Part 5. OFFICE OF CONSUMER CREDIT COMMISSIONER
Chapter 84. MOTOR VEHICLE INSTALLMENT SALES
Subchapter B. INSTALLMENT SALES CONTRACT PROVISIONS
The Finance Commission of Texas (commission) adopts amendments to 7 TAC §84.209, concerning Model Clauses for motor vehicle installment sales contracts.
The purpose of the amendments to 7 TAC §84.209 is to implement recent legislation enacted by the 80th Texas Legislature regarding fees for motor vehicle installment sales contracts. The changes implement House Bill 310 (HB 310) concerning a plate transfer fee and Senate Bill 11 (SB 11) concerning a compliance fee. The amendments to this rule are adopted with changes to the proposal published in the December 28, 2007, issue of the Texas Register (32 TexReg 9900).
House Bill 310 amends Texas Transportation Code, §502.453 by adding a $5.00 charge to the cost for transferring license plates and receiving new registration insignia. The agency believes that Texas Finance Code, Chapter 348 supports the inclusion of the plate transfer fee, at the dealer's option, as an itemized charge.
Thus, the purpose of the addition of §84.209(8)(C) concerning the plate transfer fee under Texas Transportation Code, §502.453, is to provide dealers with the option of charging under the itemization of amount financed a $5.00 fee for transferring license plates and receiving new registration insignia.
The commission received one written comment on the proposal from the Texas Automobile Dealers Association (TADA). The commenter wishes to clarify issues regarding the plate transfer fee language contained in §84.209(8)(C). The commenter states: "In order for there to be no misunderstanding by a buyer regarding this state mandated fee if a customer opts to transfer their license plates, TADA requests that the provision be titled 'Required Fee for Optional Plate Transfer .' Additionally, the commenter also requests that the amendment state that the "creditor will charge a $5.00 fee" for the plate transfer (as opposed to "may"), and that the fee be listed as "to State for Plate Transfer Fee " in the "Other Charges" section under the "Itemization of Amount Financed."
In reference to the commenter's recommended provision title, the commission agrees that the title as proposed needs clarification. The decision to transfer the plates is optional, yet if the consumer elects to proceed with a plate transfer, the fee must be paid. The commission believes that the use of the phrase "Required Fee" in the title would not properly implement the statutory provision, as the consumer must still opt to transfer the plates in order to trigger the fee requirement. Consequently, the commission believes that to achieve the best clarity, the title should be revised and adopted as follows: "Plate transfer fee." Also, the words "an optional" have been replaced with the article "a" before "$5.00 fee" for consistency.
Regarding the commenter's second suggestion, the commission agrees that if a license plate is transferred, the $5.00 fee is required by HB 310. The commission agrees that the creditor is authorized to charge the $5.00 plate transfer fee upon the consumer's decision to transfer plates and acknowledges the use of the word "will" in terms of the statutory requirement; however, the statute does not prohibit the creditor from absorbing the fee if it wishes. Thus, the commission believes that maintaining the use of the verb "may" in §84.209(8)(C) provides the necessary flexibility in the contract. Accordingly, the commission chooses to retain the verb "may" in lieu of the verb "will" as suggested by the commenter.
Concerning the commenter's final and third recommendation, the commission agrees that some clarification as to how the plate transfer fee may be listed would be useful to licensees. As a result, the commission has added the following statement to §84.209(8)(C), providing suggested language: "The creditor may document the plate transfer fee in the Other Charges section with the following language: 'to State for Plate Transfer Fee.' "
Senate Bill 11, among other things, amends Texas Transportation Code, §503.0631(f) by allowing a motor vehicle dealer to charge a fee designed to compensate the dealer for complying with the temporary tag database. The compliance fee added by SB 11 does not fall under any category of the exclusive list contained in Texas Finance Code, §348.005 of the only allowable itemized charges that a dealer can include in a retail installment sales contract. Under Texas Finance Code, §348.005(1), the compliance fee is not a fee "for registration, certificate of title, [or] license," and is not an "additional registration fee [] charged by a full service deputy. . . ." The compliance fee is not a tax under Texas Finance Code, §348.005(2). Under Texas Finance Code, §348.005(4), the compliance fee is also not a "charge [] authorized for insurance, service contracts, or warranties by Subchapter C." Texas Finance Code, §348.005(3) allows only for "fees or charges prescribed by law and connected with the sale or inspection of the motor vehicle . . . ." Texas courts have distinguished between "prescribed" and "permitted," holding that "prescribed" is a much more restrictive term indicating mandatory legal standards. Jones v. Killingsworth , 403 S.W.2d 325 (Tex. 1965). As the compliance fee is a fee that the dealer "may charge" according to SB 11, it is permissive and not required by the state for the sale or inspection of a motor vehicle. Therefore, the commission believes that the permissive compliance fee is not authorized in a retail installment sales contract subject to Texas Finance Code, Chapter 348 as an itemized charge under §348.005.
Consequently, the purpose of the addition of §84.209(8)(D) concerning the compliance fee under Texas Transportation Code, §503.0631(f), is to clearly state that the creditor is prohibited from assessing an itemized charge under the itemization of amount financed for costs associated with complying with the temporary tag database.
The amendments are adopted under Texas Finance Code §11.304, which authorizes the commission to adopt rules to enforce Title 4 of the Texas Finance Code. Additionally, Texas Finance Code, §348.513 grants the commission the authority to adopt rules to enforce the motor vehicle installment sales chapter.
The statutory provisions (as currently in effect) affected by the adopted amendments are contained in Texas Finance Code, Chapter 348.
§84.209.Model Clauses.
The following model clauses provide the plain language equivalent of provisions found in contracts subject to Texas Finance Code, Chapter 348.
(1) Identification of parties. This information identifies the parties to the contract.
(A) The model identification clause lists the name and address of the creditor, the date of the contract, and the name and address of the buyer. At the creditor's option, a creditor may include an account number or contract number. The model clause reads:
Figure: 7 TAC §84.209(1)(A) (No change.)
(B) The Buyer is referred to as "I" or "me." The Seller is referred to as "you" or "your."
(2) Assignment of contract. The model clause regarding assignment of contract reads: "This contract may be transferred by the Seller."
(3) Buyer's affirmation and promise to pay. The model clause regarding buyer's affirmation and promise to pay reads: "The credit price is shown below as the "Total Sales Price." The "Cash Price" is also shown below. By signing this contract, I choose to purchase the motor vehicle on credit according to the terms of this contract. I agree to pay you the Amount Financed, Finance Charge, and any other charges in this contract. I agree to make payments according to the Payment Schedule in this contract. If more than one person signs as a buyer, I agree to keep all the promises in this agreement even if the others do not."
(4) Inspection acknowledgment. The model clause regarding inspection acknowledgment reads: "I have thoroughly inspected, accepted, and approved the motor vehicle in all respects."
(5) Identification of motor vehicle. The motor vehicle identification information provision should contain the following information about the motor vehicle: the seller's stock number; the manufacturer's year model; the manufacturer's make; the manufacturer's model type or number; the vehicle identification number; the license plate number (if applicable); a new/used designation; and the primary purpose designation. The seller's stock number and the license number are both optional; the omission will not make a contract non-standard. The motor vehicle identification information provision may include additional information about the vehicle including, odometer reading, color, the designation as a heavy commercial vehicle, and key code. If the creditor includes this additional information about the motor vehicle, the change will not make the provision a non-standard provision. The model clause regarding identification of the motor vehicle reads:
Figure: 7 TAC §84.209(5) (No change.)
(6) Trade-in vehicle description. The model clause regarding trade-in vehicle description reads:
Figure: 7 TAC §84.209(6) (No change.)
(7) Truth in Lending Act disclosure. The model clause regarding Truth in Lending Act disclosure reads:
Figure: 7 TAC §84.209(7) (No change.)
(8) Itemization of amount financed. The creditor drafting the contract is given considerable flexibility regarding the itemization of amount financed disclosure so long as the itemization of amount financed disclosure complies with the Truth in Lending Act. As an example, a creditor may disclose the manufacturer's rebate either as: a component of the downpayment; or a deduction from the cash price of the motor vehicle. The model contract provision for the itemization of the amount financed discloses the manufacturer's rebate as a component of the downpayment. If the creditor elected to disclose the manufacturer's rebate as a deduction from the cash price of the motor vehicle, the cash price component of the itemization of amount financed would be amended to reflect the dollar amount of the manufacturer's rebate being deducted from the cash price of the motor vehicle.
(A) The model clause regarding itemization of amount financed-sales tax advance reads:
Figure: 7 TAC §84.209(8)(A) (No change.)
(B) The model clause regarding itemization of amount financed-sales tax deferred reads:
Figure: 7 TAC §84.209(8)(B) (No change.)
(C) Plate transfer fee. Under Texas Transportation Code, §502.453, the creditor may charge under the itemization of amount financed a $5.00 fee for transferring license plates and receiving new registration insignia. The creditor may document the plate transfer fee in the Other Charges section with the following language: "to State for Plate Transfer Fee."
(D) Compliance fee prohibited. Under Texas Transportation Code, §503.0631(f), the creditor is prohibited from assessing an itemized charge under the itemization of amount financed for costs associated with complying with the temporary tag database.
(9) Documentary fee.
(A) The following notice satisfies the requirements of Texas Finance Code, §348.006 if printed in a size equal to at least 10-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 parenthetical phrase may be inserted at the dealer's option or the disclosure may be made without the parenthetical phrase 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 model clause is contained in the Itemization of Amount Financed. 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."
(B) The following notice is a sufficient Spanish translation of the documentary fee disclosure required by Texas Finance Code, §348.006. The parenthetical phrase may be inserted at the dealer's option or the disclosure may be made without the parenthetical phrase 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 may read: "Un honorario de documentación no es un honorario oficial. Un honorario de documentación no es requerido por la ley, pero puede ser cargada al comprador como gastos de manejo de documentos y para realizar servicios relacionados con el cierre de una venta. Un honorario de documentación no puede exceder $50 (un contrato de vehículo automotor o una cantidad razonable acordada por las partes para un contrato de vehículo 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 èste podría 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 vehículo automotor o una cantidad razonable acordada por las partes para un contrato de vehículo comercial pesado). Esta notificación se exige por ley."
(10) Deferred downpayments. The creditor has considerable flexibility in disclosing the deferred downpayments. The model provision discloses the deferred downpayments by placing the information, the due date and dollar amount of the deferred downpayments, in several boxes. If a creditor uses this model provision, the creditor would enter the due date and dollar amount of each deferred downpayment in the appropriate boxes. As an alternative to this model provision, a creditor may disclose the deferred downpayments in the Payment Schedule of the Amount Financed in the federal disclosure box. If a creditor elects this option, the due date and the dollar amount of the deferred downpayment must be shown. If the total amount of the deferred downpayment is not satisfied by the date of the second regularly scheduled installment, the deferred downpayment must be included in the Payment Schedule. As another alternative, the creditor may disclose the deferred downpayment amount in the Payment Schedule. The model clause regarding deferred downpayments reads:
Figure: 7 TAC §84.209(10) (No change.)
(11) Required physical damage insurance. The creditor may chose to omit the statement of the retail buyer's right to obtain substitute coverage from another source. The model clause regarding required physical damage insurance reads:
Figure: 7 TAC §84.209(11) (No change.)
(12) Optional insurance coverages. The model clause regarding optional insurance coverages reads:
Figure: 7 TAC §84.209(12) (No change.)
(13) Optional credit life and accident and health insurance. The model clause regarding optional credit life and accident and health insurance reads:
Figure: 7 TAC §84.209(13) (No change.)
(14) Liability insurance. If liability insurance coverage is not included in the contract, any 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 10-point type that is boldfaced, capitalized, underlined, or otherwise set out from surrounding written material so as to be conspicuous:
(A) "THIS CONTRACT DOES NOT INCLUDE INSURANCE COVERAGE FOR PERSONAL LIABILITY AND PROPERTY DAMAGE CAUSED TO OTHERS."
(B) "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."
(C) "UNLESS A CHARGE FOR LIABILITY INSURANCE IS INCLUDED IN THE ITEMIZATION OF AMOUNT FINANCED, ANY INSURANCE REFERRED TO IN THIS CONTRACT DOES NOT INCLUDE COVERAGE FOR PERSONAL LIABILITY AND PROPERTY DAMAGE CAUSED TO OTHERS."
(15) Prohibition against oral modifications. The contract may include a provision barring oral modifications of the contract. A unilateral change to a contract may nevertheless occur as prescribed by the procedures in Texas Finance Code, Chapter 349, Subchapter C. The model clause regarding prohibition against oral modifications reads:
Figure: 7 TAC §84.209(15) (No change.)
(16) Finance charge earnings methods:
(A) Regular transaction using sum of the periodic balances method.
(i) Sales tax advance. At the creditor's option a creditor may choose one of the following model clauses regarding sales tax advance:
(I) "You figure the Finance Charge using the add-on method as defined by the Texas Finance Commission Rule. Add-on Finance Charge is calculated on the full amount of the unpaid principal balance and added as a lump sum to the unpaid principal balance for the full term of the contract." Or
(II) "The Finance Charge will be calculated by using the add-on method. Add-on Finance Charge is calculated on the full amount of the unpaid principal balance and added as a lump sum to the unpaid principal balance for the full term of the contract. The add-on Finance Charge is calculated at a rate of $____ per $100.00."
(ii) Deferred sales tax. The model clause regarding deferred sales tax reads: "The Finance Charge will be calculated by using the add-on method. Add-on Finance Charge is calculated on the full amount of the unpaid principal balance subject to a finance charge and added as a lump sum to the unpaid principal balance subject to a Finance Charge for the full term of the contract. The add-on Finance Charge is calculated at a rate of $____ per $100.00."
(B) True daily earnings method.
(i) Sales tax advance. At the creditor's option a creditor may choose one of the following model clauses regarding sales tax advance:
(I) "You figure the Finance Charge using the true daily earnings method as defined by the Texas Finance Code. Under the true daily earnings method, the Finance Charge will be figured by applying the daily rate to the unpaid portion of the Amount Financed for the number of days the unpaid portion of the Amount Financed is outstanding. The daily rate is 1/365th of the Annual Percentage Rate. The unpaid portion of the Amount Financed does not include late charges or returned check charges." Or
(II) If a retail seller requires a retail buyer to purchase credit life or credit accident and health insurance and the sales tax is not deferred, the contract rate disclosure should read: "The contract rate is _____%. This contract rate may not be the same as the Annual Percentage Rate. You will figure the Finance Charge by applying the true daily earnings method as defined by the Texas Finance Code to the unpaid portion of the principal balance. The daily rate is 1/365th of the contract rate. The unpaid principal balance does not include the late charges or returned check charges."
(ii) Deferred sales tax: If a retail seller requires a retail buyer to purchase credit life or credit accident and health insurance and the sales tax is deferred, the contract rate disclosure should read: "The contract rate is _____%. This contract rate may not be the same as the Annual Percentage Rate. You will figure the Finance Charge by applying the true daily earnings method as defined by the Texas Finance Code to the unpaid portion of the principal balance subject to a Finance Charge. The daily rate is 1/365th of the contract rate. The unpaid principal balance subject to a finance charge does not include the late charges, sales tax, or returned check charges."
(C) Scheduled installment earnings method.
(i) Sales tax advance. At the creditor's option a creditor may choose one of the following model clauses regarding sales tax advance:
(I) "You figure the Finance Charge using the scheduled installment earnings method as defined by the Texas Finance Code. Under the scheduled installment earnings method, the Finance Charge is figured by applying the daily rate to the unpaid portion of the Amount Financed as if each payment will be made on its scheduled payment date. The daily rate is 1/365th of the Annual Percentage Rate. The unpaid portion of the Amount Financed does not include late charges or returned check charges." Or
(II) If a retail seller requires a retail buyer to purchase credit life or credit accident and health insurance and the sales tax is not deferred, the contract rate disclosure should read: "The contract rate is _____%. This contract rate may not be the same as the Annual Percentage Rate. You will figure the Finance Charge by applying the scheduled installment earnings method as defined by the Texas Finance Code to the unpaid portion of the principal balance. You based the Finance Charge, Total of Payments, and Total Sale Price as if all payments were made as scheduled. The unpaid principal balance does not include the late charges or returned check charges."
(ii) Deferred sales tax. If a retail seller requires a retail buyer to purchase credit life or credit accident and health insurance and the sales tax is deferred, the contract rate disclosure should read: "The contract rate is _____%. This contract rate may not be the same as the Annual Percentage Rate. You figured the Finance Charge by applying the scheduled installment earnings method as defined by the Texas Finance Code to the unpaid portion of the principal balance subject to a Finance Charge. You based the Finance Charge, Total of Payments, and Total Sale Price as if all payments were made as scheduled. The unpaid principal balance subject to a Finance Charge does not include the late charges, sales tax, or returned check charges."
(17) Consumer warning. The following notices satisfy the requirements of Texas Finance Code §348.102(d) if printed in at least 10-point type that is boldfaced, capitalized, underlined, or otherwise set out from surrounding written material so as to be conspicuous.
(A) For contracts using the sum of the periodic balances method (Rule of 78s) or the scheduled installment earnings method, the notice may read:
(i) "NOTICE TO THE BUYER--I WILL NOT SIGN THIS CONTRACT BEFORE I READ IT OR IF IT CONTAINS ANY BLANK SPACES. I AM ENTITLED TO A COPY OF THE CONTRACT I SIGN. UNDER THE LAW, I HAVE THE RIGHT TO PAY OFF IN ADVANCE ALL THAT I OWE AND UNDER CERTAIN CONDITIONS MAY OBTAIN A PARTIAL REFUND OF THE FINANCE CHARGE. I WILL KEEP THIS CONTRACT TO PROTECT MY LEGAL RIGHTS." Or
(ii) "NOTICE TO THE BUYER--THE BUYER SHOULD NOT SIGN THIS CONTRACT BEFORE READING IT OR IF IT CONTAINS ANY BLANK SPACES. THE BUYER IS ENTITLED TO A COPY OF THE SIGNED CONTRACT. UNDER THE LAW, THE BUYER HAS THE RIGHT TO PAY OFF IN ADVANCE ALL THAT THE BUYER OWES AND UNDER CERTAIN CONDITIONS MAY OBTAIN A PARTIAL REFUND OF THE FINANCE CHARGE. THE BUYER SHOULD KEEP THIS CONTRACT TO PROTECT ITS LEGAL RIGHTS."
(B) For contracts using the true daily earnings method, the notice may read: "NOTICE TO THE BUYER--I WILL NOT SIGN THIS CONTRACT BEFORE I READ IT OR IF IT CONTAINS ANY BLANK SPACES. I AM ENTITLED TO A COPY OF THE CONTRACT I SIGN. UNDER THE LAW, I HAVE THE RIGHT TO PAY OFF IN ADVANCE ALL THAT I OWE AND UNDER CERTAIN CONDITIONS MAY SAVE A PORTION OF THE FINANCE CHARGE. I WILL KEEP THIS CONTRACT TO PROTECT MY LEGAL RIGHTS."
(18) Buyer's acknowledgment of contract receipt.
(A) The following acknowledgments conform to the requirements of Texas Finance Code, §348.112 if they appear directly above the place for the buyer's signature in at least 10-point type that is boldfaced, capitalized, underlined, or otherwise set out from surrounding written material so as to be conspicuous. A creditor may choose the most appropriate option:
(i) If the buyer's signature is dated. If this clause is chosen, the copy must be mailed within a reasonable period of time. A reasonable period of time would ordinarily be three days, excluding Sundays and holidays. The model acknowledgment may read: "I AGREE TO THE TERMS OF THIS CONTRACT. WHEN I SIGN THE CONTRACT, I WILL RECEIVE THE COMPLETED CONTRACT. IF NOT, I UNDERSTAND THAT A COPY WILL BE MAILED TO ME WITHIN A REASONABLE TIME."
(ii) If the buyer's signature is not dated. The model acknowledgment may read: "I AGREE TO THE TERMS OF THIS CONTRACT. I CONFIRM THAT BEFORE I SIGNED THIS CONTRACT, YOU GAVE IT TO ME, AND I WAS FREE TO TAKE IT AND REVIEW IT. I RECEIVED THE COMPLETED CONTRACT ON ___________ (MO.) (DAY) (YR.)."
(iii) If the buyer's signature is not dated. If this clause is chosen, the copy must be mailed within a reasonable period of time. The model acknowledgment may read: "I SIGNED THIS CONTRACT ON _________ AND A COPY WILL BE MAILED TO ME WITHIN A REASONABLE TIME."
(iv) If the buyer's signature is not dated but the contract contains the date of the transaction. The model acknowledgment may read: "I AGREE TO THE TERMS OF THIS CONTRACT AND ACKNOWLEDGE RECEIPT OF A COMPLETED COPY OF IT. I CONFIRM THAT BEFORE I SIGNED THIS CONTRACT, YOU GAVE IT TO ME, AND I WAS FREE TO TAKE IT AND REVIEW IT."
(B) Acceptance of contract receipt. The model clause regarding acceptance of contract receipt reads:
Figure: 7 TAC §84.209(18)(B) (No change.)
(19) 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 N. Lamar Blvd., Austin, Texas 78705-4207; (800) 538-1579; www.occc.state.tx.us, and can be contacted relative to any inquiries or complaints."
(20) Finance charge refund method. If a contract uses the finance charge refunding method of the sum of the periodic balances or the scheduled installment earnings method, the finance charge refund provision reads: "If I prepay in full, I may be entitled to a refund of part of the Finance Charge." On contracts using the true daily earnings method, this finance charge refund provision should not be disclosed because it is not applicable.
(A) Contracts using the sum of the periodic balances method.
(i) Name of method. The model clause to identify the method of refunding finance charge reads: "You will figure the Finance Charge refund by using the sum of the periodic balances method as defined by the Texas Finance Commission rule."
(ii) Optional description of method. The creditor may include the following additional description of the method. The model clause reads: "You will figure the Finance Charge refund using the sum of the periodic balances method as defined by the Texas Finance Commission rule. The Finance Charge Refund will be computed upon the entire Finance Charge minus the Acquisition Cost. I will not get a refund if it is less than $1.00."
(iii) Optional description of method for use in contracts for heavy commercial vehicles. 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 model clause reads: "You will figure the Finance Charge refund using the sum of the periodic balances method as defined by the Texas Finance Commission rule. The Finance Charge refund will be computed based upon the entire Finance Charge calculated using the sum of the periodic balances method. Then you will subtract the Acquisition Cost from that amount. I will not get a refund if it is less than $1.00."
(B) Contracts using the scheduled installment earnings method.
(i) Name of method. The model clause to identify the method of refunding finance charge reads: "You will figure the Finance Charge refund by the scheduled installment earnings method as defined by the Texas Finance Commission rule."
(ii) Optional description of method. The creditor may include the following additional description of the method: "You will figure my refund by deducting earned finance charges from the Finance Charge. You will figure earned finance charges by applying a daily rate to the unpaid principal balance as if I paid all my payments on the date due. If I prepay between payment due dates, you will figure earned finance charges for the partial payment period. You do this by counting the number of days from the due date of the prior payment through the date I prepay. You then multiply that number of days times the daily rate. The daily rate is 1/365th of the Annual Percentage Rate. You will also add the acquisition cost of $25 (or $150 for a heavy commercial vehicle) to the earned finance charge. I will not get a refund if it is 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 clause illustrates one way that this flexibility may be accomplished: "You will figure the Finance Charge refund using the sum of the periodic balances method as defined by the Texas Finance Commission rule if: this contract is a Regular Payment Contract as defined by the Texas Finance Commission rule, and this contract does not have a term greater than 61 months. If this contract is not a Regular Payment Contract or if it has a term greater than 61 months, you will figure the Finance Charge refund using the scheduled installment earnings method as defined by the Texas Finance Commission rule. I will not get a refund if it is less than $1.00."
(21) Application of payments. In this provision, the term "finance charge" should not be construed to have the same meaning as Finance Charge as defined by the Truth in Lending Act. A default or late charge is considered to be a finance charge under Texas law; therefore, a default or late charge can be charged and collected as part of the earned finance charge. At the creditor's option the creditor may modify the application of payments language by adding "and late charges" following the phrase "earned but unpaid finance charge." The model clause reads:
Figure: 7 TAC §84.209(21) (No change.)
(22) Effect of early and late payments. For contracts using the true daily earnings method, the model clause reads: "You based the Finance Charge, Total of Payments, and Total Sale Price as if all payments were made as scheduled. If I do not timely make all my payments in at least the correct amount, I will have to pay more Finance Charge and my last payment will be more than my final scheduled payment. If I make scheduled payments early, my Finance Charge will be reduced (less). If I make my scheduled payments late, my Finance Charge will increase."
(23) Interest on matured amount. The model provision for interest on any matured amount at any rate permitted by law reads: "If I don't pay all I owe when the final payment becomes due, or I do not pay all I owe if you demand payment in full under this contract, I will pay an interest charge on the amount that is still unpaid. That interest charge will be the higher rate of 18% per year or the maximum rate allowed by law, if that rate is higher. The interest charge for this amount will begin the day after the final payment becomes due." In this provision, the maximum rate allowed by law refers to the rate found in Texas Finance Code, Chapter 303.
(24) Balloon payments. If the contract has a balloon payment, the creditor must include a provision in the contract that allows the buyer to refinance the balloon payment over time. The provision must comply with Texas Finance Code, §348.123. The model provision for defining the balloon payment reads: "A balloon payment is a scheduled payment more than twice the amount of the average of my scheduled payments, other than the downpayment, that are due before the balloon payment."
(A) Paying the balloon payment. If a retail installment contract contains a balloon payment that is the final payment, the contract must also provide the right for the retail buyer to pay the balloon payment. The model provision for paying the amount of the final scheduled balloon payment reads: "I can pay all I owe when the balloon payment is due and keep my motor vehicle."
(B) Balloon payment alternatives. If the retail installment contract contains the right for a retail buyer to refinance a balloon installment, the contract provision to refinance the installment must comply with either clause (i) or (ii) of this subparagraph. A contract under clause (ii) of this subparagraph must also contain the right of the retail buyer to sell the motor vehicle back to the holder or the retail seller.
(i) The model clause to describe a buyer's right to refinance a balloon installment under Texas Finance Code, §348.123(a), when applicable reads: "If I buy the motor vehicle primarily for personal, family, or household use, I can enter into a new written agreement to refinance the balloon payment when due without a refinancing fee. If I refinance the balloon payment, my periodic payments will not be larger or more often than the payments in this contract. The annual percentage rate in the new agreement will not be more than the Annual Percentage Rate in this contract. This provision does not apply if my Payment Schedule has been adjusted to my seasonal or irregular income."
(ii) If the contract contains a balloon payment and the seller intends Texas Finance Code, §348.123(b)(5) to apply to the contract:
(I) Special right to refinance balloon payment under Texas Finance Code, §348.123(b)(5)(B)(iii). The model clause reads: "I can enter into a new agreement to refinance my last installment if I am not in default. I can refinance at an annual percentage rate up to 5 points greater than the Annual Percentage Rate shown in this contract. The rate will not be more than applicable law allows. The new agreement will allow me to refinance the last installment for at least 24 months with equal monthly payments. You and I can also agree to refinance the last installment over another time period or on a different payment schedule."
(II) Repurchase option. If the contract includes a balloon payment, the creditor must draft a provision addressing the repurchase option.
(25) Agreement to keep motor vehicle insured. The model clause regarding agreement to keep the motor vehicle insured reads: "I agree to have physical damage insurance covering loss or damage to the motor vehicle for the term of this contract. The insurance must cover your interest in the vehicle." The creditor may include the following optional provision: "The insurance must include collision coverage and either comprehensive or fire, theft, and combined additional coverage."
(26) Creditor's right to purchase required insurance if buyer fails to keep motor vehicle insured. The model clause regarding agreement to allow the creditor to purchase required insurance if the buyer fails to keep the motor vehicle insured reads: "If I fail to give you proof that I have insurance, you may buy physical damage insurance. You may buy insurance that covers my interest and your interest in the motor vehicle, or you may buy insurance that covers your interest only. I will pay the premium for the insurance and a finance charge at the contract rate. If you obtain collateral protection insurance, you will mail notice to my last known address shown in your file."
(27) Physical damage insurance proceeds. The model clause regarding physical damage insurance proceeds reads: "I must use physical damage insurance proceeds to repair the motor vehicle, unless you agree otherwise in writing. However, if the motor vehicle is a total loss, I must use the insurance proceeds to pay what I owe you. I agree that you can use any proceeds from insurance to repair the motor vehicle, or you may reduce what I owe under this contract. If you apply insurance proceeds to the amount I owe, they will be applied to my payments in the reverse order of when they are due. If my insurance on the motor vehicle or credit insurance doesn't pay all I owe, I must pay what is still owed. Once all amounts owed under this contract are paid, any remaining proceeds will be paid to me."
(28) 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.
(A) The model clause for contracts using the true daily earnings method reads: "If you get a refund on insurance or service contracts, or other contracts included in the cash price, you will subtract it from what I owe. Once all amounts owed under this contract are paid, any remaining refunds will be paid to me."
(B) For contracts using the scheduled installment earnings or sum of the periodic balances methods, the creditor may substitute the following clause: "If you get a refund of insurance or service contract charges, you will apply it and the unearned finance charges on it in the reverse order of the payments to as many of my payments as it will cover. Once all amounts owed under this contract are paid, any remaining refunds will be paid to me."
(29) Application of credits. The model clause regarding application of credits reads: "Any credit that reduces my debt will apply to my payments in the reverse order of when they are due, unless you decide to apply it to another part of my debt. The amount of the credit and all finance charge or interest on the credit will be applied to my payments in the reverse order of my payments."
(30) Transfer of rights. 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 as provided by Texas Finance Code, §348.301. The model clause regarding transfer of rights reads: "You may transfer this contract to another person. That person will then have all your rights, privileges, and remedies."
(31) Grant of security interest in collateral. The model clause regarding a description of a security interest granted in a typical motor vehicle installment sale reads:
Figure: 7 TAC §84.209(31) (No change.)
(32) Agreements regarding use and transfer of motor vehicle. The contract may contain a provision prohibiting a buyer from transferring any interest in the motor vehicle without the creditor's written permission, requiring the buyer to notify the seller of change of address, or prohibiting the removal of the motor vehicle from Texas. The transfer fee limitation establishes the maximum fee that a creditor could contract for, charge, or collect for transferring the buyer's equity in the motor vehicle to another party. If desired, a creditor may amend the model provision to reflect a lower transfer fee amount. The model clause concerning agreements regarding the use and transfer of the motor vehicle reads: "I will not sell or transfer the motor vehicle without your written permission. If I do sell or transfer the motor vehicle, this will not release me from my obligations under this contract, and you may charge me a transfer of equity fee of $25 ($50 for a heavy commercial vehicle). I will promptly tell you in writing if I change my address or the address where I keep the motor vehicle. I will not remove the motor vehicle (Optional: motor vehicle or other collateral) from Texas for more than 30 days unless I first get your written permission."
(33) Care of motor vehicle. The contract may obligate the buyer to keep the motor vehicle free of liens and encumbrances, require the buyer to keep the motor vehicle in good working order and repair, or prohibit the buyer from allowing the motor vehicle to be exposed to seizure, confiscation, or other involuntary transfer. The model clause regarding care of the motor vehicle reads: "I agree to keep the motor vehicle free from all liens and claims except those that secure this contract. I will timely pay all taxes, fines, or charges pertaining to the motor vehicle. I will keep the motor vehicle in good repair. I will not allow the motor vehicle to be seized or placed in jeopardy, or use it illegally. I must pay all I owe even if the motor vehicle is lost, damaged or destroyed. If a third party takes a lien or claim against or possession of the motor vehicle, you may pay the third party any cost required to free the motor vehicle from all liens or claims. You may immediately demand that I pay you the amount paid to the third party for the motor vehicle. If I do not pay this amount, you may repossess the motor vehicle and add that amount to the amount I owe. If you do not repossess the motor vehicle, you may still demand that I pay you, but you cannot compute a finance charge on this amount."
(34) Default rights and repossession provisions. This paragraph details agreements allowing acceleration of the buyer's obligation upon the buyer's default or upon the creditor's determination of insecurity as permitted by Texas Business and Commerce Code, §1.309. The following provisions are samples of model clauses regarding some of the default rights and remedies of a creditor in a typical motor vehicle installment sale transaction:
(A) Acceleration and default. The model clause regarding acceleration and default reads:
Figure: 7 TAC §84.209(34)(A) (No change.)
(B) Late charge. The model clause regarding late charge reads: "I will pay you a late charge as agreed to in this contract when it accrues."
(C) Repossession. At the creditor's option, a creditor may choose one of the following model provisions pertaining to repossession. The model clauses regarding repossession read:
(i) "If I default, you may repossess the motor vehicle from me if you do so peacefully. If any personal items are in the motor vehicle, you can store them for me and give me written notice at my last address shown on your records within 15 days of discovering that you have my personal items. If I do not ask for these items back within 31 days from the day you mail or deliver the notice to me, you may dispose of them as applicable law allows. Any accessory, equipment, or replacement part stays with the motor vehicle." In this provision, the term "peacefully" is intended to have the same meaning as "without breaching the peace," as determined by the Texas courts, and as found under clause (ii) of this subparagraph. Or
(ii) "If I default, you may repossess the motor vehicle from me if you do so without breaching the peace. If any personal items are in the motor vehicle, you can store them for me and give me written notice at my last address shown on your records within 15 days of discovering that you have my personal items. If I do not ask for these items back within 31 days from the day you mail or deliver the notice to me, you may dispose of them as applicable law allows. Any accessory, equipment, or replacement part stays with the motor vehicle."
(D) Buyer's right to redeem. The model clause regarding buyer's right to redeem reads: "If you take my motor vehicle, you will tell me how much I have to pay to get it back. If I do not pay you to get the motor vehicle back, you can sell it or take other action allowed by law. My right to redeem ends when the motor vehicle is sold or you have entered into a contract for sale or accepted the collateral as full or partial satisfaction of a contract."
(E) Disposition of motor vehicle. The model clause regarding disposition of the motor vehicle reads: "If I don't pay you to get the motor vehicle back, you can sell it or take other action allowed by law. You will send me notice at least 10 days before you sell it. You can use the money you get from selling it to pay allowed expenses and to reduce the amount I owe. Allowed expenses are expenses you pay as a direct result of taking the motor vehicle, holding it, preparing it for sale, and selling it. If any money is left, you will pay it to me unless you must pay it to someone else. If the money from the sale is not enough to pay all I owe, I must pay the rest of what I owe you plus interest. If you take or sell the motor vehicle, I will give you the certificate of title and any other document required by state law to record transfer of title."
(F) Collection costs. The model clause regarding collection costs reads: "If you hire an attorney who is not your employee to enforce this contract, I will pay reasonable attorney's fees and court costs as the applicable law allows."
(G) Cancellation of optional insurance or service contracts. The model clause regarding cancellation of optional insurance or service contracts reads: "This contract may contain charges for insurance or service contracts or for services included in the cash price. If I default, I agree that you can claim benefits under these contracts to the extent allowable, and terminate them to obtain refunds of unearned charges to reduce what I owe or repair the motor vehicle."
(35) Acceleration, waiver of notice of intent to accelerate, and notice of acceleration. A model clause regarding the holder's right to accelerate maturity of the contract and to waive the buyer's or co-buyer's common law right to notice of intent to accelerate, notice of acceleration, or both reads: "If I default, or you believe in good faith that I am not going to keep any of my promises, you can demand that I immediately pay all that I owe. You don't have to give me notice that you are demanding or intend to demand immediate payment of all that I owe."
(36) Refund upon acceleration. For contracts using the sum of the periodic balances or scheduled installment earnings methods, the model clause regarding the buyer's right to a finance charge refund upon acceleration of the contract reads: "If you demand that I pay you all that I owe, you will give me a credit of part of the Finance Charge as if I had prepaid in full."
(37) Integration and severability.
(A) The contract may include an integration clause indicating that the parties to the contract intend it to be the final written expression of their agreement. The model clause regarding integration reads: "This contract contains the entire agreement between you and me relating to the sale and financing of the motor vehicle."
(B) The contract may also 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 model clause regarding severability reads: "If any part of this contract is not valid, all other parts stay valid."
(38) No waiver and limitations on creditor's rights and usury savings.
(A) A model clause to prevent a creditor's delay in enforcing rights under the contract from affecting a waiver of those rights reads: "If you don't enforce your rights every time, you can still enforce them later."
(B) A provision establishing limitations on the creditor's rights reads: "You will exercise all of your rights in a lawful way."
(C) The model clause regarding usury savings reads: "I don't have to pay finance charge or other amounts that are more than the law allows. This provision prevails over all other parts of this contract and over all your other acts."
(39) Applicable law. A model clause to establish the law that will apply to the contract reads: "Federal law and Texas law apply to this contract."
(40) Warranty disclaimer. The disclaimer of express and implied warranties should be set out from the surrounding text so that the disclosure is conspicuous. A disclaimer of express and implied warranties, such as the following, is permitted by Texas Business and Commerce Code, Article 2, Subchapter C, and reads: "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 motor 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 motor vehicle that the motor vehicle manufacturer may provide."
(41) Preservation of consumer's claims and defenses notice. This notice only applies if the motor vehicle financed in the contract was purchased for personal, family, or household use. The preservation of consumer's claims and defenses notice disclosure should be set out from the surrounding text so that the disclosure is in all capitals, boldfaced and in at least 10-point type. The preservation of consumer's claims and defenses notice disclosure, as required by the Federal Trade Commission's preservation of consumer's claims and defenses notice, 16 C.F.R. §§433.1 et seq. , reads: "NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER. This provision applies to this contract only if the motor vehicle financed in the contract was purchased for personal, family, or household use."
(42) Used car buyer's guide. The used car buyer's guide disclosure should be set out from the surrounding text so that the disclosure is conspicuous. The disclosure should be prefaced by the words "In this box only, the word "you" refers to the Buyer." The used car buyer's guide disclosure, as required by the Federal Trade Commission's Used Car Regulation, 16 C.F.R. §§455.1 et seq. , reads:
(A) "Used Car Buyer's Guide. The information you see on the window form for this vehicle is part of this contract. Information on the window form overrides any contrary provisions in the contract of sale."
(B) Spanish Translation: "Guía para compradors de vehículos usados. La información que ve en el formulario de la ventanilla para este vehículo forma parte del presente contrato. La información del formulario de la ventanilla deja sin efecto toda disposición en contrario contenida en el contrato de venta."
(43) Negotiability and assignment. The disclosure of the negotiability of the contract should be placed on the front side of the contract and may read:
(A) "The Annual Percentage Rate may be negotiated with the Seller. The Seller may assign this contract and retain its right to receive a part of the Finance Charge";
(B) "The rates of this contract are negotiable. The seller may assign or otherwise sell this contract and receive a discount or other payment for the difference between the rate, charges, or balance"; or
(C) "A customer may obtain their own financing. The finance charge may be negotiable. The dealership may assign the retail installment contract. There is no duty to disclose the terms for the sale of this contract (e.g., price paid to retail seller to purchase retail installment contract)."
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on February 15, 2008.
TRD-200800961
Leslie L. Pettijohn
Commissioner
Office of Consumer Credit Commissioner
Effective date: March 6, 2008
Proposal publication date: December 28, 2007
For further information, please call: (512) 936-7640
Subchapter F. COSTS AND FEES
The Finance Commission of Texas (commission) adopts new 7 TAC, §89.602, concerning Fee for Filing Release, and §89.603, concerning Fee for Payoff Statement or for Information on Current Balance Owed, regarding property tax lenders. The agency plans to consider a proposed rule regarding attorney's fees for a future meeting of the commission. Section 89.602 is adopted with changes and §89.603 is adopted without changes to the proposal published in the December 28, 2007, issue of the Texas Register (32 TexReg 9901).
As a note of background regarding these rules, the property tax lender industry is a fairly young industry (approximately 10-12 years old) and an industry newly regulated by the agency. The agency decided that it would be in the best interest of consumers as well as the industry to gather information from interested stakeholders in order to prepare an informed and well-balanced proposal for the commission on the issue of fees. Accordingly, the agency distributed an Advance Notice of Proposed Rulemaking (ANPR) and received written comments from several interested stakeholders. Subsequently, the agency held a stakeholders meeting where several stakeholders provided verbal testimony and elaborated on their written comments to the ANPR.
Upon review of all the thorough and insightful commentary provided, the agency also distributed a proposed rule draft to the growing list of stakeholders for specific early or pre-comment prior to the presentation of the rules to the commission. The agency carefully evaluated the stakeholders' comments and has incorporated numerous recommendations offered by the stakeholders. The agency believes that this early participation of stakeholders in the rulemaking process has greatly benefited the resulting adoption.
The commission received one written comment on the proposal from the Texas Property Tax Lenders Association (TPTLA). The comment is generally unfavorable and requests that the allowable fees contained in both rules be increased. The specific comments regarding each rule are addressed following the individual purpose of the provision at issue.
In general, the purpose of the new rules is to establish for property tax lenders post-closing fees as required under Senate Bill 1520 (SB 1520), as enacted by the 80th Texas Legislature. The individual purposes of each rule are provided in the following paragraphs.
Section 89.602 provides the fees that may be charged by a property tax lender when filing a release of lien. Subsection (a) outlines the allowable fee components, which include the actual costs charged by the county clerk for filing the release, the actual costs of an outside attorney for preparing the release, and an administrative fee not to exceed $35 for services related to filing provided by the property tax lender.
With regard to §89.602(a)(3), the commenter requests that the administrative fee be increased to $65 in order to cover the property tax lender's costs of delivering documents to the county clerk and "to each tax office that assesses the property-as many as three tax offices per property. Copies typically are sent by either certified mail or courier, so that the transferees can track the deliveries." The commenter believes that the proposed "amount is insufficient, as it will not cover the actual costs of complying with the statute."
While the commission recognizes that the proposed amount of $25 was not adequate to cover multiple, tracked mailings, the commission believes that an increase of $10 should be more than adequate, encompassing two certified letters. The commenter mentions delivery by "courier" and the agency is aware that some property tax lenders also use commercial overnight delivery services. The commission, however, believes that utilizing U.S. certified mail is a less expensive and equally reliable method to deliver the release documents. Moreover, the agency is aware of further cost savings available to property tax lenders who use certified mail: software programs that print return receipts ("green cards") and electronic return receipts costing less than the cards. Property tax lenders may elect to use more expensive delivery methods if they wish, but the allowable administrative fee is intended to cover the necessary and most economical delivery options. Therefore, the commission agrees to increase the allowable administrative fee to $35, as opposed to the higher amount suggested by the commenter.
Subsection (b) of §89.602 states that the administrative fee contained in §89.602(a)(3) may be limited by other law, in order to provide notice to property tax lenders that this fee should be reviewed in conjunction with other state or federal laws applicable to the particular transaction.
Section 89.602(c) provides for a maximum aggregate fee of $110 that may be charged by a property tax lender for filing a release. The agency believes that this maximum fee can accommodate the filing fees of Texas county clerks (e.g., fees for filing a release in Travis or Williamson county range from $16 to $21), a reasonable attorney's fee for preparing a simple release form, and up to $35 for the mailing, delivery, and other related filing costs of the property tax lender.
Regarding §89.602(c), the commenter requests that the maximum aggregate fee be increased to $125. The commenter expresses the concern that after subtracting the typical costs involved in filing a release and delivering the copies, the proposed maximum fee is then insufficient to cover outside attorney's fees and administrative costs. As with the administrative fee, the commission acknowledges that the proposed aggregate fee of $75 should be increased, in part to account for the $10 increase already added to the administrative fee. In order to account for further out-of-pocket attorney's fees, the commission has decided that an additional increase of $25 to the maximum fee is warranted.
The commission believes that the resulting $110 maximum aggregate fee (proposed $75 + 10 + 25 = $110) will serve to provide property tax lenders with a "reasonable fee" for filing release of liens, as required by SB 1520. The commission has increased the allowance for out-of-pocket attorney's fees and increased the administrative fee in acknowledgment of the necessary communication costs required by the statute. The commenter contends that the rule as proposed would require the industry to lose money in order to comply with the requirements related to releasing liens for property tax loans. The contemplated increases will assure that the industry will not have to suffer losses in order to comply with the legal requirements to file release of liens. Thus, the commission agrees to increase the allowable maximum aggregate fee to $110, as opposed to the higher amount suggested by the commenter.
Section 89.603 describes the fees that a property tax lender may charge in conjunction with providing a payoff statement or information regarding the current balance owed by the property owner. The statutory prohibition on charging a fee for the initial payoff statement is echoed in subsection (a).
In §89.603(b), a $10 fee is prescribed for each additional payoff statement provided by a property tax lender after an initial payoff statement has been provided. The $10 amount is modeled after the payoff statement directive issued by the Department of Housing and Urban Development (Housing and Urban Development Handbook 4330.1 REV-5, Ch. 4, Directive No.: 4330.1, "Administration of Insured Home Loans").
Concerning §89.603(b), the commenter states: "The TPTLA requests that the Commission consider a graduated fee scale for parties requesting payoff statements or information on current balances owed." After the initial free payoff statement (charge prohibited by statute), the TPTLA recommends a graduated scale as follows: $10.00 for the second payoff statement, $25.00 for the third, and "$50.00 for each payoff statement provided thereafter. This graduated scale would encourage communication amongst those parties seeking the information and compensate the property tax lender for the resources they must expend to comply with the multiple requests."
The commission acknowledges that some requests for a payoff statement are abusive. The statute provides for a "reasonable fee" to be paid to property tax lenders for providing additional payoff statements. The statute does not provide that property tax lenders be paid an unreasonable fee if the number of payoff statement requests is excessive. The commission believes that the analysis must be focused on the reasonableness of the fee in relation to the cost involved in providing the information. Accordingly, the commission declines to adopt a graduated scale for fees to provide additional payoff statements and maintains that the fee as proposed is reasonable under SB 1520.
Additionally, the commission disagrees with the commenter's analysis of the effect of the two regulations on small businesses. Initially, the commenter does not provide any analysis of how or why the fee amount proposed for providing additional payoff statements is damaging to small businesses. The commenter has merely placed statements before the commission that suggest a small business would be adversely affected. Simply stating that more money could be collected by charging the commenter's recommended fee is not sufficient to show an adverse effect on small businesses. Secondly, the commenter does not present any support for the economic information upon which the commenter bases its contentions. Finally, the increased fees associated with filing the release of liens serve to eliminate any potential negative effect on small businesses claimed by the commenter. Therefore, the commission maintains that the rules as adopted will have no adverse economic effect on small businesses.
These new sections are adopted under Texas Tax Code, §32.06(a-4), which authorizes the Finance Commission to adopt rules to establish reasonable fees for property tax lenders.
The statutory provisions affected by the adopted new sections are contained in Texas Tax Code, §32.06 and §32.065, and Texas Finance Code, Chapter 351, Property Tax Lenders, known as the "Property Tax Lender License Act" (Acts 2007, 80th Leg., ch. 1220, eff. Sept. 1, 2007).
§89.602.Fee for Filing Release.
(a) Allowable fee components. Under Texas Tax Code, §32.06(b), a property tax lender may charge a property owner the following for filing the release:
(1) the actual cost charged by the county clerk for filing the release;
(2) the actual cost of attorney's fees paid to an outside attorney who is not an employee of the property tax lender for preparing the release; and
(3) an administrative fee not to exceed $35 for services related to filing provided by the property tax lender (e.g., costs to mail or deliver release to county clerk or taxing unit(s)).
(b) Potential limitations on administrative fee. The administrative fee provided by subsection (a)(3) of this section may be limited by other law.
(c) Maximum aggregate fee. The maximum aggregate fee for all of the items provided in subsection (a) of this section shall not exceed $110.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on February 15, 2008.
TRD-200800962
Leslie L. Pettijohn
Commissioner
Office of Consumer Credit Commissioner
Effective date: March 6, 2008
Proposal publication date: December 28, 2007
For further information, please call: (512) 936-7640