Part 1.
FINANCE COMMISSION OF TEXAS
Chapter 1.
CONSUMER CREDIT COMMISSIONER
Subchapter A. REGULATED LOAN LICENSES
1.
GENERAL PROVISIONS
7 TAC §§1.2, 1.9, 1.13
(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repeal will not be published.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 §§1.2, 1.9, and 1.13. This repeal is necessary
because the sections that are proposed for repeal relate to Communications
to Commissioner, Annual Reports, and Review of Records. These sections are
being reviewed and reproposed with changes in a new section of the Texas Administrative
Code. The new rules are being published simultaneously for comment in this
issue of the
Texas Register
.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period the repeal 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 repeal 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 repeal may be submitted in writing to Leslie L.
Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas, 78705-4207.
The repeal is proposed under Texas Finance Code, §11.304,
which authorizes the Finance Commission to adopt rules to enforce Title 4
of the Texas Finance Code. Additionally, Texas Finance Code, §342.551
authorizes the Finance Commission to adopt rules for the enforcement of the
consumer loan chapter.
The statutory provisions (as currently in effect) affected by the proposed
repeal are Subchapter F of Chapter 342, Texas Finance Code and the rest of
Title 4.
§1.2.Communications to Commissioner.
§1.9.Annual Reports.
§1.13.Review of Records.
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 June 16, 2000.
TRD-200004222
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: July 30, 2000
For further information, please call: (512) 936-7640
7 TAC §§1.51-1.54
(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 §§1.51-1.54. This repeal is necessary because
the sections that are proposed for repeal relate to Minimum Books: Files and
Records Required to Be Kept by Licensees, Rate and Refund Charts, File for
Official Correspondence and Reports, and Acceptance of Equivalent Records
by Commissioner. These sections are being reviewed and reproposed with changes
in a new section of the Texas Administrative Code. The new rules are being
published simultaneously for comment in this issue of the
Texas Register
.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period the repeal 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 repeal 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 repeal may be submitted in writing to Leslie L.
Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas, 78705-4207.
The repeal is proposed under Texas Finance Code, §11.304,
which authorizes the Finance Commission to adopt rules to enforce Title 4
of the Texas Finance Code. Additionally, Texas Finance Code, §342.551
authorizes the Finance Commission to adopt rules for the enforcement of the
consumer loan chapter.
The statutory provisions (as currently in effect) affected by the proposed
repeal are Subchapter F of Chapter 342, Texas Finance Code and the rest of
Title 4.
§1.51.Minimum Books: Files and Records Required to Be Kept by Licensees.
§1.52.Rate and Refund Charts.
§1.53.File for Official Correspondence and Reports.
§1.54.Acceptance of Equivalent Records by 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 June 16, 2000.
TRD-200004223
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: July 30, 2000
For further information, please call: (512) 936-7640
7 TAC §1.76, §1.79
(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 §1.76 and §1.79. This repeal is necessary
because the sections that are proposed for repeal relate to Loss Registers
and Automobile Policies. These sections are being reviewed and reproposed
with changes in a new section of the Texas Administrative Code. The new rules
are being published simultaneously for comment in this issue of the
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period the repeal 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 repeal 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 repeal may be submitted in writing to Leslie L.
Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas, 78705-4207.
The repeal is proposed under Texas Finance Code, §11.304,
which authorizes the Finance Commission to adopt rules to enforce Title 4
of the Texas Finance Code. Additionally, Texas Finance Code, §342.551
authorizes the Finance Commission to adopt rules for the enforcement of the
consumer loan chapter.
The statutory provisions (as currently in effect) affected by the proposed
repeal are Subchapter F of Chapter 342, Texas Finance Code and the rest of
Title 4.
§1.76.Loss Registers.
§1.79.Automobile Policies.
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 June 16, 2000.
TRD-200004224
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: July 30, 2000
For further information, please call: (512) 936-7640
7 TAC §1.95
(Editor's note: The text of the following section proposed for
repeal will not be published. The section 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 §1.95. This repeal is necessary because the section
that is proposed for repeal relates to Methods of Correcting Errors. This
section is being reviewed and reproposed with changes in a new section of
the Texas Administrative Code. The new rule is being published simultaneously
for comment in this issue of the
Texas Register
.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period the repeal 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 repeal 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 repeal may be submitted in writing to Leslie L.
Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas, 78705-4207.
The repeal is proposed under Texas Finance Code, §11.304,
which authorizes the Finance Commission to adopt rules to enforce Title 4
of the Texas Finance Code. Additionally, Texas Finance Code, §342.551
authorizes the Finance Commission to adopt rules for the enforcement of the
consumer loan chapter.
The statutory provisions (as currently in effect) affected by the proposed
repeal are Subchapter F of Chapter 342, Texas Finance Code and the rest of
Title 4.
§1.95.Methods of Correcting Errors.
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 June 16, 2000.
TRD-200004225
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: July 30, 2000
For further information, please call: (512) 936-7640
7 TAC §§1.131-1.135
(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 §§1.131-1.135. This repeal is necessary because
the sections that are proposed for repeal relate to Escheat Suspense Account,
Required Information, Conversion or Reduction Prohibited, Escheat to State,
and Length of Record Preservation. These sections are being reviewed and reproposed
with changes in a new section of the Texas Administrative Code. The new rules
are being published simultaneously for comment in this issue of the
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period the repeal 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 repeal 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 repeal may be submitted in writing to Leslie
L. Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas, 78705-4207.
The repeal is proposed under Texas Finance Code, §11.304,
which authorizes the Finance Commission to adopt rules to enforce Title 4
of the Texas Finance Code. Additionally, Texas Finance Code, §342.551
authorizes the Finance Commission to adopt rules for the enforcement of the
consumer loan chapter.
The statutory provisions (as currently in effect) affected by the proposed
repeal are Subchapter F of Chapter 342, Texas Finance Code and the rest of
Title 4.
§1.131.Escheat Suspense Account.
§1.132.Required Information.
§1.133.Conversion or Reduction Prohibited.
§1.134.Escheat to State.
§1.135.Length of Record Preservation.
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 June 16, 2000.
TRD-200004226
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: July 30, 2000
For further information, please call: (512) 936-7640
7 TAC §1.153
(Editor's note: The text of the following section proposed for
repeal will not be published. The section 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 §1.153. This repeal is necessary because the section
is that proposed for repeal relates to Record of Contracts. This section is
being reviewed and reproposed with changes in a new section of the Texas Administrative
Code. The new rule is being published simultaneously for comment in this issue
of the
Texas Register
.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period the repeal 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 repeal 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 repeal may be submitted in writing to Leslie L.
Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas, 78705-4207.
The repeal is proposed under Texas Finance Code, §11.304,
which authorizes the Finance Commission to adopt rules to enforce Title 4
of the Texas Finance Code. Additionally, Texas Finance Code, §342.551
authorizes the Finance Commission to adopt rules for the enforcement of the
consumer loan chapter.
The statutory provisions (as currently in effect) affected by the proposed
repeal are Subchapter F of Chapter 342, Texas Finance Code and the rest of
Title 4.
§1.153.Record of Contacts.
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 June 16, 2000.
TRD-200004227
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: July 30, 2000
For further information, please call: (512) 936-7640
7 TAC §1.172
(Editor's note: The text of the following section proposed for
repeal will not be published. The section 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 §1.172. This repeal is necessary because the section
that is proposed for repeal relates to Scrapbooks. This section is being reviewed
and reproposed with changes in a new section of the Texas Administrative Code.
The new rule is being published simultaneously for comment in the
Texas Register
.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period of the repeal 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 repeal 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 repeal may be submitted in writing to Leslie L.
Pettijohn, Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin,
Texas 78705-4207.
The repeal is proposed under Texas Finance Code, §11.304,
which authorizes the Finance Commission to adopt rules to enforce Title 4
of the Texas Finance Code. Additionally, Texas Finance Code, §342.551
authorizes the Finance Commission to adopt rules for the enforcement of the
consumer loan chapter.
The statutory provisions (as currently in effect) affected by the proposed
repeal are Subchapter F of Chapter 342, Texas Finance Code and the rest of
Title 4.
§1.172.Scrapbook.
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 June 16, 2000.
TRD-200004228
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: July 30, 2000
For further information, please call: (512) 936-7640
7 TAC §§1.1301-1.1308
The Finance Commission of Texas (the commission) proposes
new 7 TAC §§1.1301-1.1308, concerning model provisions for motor
vehicle installment sales contracts. New 7 TAC §§1.1301-1.1308 proposes
clauses and disclosures for motor vehicle installment sales contracts.
The purpose of the rules is stated in the purpose clause of the rules, §1.1301.
Compliance with the rules is optional.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period the rules are in effect, there will be no fiscal
implications for state or local government as a result of administering the
rules.
Commissioner Pettijohn also has determined that for each year of the first
five years the rules are in effect, the public benefit anticipated as a result
of the new rules will be enhanced compliance with the credit laws, increased
uniformity, and consistency in credit contracts. No net economic cost will
result to persons affected by the rules. There is no adverse impact to small
business. No difference will exist between the cost of compliance for small
businesses and the cost of compliance for the largest businesses affected
by this section.
Comments on the proposed new rules may be submitted in writing to Leslie
L. Pettijohn, Consumer Credit Commissioner, Office of Consumer Credit Commissioner,
2601 North Lamar Boulevard, Austin, Texas, 78705-4207.
The new section is proposed under the Texas Finance Code §11.304,
which authorizes the Finance Commission to adopt rules to enforce Title 4
of the Texas Finance Code. Additionally, Texas Finance Code §14.108 grants
the Consumer Credit Commissioner and the Finance Commission the authority
to interpret the provisions of Title 4, Subtitle B, in which Chapter 348 is
located.
These rules affect Chapter 348, Texas Finance Code.
§1.1301.Purpose.
(a)
The purpose of these rules is to promote compliance with
the requirements of the Texas Finance Code, Chapter 348 by creditors. The
establishment of model provisions for these transactions will encourage use
of simplified terminology and similarity of approach to some of the provisions
that are often included in motor vehicle retail installment contracts and
will ultimately benefit consumers by making these contracts easier to understand.
The use of the model clauses by creditors is not mandatory. The model clauses
provide creditors examples of how to comply with such legal requirements as
may be applicable to particular transactions, and use of these clauses may
offer creditors the protections of Texas Finance Code §349.101. However,
creditors have considerable flexibility in making many of the disclosures
addressed by the model clauses. The model clauses do not limit that flexibility.
Many approaches that differ from the model clauses may also satisfy applicable
legal requirements. A creditor's decision not to adopt a particular model
clause is not evidence of a failure to satisfy any applicable legal requirements
or prohibitions.
(b)
The provisions are not intended to constitute a complete
motor vehicle installment sale contract because these provisions specifically
address only certain credit issues. They do not address other issues that
may be legally permissible and desired by a party to the contract. Inclusion
of such additional provisions is anticipated, and their omission from the
model clauses is not evidence that they are prohibited by law.
§1.1302.Relationship with Federal Law.
(a)
The disclosure requirements of 12 C.F.R. Part 226 (Regulation
Z) adopted under the Truth in Lending Act (15 U.S.C. §1601 et seq.) and
specifically 12 C.F.R. §226.18(f), regarding variable rate disclosures,
apply according to their terms to some retail installment transactions, as
more fully provided in the Truth in Lending Act and federal Regulation Z.
(b)
In the event of any inconsistency or conflict between the
disclosure or notice requirements in these provisions and any current or future
federal law, regulation, or interpretation, the requirements of the federal
law, regulation, or interpretation will control to the extent of the inconsistency.
(c)
The term "time price differential" may be substituted for
the term "finance charge" as used in the model disclosures provided by this
regulation, except in those instances where use of that term would be prohibited
by controlling federal law, regulation, or interpretation.
§1.1303.Definitions.
The following words and terms, when used in this subchapter, have the
following meanings, unless the context clearly indicates otherwise:
(1)
Accrual method or Scheduled installment earnings method--The
scheduled installment earning method, or the accrual method, is a method to
compute a finance charge by applying a daily rate to the unpaid principal
balance as if each payment will be made on its scheduled installment date.
A payment received before or after the due date does not affect the amount
of the scheduled reduction in the unpaid principal balance. Under this method,
a finance charge refund is calculated by deducting the earned finance charges
from the total finance charges. If prepayment in full or demand for payment
in full occurs between payment due dates, a daily rate equal to 1/365th of
the annual rate is multiplied by the unpaid principal balance. The result
is then multiplied by the actual number of days from the date of the previous
scheduled installment through the date of prepayment or demand for payment
in full to determine earned finance charges for the abbreviated period. In
addition to the earned finance charges calculated in this subsection, the
creditor may also earn a $150 acquisition fee for a heavy commercial vehicle,
or a $25 fee for other vehicles, so long as the total of the earned finance
charges and the acquisition fee do not exceed the finance charge disclosed
in the contract. The creditor is not required to refund unearned finance charges
if the refund is less than $1.00. The accrual method or scheduled installment
earnings method may be used with either an Irregular Payment Contract or a
Regular Payment Contract. The computation of finance charges must comply with
the U.S. rule as defined in Appendix J of 12 C.F.R. Part 226 (Regulation Z).
(2)
Creditor--The seller or any subsequent holder or assignee
of the retail installment contract.
(3)
Daily Rate--The rate authorized under Texas Finance
Code §303.201 or §303.202 or the simple rate equivalent of the rate
applicable to the contract under Texas Finance Code §348.104 computed
on a daily basis using a 365 day calendar year.
(4)
Irregular Payment Contract--A contract:
(A)
That is payable in installments that are not consecutive,
monthly, and substantially equal in amount; or
(B)
The first scheduled installment of which is due later than
1 month and 15 days after the date of the contract.
(5)
Regular Payment Contract--Any contract that is
not an irregular payment contract.
(6)
Seller--The seller of the motor vehicle.
(7)
Sum of periodic balances method (Rule of 78s)--
(A)
Under this method, the finance charge refund is calculated
as follows:
(i)
Subtract an acquisition fee not greater than $150 for a
heavy commercial vehicle, or $25 for other vehicles, from the total finance
charge.
(ii)
Multiply the amount computed in clause (i) of this subparagraph
by the refund percentage computed below. The result is the finance charge
refund.
(iii)
Compute the refund percentage by:
(I)
Computing the sum of the unpaid monthly balances under
the contract's schedule of payments beginning:
(-a-)
On the first day, after the date of the prepayment or
demand for payment in full, that is the date of a month that corresponds to
the date of the month that the first installment is due under the contract,
or;
(-b-)
If the prepayment or demand for payment in full
is made before the first installment date under the contract, one month after
the next monthly anniversary date of the contract occurring after the prepayment
or demand;
(II)
Dividing the result in subclause (I) of this clause by
the sum of all of the monthly balances under the contract's schedule of payments.
(B)
As an alternative for heavy commercial vehicles, as defined
in the Texas Finance Code, the sum of the periodic balances method may be
computed as follows:
(i)
Multiply the total finance charge by a refund percentage
determined as follows:
(I)
Compute the sum of the unpaid monthly balances under the
contract's schedule of payments beginning:
(-a-)
On the first day, after the date of the prepayment or
demand for payment in full, that is the date of a month that corresponds to
the date of the month that the first installment is due under the contract,
or;
(-b-)
If the prepayment or demand for payment in full
is made before the first installment date under the contract, one month after
the next monthly anniversary date of the contract occurring after the prepayment
or demand;
(II)
Divide the result in subclause (I) of this clause by the
sum of all of the monthly balances under the contract's schedule of payments.
(ii)
From the result derived in clause (i) of this subparagraph,
deduct an acquisition fee not to exceed $150.
(C)
The creditor is not required to give a finance charge refund
if it would be less than $1.00.
(D)
These methods may not be used with an irregular payment
contract.
(8)
True daily earnings method--The truly daily earnings
method is a method to compute the finance charge by applying a daily rate
to the unpaid principal balance. The daily rate is 1/365th of the equivalent
contract rate. The earned finance charge is computed by multiplying the daily
rate of the finance charge by the number of days the actual unpaid principal
balance is outstanding. Payments are credited as of the time received; therefore,
payments received prior to the scheduled installment date result in a greater
reduction of the unpaid principal balance than the scheduled reduction, and
payments received after the scheduled installment date result in less than
the scheduled reduction of the unpaid principal balance. No late charges may
be assessed under this method. The computation of finance charges must comply
with the U.S. rule as defined in Appendix J of 12 C.F.R. Part 226 (Regulation
Z).
§1.1304.Disclosures and Contract Provisions Required by the Texas Finance Code.
The contract shall have the following disclosures and provisions, as
applicable:
(1)
The consumer warning required by Texas Finance Code §348.102(d).
(2)
The cash price as required by Texas Finance Code §348.102(a)(5).
The cash price may be disclosed as a separate item in the Itemization of Amount
Financed or elsewhere in the contract. The cash price is the price at which
the seller offers in the ordinary course of business to sell for cash the
goods or services that are subject to the transaction.
(3)
The amount of any downpayment, specifying the amounts
paid in money and in goods traded in, as required by §348.102. An amount
paid by the seller under Texas Finance Code §348.404 to retire an amount
owed (including amounts owed under a vehicle lease) against a motor vehicle
used as a trade-in ("payoff ) may be disclosed in several ways. The approaches
outlined in the Regulation Z Staff Commentary, as from time to time updated,
are permissible.
(4)
Itemized charges not included in cash price, as required
by Texas Finance Code §348.102. Itemized charges may include, but are
not limited to, the following charges as applicable:
(A)
State inspection fee;
(B)
Documentary fee;
(C)
Dealer's inventory tax;
(D)
Sales tax;
(E)
Other taxes not included in the cash price (the seller
may disclose one aggregate amount for all taxes or may separately itemize
one or more of the taxes);
(F)
Deputy service fee;
(G)
Title fee;
(H)
License fee;
(I)
Vehicle property insurance;
(J)
Credit life and credit disability insurance;
(K)
GAP insurance, as authorized by Texas Finance Code §348.208(b)(4);
(L)
Theft protection plan;
(M)
Service contract; or
(N)
Warranty contract.
(5)
The insurance statement required by Texas Finance
Code §348.204.
(6)
Notice of exclusion of bodily injury and property
damage insurance, if excluded, as required by Texas Finance Code §348.205.
(7)
Any documentary fee charged must be separately disclosed,
either in the itemization or elsewhere, along with the description required
by Texas Finance Code §348.006 in reasonable proximity to the disclosure
of the documentary fee. Any foreign language translation of this disclosure
that is required under Texas Finance Code §348.006 may be given in a
separate document.
(8)
A disclosure that the buyer may refinance the final
scheduled payment upon the terms previously agreed or for any other period
of time and payment schedule to which the buyer and holder may agree for a
contract described in Texas Finance Code §348.123(b)(5).
§1.1305.Other Disclosures Required by Commission Rule.
(a)
The consumer credit commissioner notice required by §1.901
of this title (relating to Consumer Notifications) must be disclosed.
(b)
In a contract using the true daily earnings method, a brief
description of the method of earning finance charge must be given. In a contract
using the accrual method or the sum of the periodic balances method of refunding
precomputed finance charges, the name of the method used, and at the creditor's
option, a description of that method. If in the same contract form, the creditor
uses the accrual method in certain circumstances and the sum of the periodic
balances method in other circumstances, the creditor shall provide a brief
description of the circumstances under which each method will be used, along
with the name of the method.
§1.1306.Other Contract Provisions.
A motor vehicle installment sale contract may include, but is not limited
to, the following contract provisions to the extent not prohibited by law
or regulation:
(1)
Disclaimer of implied warranties as provided in the Business
and Commerce Code.
(2)
A promise to pay the buyer's obligations under contract.
(3)
An agreement to keep the vehicle free of liens and
encumbrances.
(4)
An agreement to repay the creditor for any amounts
paid to satisfy liens or encumbrances on any trade-in.
(5)
An agreement to keep the vehicle in good working order
and repair.
(6)
An agreement regarding the buyer's use of the vehicle.
(7)
An agreement prohibiting the unauthorized transfer
of an interest in the collateral.
(8)
An agreement not to expose the vehicle to seizure,
confiscation, or other involuntary transfer.
(9)
Other agreements identifying other events of default.
(10)
An agreement regarding the consequences of default,
including but not limited to, an agreement permitting acceleration of the
buyer's obligation upon the buyer's default or upon the creditor's determination
of insecurity as permitted by Business and Commerce Code, §1.208.
(11)
An agreement granting a security interest in collateral,
including but not limited to, the motor vehicle, accessions to the motor vehicle,
any insurance, service contracts, or warranties financed under the contract,
and any proceeds thereof.
(12)
An agreement requiring the buyer to insure the vehicle
against loss or damage.
(13)
An agreement authorizing the creditor to purchase
insurance against loss or damage to the vehicle if the buyer fails to do so,
and to charge the premium paid by the creditor for such insurance to the buyer
plus an additional charge at a rate no more than the annual percentage rate
of the contract.
(14)
An agreement to allow the creditor to apply charges
returned to the creditor for canceled insurance, service contracts, and warranties
to the buyer's obligation under the agreement as permitted by law, regardless
of whether or not the buyer is in default under the contract.
(15)
A description of any right or remedy of either the
creditor or the buyer, including but not limited to, a description of the
creditor's rights relating to default and repossession of the collateral,
the buyer's right to redeem, and the buyer's right to refinance a balloon
payment.
(16)
A provision providing for interest on any matured
installment at any rate permitted by law.
(17)
A buyer's acknowledgment of receipt of the retail
installment contract as permitted under Texas Finance Code §348.112.
(18)
An assignment of the contract to a third party. According
to Texas Finance Code §348.301 the seller does not have a duty to disclose
the terms on which a contract or a balance under a contract is acquired, including
any discount or difference between the rates, charges, or balance under the
contract and the rates, charges, or balance acquired.
(19)
In the case of a vehicle subject to 16 C.F.R.§455.1
et seq, the notice provided for therein.
(20)
Provisions regarding change of address, removal of
the vehicle from the jurisdiction, and similar provisions.
(21)
Savings clauses.
(22)
An integration clause, providing that the contract
supersedes prior agreements and statements.
(23)
A waiver of any right to receive notice of the intent
to accelerate or notice of acceleration.
(24)
A provision stating Texas and federal law will apply
to the contract.
§1.1307.Model Clauses.
(a)
Generally.
(1)
The model clauses refer to the buyer and co-buyer as "you,"
or "buyer or "co-buyer." The seller is referred to as "seller, "creditor,
"we" or "us."
(2)
Nothing in this regulation prohibits a contract from
including provisions that provide more favorable results for the buyer than
those that would result from the use of a model clause.
(3)
A retail installment contract need not be contained
in a single document.
(b)
Consumer warning. The following notices satisfy the requirements
of Texas Finance Code §348.102(d) if printed in at least ten-point type
that is boldfaced, capitalized, underlined, or otherwise set out from surrounding
written material so as to be conspicuous:
(1)
For contracts using the sum of the periodic balances (Rule
of 78s) or the accrual method or a permissible combination of the methods.
The notice reads: "Notice to the Buyer--Do not sign this contract before you
read it or if it contains any blank spaces. You are entitled to a copy of
the contract you sign. Under the law, you have the right to pay off in advance
the full amount due and under certain conditions may obtain a partial refund
of the finance charge. Keep this contract to protect your legal rights."
(2)
For contracts using the true daily earnings method.
The bracketed portion of the notice may be included at the creditor's option.
The notice reads: "Notice to the Buyer--Do not sign this contract before you
read it or if it contains any blank spaces. You are entitled to a copy of
the contract you sign. Under the law you have the right to pay off in advance
the full amount due (and under certain conditions save a portion of the finance
charge). Keep this contract to protect your legal rights."
(c)
Buyer's acknowledgment of contract receipt. The following
acknowledgment conforms to the requirements of Texas Finance Code §348.112
if it appears directly above the place for the buyer's signature in at least
ten-point type that is boldfaced, capitalized, underlined, or otherwise set
out from surrounding written material so as to be conspicuous:
(1)
If the buyer's signature is dated. If the bracketed clause
is chosen, the copy must be mailed within a reasonable period of time. The
acknowledgment reads: "You agree to the terms of this contract and received
a completed copy when you signed it (or a copy will be mailed to you)."
(2)
If the buyer's signature is not dated. If the second
option is chosen, the copy must be mailed within a reasonable period of time.
The acknowledgment reads: "You agree to the terms of this contract and received
a completed copy on __________________________(Mo.) (Day) (Yr.)." or "You
signed this contract on ____________ and a copy will be mailed to you."
(d)
True daily earnings contract clauses.
(1)
Method of computing earned finance charge.
(A)
Description of Method. The following clause is sufficient
to explain the method for earning finance charges: "We figured the Finance
Charge using the daily rate on the unpaid principal balance."
(B)
Prepayment. The following clause is sufficient to explain
the buyer's prepayment rights: "If you pay off all your debt early, you will
not have to pay a penalty."
(2)
Optional Additional Description of Method. The
creditor has the option to add the following additional explanations:
(A)
Application of Payments. The payment explanation clause
reads: "We will apply each payment first to the earned and unpaid part of
the Finance Charge, and then to the unpaid balance owed under this contract."
(B)
Calculation of daily rate. The rate calculation clause
reads: "The daily rate is 1/365th of the equivalent contract rate."
(C)
Effect of early and late payments. The early and late payment
clause reads: "We based the Finance Charge, Total of Payments, and Total Sale
Price on the assumption that you will make every payment on the day it is
due. Your Finance Charge, Total of Payments, and Total Sale Price will be
more if you pay late and less if you pay early. Changes may take the form
of a larger or smaller final payment or, at our option, more or fewer payments
of the same amount as your scheduled payment with a smaller final payment."
(3)
Model clause for late charges. The following
sufficiently discloses the late charge for contracts using the true daily
earnings method so long as the blanks are completed so as to result in a late
charge that does not exceed that permitted by law. The blank in this disclosure
may be completed with a rate permissible under Texas Finance Code §303.201
or §303.202 or the simple rate equivalent of the rate applicable to the
contract under Texas Finance Code §348.104. If the late charge rate is
the same as the annual percentage rate, no disclosure is required. The late
charge clause reads: "Late Charge. If a payment is not received in full on
its due date, you will pay interest on the amount of the payment that is late
at the rate of __% per annum."
(e)
Contracts using the sum of periodic balances method, or
the accrual method or a permissible combination of these methods.
(1)
Refund upon prepayment. The following clause is sufficient
to explain the buyer's right to a finance charge refund upon prepayment in
full of the buyer's contract obligations. The refund upon prepayment clause
reads: "You may prepay all of your debt and get a refund of part of the Finance
Charge."
(2)
Refund upon acceleration. The following clause is
sufficient to explain the buyer's right to a finance charge refund upon acceleration
of the contract. The refund upon acceleration clause reads: "If the creditor
demands that you pay all you owe on this contract at once, the creditor will
give you a credit of part of the Finance Charge as if you had prepaid in full."
(3)
Contracts using the sum of the periodic balances method.
(A)
Name of the method. The following clause is sufficient
to identify the method of refunding finance charge. The method of refunding
finance charge clause reads: "We will figure the Finance Charge refund by
the sum of the periodic balances method as defined by the Finance Commission
of Texas rule."
(B)
Optional description of the method. The creditor may include
the following additional description of the method. The creditor may insert
any amount up to $25 (or up to $150 for a heavy commercial vehicle) at the
location indicated by the first set of brackets. The words in the second and
third bracketed portions are optional. The optional description of method
clause reads: "We will figure your refund by first subtracting (insert an
amount not exceeding $25) ((insert an amount not exceeding $150) if you are
buying a heavy commercial vehicle) from the Finance Charge. Then we will multiply
the difference by the refund percentage. We will figure the refund percentage
by dividing the sum of the unpaid monthly balances in the payment schedule
by the sum of all of the monthly balances in the payment schedule. (We will
figure the sum of the unpaid monthly balances based on the due date of the
next scheduled payment after you prepay, unless you prepay before the date
the first scheduled payment is due. If you prepay before the date the first
scheduled payment is due, we will figure the sum of the unpaid monthly balances
based on the due date of the second scheduled payment.) You will not get a
refund if the refund would be less than $1.00."
(C)
At the creditor's option, a contract for a heavy commercial
vehicle, as defined in the Texas Finance Code, may include the following description
of the method. The words in the first bracketed portion are optional. The
creditor may insert any amount up to $150 at the location indicated by the
second set of brackets. The heavy commercial vehicle earnings method option
clause reads: "We will figure your refund by dividing the sum of the unpaid
monthly balances in the payment schedule by the sum of all of the monthly
balances in the payment schedule. (We will figure the sum of the unpaid monthly
balances based on the due date of the next scheduled payment after you prepay,
unless you prepay before the date the first scheduled payment is due. If you
prepay before the date the first scheduled payment is due, we will figure
the sum of the unpaid monthly balances based on the due date of the second
scheduled payment.) From the result of that multiplication, we will then subtract
(creditor insert an amount not exceeding $150). You will not get a refund
if the refund would be less than $1.00."
(4)
Contracts using the accrual method.
(A)
Name of the method. The following clause is sufficient
to identify the method of refunding the finance charge. The name of method
clause reads: "We will figure the Finance Charge refund by the accrual method
as defined by the Finance Commission of Texas rule."
(B)
Optional description of the method. The creditor may include
the following additional description of the method. The optional description
method clause reads: "We will figure your refund by deducting earned finance
charges from the Finance Charge. We will figure earned finance charges by
applying a daily rate to the unpaid principal balance as if you paid all your
payments on the date due. If you prepay between payment due dates, we will
figure earned finance charges for the partial payment period. We will do this
by counting the number of days from the due date of the prior payment through
the date you prepay. We will then multiply that number of days times the daily
rate. The daily rate will be the annual rate divided by 365. We will also
add (an amount not exceeding $25) ((an amount not exceeding $150) if you are
buying a heavy commercial vehicle) to the earned finance charge. You will
not get a refund if the refund would be less than $1.00."
(C)
Flexible contract forms designed to accommodate alternative
methods. Creditors may use a flexible contract form with alternative earnings
methods, so long as the method used on a particular contract is permissible
for that contract. The following illustrates one way that this may be done:
"The creditor will figure the Finance Charge refund using the applicable method
described below. We will figure the finance charge rebate using the sum of
the periodic balances method as defined by the Finance Commission of Texas
rule if two things are true. First, this contract must have a regular payment
schedule. Second, it must not have a term greater than 61 months. A regular
payment schedule is one with substantially equal monthly payments and a first
scheduled payment due no later than one month plus 15 days from the date of
this contract. If this contract does not have a regular payment schedule or
if it has a term greater than 61 months, we will figure the Finance Charge
refund using the accrual method as defined by the Finance Commission of Texas
rule. You will not get a refund if the refund would be less than $1.00.00."
(5)
Model clause for late charges. The following
sufficiently discloses the late charge for contracts using the sum of the
periodic balances method or accrual earnings method so long as the blanks
are completed so as to result in a late charge that does not exceed that permitted
by law. The blank in this disclosure should be completed with a rate permissible
under Texas Finance Code §303.201 or §303.202 or the simple rate
equivalent of the rate applicable to the contract under Texas Finance Code §348.104.
The late charge clause reads: "Late Charge. If a payment is not received in
full within 15 days after it is due (10 days if you are buying a heavy commercial
vehicle), you will pay a late charge of:
(A)
__% of the part of the payment that is late.
(B)
Interest on the part of the payment that is late at the
rate of ______% per annum."
(f)
Required physical damage insurance.
Figure: 7 TAC §1.1307(f)
(g)
Optional insurance coverages.
Figure 1: 7 TAC §1.1307(g)
Figure 2: 7 TAC §1.1307(g)
(h)
Right to Refinance.
(1)
Right to refinance balloon payment contracts. The following
is sufficient to describe a buyer's right to refinance a balloon installment
under Texas Finance Code §348.123(a), when applicable: "A balloon payment
is a scheduled payment that is more than twice the average of your earlier
scheduled payments. If you are purchasing the vehicle primarily for personal,
family or household use, you have the right to refinance the amount of a balloon
payment when it is due without being charged a refinancing fee. If you refinance
a balloon payment, you have the right to enter into a new written agreement
with a payment schedule with periodic payments that are not larger or more
frequent than the average amount or frequency of your earlier scheduled payments.
The annual percentage rate on the new written agreement will not exceed the
Annual Percentage Rate of this contract. This provision does not apply if
your payment schedule has been adjusted to your seasonal or irregular income."
(2)
Special right to refinance where creditor offers to
repurchase the vehicle for the scheduled balloon amount. The following is
sufficient to describe the buyer's right to refinance in a transaction that
is referred to in Texas Finance Code §348.123(b)(5): "If you are not
in default, you may enter into a new written agreement with us to refinance
the last installment. You have the right to refinance at an annual percentage
rate that does not exceed the annual percentage rate shown on the front of
this contract plus 5 percentage points. The rate will not exceed the maximum
lawful rate applicable to the refinancing. You have the right to refinance
the last installment for 24 months with equal monthly payments. You and we
may also agree to refinance the last installment over another time period
or on a different payment schedule."
(i)
Model clause for liability insurance. If liability insurance
coverage is not included in the contract, either of the following notices
are sufficient to satisfy the requirements of Texas Finance Code §348.205
if printed in a size equal to at least ten-point type that is boldfaced, capitalized,
underlined, or otherwise set out from surrounding written material so as to
be conspicuous: "Any insurance referred to in this contract does not include
coverage for personal liability and property damage caused to others." Or
"Liability insurance coverage for bodily injury and property damage caused
to others is not included in this contract." Or "Unless a charge for liability
insurance is included in the Itemization of Amount Financed, (liability insurance
coverage for bodily injury and property damage caused to others is not included
in this contract) or (any insurance referred to in this contract does not
include coverage for personal liability and property damage caused to others.)"
(j)
Model clause for agreement to keep vehicle insured.
(1)
Agreement to keep vehicle insured. The agreement to keep
vehicle insured clause reads: "You agree to have physical damage insurance
covering loss or damage to the vehicle for the term of this contract. The
insurance must cover our interest in the vehicle."
(2)
Agreement to allow creditor to purchase required insurance
if buyer fails to keep the vehicle insured. The agreement to allow creditor
to purchase required insurance clause reads: "If you fail to provide us reasonable
evidence that you have this insurance, we may, if we decide, buy physical
damage insurance. If we decide to buy this insurance, we may either buy insurance
that covers your interest and our interest in the vehicle, or buy insurance
that covers only our interest. The amount you must pay will be the premium
for the insurance and a finance charge at the Annual Percentage Rate shown
on this contract."
(k)
Model clause for consumer credit commissioner notice. The
following notice satisfies the requirements of Texas Finance Code §14.104
and §1.901 of this title (relating to Consumer Notifications). The telephone
number of the retail seller, creditor, or holder may be printed in conjunction
with the name and address of the retail seller, creditor, or holder elsewhere
on the contract or agreement provided the notice required by Texas Finance
Code §14.104 is amended to direct the reader's attention to the area
of the contract where the telephone number may be found. The consumer credit
commissioner notice reads: "To contact (insert authorized business name of
retail seller, creditor or holder as appropriate) about this account, call
(insert telephone number of retail seller, creditor, or holder as appropriate).
This contract is subject in whole or in part to Texas law which is enforced
by the Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas
78705-4207. Phone 800-538-1579; 512/936-7600, and can be contacted relative
to any inquiries or complaints."
(l)
Model clause for documentary fee.
(1)
The following notice satisfies the requirements of Texas
Finance Code §348.006 if printed in a size equal to at least ten-point
type that is boldfaced, capitalized, underlined, or otherwise set out from
surrounding written material so as to be conspicuous and within reasonable
proximity to the place at which the fee is disclosed. The bracketed insert
may be inserted at the dealer's option or the disclosure may be made without
the bracketed portion if the dealer does not charge an amount in excess of
$50 for either ordinary motor vehicles or heavy commercial vehicles or if
the contract form is not used for heavy commercial vehicles. The documentary
fee clause reads: "A documentary fee is not an official fee. A documentary
fee is not required by law, but may be charged to buyers for handling documents
and performing services relating to the closing of a sale. A documentary fee
may not exceed $50 (for a motor vehicle contract or a reasonable amount agreed
to by the parties for a heavy commercial vehicle contract). This notice is
required by law."
(2)
The following notice is a sufficient Spanish translation
of the documentary fee disclosure required by Texas Finance Code §348.006.
The bracketed insert may be inserted at the dealer's option or the disclosure
may be made without the bracketed portion if the dealer does not charge an
amount in excess of $50 for either ordinary motor vehicles or heavy commercial
vehicles or if the contract form is not used for heavy commercial vehicles.
The Spanish translation reads: "Un honorario de documentación no es
un honorario official. Un honorario de documentación no es requerido
por la ley, pero puede ser cargada al comparador como gastos de manojo de
documentos y para realizar servicios relacionados con el cierre de una venta.
Un honorario de documentación no puede exceder $50 (un contrato de
vehiculo automotor o una cantidad razonable acordada por las partes para un
contrato de vehiculo comercial pesado). Esta notificación es requerida
por la ley." Or "Un cargo documental no es un cargo oficial. La ley no exige
que se imponga un cargo documental. Pero ‚ste podria cobrarse a los
compradores por el manejo de la documentación y la prestación
de servicios en relación con el cierre de una venta. Un cargo documental
no puede exceder de $50 para (un contrato de vehiculo automotor o una cantidad
razonable acordada por las partes para un contrato de vehiculo comercial pesado).
Esta notificación se exige por ley."
(m)
Model clause for grant of a security interest. The following
are samples of permissible descriptions of a security interest granted in
a typical motor vehicle installment sale. The grant of security interest clause
reads: "You give us a security interest in: 1. The vehicle and all parts or
goods now or later attached to it; and 2. all insurance or service contracts
we finance for you and any refunds of charges for them. This secures payment
of all amounts you at any time owe on this contract. You agree to have the
certificate of title show our security interest in the vehicle." Or "You give
us a security interest in: 1. The vehicle and all parts or goods installed
in it; 2. All money or goods received (proceeds) for the vehicle; 3. All insurance
or service contracts the creditor finances for you; and 4. All proceeds from
insurance or service contracts we finance for you (this includes any refunds
of premiums). This secures payment of all you owe on this contract. It also
secures your other agreements in this contract. You agree to have the certificate
of title show our security interest (lien) in the vehicle."
(n)
Model clauses for default rights and repossession provisions.
The following provisions are samples of permissible descriptions of some of
the default rights and remedies of a creditor in a typical motor vehicle installment
sale transaction:
(1)
Acceleration and default. The acceleration and default
clause reads: "If you default on any of your obligations in this contract
or if we in good faith believe the prospect of payment or performance of this
contract is impaired, we may demand that you pay all you owe on this contract
at once." Or "If you break any of your promises (default) or if we in good
faith believe the prospect of payment or performance of this contract is impaired,
we may demand that you pay all you owe on this contract at once. Default means:
1. You do not pay any payment on time; 2. You start a proceeding in bankruptcy
or one is started against you or your property; or 3. You break any agreements
in this contract."
(2)
Collection costs. The collection costs clause reads:
"If we hire an attorney who is not our salaried employee to collect what you
owe, you will pay any reasonable attorney's fee and court costs, as the law
allows."
(3)
Repossession. The repossession clause reads: "If you
default, we may take (repossess) the vehicle from you if we do so peacefully.
Any accessories, equipment or replacement parts will stay with the vehicle.
If any personal items are in the vehicle, we may store them for you and will
give you written notice at your last address shown on our records within 15
days of discovering that we have such items. If you do not ask for these items
back within 31 days from the notice, we may dispose of them as the law allows."
(4)
Buyer's right to redeem. The buyer's right to redeem
clause reads: "If we repossess the vehicle, you may pay to get it back (redeem).
We will tell you how much to pay to redeem. Your right to redeem ends when
we sell the vehicle."
(5)
Disposition of collateral. The disposition of collateral
clause reads: "If you do not redeem, we may sell the vehicle. We will send
you written notice of sale before selling the vehicle. We will apply the money
from the sale, less allowed expenses, to any amount you owe under this contract.
If any money is left (surplus), we will pay it to you. If the money from the
sale is not enough to pay the amount you owe, you must pay the rest to us.
If you do not pay this amount when we ask, we may charge you interest at the
highest lawful rate until you pay." Or "If you do not redeem, we will (may)
sell the vehicle. We will send you a written notice of sale before selling
the vehicle. We will apply the money from the sale, less allowed expenses,
to the amount you owe. Allowed expenses are expenses we pay as a direct result
of taking the vehicle, holding it, preparing it for sale, and selling it.
Attorney fees and court costs the law permits are also allowed expenses. If
any money is left over (surplus), we will pay it to you. If the money from
the sale is not enough to pay the amount you owe, you must pay the rest to
us. If you do not pay this amount when we ask, we may charge you interest
at the highest lawful rate until you pay."
(6)
Cancellation of optional insurance or service contracts.
The cancellation of optional insurance or service contracts clause reads:
"This contract may contain charges for optional insurance or service contracts.
If we repossess the vehicle, you agree that we may claim benefits under these
contracts and terminate them to obtain refunds of unearned charges to reduce
what you owe or repair the vehicle."
(o)
Warranty Disclaimer. A disclaimer of express and implied
warranties, such as the following, is permitted by Article 2, Section 3 of
the Business and Commerce Code: "Unless the seller makes a written warranty,
or enters into a service contract within 90 days from the date of this contract,
the seller makes no warranties, express or implied, on the vehicle, and there
will be no implied warranties of merchantability or of fitness for a particular
purpose This provision does not affect any warranties covering the vehicle
that the vehicle manufacturer may provide."
(p)
Promise to Pay. The following is an appropriate description
of a buyer's obligation to pay: "By signing this contract, you choose to buy
the vehicle on credit under the agreements on the front and back of this contract.
You agree to pay the creditor the Amount Financed and Finance Charge according
to the payment schedule shown in this contract."
(q)
Other Agreements regarding the use, encumbrance, and transfer
of the vehicle. The contract may obligate the buyer to keep the vehicle free
of liens and encumbrances, require the buyer to keep the vehicle in good working
order and repair, prohibit the buyer from transferring any interest in the
vehicle without the creditor's written permission, and prohibit the buyer
from allowing the vehicle to be exposed to seizure, confiscation, or other
involuntary transfer. For example, the following is permissible: "You agree
not to remove the vehicle from the U.S., or to sell, rent, lease, or transfer
any interest in the vehicle or this contract without our written permission.
You agree not to expose the vehicle to misuse, seizure, confiscation, or involuntary
transfer. If we pay any taxes, fines, or charges on the vehicle, you agree
to repay the amount when we ask for it."
(r)
Returned Insurance Premiums and Service Contract Charges.
The contract may authorize a creditor to apply charges returned to the creditor
for canceled insurance, service contract, and extended warranty charges to
the buyer's obligation under the agreement as permitted by law, regardless
of whether or not the buyer is in default under the contract.
(1)
The following is permissible for contracts using the true
daily earnings method: "If we obtain a refund on insurance or service contracts,
we will subtract the refund from what you owe."
(2)
For contracts using the accrual or sum of the periodic
balances method, the creditor may substitute the following: "If we obtain
a refund of insurance or service contract charges, we will apply the refund
and the unearned finance charges on the refund to as many of your payments
as they will cover beginning with the final (next) payment. We will tell you
of what we do."
(s)
Integration Clause. The contract may include an integration
clause indicating that the parties to the contract intend it to be final written
expression their agreement, such as: "This contract contains the entire agreement
between you and us relating to this contract."
(t)
Prohibition against oral modifications. The contract may
include a provision barring oral modifications of the contract, such as: "Any
change to this contract must be in writing, and both you and we must sign
it. No oral changes to this contract are binding."
(u)
Severability. The contract may include a severability clause
providing that the invalidity of any portion of the contract does not render
invalid other parts of the contract that would otherwise be valid. The severability
clause reads: "If any part of this contract is not valid, all other parts
stay valid."
(v)
No waiver of creditor's rights. A clause such as the following
is permissible to prevent a creditor's delay in enforcing rights under the
contract from effecting a waiver of those rights. The waiver of creditor's
rights clause reads: "We may delay or refrain from enforcing any of our rights
under this contract without losing them."
(w)
Waiver of Notice of Intent to Accelerate and Notice of
Acceleration. A clause such as the following is permissible to waive the buyer's
or co-buyer's common law right to notice of intent to accelerate, notice of
acceleration, or both: "You give up (waive) your common law rights to receive
notice of intent to accelerate and notice of acceleration. This means that
you give up the right to receive notice that we intend to demand that you
pay all that you owe on this contract at once (accelerate) and notice that
we have accelerated."
(x)
Applicable law. A clause such as the following is permissible
to establish the law that will apply to the contract: "Federal law and Texas
law apply to this contract."
§1.1308.Permissible Changes.
Creditors may make the following types of changes to the model clauses
and may still be eligible for the defenses provided by Texas Finance Code, §349.101:
(1)
The addition of information related to information set
forth in the model clauses that is not otherwise prohibited by law.
(2)
The deletion of inapplicable disclosures.
(3)
Using a line for the consumer to initial, rather than
a checkbox.
(4)
Adding a signature line to the insurance disclosures
to reflect joint policies.
(5)
Substituting another term for "buyer", "seller" or
"creditor" that has the same meaning, or use of pronouns such as "you", "we"
and "us" or "it.
(6)
The model clauses may be presented in any order, and
may be combined or further segregated at the creditor's option.
(7)
Inserting descriptive headings or number provisions.
(8)
Changing the case of a word if otherwise permitted
by the Texas Finance Code.
(9)
References to different provisions for heavy commercial
vehicles may be omitted where the creditor elects to treat buyers of heavy
commercial vehicles under the rules applicable to other vehicles.
(10)
Other changes which do not affect the substance of
the disclosures.
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 June 16, 2000.
TRD-200004221
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: July 30, 2000
For further information, please call: (512) 936-7640
7 TAC §1.830-1.839
The Finance Commission of Texas (the commission) proposes
the adoption of new §§1.830-1.839 concerning regulated loan licensee
duties and record requirements.
Simultaneously, the Finance Commission is repealing various rules and adopting
these rules in their place. These rules being repealed were reviewed and those
being proposed to be adopted here were evaluated and an assessment made that
the reasons for (re)adopting the rules continues to exist.
Section 1.830 specifies the records that must be maintained for loans made
under the authority of Chapter 342, Subchapter E and F. The section also prescribes
various procedures in the course of making or servicing a loan, such as in
the disbursement of official fees collected from the borrower. This rule will
replace 7 TAC §1.51 that is being simultaneously proposed for repeal.
The rule is necessary to ensure that the appropriate documentation is maintained
by licensed lenders ensuring compliance with appropriate state and federal
laws.
Section 1.831 specifies the records that must be maintained for loans made
under the authority of Chapter 342, Subchapter G. The section also prescribes
various procedures in the course of making or servicing a loan, such as in
the disbursement of official fees collected from the borrower. This rule is
parallel to §1.830 in order to maintain consistency between the record
keeping rules. The rule is necessary to ensure that the appropriate documentation
is maintained by licensed lenders to ensure compliance with appropriate state
and federal laws.
Section 1.832 specifies the records that must be maintained for loans brokered
under the authority of Chapter 342, Subchapter G. These rules closely conform
to similar rules promulgated by the Savings and Loan Commissioner addressing
required records by mortgage brokers for first mortgages. The rule is necessary
to ensure that the appropriate documentation is maintained by licensees to
ensure compliance with appropriate state and federal laws.
Section 1.833 addresses other required records such as general business
records. These rules replace 7 TAC §1.53 and §1.172. The rule is
necessary to ensure that appropriate documentation is maintained by licensees
to ensure compliance with appropriate state and federal laws.
Section 1.834 provides the requirements, procedures, and flexibility for
licensees who choose to maintain records electronically or optically image
records. This rule will replace 7 TAC §1.54. The rule is necessary to
ensure that automated systems appropriately record and maintain sufficient
information to demonstrate compliance with state and federal laws.
Section 1.835 authorizes the commissioner to require a licensee to review
loan records and make corrections, if it is determined during the course of
an examination that a licensee is engaging in transactions that do not comply
with the law or the licensee is not maintaining records that comply with the
law. This rule will replace 7 TAC §1.13. The rule is necessary to ensure
that transactions comply and that records are being maintained with the applicable
law.
Section 1.836 provides the procedures for correcting violations or laws
or errors on accounts. This rule will replace 7 TAC §1.95. The rule is
necessary to provide a uniform procedure for curing violations of law and
correcting entries on accounts.
Section 1.837 details the procedures for handling unclaimed funds that
are due to a borrower. The rule provides procedures that conform to Chapter
25 of the Texas Property Code.
Section 1.838 sets the required date and states the requirement for filing
an annual report. The rule replaces 7 TAC §1.9.
Section 1.839 proscribes the formula for assessing examination fees. The
fee schedule is currently in place and the rule simply clarifies the procedure.
The rule further provides for an increased fee to be assessed to licensees
who require an expedited follow-up examination due to noncompliance issues.
The rule is necessary to permit the agency to recover the direct and indirect
costs associated with conducting examinations.
Leslie L. Pettijohn, Consumer Credit Commissioner has determined that for
the first five-year period the rules will be in effect, there will be no fiscal
implications for state or local government as a result of administering or
enforcing the rules.
Commissioner Pettijohn also has determined that for each year of the first
five-year period the rules will be in effect, the public benefit anticipated
as a result of the adoption of the new rules will be to more adequately inform
the public and the regulated entities of the duties and record requirements
of regulated loan licensees.
There should be no additional cost to most licensees to comply with the
rule. If a licensee, such as a mortgage broker, is not maintaining the appropriate
records, that licensee would now be required to maintain those records. The
cost to store or maintain those records should be minimal. A licensee with
serious noncompliance issues may find additional costs associated with examinations
as specified in §1.839.
Comments on the proposed adoption of the new rules may be submitted in
writing to Leslie L. Pettijohn, Consumer Credit Commissioner, 2601 North Lamar
Boulevard, Austin, Texas, 78705-4207.
The new rules are proposed under Texas Finance Code, §11.304,
which authorizes the Finance Commission to adopt rules to enforce Title 4
of the Texas Finance Code. Additionally, Texas Finance Code, §342.551
authorizes the Finance Commission to adopt rules for the enforcement of the
consumer loan chapter.
These rules affect Chapter 342 of the Texas Finance Code.
§1.830.Files and Records Required (Subchapter E and F Lenders).
Each licensee must maintain records with respect to each loan made
under Chapter 342, Subchapter E and F of the Texas Finance Code and make those
records available for examination.
(1)
Loan register or transaction log. A loan register must
be maintained currently. A licensee may file, in chronological order, copies
of any loan document or form prepared at the time a loan is made reflecting
the information set forth in subparagraphs (A)-(D) of this paragraph to serve
as a loan register. A loan register must contain the following information:
(A)
Date of loan (day, month, and year);
(B)
Surname of borrower;
(C)
Total of payments (amount of loan), and;
(D)
Loan number. Loans may be numbered in ascending sequence
as made or may bear an account number permanently assigned to one borrower
with a numerical suffix reflecting the number of loans to the borrower. A
permanent account number may be used in an automated system for each series
of loans to a borrower; however, a consecutive suffix number must be assigned
to each loan in the series to distinguish it from the others.
(2)
Alphabetical index of current borrowers. A current
alphabetical index or report of outstanding loans showing the full name of
each borrower, coborrower, or other obligor on the loan and the loan number
assigned each loan must be maintained.
(3)
Borrower's account record.
(A)
A separate record must be maintained for the account of
each borrower and the record must contain at least the following information
on each loan:
(i)
Loan number as recorded on loan register;
(ii)
Loan schedule and terms itemized to show:
(I)
Date of loan;
(II)
Number of installments;
(III)
Due date of installments;
(IV)
Amount of each installment, and;
(V)
Maturity date.
(iii)
Name, address, and telephone number of borrower;
(iv)
Names and addresses of coborrowers or other obligors,
if any;
(v)
Type or brief description of security; if none, so indicate;
(vi)
Total of payments (amount of loan);
(vii)
Amount financed (cash advance);
(viii)
Total interest charges on Subchapter E loans, including
additional days charges for irregular installments; or, if the loan is made
under Subchapter F, the acquisition charge and the installment account handling
charge shown separately;
(ix)
Amount of premium charges for insurance itemized to show:
(I)
Credit life insurance;
(II)
Credit accident and health (disability) insurance;
(III)
Personal property insurance;
(IV)
Automobile physical damage insurance;
(V)
Nonfiling insurance, and;
(VI)
Involuntary unemployment insurance.
(x)
Amount of official fees for recording, amending, or continuing
a notice of security interest that are collected at the time the loan is made
and which is to be disbursed within the period of 30 days as prescribed in
paragraph (5)(D)(i) of this section;
(xi)
Amount of personal property insurance when the amount
of insurance is not equal to amount of the total of payments (amount of loan),
and;
(xii)
Individual payment entries itemized to show:
(I)
Date payment received; dual postings are acceptable if
date of posting is other than date of receipt;
(II)
Amounts received for application to principal and precomputed
interest, and;
(III)
Amounts received for default, deferment, or other authorized
charges.
(B)
Corrective entries are permitted when justified.
(C)
In the event a loan is prepaid in full, refunds of unearned
charges and unearned insurance premiums are required. A licensee is responsible
for substantiating final entries and that refunds were paid to the borrower.
Refund amounts must be itemized to show:
(i)
Interest refunded;
(ii)
Credit life, accident and health, involuntary unemployment,
single interest, and personal property insurance charges refunded, showing
separately the refund applicable to each separate insurance policy or coverage,
and;
(iii)
Dual automobile physical damage insurance when borrower
requests cancellation of the policy.
(D)
When an error is made on the individual borrower's account
record, a line must be drawn through the improper entry and the correct entry
made above or below. No erasures or other obliterations may be made on the
payments received section of a manual individual record.
(E)
When accounts are transferred from a licensed location,
a separate record of these accounts must be maintained by the transferor.
The record must show the name of the borrower, the account number, the date
of transfer, and the location to which the accounts are transferred.
(F)
Separate individual borrower's account records must be
maintained for open and closed loans. Any systematic method of filing may
be utilized so long as any account record may be readily located by reference
to either a name or loan number.
(4)
Borrower disbursement record. The loan contract,
statement of loan or account record, or single separate disbursement record
must show the individual amounts paid out at the borrower's direction or request
on his behalf or for his benefit. Each disbursement must be substantiated
by receipts, documents, canceled checks, or other records.
(5)
Fee record.
(A)
The amount of official fees collected at the time the loan
is made and to be disbursed within the period prescribed in subparagraph (D)(i)
of this paragraph must be disclosed on the individual borrower's account record.
(B)
Information concerning fees for termination, continuation,
or amendment collected at the time a loan is made but not disbursed, as prescribed
by subparagraph (D)(i) of this paragraph, or collected subsequent to the making
of the loan, must be entered in a record. Entries to this record must be in
chronological order as to the date the fees are collected. The record must
show the date each fee is collected, the amount of each fee collected, the
date each fee is disbursed and the amount of each fee disbursed. In addition,
if a fee is collected in advance for the purpose of filing a UCC-3 to "continue"
a notice of security interest, the record must show the date the present filing
expires.
(C)
If more than one fee is included in a disbursement by check
to the recording office, the loan number of each account to which the disbursement
is related on the check copy, check stub, or voucher must be documented.
(D)
Disbursement procedures.
(i)
Fees collected at the time a loan is made for recording,
amending, or continuing a notice of security interest must be disbursed to
the recording agency within 30 days from the date of collection from the borrowers.
If fees are not properly disbursed within 30 days, the borrower must be given
credit for the fee and any filing may be made only at the licensee's expense.
If filing of continuation fees may not be made during the 30 days following
the date of the loan due to conflict with §9.403 of the Uniform Commercial
Code, the licensee must follow the procedure outlined in subparagraph (B)
of this paragraph. (Note: Subparagraph (E)(i) of this paragraph summarizes
the filing requirements of §9.403 of the Uniform Commercial Code.)
(ii)
Each licensee should disburse, to the recording agency,
termination fees collected from borrowers within 30 days from the date the
loan is paid in full. If the termination fees are not disbursed within this
period, the fees must be returned to the borrowers and the termination effected
at expense of the licensee.
(E)
Continuation of liens will be dependent upon conformity
with the following:
(i)
If a licensee desires to continue a notice of security
interest on which a maturity date was not initially established on the financing
statement, a continuation statement must be filed no later than 60 days after
the maturity date and no sooner than six months prior to the maturity date.
A licensee may exercise one of the following options when "continuing" a lien:
(I)
The cost of filing a continuation statement may be included
in the official fees collected in connection with a renewal loan that has
a maturity date extending past the end of the five year period or past the
initial maturity date.
(II)
The filing fee may be collected directly from the borrower
within the period for filing prescribed by §9.403 of the Uniform Commercial
Code.
(III)
The borrower and the licensee may agree to charge the
borrower's account for the cost of filing.
(IV)
The cost of filing may be borne by the licensee.
(ii)
Record of fees collected under this section must be maintained
as prescribed in subparagraph (A) or (B) of this paragraph.
(6)
Record of daily transactions. Each licensee
must maintain sufficient records to adequately reflect, on an individual account
basis, the business occurring during each day. The records must reflect the
date on which each transaction occurred.
(7)
Record of loans in litigation and repossession.
(A)
An index of each repossession as it occurs and each legal
action by or against the licensee as it is initiated must be recorded. The
index must show the borrower's name, account number, and date of action. If
accounts have been transferred, it must be noted in the index as well as on
the record of transferred accounts.
(B)
All loan records, account cards, correspondence, and any
other pertinent information must be maintained in the borrower's account folders
or files. The file must include the following applicable items:
(i)
Identification of the collateral sought or acquired by
the licensee;
(ii)
A copy of the original petition and the most current amended
petition, if any;
(iii)
Proof of judgment if a judgment is taken and amounts
awarded by the court;
(iv)
The date and terms of settlement if settlement is made
between the borrower and the licensee before judgment;
(v)
Record of all payments received after judgment, properly
identified and applied;
(vi)
When the licensee, acting as a secured party, takes possession
of the collateral and disposes of it at a public or private sale as provided
under the Uniform Commercial Code, and the sale is not a judicial sale, written
evidence substantiating the commercial reasonableness of all aspects of the
sale of the collateral, and of its preparation for sale, if any. These documents
should include copies of any invoices or receipts, condition reports indicating
the condition of the collateral, notice of intended disposition or the waiver
of the notice signed after default by the borrower and other obligors, and
evidence of fair sale of the collateral. One means of providing evidence of
fair sale or the commercial reasonableness of sale is the taking of not less
than three bona fide bids. Bids must disclose the names and addresses of the
bidders.
(vii)
Name and address of purchaser of repossessed collateral.
(8)
Loan records and documents.
(A)
All obligations signed by the borrower, including promissory
notes and security agreements, must be kept at an office in the state designated
by the licensee or made available in the state, except when transferred under
an agreement which gives the commissioner access to the documents. Copies
of loan documents, financing statements, loan applications, records of insurance
policies issued by or through the licensee in connection with the loan, and
books and records required by this rule must be maintained in the licensed
location or be made available at some place in the state designated by the
licensee in writing to the commissioner. Documents may be maintained out of
state if the licensee has in writing acknowledged responsibility for either
making the records available within the state for examination or by acknowledging
responsibility for additional examination costs associated with examinations
conducted out of state.
(B)
Loan documents and other records must be maintained as
required to evidence compliance with applicable state and federal laws and
regulations, including but not limited to, the Equal Credit Opportunity Act
and the Truth in Lending Act. If tangible personal property is taken as collateral
on a loan, the loan documents or attachments must describe the property in
detail sufficient to identify each individual item taken.
(C)
If tangible personal property is taken as collateral on
a loan, the loan documents or attachments must describe the property in detail
sufficient to identify each individual item taken.
(D)
Copies of receipts on cash payments collected outside the
licensed office must be maintained.
(E)
If an automobile insurance policy is required, a copy of
the policy or insurance application and other pertinent records relating to
the rating of the policy as finally issued must be maintained in the borrower's
file.
(9)
Insurance Loss Registers. Each licensee must
maintain a register reflecting information on life, accident and health, property
insurance, involuntary unemployment, and single interest insurance claims
whether paid or denied by the insurance carrier.
(A)
Life Insurance Claims. The register pertaining to life
insurance claims must show the name of the borrower, the account number, and
the date of death. The borrower's individual file or account record must disclose
the amount of indebtedness at the time of death, the gross amount of the claim
paid, the amount of insurance benefits paid beneficiaries other than the licensee
which is in excess of the net amount necessary to pay the indebtedness and
the check number or numbers by which the amount is paid beneficiaries other
than the licensee.
(B)
Accident and health insurance claims. The register pertaining
to accident and health insurance claims must show the name of the borrower,
the account number, and the date of the initial filing of a claim for any
continuous period of disability.
(C)
Personal property insurance losses. The register pertaining
to personal property insurance claims must show the name of the borrower,
the account number, the amount of insurance written on tangible personal property
other than a motor vehicle, the amount of the settlement, and a notation as
to whether the loss is a total or partial loss.
(D)
Involuntary unemployment insurance claims. The register
pertaining to involuntary unemployment insurance claims must show the name
of the borrower, the account number, and the date of the initial filing of
the claim.
(E)
Single interest insurance claims. The register pertaining
to single interest insurance claims must show the borrower's name, the account
number, the amount of the insurance written on the motor vehicle, the amount
of the settlement, and a notation as to the basis of the settlement (actual
cash value, repair, or the remaining outstanding balance).
(10)
Retention of records. All required books and
records must be available for inspection at any time by the commissioner or
the commissioner's authorized representatives, and must be retained for a
period of four years from the date of the loan, or two years from the date
of the final entry made thereon, whichever is later.
§1.831.Files and Records Required. (Subchapter G Lenders)
Each licensee must maintain records with respect to each loan made
under Chapter 342, Subchapter G of the Texas Finance Code and each home equity
loan made under Article XVI, Section 50 of the Texas Constitution and make
those records available for examination.
(1)
Loan register or transaction log. A loan register must
be maintained. A licensee may file, in chronological order, copies of any
loan document or form prepared at the time a loan is made reflecting the information
set forth in subparagraphs (A)-(D) of this paragraph to serve as a loan register.
A loan register must contain the following information:
(A)
Date of loan day (day, month, and year);
(B)
Surname of borrower;
(C)
Total of payments (amount of loan), and;
(D)
Loan number.
(2)
Record of individual borrower's account.
(A)
A separate record must be maintained for the account of
each borrower and the record must contain at least the following information
on each loan:
(i)
Loan number as recorded on loan register;
(ii)
Loan schedule and terms itemized to show:
(I)
Date of loan;
(II)
Number of installments;
(III)
Due date of installments;
(IV)
Amount of each installment, and;
(V)
Maturity date.
(iii)
Name, address, and telephone number of borrower;
(iv)
Names and addresses of coborrowers, if any;
(v)
Legal description of real property;
(vi)
Principal amount;
(vii)
Total interest charges, including additional days charges
for irregular installments and points;
(viii)
Amount of premium charges for insurance itemized to
show:
(I)
Credit life insurance;
(II)
Credit accident and health (disability) insurance;
(III)
Personal property insurance;
(ix)
Amount of official fees for recording, amending, or continuing
a notice of security interest that are collected at the time the loan is made.
(x)
Individual payment entries itemized to show:
(I)
Date payment received; dual postings are acceptable if
date of posting is other than date of receipt;
(II)
Actual amounts received for application to principal and
interest, and;
(III)
Actual amounts paid for default, deferment, or other
authorized charges.
(B)
Corrective entries are permitted when justified.
(C)
In the event a loan is prepaid in full, refunds of unearned
charges and unearned insurance premiums may be required. A licensee is responsible
for substantiating final entries and for substantiating that refunds due were
paid to borrowers. Refund amounts must be itemized to show:
(i)
Interest charges refunded, including the refund of any
unearned points, and;
(ii)
Credit life, accident and health, and personal property
insurance charges refunded, showing separately the refund applicable to each
separate insurance policy or coverage.
(D)
When accounts are transferred from a licensed location,
a separate record of these accounts must be maintained by the transferor.
The record must show the name of the borrower, the account number, the date
of transfer, and the location to which the accounts are transferred.
(3)
Borrower disbursement record. The loan contract,
statement of loan or account record, or single separate disbursement record
must show the individual amounts paid out at the borrower's direction or request
on his behalf or for his benefit. Each disbursement must be substantiated
by receipts, documents, canceled checks, or other records.
(4)
Fee record.
(A)
The amount of official fees collected at the time the loan
is made must be recorded on the individual borrower's account record.
(B)
Disbursement procedures.
(i)
Fees collected at the time a loan is made for recording,
amending, or continuing a notice of security interest must be disbursed to
the recording agency within 30 days from the date of collection from the borrowers.
(ii)
Each licensee should disburse, to the recording agency,
release of lien fees collected from borrowers within 30 days for the date
the loan is paid in full. If the release of lien fees are not disbursed within
this period, the fees must be returned to the borrowers and the release of
lien effected and the expense borne by the licensee.
(5)
Record of daily transactions. Each licensee
must maintain sufficient records to adequately reflect, on an individual account
basis, the business occurring during each day. The records must reflect the
date on which each transaction occurred.
(6)
Record of loans in litigation and foreclosure.
(A)
An index of each foreclosure as it occurs and each legal
action by or against the licensee as it is initiated must be recorded. The
index must show the borrower's name, account number, and date of action.
(B)
All loan records, correspondence, and any other information
pertinent to the litigation or foreclosure must be maintained in the borrower's
account folders or files.
(7)
Loan records and documents.
(A)
All obligations signed by the borrower, including promissory
notes and security agreements, must be kept at an office in the state designated
by the licensee or made available in the state, except when transferred under
an agreement which gives the commissioner access to the documents. Copies
of loan documents, closing statements, loan applications, records of insurance
policies issued by or through the authorized lender in connection with the
loan, and books and records required by this rule must be maintained in the
licensed location or made available at some place in the state designated
by the licensee in writing to the commissioner. Documents may be maintained
out of state if the licensee has in writing acknowledged responsibility for
either making the records available within the state for examination or by
acknowledging responsibility for additional examination costs associated with
examinations conducted out of state.
(B)
Loan documents and other records must be maintained as
required to evidence compliance with applicable state and federal laws and
regulations including, but not limited to, the Real Estate Settlement Procedures
Act, the Equal Credit Opportunity Act, and the Truth in Lending Act.
(8)
Insurance Loss Registers. Each licensee must
maintain a register reflecting information on life, accident and health, and
property insurance claims whether paid or denied by the insurance carrier.
(A)
Life Insurance Claims. The register pertaining to life
insurance claims must show the name of the borrower, the account number, and
the date of death. The borrower's individual file or account record must disclose
the amount of indebtedness at the time of death, the gross amount of the claim
paid, the amount of insurance benefits paid beneficiaries other than the licensee
which is in excess of the net amount necessary to pay the indebtedness and
the check number or numbers by which the amount is paid beneficiaries other
than the licensee.
(B)
Accident and health insurance claims. The register pertaining
to accident and health insurance claims must show the name of the borrower,
the account number, and the date of the initial filing of a claim for any
continuous period of disability.
(C)
Personal property insurance losses. The register pertaining
to personal property insurance claims must show the name of the borrower,
the account number, the amount of insurance written on tangible personal property
other than a motor vehicle, the amount of the settlement, and a notation as
to whether the loss is a total or partial loss.
(9)
Retention of records. All required books and
records must be available for inspection at any time by the commissioner or
the commissioner's authorized representatives, and must be retained for a
period of four years from the date of the loan, or two years from the date
of the final entry made thereon, whichever is later.
§1.832.Files and Records Required (Subchapter G Mortgage Brokers).
(a)
Each licensee must maintain records with respect to each
loan brokered under Chapter 342, Subchapter G and make those records available
for examination.
(b)
Loan register or transaction record. A mortgage register
or transaction record, maintained on a current basis (which means that all
entries must be made within no more than seven days from the date on which
the matters they relate to occurred), setting forth at a minimum:
(1)
The date of the mortgage loan application;
(2)
The surname and address of each mortgage applicant;
(3)
A description of the disposition of the application
for a mortgage loan, and;
(4)
The identity of the person or entity who initially
funded or acquired the mortgage loan.
(c)
Mortgage loan file or borrower's file. A mortgage loan
file or borrower's file for each mortgage loan application received must be
maintained. Each file must contain at least the following:
(1)
A copy of the mortgage loan application;
(2)
Either:
(A)
A copy of the signed closing statement if the mortgage
loan is closed in the name of an entity through which the mortgage broker
is providing mortgage lending services, or;
(B)
Documentation of the timely denial or other disposition
of the application for the mortgage loan.
(3)
A copy of each item of correspondence, each evidence
of any contractual arrangement or understanding (including any interest rate
lock-ins or loan commitments), and all notes and memoranda of conversations
or meetings with any mortgage applicant or any other party in connection with
the mortgage loan application or its ultimate disposition.
(d)
Loan records and documents. Other books and records must
be maintained as may be required to evidence compliance with applicable state
and federal laws and regulations including, but not limited to, the Real Estate
Settlement Procedures Act, the Equal Credit Opportunity Act, and the Truth
in Lending Act.
(e)
General business records. General business and accounting
records concerning disbursement and receipt of fees associated with the mortgage
loan activity must be maintained.
(f)
Record retention. All required books and records must be
available for inspection at any time by the commissioner or the commissioner's
authorized representative, and must be retained for a period of four years
or a longer period if required by applicable state or federal laws or regulations.
§1.833.Other Required Records.
(a)
Official Correspondence File. Each licensee must maintain
a separate file for all communications from the Office of Consumer Credit
Commissioner and for copies of correspondence and reports addressed to the
commissioner. This shall include a copy of the Texas Credit Title, examination
reports, and any rules issued by the commissioner.
(b)
General business and accounting records. General business
and accounting records concerning the financial transactions of the loan business
must be maintained.
(c)
Supplemental Insurance Records. Each licensee must maintain
in the borrower's file supplemental records supporting the settlements or
denials of claims reported in the registers. In the case of property insurance
claims, these supplemental records must clearly indicate whether the amount
of the settlement on each individual item is based on replacement or based
on repair. If the reason for the denial of a life insurance or an accident
and health insurance claim is based upon the medical records of the borrower,
supplemental records supporting the denial of the claim must be forwarded
to the commissioner upon request.
(d)
Collection Contacts.
(1)
A licensee or the licensee's agent must make a written
record of each and every contact made by a licensee with the borrower or any
other person. The record must also include every contact made by the borrower
with licensee. The written record must include the date, method of contact,
contacted party, person initiating the contact, and summary of the contact.
(2)
Each record must be maintained in a manner that is
readily decipherable.
(e)
Advertising Record.
(1)
Each licensee must maintain, either at the licensed office
or at a principal Texas office, so designated to the commissioner, a complete
record of all written communications soliciting loans (including scripts of
radio and television broadcasts, and reproductions of billboards and signs
not at the licensed place of business) for a period of not less than one year
from the date of use, or until the next examination by a representative of
the commissioner. The date or period of use of each solicitation or advertisement
must be indicated.
(2)
If any language other than English is used in any
advertising material, a true and correct translation thereof must appear along
with the advertising material.
§1.834.Electronic Records.
(a)
Records and accounting systems maintained in whole or in
part by electronic systems must contain the equivalent information as required
in §1.830 and §1.831 of this title relating to Files and Records
Required (Subchapter E and F Lenders) and Files and Record Required (Subchapter
G Lenders)). A licensee must provide documentation of the system to the commissioner
that explains how the required information is maintained within the system.
(b)
If an examination of the system demonstrates that the required
records are not being maintained appropriately the commissioner may disapprove
the use of the system. A licensee will have 90 days to bring the electronic
system into compliance.
(c)
Records may be retained and stored using optical image
storage media, provided the following requirements are satisfied:
(1)
The optical image storage must be nonerasable "write once,
read many" ("WORM") that does not allow changes to the stored document or
record.
(2)
The stored document or record is made or preserved
as part of and in the regular course of business.
(3)
The custodian of the record is able to identify the
stored document or record, the mode of its preparation, and the mode of storing
it on the optical image storage.
(4)
The optical image storage system contains a reliable
indexing system that provides ready access to a desired document or record,
appropriate quality control of the storage process to ensure the quality of
imaged documents or records, and date ordered arrangement of stored documents
or records to assure a consistent and logical flow of paperwork to preclude
unnecessary search time.
(5)
The original documents must be maintained for one
year after the date of the loan. The optical imaged records must be maintained
for the entire required retention period.
(d)
A licensee will maintain at the licensee's office a method
of viewing documents or records stored pursuant to this section. A licensee
must provide a hard copy of any document or record requested by the Commissioner.
§1.835.Review of Records.
If it is determined during the course of an examination the extent
of error and discrepancies made by a licensee indicate that the licensee has
not been conducting business in substantial compliance with the law, the commissioner
may direct the licensee to review the account records and make proper adjustments
to any accounts in error or make any appropriate refunds.
§1.836.Correction of Errors or Violations.
(a)
Any amount found to be due a borrower may be credited to
the next payment or payments on the account of the borrower, if the borrower
has an existing obligation to the licensee. The licensee must notify the borrower
in writing of the date and amount of the next payment due after this credit
has been given.
(b)
In lieu of crediting an existing account, refunds may be
made directly to the borrower by cash or check.
(c)
If the error correction or adjustment to an account is
related to an improper charge or proceeds improperly held by the licensee
on which interest has been precomputed, the licensee may alternatively credit
the final maturing installment or installments of the contract provided that
credit is also given the borrower for the proportionate interest originally
charged on the amount being credited.
(d)
At the time of adjustment if more than half the term of
a precomputed loan has expired, then an interest adjustment must be made.
§1.837.Unclaimed Funds.
(a)
Escheat Suspense Account. The licensee must transfer any
amounts due a borrower not paid within one year, unclaimed funds, to an escheat
suspense account. The transfer must be noted on the account record of the
borrower.
(b)
Required Information. Evidence of a bona fide attempt to
pay a refund to a borrower must be kept in the records of the borrower. The
minimum acceptable evidence of a bona fide attempt must be a registered or
certified letter sent to the last known address of the borrower. The licensee
must place with the records of the borrower any information that indicates
the borrower has died leaving no will or heirs, or has left the community
and the borrower's whereabouts are unknown.
(c)
Use of unclaimed monies. Use of unclaimed funds within
the business until such time as paid to the borrower, the estate of the borrower,
or to the State of Texas is not prohibited; however, funds transferred to
an escheat suspense account must not be commingled with the funds of the business.
(d)
Escheat to State. At the end of three years the unclaimed
funds must be paid to the State of Texas Comptroller of Public Accounts, Treasury
Division, as required by Texas Property Code §72.101.
(e)
Record Retention. The records of the escheat suspense account
must be retained for a period of ten years.
§1.838.Annual Report.
Each licensee must file the required annual report by May 1 for the
prior year's calendar loan activity on forms prescribed by the commissioner
and must comply with all instruction relating to submitting the report.
§1.839.Examination Fees.
(a)
Assessment. The commissioner will assess and collect a
nonrefundable examination fee designed to recover the expenditures associated
with the examination function, according to the formula in this section.
(1)
General administrative fee per exam ($150.00). The administrative
and necessary costs necessary for the expenditures related to an examination;
(2)
Administrative fee for each additional day ($100.00).
The administrative and indirect costs necessary for the expenditures related
to each additional examination day required, and;
(3)
Hourly examination rate ($60.00). The direct and indirect
examiner cost for time required to conduct the examination.
(b)
Calculation of a day. A day is measured as eight business
hours spent on site conducting an examination.
(c)
Due date. An examination fee is due upon delivery of the
examination bill following the conclusion of an examination.
(d)
Return examinations. If a follow-up examination visit is
required within ninety days after a written deficiency report given as a result
of a failure to comply with Chapter 342 of the Texas Finance Code, this chapter,
or the special instruction section of the examination report, the return examination
will be assessed at two times the rates provided in subsection (a)(3) of this
section.
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 June 16, 2000.
TRD-200004220
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: July 30, 2000
For further information, please call: (512) 936-7640
3.
REQUIRED BOOKS AND RECORDS
4.
INSURANCE
5.
REFUND
8.
UNCLAIMED FUNDS
9.
COLLECTION PRACTICES
10.
ADVERTISING
Subchapter R. MOTOR VEHICLE INSTALLMENT SALES CONTRACT PROVISIONS
Subchapter J. AUTHORIZED LENDER'S DUTIES AND AUTHORITY
Chapter 4.
CURRENCY EXCHANGE