Part I.
Finance Commission of Texas
Chapter 1.
Consumer Credit Commissioner
Subchapter A. Regulated Loan Licenses
1.
General Provisions
7 TAC §1.14, §1.15
(Editor's note: The text of the following sections proposed for
repeal will not be published. The sections may be examined in the offices
of the Finance Commission of Texas or in the Texas Register office, Room 245,
James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Finance Commission of Texas (the commission)
proposes the repeal of §1.14 and §1.15. This repeals are necessary
because the sections relate to authorized lender's duties prescribed under
Chapter 3, Texas Civil Statutes, Article 5069-3.01
et seq.
, which was repealed by the 75th Legislature (1997). Moreover
these rules are being replaced by a new set of rules for Chapter 3A, a new
chapter of the
Texas Credit Title
which encompasses
old Chapter 3 through 5. The new rules are being published for comment in
the
Texas Register
.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period of the repeals as proposed will be in effect,
there will be no fiscal implications for state or local government as a result
of administering or enforcing the repeal.
Ms. Pettijohn also has determined that for each year of the first five-year
period the repeals as proposed will be in effect, the public benefit anticipated
as a result of the repeal is the removal of unenforceable and obsolete regulations
which will provide space for replacement rules. These is no anticipated cost
to persons who are required to comply with the repeals as proposed. There
will be no adverse economic effect on small businesses.
Comments on the proposed repeals may be submitted in writing to Leslie
L. Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas 78705-4207.
The repeals are proposed under Texas Civil Statutes, Article
5069-3A.901, which authorizes the Finance Commission to adopt rules to enforce
new Chapter 3A. The repeal will not be adopted until the proposed replacement
sections are adopted.
The statutory provisions (as currently in effect) affected by the proposed
repeals are Texas Civil Statutes, Article 5069, Chapter 3A, Subchapter J.
§1.14. Quotation of Net Payoffs.
§1.15. Bilingual Disclosure.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of the Secretary of State, on
February 25, 1999.
TRD-9901185
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: April 11, 1999
For further information, please call: (512) 936-7640
7 TAC §§1.71-1.75, 1.77, 1.78, 1.80
(Editor's note: The text of the following sections proposed for
repeal will not be published. The sections may be examined in the offices
of the Finance Commission of Texas or in the Texas Register office, Room 245,
James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Finance Commission of Texas (the commission)
proposes the repeal of §§1.71-1.75, 1.77, 1.78, and 1.80. The repeals
are necessary because the sections that are proposed for repeal relate to
insurance in connection with loans made under authority of Chapter 3, Texas
Civil Statutes, Article 5069-3.01
et seq.
,
which was repealed by the 75th Legislature (1997). Moreover, they are being
replaced by a new set of rules for Chapter 3A, a new chapter of the
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period of the repeals as proposed will be in effect,
there will be no fiscal implications for state or local government as a result
of administering or enforcing the repeal.
Ms. Pettijohn also has determined that for each year of the first five-year
period the repeals as proposed will be in effect, the public benefit anticipated
as a result of the repeal is the removal of unenforceable and obsolete regulations
which will provide space for replacement rules. There is no anticipated cost
to persons who are required to comply with the repeal as proposed. There will
be no adverse economic effect on small businesses.
Comments on the proposed repeals may be submitted in writing to Leslie
L. Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas 78705-4207.
The repeals are proposed under Texas Civil Statutes, Article
5069-3A.901, which authorizes the Finance Commission to adopt rules to enforce
new Chapter 3A. The repeal will not be adopted until the proposed replacement
sections are adopted.
The statutory provisions (as currently in effect) affected by the proposed
repeals; Texas Civil Statutes, Article 5069, Chapter 3A, Subchapter I.
§1.71. Disclosure in Policy; Borrower's Copy; Master Copy.
§1.72. Mutual Insurance.
§1.73. Insurance Premiums.
§1.74. Substantiation of Personal Property Insurance.
§1.75. Limitation of Personal Property Insurance.
§1.77. Refunds.
§1.78. Refunding Procedures-Prepayment Due to Loss.
§1.80. Filing with Commissioner.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of the Secretary of State, on
February 25, 1999.
TRD-9901186
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: April 11, 1999
For further information, please call: (512) 936-7640
7 TAC §1.93, §1.96
(Editor's note: The text of the following sections proposed for
repeal will not be published. The sections may be examined in the offices
of the Finance Commission of Texas or in the Texas Register office, Room 245,
James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Finance Commission of Texas (the commission)
proposes the repeal of §1.93 and §1.96. This repeals are necessary
because the sections that are proposed for repeal relate to insurance in connection
with loans made under authority of Chapter 3, Texas Civil Statutes, Article
5069-3.01
et. seq.
, which was repealed by
the 75th Legislature (1997). Moreover, they are being replaced by a new set
of rules for Chapter 3A, a new chapter of the
Texas
Credit Title
which encompasses old chapters 3 through 5. The new rules
are being published for comment in the
Texas Register
.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period of the repeals as proposed will be in effect,
there will be no fiscal implications for state or local government as a result
of administering or enforcing the repeal.
Ms. Pettijohn also has determined that for each year of the first five-year
period the repeals as proposed will be in effect, the public benefit anticipated
as a result of the repeal is the removal of unenforceable and obsolete regulations
which will provide space for replacement rules. These is no anticipated cost
to persons who are required to comply with the repeal as proposed. There will
be no adverse economic effect on small businesses.
Comments on the proposed repeals may be submitted in writing to Leslie
L. Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas 78705-4207.
The repeals are proposed under Texas Civil Statutes, Article
5069-3A.901, which authorizes the Finance Commission to adopt rules to enforce
new Chapter 3A. The repeals will not be adopted until the proposed replacement
sections are adopted.
The statutory provisions (as currently in effect) affected by the proposed
repeals; Texas Civil Statutes, Article 5069, Chapter 3A, Subchapter I.
§1.93. Insurance Refunds.
§1.96. Computation of Unearned Life, Accident, and Health Premiums.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of the Secretary of State, on
February 25, 1999.
TRD-9901187
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: April 11, 1999
For further information, please call: (512) 936-7640
7 TAC §§1.801-1.811
The Finance Commission of Texas (the commission) proposes
new §§1.801-1.811, concerning Insurance as provided in Subchapter
I, Chapter 3A, Article 5069.
Pursuant to Subchapter I, a lender may request or require various insurance
coverages in connection with a loan made under Texas Civil Statutes, Chapter
3A. The proposed rules will provide guidance concerning procedures involved
in procuring, maintaining, and terminating these insurance coverages.
Section 1.801 defines terms that are used in connection with these transactions.
Section 1.802 explains the procedures for property insurance that may be
written in connection with a loan made under Chapter 3A. The substance of
this rule is currently embodied in 7 TAC §1.73 (which is being proposed
for simultaneous repeal) and has been in effect since its initial adoption
in 1972. The commissioner has a responsibility to determine if rates for property
insurance that is obtained by the lender at rates that are not fixed or approved
by the Texas Department of Insurance bear a reasonable relationship to the
amount, term, and conditions of the loan, the value of the collateral, and
the existing hazards or risk of loss, damage, or destruction. This rule provides
the procedure for making that determination.
Section 1.803 provides the limits for property insurance relative to the
amount of the note and the value of the collateral. The rule also provides
a procedure for substantiating the amount of property insurance, especially
when the credit insurance policy covers multiple items of collateral . This
procedure is currently embodied in 7 TAC §1.74 (which is being proposed
for simultaneous repeal) and has been in effect since its initial adoption
in 1972. The procedure is necessary to determine an appropriate settlement
amount when a claim is made for a partial personal property loss.
Section 1.804 details the manner of determining the appropriate value of
insured items, in the event of a claim. Specifically, the rule lays out the
"claims ratio" as an approved formula for allocating value to individual items
of collateral in the event of a claim when the total amount of property insurance
written is less than the total value of the collateral.
Section 1.805 describes the types of credit insurance authorized to be
sold in connection with a Chapter 3A loan. The rule is necessary to prescribe
these types of insurance and require compliance with the applicable sections
of the insurance statutes.
Section 1.806 requires the lender to provide a borrower with a copy of
a policy or certificate of insurance for coverage sold in connection with
a Chapter 3A loan. This rule is necessary to prescribe the specific information
required to be disclosed to the borrower and to provide for a reasonable time
frame in which the information is to be disclosed to the borrower.
Section 1.807 refers the reader to other applicable requirements for placement
of single-interest insurance on a loan written under the authority of Chapter
3A.
Section 1.808 provides the procedures for terminating insurance policies
in the event that a loan has been discharged. This procedure is currently
embodied in 7 TAC §1.77 (which is being proposed for simultaneous repeal)
and has been in effect since its initial adoption in 1972. The procedure is
necessary to provide lenders guidance for complying with the credit statutes
and the insurance statutes in the event of the termination of a policy.
Section 1.809 explains refunding procedures when an account is paid in
full due to the proceeds of an insured property loss. This procedure is currently
embodied in 7 TAC §1.78 (which is being proposed for simultaneous repeal)
and has been in effect since its initial adoption in 1972. The procedure is
necessary to provide lenders guidance in crediting accounts or refunding the
unearned portions of insurance premiums and interest charges when the account
has been paid in full by the insurance proceeds.
Section 1.810 prescribes the procedure for cancellation of property insurance
when a borrower provides a lender with evidence that the borrower has equivalent
insurance. This rule is necessary to provide a procedure for the cancellation
of equivalent insurance so that borrowers and lenders understand the steps
required to accomplish the cancellation.
Section 1.811 provides the terms and conditions for writing a nonfiling
insurance policy on a Chapter 3A loan. This insurance is insurance that is
written in lieu of the fees that may be assessed for filing, recording, and
releasing financing statements on the security for a loan. These rules are
necessary to provide clarity to lenders regarding the instances when a charge
for this insurance may be assessed.
These new sections are necessary due to the repeal of the former Article
5069, Chapters 3, 4, and 5 and the adoption of new Article 5069-3A.001
Leslie L. Pettijohn, Consumer Credit Commissioner has determined that for
the first five-year period the new rules will be in effect, there will be
no fiscal implications for state or local government as a result of administering
or enforcing these rules.
Commissioner Pettijohn also has determined that for each year of the first
five-year period the new rules will be in effect, the public benefit anticipated
as a result of the adoption of the new rules is the clarification to lenders
of the maximum allowable charges provided under the law and guidelines for
compliance, thereby assisting lenders and borrowers in constructing transactions
that comply with the law. It is anticipated that there will be no adverse
economic effect on small businesses.
Comments on the proposed new sections may be submitted in writing to Leslie
L. Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas 78705-4207.
The new sections are proposed under Texas Civil Statutes, Article
5069-3A.901, which authorizes the Finance Commission to adopt rules to enforce
new Chapter 3A.
Texas Civil Statutes, Article 5069-3A, Subchapter I is affected by these
proposed new sections.
§1.801. Definitions.
Words and terms used in this subchapter that are defined in Texas Revised
Civil Statutes, Article 5069, Chapter 3A, have the meanings as defined in
Chapter 3A. The following words and terms, shall have the following meanings
unless the context clearly indicates otherwise.
(1)
Personal property insurance - coverage to insure tangible
personal property offered as security for a loan made under Chapter 3A.
(2)
Property insurance - coverage to insure either an
interest in real estate or tangible personal property offered as security
for a loan made under Chapter 3A.
(3)
Single-interest insurance - a form of property insurance
that protects only the lender's interest in the property.
(4)
Credit insurance - includes credit life insurance,
credit accident and health insurance, and involuntary unemployment insurance.
(5)
Total personal property loss - the loss of all items
of personal property listed as security for a loan and insured by a particular
insurance policy.
(6)
Partial personal property loss - any loss other than
a total personal property loss.
§1.802. Authorized Property Insurance.
(a)
Property insurance written in connection with a loan made
under Chapter 3A must be written at rates not in excess of the rates fixed
or approved by the Texas Department of Insurance if a rate structure has been
fixed or approved for that particular type of coverage.
(b)
If property insurance requested or required on a loan
is sold or obtained by a licensee at a rate that is not fixed or approved
by the Texas Department of Insurance, the licensee must first obtain prior
acknowledgment from the commissioner that the coverage and the rate bear a
reasonable relationship to:
(1)
the amount, term, and conditions of the loan;
(2)
the value of the collateral; and
(3)
the existing hazards or risk of loss, damage, or
destruction.
(c)
Insurance written at rates not fixed or approved by the
Texas Department of Insurance is subject to cancellation or adjustment if
the insurance is not otherwise approved by the commissioner.
(d)
If a licensee is seeking authority from the commissioner
under subsection (b) of this section for a rate not fixed or approved by the
Texas Department of Insurance, a copy of the relevant policy that is to be
issued shall be filed with the Office of Consumer Credit Commissioner, together
with any evidence that is probative on the factors listed in subsection (b)
of this section.
(e)
Property insurance written in connection with a Chapter
3A loan must be provided by a company authorized to do business in this state.
§1.803. Limitations on Property Insurance.
(a)
Personal property insurance, other than insurance covering
an automobile, must not be written in an amount in excess of the total related
note unless prior to writing the insurance the complete policy of insurance,
the proposed rates, and the proposed conditions have been approved by the
commissioner.
(b)
Property insurance must not be written for more than the
value of the item or items insured.
(c)
Automobile insurance written in accordance with applicable
law, the regulations promulgated by the Texas Department of Insurance, and
the rating procedures established by the Texas Department of Insurance is
presumed to satisfy the requirement set forth in this subsection.
(d)
Each licensee shall substantiate that the amount of personal
property insurance, other than coverage on an automobile, is reasonable in
relation to the value of the item or items insured. The value shall be established
in writing by the borrower and the licensee on each insured item and each
value shall be reasonable in relation to the actual replacement cost of the
item. A valuation that has been established on goods to be insured may not
be increased unless it can be shown there has been a substantial change in
the nature of the items insured or the value of these items.
§1.804. Claim Provisions for Property Insurance Other Than Insurance Covering Automobiles.
(a)
Personal property insurance other than insurance property
covering automobiles written on a loan subject to Chapter 3A should provide
a procedure for determining and adjusting the value of insured items in the
event of loss. If a licensee does not utilize a formula submitted to and approved
by the commissioner for adjusting the value of the items insured and if a
loss occurs, the value initially stated is presumed to be the actual replacement
cost of each insured item throughout the life of the policy.
(b)
Personal property insurance may be written in an amount
that is less than the value of the loan collateral at rates not fixed or approved
by the Texas Department of Insurance. Personal property insurance may not
be written unless it provides for payment of a sum not less than the claims
ratio multiplied by the amount of the loss. The claims ratio is calculated
by dividing the amount of insurance by the total value of the secured collateral
covered by the insurance policy, rounded to the fourth digit to the right
of the decimal point. For example, the terms of a transaction are as follows:
the original total of payments in an installment loan is $3,000; the term
is 2 1/2 years with monthly installment payments of $100; property insurance
is purchased to insure 3 items of collateral for up to $3,000: a piano worth
$2,500, a computer worth $1,500, and a television worth $500; and the piano
is then stolen and reported to the insurer by the borrower. The claims ratio
is calculated by dividing the value of the insurance written, $3,000, by the
total value of the collateral covered by the policy, $4,500. Applying the
claims ratio of 2/3 or .6667 to the amount of the loss, $2,500, leads to the
conclusion that no less than $1,666.75 should be paid under the applicable
property insurance policy. A licensee may only write a policy of property
insurance that would provide for a payment of not less than $1,666.75 under
the aforementioned facts.
§1.805. Authorized Credit Insurance.
(a)
Credit insurance written in connection with a Chapter
3A loan shall be decreasing term insurance.
(b)
Credit life insurance and credit accident and health insurance
shall be written in compliance with Texas Insurance Code Article 3.53 and
any regulations issued by the Texas Department of Insurance under the authority
of that provision.
(c)
Involuntary unemployment insurance shall be written in
compliance with Texas Insurance Code Article 21.79E and any regulations issued
by the Texas Department of Insurance under the authority of that provision.
§1.806. Provision of Policy or Certificate.
If a Chapter 3A loan provides for the purchase of insurance by the
borrower from the lender, the lender shall furnish to the borrower, within
30 days of the date of the loan, a properly executed policy or certificate
of insurance. The policy or certificate of insurance shall clearly set forth:
(1)
the amount of the premium;
(2)
the kind of insurance provided;
(3)
the coverage of the insurance; and
(4)
all terms, including options, limitations, restrictions
and conditions of the insurance that has been purchased.
§1.807. Single-interest insurance.
If a lender arranges for single-interest insurance and assesses a
charge for the insurance to the borrower, the lender must comply with the
provisions of Texas Finance Code §341.302.
§1.808. Termination and Refund.
(a)
Upon discharge of an indebtedness by prepayment, renewal,
or refinancing, any insurance, other than nonfiling insurance, written under
the authority of Subchapter I of Chapter 3A of the Credit Code, Texas Revised
Civil Statutes, Articles 5069-3A.701 through 5069-3A.716, shall be automatically
terminated. At the option of the borrower, dual-interest automobile insurance
may be retained without cancellation. If a policy of insurance is terminated
prior to scheduled maturity, a credit of the unearned premium shall be applied
to the borrower's account or a refund of the unearned premium shall be paid
by the lender to the borrower.
(b)
Upon termination of a personal property insurance policy
prior to the scheduled maturity of a loan, other than single-interest insurance,
the licensee shall provide the borrower a refund or credit calculated in accordance
with the policy approved by the commissioner. The policy shall provide for
a pro rata method of making refunds. The pro rata method of making refunds
involves computing a factor to apply to the total premium to determine the
unearned portion. The factor is determined by dividing the term remaining
on the loan by the total loan term.
(c)
Upon termination of a single-interest insurance policy
prior to the scheduled maturity of a loan, the lender shall provide the borrower
a refund or credit calculated in accordance with the insurance policy approved
by the Texas Department of Insurance.
(d)
Upon termination of a credit life or credit accident and
health insurance policy prior to the scheduled maturity of a loan, the lender
shall provide the borrower a refund or credit calculated in compliance with
Texas Insurance Code Article 3.53 and regulations issued by the Texas Department
of Insurance under the authority of that provision.
(e)
Upon termination of a credit involuntary unemployment
insurance policy prior to the scheduled maturity of a loan, the lender shall
provide the borrower a refund or credit calculated in accordance with the
insurance policy approved by the Texas Department of Insurance.
§1.809. Prepayment of Loan from Insurance Proceeds.
(a)
Personal Property Insurance. If a loan is prepaid in full
from the proceeds of a personal property insurance policy following a personal
property loss, the refund should be computed as follows:
(1)
Total personal property loss, other than automobile.
(A)
An interest refund shall be computed as of the date the
settlement check is received by the licensee or 45 days from the date of loss,
whichever occurs first.
(B)
A credit insurance premium refund and single-interest
insurance premium refund shall be computed as of the date the settlement check
is received by the licensee.
(C)
A personal property insurance premium refund, other than
an insurance premium refund on an automobile, shall be computed as of the
day following the date of loss. In the event the borrower has requested cancellation,
any dual-interest automobile insurance premium refund shall be computed as
prescribed by the Texas Department of Insurance manual rules and rates.
(2)
Partial personal property loss, other than automobile.
(A)
An interest refund shall be computed as of the date the
settlement check is received by the licensee or 45 days from the date of loss,
whichever occurs first.
(B)
A credit insurance premium refund and single-interest
insurance premium refund shall be computed as of the date the settlement check
is received by the licensee.
(C)
A personal property insurance premium refund shall be
computed as of the date the settlement check is received by the licensee.
A dual-interest automobile insurance premium refund shall be computed as prescribed
by the Texas Department of Insurance manual rules and rates.
(3)
Total or partial automobile insurance loss.
(A)
An interest refund shall be computed as of the date the
settlement check is received or 45 days from the date of loss, whichever occurs
first.
(B)
A credit insurance premium refund shall be computed as
of the date the settlement check is received by the licensee.
(C)
A personal property insurance premium refund shall be
computed as of the date the settlement check is received by the licensee.
An automobile insurance premium refund shall be computed as prescribed by
Texas Department of Insurance manual rules and rates.
(b)
Credit life insurance. If a loan is prepaid in full or
in part by the proceeds of a credit life insurance claim, the refund should
be computed as follows:
(1)
Complete prepayment. An interest refund, credit accident
and health insurance premium refund, credit involuntary unemployment insurance
premium refund, single-interest insurance premium refund, and personal property
insurance premium refund shall be computed as of the date of death. A dual
interest automobile insurance premium refund shall be computed as prescribed
by the Texas Department of Insurance manual rules and rates in the event cancellation
is requested by the proper representative of the estate.
(2)
Partial prepayment. If a loan is prepaid in part
by the proceeds of a credit life insurance claim following the death of the
primary borrower, any other credit insurance associated with the primary borrower,
such as credit accident and health insurance and credit involuntary unemployment
insurance, shall be canceled. The refunds of the unearned credit insurance
premiums shall be computed as of the date of death.
(c)
Credit accident and health insurance. If an insurance
carrier has classified a disability as permanent and elected to prepay a loan
in full, the interest refund, credit life insurance premium refund, credit
involuntary unemployment insurance premium refund, or personal property insurance
premium refund shall be computed as of the day the settlement check is received
by the licensee. If cancellation is requested by the borrower, any dual-interest
automobile insurance premium refund shall be computed as prescribed by the
Texas Department of Insurance automobile manual rules and rates.
§1.810. Evidence of Equal Insurance Coverage.
If a borrower provides a lender with evidence of property insurance
coverage that names the lender as a loss payee and that is equivalent to insurance
purchased already through the lender, the lender must promptly cancel any
equivalent property insurance or single-interest insurance. The refund of
any unearned insurance premium shall be applied to the balance of the loan
or refunded to the borrower.
§1.811. Nonfiling Insurance.
If a Chapter 3A loan is renewed and a charge was assessed for nonfiling
insurance in the original loan, a new charge for nonfiling insurance may not
be assessed or contracted for in the renewed loan unless the term of the renewed
loan extends more than five years after the date of the original loan. If
different collateral is substituted or added to a loan, then a new charge
for nonfiling insurance may be assessed.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on
February 25, 1999.
TRD-9901188
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: April 11, 1999
For further information, please call: (512) 936-7640
7 TAC §§1.826-1.828
The Finance Commission of Texas (the commission) proposes
new §§1.826-1.828, concerning an authorized lender's duties and
authority under Subchapter J, Chapter 3A, Texas Civil Statute, Article 5069.
Section 1.826 requires that a lender shall provide a borrower with a payoff
quote. This provision is necessary to enable a borrower to prepay the loan
at any time in accordance with Article. 3A.803. The former provision requiring
payoff quotes is found at 7 TAC §1.14.
Section 1.827 requires a lender to provide a borrower with a Spanish language
disclosure when a majority of the negotiations have occurred in Spanish. The
substance of this rule is currently embodied in 7 TAC §1.15 (which is
being proposed for simultaneous repeal) and has been in effect since its initial
adoption in 1972. This rule is necessary to ensure that consumers are adequately
informed of the terms and conditions of a loan.
Section 1.828 provides the procedures for a lender to satisfy the requirements
of Article 3A.804. This rule is necessary to provide lenders with guidance
for complying with this section.
These rules are necessary due to the repeal of the former Article 5069,
Chapter 5 and the adoption of new Article 5069-3A.001
et seq
. Generally, these procedures are well established and are commonly
used throughout the regulated industry. These rules should serve, however,
to clarify the calculations and procedures.
Leslie L. Pettijohn, Consumer Credit Commissioner has determined that for
the first five-year period these rules will be in effect, there will be no
fiscal implications for state or local government as a result of administering
or enforcing these rules.
Commissioner Pettijohn also has determined that for each year of the first
five-year period these rules will be in effect, the public benefit anticipated
as a result of the adoption of the new rules is the clarification to lenders
of the maximum allowable charges provided under the law, thereby assisting
lenders and borrowers in constructing transactions that comply with the law.
It is anticipated that there will be no adverse economic effect on small businesses.
Comments on the proposed adoption of the new sections may be submitted
in writing to Leslie L. Pettijohn, Consumer Credit Commissioner, 2601 North
Lamar Boulevard, Austin, Texas 78705-4207.
The new sections are proposed under Texas Civil Statutes, Article
5069-3A.901, which authorizes the Finance Commission to adopt rules to enforce
new Chapter 3A.
Texas Civil Statutes, Article 5069-3A, Subchapter J is affected by these
proposed new sections.
§1.826. Quotation of Net Pay-Offs.
(a)
If a borrower, spouse of a borrower, or a co-obligor inquires
about the net amount necessary to pay the borrower's indebtedness in full,
a lender shall provide the requested information to the person making the
inquiry free of charge within a reasonable time. A lender shall provide this
information even if at the time the inquiry is made the account is delinquent.
On a net pay-off inquiry relating to a secondary mortgage loan under Subchapter
G a lender shall provide the quote in writing.
(b)
In the case of a loan made under Subchapter E or F, a
reasonable time in which to respond to an inquiry for a net pay-off shall
be two business days. On a secondary mortgage loan made under Subchapter G,
a reasonable time in which to respond to an inquiry for a net pay-off shall
be seven calendar days.
§1.827. Bilingual Disclosure.
(a)
Each licensee shall fully disclose the terms of a loan
contract subject to Chapter 3A to the borrower. If all or a majority of the
negotiations between the licensee and the borrower are conducted in the Spanish
language, disclosure of the terms of the contract shall be in writing in the
Spanish language as well as in English. The disclosure shall be deemed to
have been made properly if the borrower is furnished a completed form prescribed
by the commissioner for this purpose and the borrower acknowledges receipt
thereof or if the lender provides the borrower with a written disclosure of
equivalent information.
(b)
To provide evidence that the disclosure form referred
to in subsection (a) of this section has been given, the following statement
is to be written, printed, stamped, or typed on the original promissory note
or loan contract and signed or initialed by the borrower or borrowers: "RECIBI
LA FORMA INFORME DE PRESTAMO."
§1.828. Return of Instruments to Borrower.
Upon discharge of an indebtedness by payment, renewal, or refinancing,
a lender shall return an original or true and correct copy of the instrument
creating the indebtedness marked "PAID" or, in lieu of a marked original or
copy, provide a discharge and release of all obligations under the loan to
satisfy the requirements of Texas Revised Civil Statute Article 5069-3A.804.
In addition, if a loan has been paid off, a lender shall give the borrower,
in a recordable form, a release of the lien, including a lien on an automobile
title or real estate, or shall provide documentation for the release to the
borrower, at the option of the lender whose loan has been paid a copy of an
endorsement, with or without recourse, representation or warranty, and assignment
of the lien to a lender that is refinancing the loan. A lender shall comply
with the requirements of this section within a reasonable time not to exceed
30 days after receipt of collected funds by the lender.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on
February 25, 1999.
TRD-9901189
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: April 11, 1999
For further information, please call: (512) 936-7640
Chapter 119.
Publicly Offered Cattle Feeding Programs
4.
Insurance
5.
Refund
Subchapter I. Insurance
Subchapter J. Authorized Lender's Duties and Authority
Part VII.
State Securities Board