceed the applicable rate
ceiling.
(b) The parties to a qualified commercial loan agreement may
contract for the following charges:
(1) a discount or commission that an obligor has paid or agreed
to pay to one or more underwriters of securities issued by the
obligor;
(2) an option or right to exchange, redeem, or convert all or a
portion of the principal amount of the loan, or interest on the
principal amount, for or into capital stock or other equity
securities of an obligor or of an affiliate of an obligor;
(3) an option or right to purchase capital stock or other equity
securities of an obligor or of an affiliate of an obligor;
(4) an option or other right created by contract, conveyance, or
otherwise, to participate in or own a share of the income,
revenues, production, or profits:
(A) of an obligor or of an affiliate of an obligor;
(B) of any segment of the business or operations of an obligor
or of an affiliate of an obligor; or
(C) derived or to be derived from ownership rights of an obligor
or of an affiliate of an obligor in property, including any
proceeds of the sale or other disposition of ownership rights; or
(5) compensation realized as a result of the receipt, exercise,
sale, or other disposition of an option or other right described
by this subsection.
(c) A charge under Subsection (b) is not interest.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.102. ASSET-BACKED SECURITIES TRANSACTION. An amount
that is paid, passed through, or obligated to be paid or to be
passed through in connection with asset-backed securities or that
is not paid as a result of a discounted sale price to the holders
of asset-backed securities by a pass-through entity is not
interest. This section does not affect interest that is agreed on
and fixed by the parties to a written contract and paid, charged,
or received on the ultimate underlying assets pledged to or held
for the benefit of holders of asset-backed securities.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.103. ACCOUNT PURCHASE TRANSACTION. (a) An amount of a
discount in, or charged under, an account purchase transaction is
not interest.
(b) For the purposes of this chapter, the parties'
characterization of an account purchase transaction as a purchase
is conclusive that the account purchase transaction is not a
transaction for the use, forbearance, or detention of money.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
State Codes and Statutes
Statutes >
Texas >
Finance-code >
Title-4-regulation-of-interest-loans-and-financed-transactions >
Chapter-306-commercial-transactions FINANCE CODE
TITLE 4. REGULATION OF INTEREST, LOANS, AND FINANCED TRANSACTIONS
SUBTITLE A. INTEREST
CHAPTER 306. COMMERCIAL TRANSACTIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 306.001. DEFINITIONS. In this chapter:
(1) "Account purchase transaction" means an agreement under
which a person engaged in a commercial enterprise sells accounts,
instruments, documents, or chattel paper subject to this subtitle
at a discount, regardless of whether the person has a repurchase
obligation related to the transaction.
(2) "Affiliate of an obligor" means a person who directly or
indirectly, or through one or more intermediaries or other
entities, owns an interest in, controls, is controlled by, or is
under common control with the obligor, or a person in which the
obligor directly or indirectly, or through one or more
intermediaries or other entities, owns an interest. In this
subdivision "control" means the possession, directly or
indirectly, or with one or more other persons, of the power to
direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by
contract, or otherwise.
(3) "Asset-backed securities" means debt obligations or
certificates of beneficial ownership that:
(A) are a part of a single issue or single series of securities
in an aggregate of $1 million or more and issuable in one or more
classes;
(B) are secured by a pledge of, or represent an undivided
ownership interest in:
(i) one or more fixed or revolving financial assets that by
their terms convert into cash within a definite period; and
(ii) rights or other assets designed to assure the servicing or
timely distribution of proceeds to security holders; and
(C) are issued for a business, commercial, agricultural,
investment, or similar purpose by a pass-through entity.
(4) "Business entity" means a partnership, corporation, joint
venture, limited liability company, or other business
organization or business association, however organized.
(5) "Commercial loan" means a loan that is made primarily for
business, commercial, investment, agricultural, or similar
purposes. The term does not include a loan made primarily for
personal, family, or household use.
(6) "Guaranty" means an agreement under which a person:
(A) assumes, guarantees, or otherwise becomes primarily or
contingently liable for the payment or performance of an
obligation of another person;
(B) provides security, by creation of a lien or security
interest or otherwise, for the payment or performance of an
obligation of another person; or
(C) agrees to purchase or to advance consideration to purchase
an obligation of another person or property that is security for
the payment or performance of the obligation.
(7) "Pass-through entity" means a business entity, association,
grantor or common-law trust under state law, or segregated pool
of assets under federal tax law that, on the date of original
issuance of asset-backed securities, does not have significant
assets other than:
(A) assets pledged to or held for the benefit of holders of the
asset-backed securities; or
(B) assets pledged to or held for the benefit of holders of
other asset-backed securities previously issued.
(8) "Prepayment premium" means compensation paid by or that is
or will become due from an obligor to a creditor solely as a
result or condition of the payment or maturity of all or a
portion of the principal amount of a loan before its stated
maturity or a regularly scheduled date of payment, as a result of
the obligor's election to pay all or a portion of the principal
amount before its stated maturity or a regularly scheduled date
of payment.
(9) "Qualified commercial loan":
(A) means:
(i) a commercial loan in which one or more persons as part of
the same transaction lends, advances, borrows, or receives, or is
obligated to lend or advance or entitled to borrow or receive,
money or credit with an aggregate value of:
(a) $3 million or more if the commercial loan is secured by real
property; or
(b) $250,000 or more if the commercial loan is not secured by
real property and, if the aggregate value of the commercial loan
is less than $500,000, the loan documents contain a written
certification from the borrower that:
(1) the borrower has been advised by the lender to seek the
advice of an attorney and an accountant in connection with the
commercial loan; and
(2) the borrower has had the opportunity to seek the advice of
an attorney and accountant of the borrower's choice in connection
with the commercial loan; and
(ii) a renewal or extension of a commercial loan described by
Paragraph (A), regardless of the principal amount of the loan at
the time of the renewal or extension; and
(B) does not include a commercial loan made for the purpose of
financing a business licensed by the Motor Vehicle Board of the
Texas Department of Motor Vehicles under Section 2301.251(a),
Occupations Code.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999. Amended by Acts 1999, 76th Leg., ch. 531, Sec. 2, eff.
Sept. 1, 1999; Acts 1999, 76th Leg., ch. 994, Sec. 2, eff. Sept.
1, 1999; Acts 2003, 78th Leg., ch. 1276, Sec. 14A.772, eff. Sept.
1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.08, eff. September 1, 2005.
Acts 2009, 81st Leg., R.S., Ch.
933, Sec. 3D.01, eff. September 1, 2009.
Sec. 306.002. INTEREST; APPLICATION OF OTHER PROVISIONS OF
SUBTITLE. (a) A creditor may contract for, charge, and receive
from an obligor on a commercial loan a rate or amount of interest
that does not exceed the applicable ceilings computed in
accordance with Chapter 303.
(b) All other applicable provisions, remedies, and penalties of
this subtitle apply to a commercial loan unless this chapter
expressly provides otherwise.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.003. COMPUTATION OF TERM. A creditor and an obligor
may agree to compute the term and rate of a commercial loan based
on a 360-day year consisting of 12 30-day months. For purposes of
this chapter, each rate ceiling expressed as a rate per year may
mean a rate per year consisting of 360 days and of 12 30-day
months.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.004. DETERMINING RATES OF INTEREST BY SPREADING. (a)
To determine whether a commercial loan is usurious, the interest
rate is computed by amortizing or spreading, using the actuarial
method during the stated term of the loan, all interest at any
time contracted for, charged, or received in connection with the
loan.
(b) If a commercial loan is paid in full before the end of the
stated term of the loan and the amount of interest received for
the period that the loan exists exceeds the amount that produces
the maximum rate authorized by law for that period, the lender
shall:
(1) refund the amount of the excess to the borrower; or
(2) credit the amount of the excess against amounts owing under
the loan.
(c) A lender who complies with Subsection (b) is not subject to
any of the penalties provided by law for contracting for,
charging, or receiving interest in excess of the maximum rate
authorized.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.005. PREPAYMENT PREMIUMS AND SIMILAR AMOUNTS. With
respect to a loan subject to this chapter, a creditor and an
obligor may agree to a prepayment premium, make-whole premium, or
similar fee or charge, whether payable in the event of voluntary
prepayment, involuntary prepayment, acceleration of maturity, or
other cause that involves premature termination of the loan, and
those amounts do not constitute interest.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.12, eff. September 1, 2005.
Sec. 306.006. CERTAIN AUTHORIZED CHARGES ON COMMERCIAL LOANS.
In addition to the interest authorized by this chapter, the
parties to a commercial loan may agree and stipulate for:
(1) a delinquency charge on the amount of any installment or
other amount in default for a period of not less than 10 days in
an amount not to exceed five percent of the total amount of the
installment; and
(2) a returned check fee in an amount that does not exceed the
maximum fee authorized in Section 3.506, Business & Commerce
Code, on any check, draft, order, or other instrument or form of
remittance that is returned unpaid or dishonored for any reason.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.13, eff. September 1, 2005.
Sec. 306.007. GUARANTY, ASSUMPTION, PAYMENT, OR OTHER AGREEMENT.
With respect to a commercial loan, an obligor may be required to
assume, pay, or provide a guaranty of another person's existing
or future obligation as a condition of the obligor's own use,
forbearance, or detention of money. The amount of the other
person's obligation required to be assumed, paid, or guaranteed
does not constitute interest with respect to any obligation of
the obligor.
Added by Acts 2005, 79th Leg., Ch.
1018, Sec. 2.14, eff. September 1, 2005.
SUBCHAPTER B. PROVISIONS RELATING TO SPECIFIC TYPES OF COMMERCIAL
LOANS OR TRANSACTIONS
Sec. 306.101. QUALIFIED COMMERCIAL LOAN. (a) The parties to a
qualified commercial loan agreement may contract for a rate or
amount of interest that does not exceed the applicable rate
ceiling.
(b) The parties to a qualified commercial loan agreement may
contract for the following charges:
(1) a discount or commission that an obligor has paid or agreed
to pay to one or more underwriters of securities issued by the
obligor;
(2) an option or right to exchange, redeem, or convert all or a
portion of the principal amount of the loan, or interest on the
principal amount, for or into capital stock or other equity
securities of an obligor or of an affiliate of an obligor;
(3) an option or right to purchase capital stock or other equity
securities of an obligor or of an affiliate of an obligor;
(4) an option or other right created by contract, conveyance, or
otherwise, to participate in or own a share of the income,
revenues, production, or profits:
(A) of an obligor or of an affiliate of an obligor;
(B) of any segment of the business or operations of an obligor
or of an affiliate of an obligor; or
(C) derived or to be derived from ownership rights of an obligor
or of an affiliate of an obligor in property, including any
proceeds of the sale or other disposition of ownership rights; or
(5) compensation realized as a result of the receipt, exercise,
sale, or other disposition of an option or other right described
by this subsection.
(c) A charge under Subsection (b) is not interest.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.102. ASSET-BACKED SECURITIES TRANSACTION. An amount
that is paid, passed through, or obligated to be paid or to be
passed through in connection with asset-backed securities or that
is not paid as a result of a discounted sale price to the holders
of asset-backed securities by a pass-through entity is not
interest. This section does not affect interest that is agreed on
and fixed by the parties to a written contract and paid, charged,
or received on the ultimate underlying assets pledged to or held
for the benefit of holders of asset-backed securities.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 306.103. ACCOUNT PURCHASE TRANSACTION. (a) An amount of a
discount in, or charged under, an account purchase transaction is
not interest.
(b) For the purposes of this chapter, the parties'
characterization of an account purchase transaction as a purchase
is conclusive that the account purchase transaction is not a
transaction for the use, forbearance, or detention of money.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
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