Proposed Rules Title 7

TITLE 7. BANKING AND SECURITIES

Part 2. TEXAS DEPARTMENT OF BANKING

Chapter 15. CORPORATE ACTIVITIES

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes new §15.9, concerning corporate filings after January 1, 2010; §15.10, concerning protested applications, §15.11, concerning hearings on applications; and §15.12, concerning waiver of requirements. The commission also proposes to amend §15.6, concerning applications for bank charter: notices to applicants; application processing times; appeals; and §15.8, concerning corporate filings. Finally, the commission proposes to repeal §15.9, concerning waiver of requirements, and §15.112, concerning waiver of requirements.

The new and amended rules are proposed to implement legislative changes resulting from the passage of HB 1962 and HB 2754, 80th Texas Legislature. The new and amended rules concern the method for protesting bank charter applications, the Banking Commissioner's (commissioner) discretion to convene a hearing in regard to bank charter applications, and the filing of corporate documents under the Texas Business Corporations Act (TBCA) or the Texas Business Organizations Code (TBOC).

Chapter 15, Subchapter A (§§15.1 - 15.9), implements Finance Code §§32.001 - 32.008 by setting out details regarding filing fees, corporate filings, and processing applications for bank charters.

The proposed amendment to §15.6 arises from that part of HB 2754 which was codified as Finance Code §32.005. Section 15.6(b) specifies that the department will notify the applicant of any protest. Section 15.6(c) is amended to clarify that the commissioner may convene a hearing whether or not a protest is filed, and that if the commissioner does so, the 180 day deadline for acting on an application does not apply. Section 15.6(c) is also amended to refer the reader to new §15.10, which governs procedures for protests.

The proposed amendment to §15.8(a) arises from the legislature's enactment of the Texas Business Organizations Code (TBOC) in 2003. The TBOC reorganized corporate structure and became effective January 1, 2006. In 2007, the legislature passed HB 1962, part of which is codified as Finance Code §32.008. Finance Code §32.008(a) makes the TBOC generally applicable to banking associations. Finance Code §32.008(d) states that, until January 1, 2010, a bank organized before January 1, 2006 can choose to be governed by the former law, the Texas Business Corporations Act (TBCA). Therefore, §15.8(a) is amended to clarify that, until January 1, 2010, banks organized before January 1, 2006 may file corporate documents proper under the TBCA.

The proposed amendment to §15.8(d) is authorized by Finance Code §201.103 and clarifies that a bank may file a statement with the secretary of state regarding the appointment, change or cancellation of an appointment of an agent to receive process.

Existing §15.9, concerning waiver of requirements, is proposed for repeal to make way for new §15.9. The content of existing §15.9 will be moved to new §15.12.

Proposed new §15.9, like §15.8, arises from the legislature's enactment of the TBOC in 2003. As stated above, Finance Code §32.008(a) makes the TBOC generally applicable to banking associations. After January 1, 2010, all state banks will be governed by the TBOC. Therefore, §15.9 follows the format of §15.8 and specifies the type of filings a state bank may make in compliance with the TBOC and whether those filings should be made with the secretary of state or the commissioner.

Proposed new §15.10 details the procedures for handling protests of applications of new bank charters. These procedures were revised by the legislature in HB 2754 and are codified as Finance Code §32.005(a) and (b).

Proposed new §15.11 details procedures for requesting hearings, clarifies that the commissioner has discretion whether or not to convene a hearing, and states how a hearing shall be conducted. These procedures were revised by the legislature in HB 2754 and are codified as Finance Code §32.005(c).

Proposed new §15.12 was formerly numbered §15.9. The text has been moved to remain the last section of Subchapter A for better organization.

Existing §15.112, concerning waiver of requirements is proposed for repeal because proposed new §15.12 covers the subject matter of existing §15.112 and therefore existing §15.112 is unnecessary.

Lynda Drake, Director of Corporate Activities, Texas Department of Banking, has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rules.

Ms. Drake also has determined that, for each year of the first five years the rules as proposed are in effect, the public benefit anticipated as a result of enforcing the rules is that the statutory procedures for protesting bank charter applications are clearly set out in the rules, the rules clearly explain the statutory grant of discretion to the commissioner regarding whether or not to convene a hearing on bank charter applications, and the rules specify what corporate filings to make before and after January 1, 2010.

For each year of the first five years that the rule will be in effect, there will be no economic costs to persons required to comply with the rule as proposed.

There will be no adverse economic effect on small businesses or micro-businesses. There will be no difference in the cost of compliance for small businesses as compared to large businesses.

To be considered, comments on the proposed new sections, repeals, and amendments must be submitted no later than 5:00 p.m. on the 30th day after the date of publication of this notice. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@banking.state.tx.us.

Subchapter A. FEES AND OTHER PROVISIONS OF GENERAL APPLICABILITY

7 TAC §§15.6, 15.8 - 15.12

The amendments and new sections are proposed under Finance Code §11.301, which provides that the commission may adopt banking rules as provided by Finance Code §31.003, under Finance Code §31.003(a), which provides that the commission may adopt rules to accomplish the purposes of the banking statutes, including rules necessary or reasonable to implement and clarify banking statutes and to facilitate the fair hearing and adjudication of matters before the commissioner, and under Finance Code §32.008, which authorizes the commission to adopt rules to limit or refine the applicability of general corporate laws to a state bank or to alter or supplement the procedures and requirements of those laws applicable to actions taken under chapter 32 of the Finance Code and permitting a state bank to elect to be governed by the provisions of the TBOC to the extent not inconsistent with Subtitle A of Title 3 of the Finance Code or the proper business of a state bank.

Finance Code, §32.005 and §32.008 are affected by the proposed new and amended sections.

§15.6.Applications for Bank Charter: Notices to Applicants; Application Processing Times; Appeals.

(a) (No change.)

(b) Notice to applicant. The banking commissioner shall issue a written notice as required by §15.4 of this title (relating to Required Information and Abandoned Filings) informing the applicant either that all filing fees have been paid and the application is complete and accepted for filing, or that the application is deficient and specific additional information is required. If a protest is timely filed, the department will notify the applicant of the protest.

(c) Action on applications. If an application is not protested and if the banking commissioner has not ordered a hearing, the [~~The~~] banking commissioner shall approve or deny an application for a state bank charter or an application for conversion of a financial institution to a state bank on or before the 180th day after the date the application is accepted for filing, unless extended by written agreement between the applicant and the banking commissioner[; provided that, if the application is protested, the banking commissioner shall convene a hearing on or before the 90th day after the date the protest is received and shall render a decision in accordance with Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)]. If the application is protested, the application will be acted on in accordance with §15.10 of this title (relating to Protested Applications).

(d) - (e) (No change.)

§15.8.Corporate Filings before January 1, 2010 .

(a) This section is applicable to all state banks organized before January 1, 2006, unless the state bank has elected to be governed by the provisions of the Texas Business Organizations Code to the extent not inconsistent with Title 3, Subtitle A of the Texas Finance Code. State banks that elect to be governed by the provisions of the Texas Business Organizations Code shall comply with the provisions of §15.9 of this title (relating to Corporate Filings after January 1, 2010).

(b) [~~(a)~~] In accordance with the applicable provisions of the Finance Code, Title 3, Subtitle A or G, the following corporate forms regarding a state bank, along with the applicable filing fees, must be filed with the banking commissioner:

(1) articles of correction as authorized by Texas Civil Statutes, Article 1302-7.02;

(2) articles of amendment under the Finance Code, §32.101;

(3) restated articles of association under the Finance Code, §32.101;

(4) restated articles of association with amendments under the Finance Code, §32.101;

(5) articles of merger under the Finance Code, §32.301 et seq, as supplemented by the Texas Business Corporation Act (TBCA), Article 5.04;

(6) articles of share exchange under TBCA, Article 5.02;

(7) statements regarding delayed effective condition under TBCA, Article 10.03;

(8) establishment of a series of shares by the board of directors under the Finance Code, §32.102;

(9) statement regarding a restriction on the transfer of shares under TBCA, Article 2.22(E); and

(10) abandonment of a merger or share exchange prior to its effective date under TBCA, Article 5.03(I).

(c) [~~(b)~~] For purposes of corporate filings with the banking commissioner under subsection (b) [~~(a)~~ ] of this section, state banks may utilize a modified version of forms promulgated by the secretary of state if the banking commissioner or the finance commission has not promulgated an appropriate corporate form; however, the banking commissioner may require the submission of additional information. The modified corporate forms must:

(1) specifically reference the applicable provisions of the Finance Code;

(2) change references from "corporation" to "association"; and

(3) change the references to "stated capital" and similar terms defined in the TBCA to an appropriate reference to terms defined in the Finance Code.

(d) [~~(c)~~] In accordance with the applicable provisions of the TBCA, a state bank may file the following corporate forms with the secretary of state as instructed in the TBCA:

(1) name registrations under TBCA, Article 2.07; [~~and~~]

(2) assumed name certificates under TBCA, Article 2.05;[.]

(3) a statement appointing an agent authorized to receive service of process under Finance Code §201.103;

(4) an amendment to a statement appointing an agent to receive service of process under Finance Code §201.103; and

(5) a cancellation of the appointment of an agent to receive service of process under Finance Code §201.103.

(e) [~~(d)~~] The following corporate forms are inapplicable to state banks and are not required to be filed by a state bank with either the secretary of state or the banking commissioner:

(1) changes of registered office or agent under TBCA, Article 2.10 or Article 2.10-1;

(2) name reservations under TBCA, Article 2.06;

(3) applications for reinstatement under TBCA, Article 10.01;

(4) articles of dissolution under TBCA, Article 6.06; and

(5) revocation of dissolution under TBCA, Article 6.05.

§15.9.Corporate Filings after January 1, 2010.

(a) This section is applicable to:

(1) all state banks organized after January 1, 2006;

(2) all state banks organized before January 1, 2006 that have elected to be governed by the provisions of the Texas Business Organizations Code to the extent not inconsistent with Title 3, Subtitle A of the Texas Finance Code; and

(3) effective, January 1, 2010, all state banks no matter what their date of organization.

(b) In accordance with the applicable provisions of the Finance Code, Title 3, Subtitle A or G, the following corporate forms regarding a state bank, along with the applicable filing fees, must be filed with the banking commissioner:

(1) a certificate of correction as authorized by Texas Business Organizations Code (TBOC), §4.101;

(2) articles of amendment under the Finance Code, §32.101;

(3) restated, or, amended and restated, articles of association under the Finance Code, §32.101, and TBOC §3.059 and §21.052;

(4) articles of merger under the Finance Code, §32.301 et seq, as supplemented by the TBOC §10.151;

(5) certificate of exchange under TBOC, §10.151;

(6) statement of event or fact pursuant to TBOC §4.055;

(7) establishment of a series of shares by the board of directors under the Finance Code, §32.102, as supplemented by TBOC §21.155 and §21.156;

(8) statement regarding a restriction on the transfer of shares under TBOC, §21.212; and

(9) abandonment of a merger or interest exchange prior to its effective date under TBOC §4.057.

(c) For purposes of corporate filings with the banking commissioner under subsection (b) of this section, state banks may utilize a modified version of forms promulgated by the secretary of state if the banking commissioner or the finance commission has not promulgated an appropriate corporate form; however, the banking commissioner may require the submission of additional information. The modified corporate forms must:

(1) specifically reference the applicable provisions of the Finance Code;

(2) change references from "corporation" to "association"; and

(3) change the references to "stated capital" and similar terms defined in the TBOC to an appropriate reference to terms defined in the Finance Code.

(d) In accordance with the applicable provisions of the Finance Code and the TBOC, a state bank may file the following corporate forms with the secretary of state as instructed in the Finance Code or the TBOC:

(1) name registrations under TBOC §§5.151 - 5.155;

(2) assumed name certificates under TBOC §5.051;

(3) a statement appointing an agent authorized to receive service of process under Finance Code §201.103;

(4) an amendment to a statement appointing an agent to receive service of process under Finance Code §201.103; and

(5) a cancellation of the appointment of an agent to receive service of process under Finance Code §201.103.

(e) The following corporate forms are inapplicable to state banks and are not required to be filed by a state bank with either the secretary of state or the banking commissioner:

(1) changes of registered office or agent under TBOC §5.202 or §5.203;

(2) name reservations under TBOC §5.101;

(3) certificate of termination under TBOC §11.101; and

(4) certificate of reinstatement under TBOC §11.202.

§15.10.Protested Applications.

(a) A protest of a charter application must be received by the department before the 15th day after the date the organizers publish notice and must be accompanied by any fee required by §15.5(b) of this title (relating to Public Notice). If the protest is untimely, the department will return all fees and deposits to the protesting party. If the protest is timely, the department shall notify the applicant of the protest and mail or deliver a complete copy of the nonconfidential sections of the charter application to the protesting party before the 15th day after the later of the date of receipt of the protest or receipt of the charter application.

(b) A protesting party must file a detailed protest responding to each contested statement in the nonconfidential portion of the application not later than the 20th day after the date the protesting party receives the application from the department. The protesting party must relate each statement and response in his protest to the standards for approval set forth in Finance Code §32.003(b).

(c) The applicant must file a written reply to the protesting party's detailed response on or before the 10th day after the date the response is filed.

(d) The protesting party's response and the applicant's reply must be in the form and must be served as required by Finance Code §32.005(b). Any comment received by the department and any reply of the applicant to the comment shall be made available to the protesting party.

§15.11.Hearings on Applications.

(a) The banking commissioner may not be compelled to hold a hearing before granting or denying the charter application. The banking commissioner may grant a hearing at the request of an applicant or a protesting party. The banking commissioner may order a hearing without any party having requested one.

(b) A party requesting a hearing must indicate with specificity the issues involved that cannot be determined on the basis of the record complied under §15.10(b) - (d) of this title (relating to Protested Applications) and why the issues cannot be determined.

(c) If the banking commissioner sets a hearing, the banking commissioner shall conduct a public hearing and one or more prehearing conferences as the banking commissioner considers advisable and consistent with applicable law. The banking commissioner shall also allow the parties to undertake such discovery as the banking commissioner considers advisable and consistent with applicable law, except that the banking commissioner may not permit discovery of confidential information in the charter application or the investigation report.

§15.12.Waiver of Requirements.

The banking commissioner in the exercise of discretion may waive or modify any requirement imposed by this chapter, unless specifically required by statute.

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 April 18, 2008.

TRD-200802037

A. Kaylene Ray

General Counsel

Texas Department of Banking

Proposed date of adoption: June 20, 2008

For further information, please call: (512) 475-1300

7 TAC §15.9

(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 Texas Department of Banking or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The repeal of §15.9 is proposed under Finance Code §11.301, which provides that the commission may adopt banking rules as provided by Finance Code §31.003, under Finance Code §31.003(a), which provides that the commission may adopt rules to accomplish the purposes of the banking statutes, including rules necessary or reasonable to implement and clarify banking statutes and to facilitate the fair hearing and adjudication of matters before the commissioner, and under Finance Code §32.008, which authorizes the commission to adopt rules to limit or refine the applicability of general corporate laws to a state bank or to alter or supplement the procedures and requirements of those laws applicable to actions taken under chapter 32 of the Finance Code.

Finance Code §32.005 and §32.008 are affected by the proposed repeal.

§15.9.Waiver of Requirements.

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 April 18, 2008.

TRD-200802038

A. Kaylene Ray

General Counsel

Texas Department of Banking

Proposed date of adoption: June 20, 2008

For further information, please call: (512) 475-1300

Subchapter F. APPLICATIONS FOR MERGER, CONVERSION, AND PURCHASE OR SALE OF ASSETS

7 TAC §15.112

The repeal of §15.112 is proposed under Finance Code §11.301, which provides that the commission may adopt banking rules as provided by Finance Code §31.003, under Finance Code §31.003(a), which provides that the commission may adopt rules to accomplish the purposes of the banking statutes, including rules necessary or reasonable to implement and clarify banking statutes and to facilitate the fair hearing and adjudication of matters before the commissioner, and under Finance Code §32.008, which authorizes the commission to adopt rules to limit or refine the applicability of general corporate laws to a state bank or to alter or supplement the procedures and requirements of those laws applicable to actions taken under chapter 32 of the Finance Code.

Finance Code §32.005 and §32.008 are affected by the proposed repeal.

§15.112.Waiver of Requirements.

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 April 18, 2008.

TRD-200802039

A. Kaylene Ray

General Counsel

Texas Department of Banking

Proposed date of adoption: June 20, 2008

For further information, please call: (512) 475-1300

Chapter 21. TRUST COMPANY CORPORATE ACTIVITIES

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes new §21.9, concerning corporate filings after January 1, 2010; §21.10, concerning protested applications; §21.11, concerning hearings on applications; and §21.12, concerning waiver of requirements. The commission also proposes to amend §21.6, concerning applications for trust charter: notices to applicants; application processing times; appeals; §21.8, concerning corporate filings; §21.63, concerning expedited filings; and, §21.91, concerning acquisition and retention of shares as treasury stock. Finally, the commission proposes to repeal §21.9, concerning waiver of requirements.

The new and amended rules are proposed to implement legislative changes resulting from the passage of HB 1962 and HB 2754. The new and amended rules concern the method for protesting trust charter applications, the Banking Commissioner's (commissioner) discretion to convene a hearing in regard to trust charter applications, and the filing of corporate documents under the Texas Business Corporations Act (TBCA) or the Texas Business Organizations Code (TBOC).

Chapter 21, Subchapter A (§§21.1 - 21.9), implements Finance Code §§182.001 - 182.009 by setting out details regarding filing fees, corporate filings, and processing applications for trust charters.

The proposed amendment to §21.6 arises from the part of HB 2754 which was codified as Finance Code §182.005. Section 21.6(b) specifies that the department will notify the applicant of any protest. Section 21.6(c) is amended to clarify that the commissioner may convene a hearing whether or not a protest is filed, and that if the commissioner does so, the 180 day deadline for acting on an application does not apply. Section 21.6(c) is also amended to refer the reader to new §21.10, which governs procedures for protests.

The proposed amendment to §21.8(a) arises from the legislature's enactment of the Texas Business Organizations Code (TBOC) in 2003. The TBOC reorganized corporate structure and became effective January 1, 2006. In 2007, the legislature passed HB 1962, part of which is codified as Finance Code §182.009. Finance Code §182.009(a) makes the TBOC generally applicable to trust associations. Finance Code §182.009(d) states that, until January 1, 2010, a state trust company organized before January 1, 2006 can choose to be governed by the former law, the Texas Business Corporations Act (TBCA). Therefore, §21.8(a) is amended to clarify that, until January 1, 2010, state trust companies organized before January 1, 2006 that made this election may file corporate documents in accordance with the TBCA.

The proposed amendment to §21.8(d) is authorized by Finance Code §201.103 and clarifies that a trust company may file a statement with the secretary of state regarding the appointment, change or cancellation of an appointment of an agent to receive process.

For organizational purposes, existing §21.9, concerning waiver of requirements, is proposed for repeal to make way for new §21.9. The content of existing §21.9 will be moved to new §21.12.

Proposed new §21.9, like §21.8, arises from the legislature's enactment of the TBOC in 2003. As stated above, Finance Code §182.009(a) makes the TBOC generally applicable to trust associations. After January 1, 2010, all state trust companies will be governed by the TBOC regardless of the date of their organization. Therefore, §21.9 follows the format of §21.8 and specifies the type of filings required by a state trust company to be in compliance with the TBOC and whether those filings should be made with the secretary of state or the commissioner.

Proposed new §21.10 details the procedures for handling protests of applications of new trust company charters, which were revised by the legislature in HB 2754 and which are codified as Finance Code §182.005(a) and (b).

Proposed new §21.11 details procedures for requesting hearings, clarifies that the commissioner has discretion whether or not to convene a hearing, and states how a hearing shall be conducted. These procedures were revised by the legislature in HB 2754 and are codified as Finance Code §182.005(c).

Proposed new §21.12 was formerly numbered §21.9. The text has been moved to remain the last section of Subchapter A.

The proposed amendments to §21.63 and §21.91 are to correct a typographical error and to delete a reference to a repealed rule, respectively.

Ms. Drake also has determined that, for each year of the first five years the rules as proposed are in effect, the public benefit anticipated as a result of enforcing the rules is that the statutory procedures for protesting trust charter applications are clearly set out in the rules, the rules clearly explain the statutory grant of discretion to the commissioner regarding whether or not to convene a hearing on trust charter applications, and the rules specify what corporate filings to make before and after January 1, 2010.

For each year of the first five years that the rules will be in effect, there will be no economic costs to persons required to comply with the rules as proposed.

There will be no adverse economic effect on small businesses or micro-businesses. There will be no difference in the cost of compliance for small businesses as compared to large businesses.

To be considered, comments on the proposed new sections, repeals and amendments must be submitted no later than 5:00 p.m. on the 30th day after the date of publication of this notice. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@banking.state.tx.us.

Subchapter A. FEES AND OTHER PROVISIONS OF GENERAL APPLICABILITY

7 TAC §§21.6, 21.8 - 21.12

The amendments and new sections are proposed under Finance Code, §181.003(a), which provides that the commission may adopt rules to accomplish the purposes of the Subtitle F, Trust Companies, including rules necessary or reasonable to implement and clarify Subtitle F and to facilitate the fair hearing and adjudication of matters before the commissioner, and under Finance Code §182.009, which authorizes the commission to adopt rules to alter or supplement the procedures and requirements of those laws applicable to actions taken under chapter 182 of the Finance Code and permits a state trust company to elect to be governed by the provisions of the TBOC to the extent not inconsistent with subtitle F of Title 3 of the Finance Code or the proper business of a state trust company.

Finance Code §182.005 and §182.009 are affected by the proposed new and amended sections.

§21.6.Applications for Trust Charter: Notices to Applicants; Application Processing Times; Appeals.

(a) (No change.)

(b) Notice to applicant. The banking commissioner shall issue a written notice as required by §21.4 of this title (relating to Required Information and Abandoned Filings) informing the applicant either that all filing fees have been paid and the application is complete and accepted for filing, or that the application is deficient and specific additional information is required. If a protest is timely filed, the department will notify the applicant of the protest.

(c) Action on applications. If an application is not protested and if the banking commissioner has not ordered a hearing, the [~~The~~] banking commissioner shall approve or deny an application for a trust company charter on or before the 180th day after the date the application is accepted for filing, unless extended by written agreement between the applicant and the banking commissioner. If [~~; provided that, if~~ ] the application is protested, the application will be acted on in accordance with §21.10 of this title (relating to Protested Applications) [ banking commissioner shall convene a hearing on or before the 90th day after the date the protest is received and shall render a decision in accordance with Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings)].

(d) - (e) (No change.)

§21.8.Corporate Filings before January 1, 2010 .

(a) This section is applicable to all state trust companies organized before January 1, 2006, unless the state trust company has elected to be governed by the provisions of the Texas Business Organizations Code to the extent not inconsistent with the Trust Company Act. State trust companies that elect to be governed by the provisions of the Texas Business Organizations Code shall comply with the provisions of §21.9 of this title (relating to Corporate Filings after January 1, 2010).

(b) [~~(a)~~] In accordance with the applicable provisions of the Trust Company Act, the following corporate forms regarding a trust company, along with the applicable filing fees, must be filed with the banking commissioner:

(1) articles of correction as authorized by Texas Civil Statutes, Article 1302-7.02;

(2) articles of amendment under Finance Code, §182.101;

(3) restated articles of association under the Finance Code, §182.101;

(4) restated articles of association with amendments under Finance Code, §182.101;

(5) articles of merger under Finance Code, §§182.301 et seq, as supplemented by the Texas Business Corporation Act (TBCA), Article 5.04;

(6) articles of share exchange under TBCA, Article 5.02;

(7) statements regarding delayed effective condition under TBCA, Article 10.03;

(8) establishment of a series of shares by the board of directors under Finance Code, §182.101;

(9) statement regarding a restriction on the transfer of shares under TBCA, Article 2.22(E);

(10) statement of cancellation of redeemable shares under TBCA, Article 4.10(B);

(11) statement of cancellation of treasury shares under TBCA, Article 4.11;

(12) statement regarding the reduction of capital and surplus under TBCA, Article 4.12; and

(13) abandonment of a merger or share exchange prior to its effective date under TBCA, Article 5.03(I).

(c) [~~(b)~~] For purposes of corporate filings with the banking commissioner under subsection (b) [~~(a)~~ ] of this section, trust companies may utilize a modified version of forms promulgated by the secretary of state if the banking commissioner or the finance commission has not promulgated an appropriate corporate form; however, the banking commissioner may require the submission of additional information. The modified corporate forms must:

(1) specifically reference the applicable provisions of the Trust Company Act;

(2) change references from "corporation" to "association;" and

(3) change the references to "stated capital" and similar terms defined in the TBCA to an appropriate reference to terms defined in the Trust Company Act.

(d) [~~(c)~~] In accordance with the applicable provisions of the TBCA, a trust company may file the following corporate forms with the secretary of state as instructed in the TBCA:

(1) name registrations under TBCA, Article 2.07; [~~and~~]

(2) assumed name certificates under TBCA, Article 2.05;[.]

(3) a statement appointing an agent authorized to receive service of process under Finance Code §201.103;

(4) an amendment to a statement appointing an agent to receive service of process under Finance Code §201.103; and

(5) a cancellation of the appointment of an agent to receive service of process under Finance Code §201.103.

(e) [~~(d)~~] The following corporate forms are inapplicable to trust companies and are not required to be filed by a trust company with either the secretary of state or the banking commissioner:

(1) changes of registered office or agent under TBCA, Article 2.10 or Article 2.10-1;

(2) name reservations under TBCA, Article 2.06;

(3) applications for reinstatement under TBCA, Article 10.01;

(4) articles of dissolution under TBCA, Article 6.06; and

(5) revocation of dissolution under TBCA, Article 6.05.

§21.9.Corporate Filings after January 1, 2010.

(a) This section is applicable to:

(1) all state trust companies organized after January 1, 2006;

(2) all state trust companies organized before January 1, 2006 that have elected to be governed by the provisions of the Texas Business Organizations Code to the extent not inconsistent with the Trust Company Act; and

(3) effective, January 1, 2010, all state trust companies no matter what their date of organization.

(b) In accordance with the applicable provisions of the Trust Company Act, the following corporate forms regarding a state trust company, along with the applicable filing fees, must be filed with the banking commissioner:

(1) a certificate of correction as authorized by Texas Business Organizations Code (TBOC), §4.101;

(2) articles of amendment under the Finance Code, §32.101;

(3) restated, or, amended and restated, articles of association under the Finance Code, §32.101, and TBOC §3.059 and §21.052;

(4) articles of merger under the Finance Code, §32.301 et seq, as supplemented by the TBOC §10.151;

(5) certificate of exchange under TBOC, §10.151;

(6) statement of event or fact pursuant to TBOC §4.055;

(7) establishment of a series of shares by the board of directors under the Finance Code, §32.102, as supplemented by TBOC §21.155 and §21.156;

(8) statement regarding a restriction on the transfer of shares under TBOC, §21.212; and

(9) abandonment of a merger or interest exchange prior to its effective date under TBOC §4.057.

(c) For purposes of corporate filings with the banking commissioner under subsection (b) of this section, state trust companies may utilize a modified version of forms promulgated by the secretary of state if the banking commissioner or the finance commission has not promulgated an appropriate corporate form; however, the banking commissioner may require the submission of additional information. The modified corporate forms must:

(1) specifically reference the applicable provisions of the Finance Code;

(2) change references from "corporation" to "association"; and

(3) change the references to "stated capital" and similar terms defined in the TBOC to an appropriate reference to terms defined in the Finance Code.

(d) In accordance with the applicable provisions of the Finance Code and the TBOC, a state trust company may file the following corporate forms with the secretary of state as instructed in the Finance Code or the TBOC:

(1) name registrations under TBOC §§5.151 - 5.155;

(2) assumed name certificates under TBOC §5.051;

(3) a statement appointing an agent authorized to receive service of process under Finance Code §201.103;

(4) an amendment to a statement appointing an agent to receive service of process under Finance Code §201.103; and

(5) a cancellation of the appointment of an agent to receive service of process under Finance Code §201.103.

(e) The following corporate forms are inapplicable to state trust companies and are not required to be filed by a state trust company with either the secretary of state or the banking commissioner:

(1) changes of registered office or agent under TBOC §5.202 or §5.203;

(2) name reservations under TBOC §5.101;

(3) certificate of termination under TBOC §11.101; and

(4) certificate of reinstatement under TBOC §11.202.

§21.10.Protested Applications.

(a) A protest of a charter application must be received by the department before the 15th day after the date the organizers publish notice and must be accompanied by any fee required by §21.5(b) of this title (relating to Public Notice). If the protest is untimely, the department will return all fees and deposits to the protesting party. If the protest is timely, the department shall notify the applicant of the protest and mail or deliver a complete copy of the nonconfidential sections of the charter application to the protesting party before the 15th day after the later of the date of receipt of the protest or receipt of the charter application.

(c) The applicant must file a written reply to the protesting party's detailed response on or before the 10th day after the date the response is filed.

(d) The protesting party's response and the applicant's reply must be in the form and must be served as required by Finance Code §182.005(b). Any comment received by the department and any reply of the applicant to the comment shall be made available to the protesting party.

§21.11.Hearings on Applications.

(a) The banking commissioner may not be compelled to hold a hearing before granting or denying the charter application. He may grant a hearing at the request of an applicant or a protesting party. He may order a hearing without any party having requested one.

(b) A party requesting a hearing must indicate with specificity the issues involved that cannot be determined on the basis of the record complied under §21.10(b) - (d) of this title (relating to Protested Applications) and why the issues cannot be determined.

(c) If the banking commissioner sets a hearing, he shall conduct a public hearing and one or more prehearing conferences as he considers advisable and consistent with applicable law. He shall also allow the parties to undertake such discovery as he considers advisable and consistent with applicable law, except that he may not permit discovery of confidential information in the charter application or the investigation report.

§21.12.Waiver of Requirements.

The banking commissioner in the exercise of discretion may waive or modify any requirement imposed by this chapter.

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 April 18, 2008.

TRD-200802040

A. Kaylene Ray

General Counsel

Texas Department of Banking

Proposed date of adoption: June 20, 2008

For further information, please call: (512) 475-1300

7 TAC §21.9

The repeal of §21.9 is proposed under Finance Code §181.003, which provides that the commission may adopt rules to accomplish the purposes of the Subtitle F, Trust Companies, including rules necessary or reasonable to implement and clarify Subtitle F and to facilitate the fair hearing and adjudication of matters before the commissioner, and Finance Code §182.009, which provides that the commission may adopt rules to alter or supplement the procedures and requirements of the general corporate laws listed in §182.009 applicable to an action taken under Finance Code Chapter 182 by a state trust company.

Finance Code §182.005 and §182.009 are affected by the proposed repeal.

§21.9.Waiver of Requirements.

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 April 18, 2008.

TRD-200802041

A. Kaylene Ray

General Counsel

Texas Department of Banking

Proposed date of adoption: June 20, 2008

For further information, please call: (512) 475-1300

Subchapter F. APPLICATION FOR MERGER, CONVERSION, OR SALE OF ASSETS

7 TAC §21.63

The amendment to §21.63 is proposed under Finance Code, §181.003(a), which provides that the commission may adopt rules to accomplish the purposes of the Subtitle F, Trust Companies, including rules necessary or reasonable to implement and clarify Subtitle F and to facilitate the fair hearing and adjudication of matters before the commissioner.

Finance Code §182.301 to §182.405 are affected by the proposed amended section.

§21.63.Expedited Filings.

(a) - (d) (No change.)

(e) The banking commissioner shall approve or deny an expedited filing on or before a date that is 30 days after the date the expedited filing is accepted for filing pursuant to §21.4 of this title (relating to Required Information and Abandoned Filings). The banking commissioner may, in the exercise of discretion, before the expiration of the period for decision, give the applicant written notice that the banking commissioner will convene a hearing to obtain evidence related to the application, and the decision will thereafter be made in accordance with §21.72 [~~§21.82~~] of this title (relating to Approval; Conditional Approval; Denial of Application; Hearings).

(f) (No change.)

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 April 18, 2008.

TRD-200802042

A. Kaylene Ray

General Counsel

Texas Department of Banking

Proposed date of adoption: June 20, 2008

For further information, please call: (512) 475-1300

Subchapter G. CHARTER AMENDMENTS AND CERTAIN CHANGES IN OUTSTANDING STOCK

7 TAC §21.91

The amendment to §21.91 is proposed under Finance Code, §181.003(a), which provides that the commission may adopt rules to accomplish the purposes of the Subtitle F, Trust Companies, including rules necessary or reasonable to implement and clarify Subtitle F and to facilitate the fair hearing and adjudication of matters before the commissioner.

Finance Code §§182.103, 184.101 and 184.102 are affected by the proposed amended section.

§21.91.Acquisition and Retention of Shares as Treasury Stock.

(a) - (c) (No change.)

(d) Disapproval. The banking commissioner may disapprove the proposed plan of acquisition if the banking commissioner concludes that the trust company's plan of acquisition:

(1) - (2) (No change.)

(3) may threaten the adequacy of the trust company's equity capital or its restricted capital, or could result in a trust company failing to maintain the minimum required level in restricted capital set forth in Finance Code, §182.103[~~, or §17.1(b) of this title~~]; or

(4) (No change.)

(e) - (h) (No change.)

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 April 18, 2008.

TRD-200802043

A. Kaylene Ray

General Counsel

Texas Department of Banking

Proposed date of adoption: June 20, 2008

For further information, please call: (512) 475-1300

Part 5. OFFICE OF CONSUMER CREDIT COMMISSIONER

Chapter 84. MOTOR VEHICLE INSTALLMENT SALES

Subchapter B. INSTALLMENT SALES CONTRACT PROVISIONS

7 TAC §84.209

(Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the Office of Consumer Credit Commissioner or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Finance Commission of Texas (commission) proposes the repeal of 7 TAC §84.209, concerning Model Clauses. The commission has determined that this rule more effectively belongs in a different location within Chapter 84 in order to better track the organization of Texas Finance Code, Chapter 348. Therefore, this rule is being proposed for repeal and a new (relocated) rule is proposed elsewhere 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.

Commissioner Pettijohn also has determined that for each year of the first five years the repeal as proposed will be in effect, the public benefit anticipated as a result of the repeal will be more logically organized and readily available rules for lenders and consumers. 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 or micro businesses. There will be no effect on individuals required to comply with the repeal as proposed.

Comments on the proposed repeal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207, or by e-mail to laurie.hobbs@occc.state.tx.us. To be considered, a written comment must be received on or before the 31st day after the date the proposed repeal is published in the Texas Register . At the conclusion of the 31st day after the proposed repeal is published in the Texas Register, no further written comments will be considered or accepted by the commission.

The repeal is proposed 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 authorizes the commission to adopt rules for the enforcement of the motor vehicle installment sales chapter.

The statutory provisions (as currently in effect) affected by the proposed repeal are contained in Texas Finance Code, Chapter 348.

§84.209.Model Clauses.

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 April 18, 2008.

TRD-200802035

Leslie L. Pettijohn

Commissioner

Office of Consumer Credit Commissioner

Earliest possible date of adoption: June 1, 2008

For further information, please call: (512) 936-7611

Subchapter C. SALES FINANCE OPERATIONS

7 TAC §84.302

The Finance Commission of Texas (commission) proposes the repeal of 7 TAC §84.302, concerning Prepaid Maintenance Agreements. The commission has determined that this rule more effectively belongs in a different location within Chapter 84 in order to better track the organization of Texas Finance Code, Chapter 348. Therefore, this rule is being proposed for repeal and a new (relocated) rule is proposed elsewhere in this issue of the Texas Register.

The statutory provisions (as currently in effect) affected by the proposed repeal are contained in Texas Finance Code, Chapter 348.

§84.302.Prepaid Maintenance Agreements.

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 April 18, 2008.

TRD-200802036

Leslie L. Pettijohn

Commissioner

Office of Consumer Credit Commissioner

Earliest possible date of adoption: June 1, 2008

For further information, please call: (512) 936-7611

Subchapter C. INSURANCE

7 TAC §§84.302 - 84.305, 84.307

The Finance Commission of Texas (commission) proposes new §§84.302 - 84.305 and §84.307, concerning Insurance, with regard to motor vehicle sales finance dealers licensed by the Office of Consumer Credit Commissioner.

The new rules (§§84.302 - 84.305) contain new operational provisions regarding insurance. The purpose of the new operational rules is to conform the commission's rules to current practice, to provide clarification for licensees required to comply with the rules, and to provide more specific guidance for the examination process.

Section 84.307 (current §84.302) is being relocated and reorganized. The agency believes that the reorganization will benefit licensees in that this rule will be easier to find in a more logical location and order which better tracks the organization of Texas Finance Code, Chapter 348. The relocated rule is substantially similar to the rule pending repeal, as found in 7 TAC §84.302, concerning Prepaid Maintenance Agreements. The commission's proposed repeal of this section is published elsewhere in this issue of the Texas Register.

In reference to the relocated rule, the purpose of the rule tracks the original purpose language used when the rule was originally adopted. Please note that, aside from changes to section number references, the new rule contained in §84.307 is merely being relocated without changes.

The following paragraphs outline the individual purposes of each proposed rule. The relocated rule will be listed with its current location "(current §84.XXX)" listed after the proposed new section number.

Section 84.302 describes the basic requirements and types of credit insurance authorized to be sold in connection with retail installment sales contracts for motor vehicles. The rule is necessary to prescribe these types of insurance and require compliance with the applicable statutes contained in the Texas Insurance Code.

Section 84.303 outlines the required elements that must be included in a policy or certificate of insurance given to the retail buyer if a motor vehicle retail installment sales contract provides for the purchase of insurance by the retail buyer from the retail seller. This rule is necessary to prescribe the specific information required to be disclosed to the retail buyer and to provide for a reasonable time frame in which the information is to be disclosed.

Section 84.304 requires that if a retail buyer provides a holder with equivalent property insurance coverage that names the holder as a loss payee, the holder must cancel any equivalent property insurance.

Section 84.305 provides that if a holder arranges for collateral protection insurance and assesses a charge for the insurance to the retail buyer, the holder must comply with Texas Finance Code, Chapter 307.

Section 84.307 (current §84.302) outlines the methods of disclosure on a retail installment sales contract for prepaid maintenance agreements sold in connection with motor vehicles. Prepaid maintenance agreements that are required or otherwise included with the sale of a motor vehicle must be disclosed as a component of the cash price. Those agreements sold on a voluntary basis may be disclosed under two methods specified in the rule.

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 has determined that for each year of the first five years the new operational rules are in effect the public benefit anticipated will be that the commission's rules will conform to current practice, will be more easily understood by licensees required to comply with the rules, and will be more easily enforced. For §84.307 (relocated rule), Commissioner Pettijohn has also determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of the relocated rule will be enhanced compliance with the credit laws and consistency in credit contracts.

There is no anticipated cost to persons who are required to comply with the rules as proposed. There is no anticipated adverse economic effect on small or micro businesses. There will be no effect on individuals required to comply with the rules as proposed.

Comments on the proposed new rules may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by e-mail to laurie.hobbs@occc.state.tx.us. To be considered, a written comment must be received on or before the 31st day after the date the proposed rules are published in the Texas Register . At the conclusion of the 31st day after the proposed rules are published in the Texas Register, no further written comments will be considered or accepted by the commission.

These new sections 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, §348.513 grants the Finance Commission the authority to adopt rules to enforce the motor vehicle installment sales chapter.

These rules affect Texas Finance Code, Chapter 348.

§84.302.Authorized Credit Insurance.

(a) Authorized credit insurance includes credit life, credit accident and health insurance, credit involuntary unemployment insurance, and dual-interest gap insurance.

(b) Credit life insurance, credit accident and health insurance, and involuntary unemployment insurance written in connection with a Texas Finance Code, Chapter 348 motor vehicle retail installment sales contract shall be decreasing term insurance.

(c) Credit life insurance and credit accident and health insurance must be written in compliance with Texas Insurance Code, Chapters 1131 and 1153, and any regulations issued by the Texas Department of Insurance under the authority of those provisions.

(d) Involuntary unemployment insurance must be written in compliance with Texas Insurance Code, Chapter 3501, and any regulations issued by the Texas Department of Insurance under the authority of that chapter.

(e) Dual-interest gap insurance, authorized by Texas Finance Code, §348.208(b)(4), must be written at rates and on forms set and filed in accordance with Texas Insurance Code, Chapters 2251 and 2301, and any regulations issued by the Texas Department of Insurance under the authority of those provisions.

(f) Credit insurance must be procured from an insurance company authorized to do business in this state. Surplus lines insurance companies are not authorized to offer credit insurance on a Chapter 348 motor vehicle retail installment sales contract.

(g) Debt cancellation, debt suspension, and gap waiver agreements are not credit insurance. Debt cancellation, debt suspension, and gap waiver agreements are not authorized to be sold or written with a Chapter 348 motor vehicle retail installment sales contract.

§84.303.Provision of Policy or Certificate.

If a Texas Finance Code, Chapter 348 motor vehicle retail installment sales contract provides for the purchase of insurance by the retail buyer from the retail seller, the retail seller must provide to the retail buyer, within 30 days of the date of the contract, a properly executed policy or certificate of insurance. The policy or certificate of insurance must clearly set forth:

(1) the amount of the premium;

(2) the kind of insurance provided;

(3) the coverage of the insurance; and

(4) all terms, including options, limitations, restrictions and conditions of the insurance that has been purchased.

§84.304.Evidence of Equivalent Insurance.

If a retail buyer provides a holder with evidence of property insurance coverage that names the holder as a loss payee and that is equivalent to insurance purchased through the holder, the holder must promptly cancel any equivalent property insurance or collateral protection insurance. The refund of any unearned insurance premium shall be applied to the balance of the contract or refunded to the retail buyer.

§84.305.Collateral Protection Insurance.

If a holder arranges for collateral protection insurance and assesses a charge for the insurance to the retail buyer, the holder must comply with the provisions of Texas Finance Code, Chapter 307.

§84.307.Prepaid Maintenance Agreements.

(a) If the prepaid maintenance agreement is required in connection with the sale of a motor vehicle, regardless of whether the sale is a cash sale or a credit sale, the charge for the prepaid maintenance agreement should be disclosed or otherwise included as a component of the cash price.

(b) If the prepaid maintenance agreement is offered as a voluntary purchase in connection with the credit sale of a motor vehicle, the prepaid maintenance agreement may be disclosed:

(1) as a component of the cash price; or

(2) as an itemized charge on the retail installment sales contract.

(c) At the time of the sale, the services covered by the prepaid maintenance agreement should be reasonably expected to be delivered during the term of the agreement.

(d) The agency may evaluate the assessed charge for a prepaid maintenance agreement. If the agency determines that the charge is excessive considering relevant factors, then the agency may consider the excessive amount as finance charge. One of the relevant factors the agency will consider is whether the assessed charge and sales representations between cash and credit transactions differ.

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 April 18, 2008.

TRD-200802031

Leslie L. Pettijohn

Commissioner

Office of Consumer Credit Commissioner

Earliest possible date of adoption: June 1, 2008

For further information, please call: (512) 936-7611

Subchapter E. HOLDER'S RIGHTS, DUTIES, AND LIMITATIONS

7 TAC §§84.501, 84.503, 84.504

The Finance Commission of Texas (commission) proposes new §§84.501, 84.503, and 84.504, concerning Holder's Rights, Duties, and Limitations, with regard to motor vehicle sales finance dealers licensed by the Office of Consumer Credit Commissioner.

The new rules contain new operational provisions regarding payoff statements, and collection practices and contacts. The purpose of the rules is to conform the commission's rules to current practice, to provide clarification for licensees required to comply with the rules, and to provide more specific guidance for the examination process. The following paragraphs outline the individual purposes of each proposed rule.

Section 84.501 requires a holder to provide a retail buyer with a payoff statement on written request of the retail buyer. This provision is necessary to enable a retail buyer to prepay the debt at any time in accordance with Chapter 348. The rule also outlines the content of the payoff statement and what is considered to be a reasonable time in which to respond to an inquiry for a payoff statement for different types of accounts.

Section 84.503 addresses the allowable collection practices of motor vehicle sales finance licensees, including a prohibition on the use of any physical force or violence against any person or property.

Section 84.504 outlines who may be contacted regarding a debt subject to Texas Finance Code, Chapter 348, and when a licensee may communicate with a retail buyer. The rule limits the communication restrictions according to each particular retail buyer and that buyer's specific debt under a motor vehicle retail sales installment contract. The rule prohibits the use of any simulated legal process and the misrepresentation of the identity of the licensee.

In reference to §84.501, while there are costs involved in providing payoff statements and statements of payments, the statutory requirement for holders to supply these statements has been in place for over a decade, as contained in Texas Finance Code, §348.405. Any costs related to payoff statements or statements of payments are imposed by the statute and are not a result of the proposed rule. The rule serves to provide clarification and guidance for both retail buyers and holders as to what should occur when a statement is requested.

Concerning §84.503 and §85.504, some training may be required by licensees with respect to these provisions on collection practices and collection contacts. Federal regulations, however, already require licensees to adhere to many of the basic requirements contained in these rules. Moreover, it is the agency's understanding that some licensees have similar practices concerning collections in order to limit exposure to potential litigation by retail buyers. The rules may even reduce that exposure by providing more specific guidelines for collection practices and collection contacts. It is the agency's estimation that any additional training required would be minimal (e.g., 30 minutes to orally review rules with employees) and at most, would result in a nominal cost to licensees.

There is no anticipated adverse economic effect on small or micro businesses. Aside from the potential costs outlined in the preceding paragraphs, there will be no effect on individuals required to comply with the rules as proposed.

These rules affect Texas Finance Code, Chapter 348.

§84.501.Payoff Statement or Statement of Payments.

(a) Payoff statement. On the written request of the retail buyer or the buyer's designee, a holder must provide a payoff statement to the person making the request within a reasonable time.

(b) Statement of payments. On the written request of the retail buyer or the retail buyer's designee, a holder must provide a statement of the dates and amounts of payments and the total amount unpaid under the contract to the person making the request within a reasonable time.

(c) Delinquent accounts. A holder must provide the information required by this section even if at the time the inquiry is made the account is delinquent.

(d) Requesting statement. A holder may designate a location where the person requesting a payoff statement or statement of payments may submit a request for the statement. The designation may include a mailing address, physical address, telephone number, website address, email address, or other point of contact for submission of the request. The designated location must be reasonably accessible to the retail buyer or buyer's designee. The mailing address and telephone number are presumed to be reasonably accessible. If the holder does not designate a location where the retail buyer or buyer's designee may request a payoff statement or statement of payments, the retail buyer or buyer's designee may submit the written request to any physical address or mailing address of the holder.

(e) Verification of retail buyer. The holder may require the retail buyer to provide certain specified information (full name of the retail buyer, social security number, account number, unique password given to the retail buyer) to verify the requester's identity before processing the payoff statement or statement of payments.

(f) Content of payoff statement. The payoff statement must, at a minimum, contain the following information:

(1) the name of the holder;

(2) the address of the holder;

(3) the telephone number of the holder;

(4) the account number or other identifying number of the retail buyer, if applicable;

(5) the date of the payoff statement;

(6) the amount necessary to payoff the account, including daily accrual and known and identified subsequent events;

(7) a statement that specifies how and where to tender the payoff amount to the holder; and

(8) the last date upon which the payoff terms will be honored as specified by subsection (j) of this section.

(g) Delivery of payoff statement or statement of payments. The holder may provide the payoff statement or statement of payments to the retail buyer over the telephone or by mail, email, website address, or other means. If requested by the retail buyer or buyer's designee, the payoff statement or statement of payments must be given in writing.

(h) Cost of payoff statement or statement of payments. The retail buyer is entitled to one written payoff statement or written statement of payments free of charge during a six-month period. The charge for each additional written payoff statement or written statement of payments may not exceed $1.00. A holder may not charge a fee for a payoff statement or statement of payments unless the holder provides the statement in writing.

(i) Reasonable time period. In the case of a motor vehicle retail installment sales contract made under Texas Finance Code, Chapter 348, a reasonable time in which to respond to an inquiry for a payoff statement or statement of payments is:

(1) for accounts in litigation, bankruptcy, or repossession status, 5 (five) calendar days;

(2) for all other accounts not meeting the requirements of paragraph (1) of this subsection, two (2) business days.

(3) The reasonable time period for processing the payoff statement or statement of payments does not begin to run unless the retail buyer or buyer's designee provides the information necessary to verify the requester's identity.

(j) Payoff statement binding. Pursuant to Texas Finance Code, §348.408, a holder who gives the retail buyer or the buyer's designee outstanding balance information in a payoff statement is bound by that information and must honor that information for a reasonable time.

(1) If the holder gives the payoff statement to the retail buyer or buyer's designee by hand-delivery, facsimile, or email, a reasonable time is 10 calendar days.

(2) If the holder gives the payoff statement to the retail buyer or buyer's designee by first-class mail, registered or certified mail, or any other delivery method not specified by paragraph (1) of this subsection, a reasonable time is 15 calendar days.

§84.503.Collection Practices.

(a) In attempting to collect money due on a motor vehicle retail installment sales contract or to take possession of any property securing a motor vehicle installment sales contract, a licensee or the licensee's agent shall not use any means other than appeals to reason or lawful remedies authorized under the laws of this state.

(b) A licensee or the licensee's agent shall not use any physical force or violence against any person or use any physical force or violence against any property.

§84.504.Collection Contacts.

(a) A licensee or the licensee's agent shall have the right to contact any person in order to secure information concerning a retail buyer, unless any person other than the retail buyer, the retail buyer's spouse, a member of the retail buyer's household, a co-buyer, endorser, surety, or guarantor of the obligation, objects to any contact by a licensee or the licensee's agent. Upon receipt of the objection, the licensee or agent, shall cease and desist from any further contact with the person relative to the debt in question.

(b) A licensee or the licensee's agent shall not solicit the payment of all or any part of any debt subject to Texas Finance Code, Chapter 348 from any person other than the retail buyer, a co-buyer, endorser, surety, guarantor, retail buyer's designee, trustee, insurance company or service contract provider paying a claim involving the debtor or motor vehicle, executor or administrator of a will associated with the debt, or any party having a lawful right or claim to the motor vehicle.

(c) Without the prior written consent of the retail buyer given directly to the licensee or the express permission of a court of competent jurisdiction, a licensee may not communicate with a retail buyer in connection with the collection of amounts due under a motor vehicle retail installment sales contract at any unusual time. In the absence of any knowledge to the contrary, a licensee can assume that the convenient time for communicating with a retail buyer is after 8:00 a.m. and before 9:00 p.m., local time at the retail buyer's location.

(d) A licensee may not communicate with a retail buyer in connection with the collection of amounts due under a motor vehicle retail installment sales contract at the retail buyer's place of employment if the licensee has received written notification from the retail buyer or the retail buyer's employer to cease communications with the retail buyer while at the place of employment. The licensee may require the retail buyer or retail buyer's employer to place the objection in writing. The objection, if required, should specify the name of the retail buyer or group of retail buyers subject to the objection. This restriction may be overridden by court order.

(e) Without the prior written consent of the retail buyer given directly to the licensee or the express permission of a court of competent jurisdiction, a licensee may not communicate any information pertaining to a debt or obligation unless the person receiving the information is the retail buyer, the retail buyer's attorney, the retail buyer's designee, a co-buyer, endorser, surety, or guarantor of the obligation, a consumer reporting agency, another creditor, the attorney of the creditor, or any party that has a lawful or permissible right to the information pursuant to the Federal Trade Commission's Privacy of Consumer Financial Information regulation, 16 C.F.R. §313.1, et seq., or similar privacy regulation. Unless notified pursuant to subsection (a) of this section, this prohibition does not apply to a licensee seeking information about the location of the retail buyer.

(f) In attempting to collect money due on a contract or to take possession of any property securing a motor vehicle retail installment sales contract, a licensee or the licensee's agent shall not use any simulated legal process, simulated legal document, or legal form designed to suggest that legal proceedings have been commenced or completed when in fact they have not.

(g) In attempting to collect money due on a motor vehicle retail installment sales contract, to take possession of any property securing a motor vehicle retail installment sales contract, or to secure information concerning a motor vehicle retail installment sales contract, a licensee or the licensee's agent shall not impersonate or attempt to impersonate any law enforcement officer or other agent of federal, state, or local governments, nor shall a licensee or a licensee's agent misrepresent the identity of the licensee.

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 April 18, 2008.

TRD-200802032

Leslie L. Pettijohn

Commissioner

Office of Consumer Credit Commissioner

Earliest possible date of adoption: June 1, 2008

For further information, please call: (512) 936-7611

Subchapter G. EXAMINATIONS

7 TAC §§84.703 - 84.706

The Finance Commission of Texas (commission) proposes new §§84.703 - 84.706, concerning Examinations, with regard to motor vehicle sales finance dealers licensed by the Office of Consumer Credit Commissioner.

The new rules contain new operational provisions regarding examination procedures. The purpose of the rules is to conform the commission's rules to current practice, to provide clarification for licensees required to comply with the rules, and to provide more specific guidance for the examination process. The following paragraphs outline the individual purposes of each proposed rule.

Section 84.703 authorizes the commissioner to require a licensee to review records and make corrections, if an examination reveals that a licensee is engaging in a pattern or practice that appears to be a systemic violation of the law. The rule is necessary to ensure that transactions comply and that records are being maintained with the applicable law.

Section 84.704 provides the procedures for correcting violations of laws or errors on accounts. The rule is necessary to provide a uniform procedure for curing violations of law and correcting entries on accounts. The rule includes procedures for cash refunds and for refunds made by check, money order, or other negotiable instrument.

Section 84.705 details the procedures for handling unclaimed funds that are due to a retail buyer. The rule provides procedures that conform to Texas Property Code, Chapter 72.

Section 84.706 provides for a fee in addition to the assessment fee that may be charged 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 follow-up examinations.

Regarding §84.703, a person required to comply with the rules may be responsible for the potential costs of review and correcting records, but only if an examination reveals a pattern or practice that appears to be a systemic violation of the law. First, a records review would only be required if such a systemic violation has been discovered during the licensee's examination. For licensees receiving an examination without this finding, these costs will not apply. Second, once a systemic violation is found, much depends on the actions taken by the licensee to remedy the deficiencies. And third, in addition to the steps taken by the licensee in the interim, the extent of any records review will also depend on the types of issues and deficiencies cited. Thus, as a result of the fact-specific nature of review of records situations, these costs are impossible to predict for any particular licensee.

Likewise, concerning §84.706, a person required to comply with the rules may be responsible for the potential costs of follow-up examination fees, but only if a follow-up examination visit is required within nine months after a written deficiency report has been given to the licensee as a result of noncompliance. First, follow-up examinations only occur if a rating of "unacceptable" is received by the licensee. For those licensees not receiving an unacceptable rating, these costs will not apply. Second, once an unacceptable rating is received, much depends on the actions taken by the licensee to remedy the deficiencies prior to the return visit. And third, in addition to the steps taken by the licensee in the interim, the length of any follow-up examination will also depend on the types of issues and deficiencies cited. Therefore, due to the involvement of these numerous case-by-case factors, it is impossible to predict these costs for any particular licensee. The rule provides the best expectation possible by listing the rate of $100 per hour per examiner.

These rules affect Texas Finance Code, Chapter 348.

§84.703.Review of Records.

One purpose of examinations by the OCCC is to determine the level of compliance with the law by the licensee. If the examination reveals a pattern or practice that appears to be a systemic violation of the law, the commissioner or the commissioner's representative may direct the licensee to review records and make appropriate changes to bring the licensee's records into compliance with the law. The appropriate changes may include restitution to customers for unlawful charges or unlawful amounts.

§84.704.Correction of Errors or Violations.

(a) Any amount due a retail buyer because of a correction of an error or a violation may be credited to the next payment or payments on the existing account of the retail buyer. The licensee must notify the retail buyer 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, a refund may be made directly to the retail buyer by cash, check, money order or other negotiable instrument. The licensee must maintain sufficient records that the refund was made.

(1) Cash refunds. If the refund is made directly to the retail buyer in cash, the licensee must obtain a signed or authenticated acknowledgment from the retail buyer. The signed or authenticated acknowledgment must contain the following information:

(A) the retail buyer's full name;

(B) the retail buyer's account number (the account number upon which the refund was made);

(D) a statement that the retail buyer received the refund in cash and that the licensee has not instructed or required the retail buyer to repay the cash refund.

(2) Refunds made by check, money order, or other negotiable instrument. If the refund is made directly to the retail buyer by check, money order or other negotiable instrument, the licensee must, at a minimum, mail the refund to the last known address of the retail buyer by first-class mail. The licensee must maintain a complete paper or electronic copy of the check, money order, or other negotiable instrument. The licensee must also maintain sufficient information that could be used to determine who successfully negotiated the check, money order, or other negotiable instrument. If the check or money order is drawn from an account that is not under the licensee's control, sufficient information will include the name of the bank or company upon which the refund check or money order is drawn, the account number upon which the refund check or money order is drawn, the amount of the check or money order, check or money order number, and routing or tracking number of the check or money order.

(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 time price differential has been precomputed (regular transaction using sum of the periodic balances method or scheduled installment earnings method), the licensee may alternatively credit the final maturing installment or installments of the contract. In addition to the error correction or adjustment, a licensee must also give the retail buyer the proportionate amount of time price differential originally charged on the amount being credited.

(d) If the licensee applies the refund to an existing account of the licensee, the licensee may be required to refund the amount due a retail buyer plus the amount of accrued time price differential on the correction or adjustment amount or a proportionate amount of time price differential originally charged on the amount being credited. If more than half of the precomputed time balance (regular transaction using the sum of the periodic balance method or scheduled installment earnings method) has been paid before applying the credit to the account, the licensee may be required to refund the proportionate amount of time price differential originally charged on the amount being credited.

(e) If the error correction or adjustment is made to an account where the time price differential charge is earned using the true daily earnings method, the licensee must refund or credit the amount due a retail buyer in addition to the amount of accrued time price differential on the correction or adjustment amount.

§84.705.Unclaimed Funds.

(a) Escheat suspense account. The licensee must transfer any amounts due a retail buyer not paid within one year (i.e., unclaimed funds) to an escheat suspense account. The transfer must be noted on the account record of the retail buyer.

(b) Required information. Evidence of a bona fide attempt to pay a refund to a retail buyer must be kept in the records of the retail buyer. The licensee must place with the records of the retail buyer any information received by the licensee that indicates the retail buyer has died leaving no will or heirs or has left the community and the retail buyer's whereabouts are unknown. If deemed necessary, a licensee may be required to send the unclaimed funds by registered or certified mail to the last known address of the retail buyer.

(c) Use of unclaimed monies. Use of unclaimed funds within the business until such time as paid to the retail buyer, to the estate of the retail buyer, or to the State of Texas if the last known address of the retail buyer as shown on the records of the holder is in this state, 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 (3) 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 10 years.

§84.706.Follow-up Examination Fees.

If a follow-up examination visit is required within nine (9) months after a written deficiency report has been given as a result of a failure to comply with Texas Finance Code, Chapter 348, this chapter, or the special instruction section of the examination report, an examination fee at the hourly rate of $100 per examiner may be assessed.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 18, 2008.

TRD-200802033

Leslie L. Pettijohn

Commissioner

Office of Consumer Credit Commissioner

Earliest possible date of adoption: June 1, 2008

For further information, please call: (512) 936-7611

Subchapter H. RETAIL INSTALLMENT SALES CONTRACT PROVISIONS

7 TAC §84.808

The Finance Commission of Texas (commission) proposes new §84.808, concerning Retail Installment Sales Contract Provisions, with regard to motor vehicle sales finance dealers licensed by the Office of Consumer Credit Commissioner.

Rule §84.808 is being relocated and reorganized. The agency believes that the reorganization will benefit licensees in that this rule will be easier to find in a more logical location and order which better tracks the organization of Texas Finance Code, Chapter 348. The relocated rule is substantially similar to the rule pending repeal, as found in 7 TAC §84.209, concerning Model Clauses. The commission's proposed repeal of this section is published elsewhere in this issue of the Texas Register.

Concerning new (relocated) §84.808, the rule (along with recently relocated §§84.801-84.807, and 84.809) implements the provisions of Texas Finance Code, §341.502, which require contracts under Chapter 342 or 348, whether in English or in Spanish, to be written in plain language. Use of the model clauses is optional; however, should a licensee choose not to use the model clauses, or a contract comprised of model clauses, then the licensee's non-standard contract must be submitted to the agency in accordance with the provisions of 7 TAC §84.802.

In reference to this relocated rule, the purpose of the rule tracks the original purpose language used when the rule was originally adopted. Please note that, aside from changes to section number references, the new rule contained in §84.808 is merely being relocated without changes.

The following paragraph outlines the purpose of the proposed rule. The Relocated rule is listed with the current location "(current §84.XXX)" listed after the proposed new section number.

Section 84.808 (current §84.209) contains the model clauses. These clauses are the administrative interpretation of a plain language version of typical contract provisions. Some model clauses are required by state and federal statutes and regulations depending on the circumstances of a particular transaction. Established model contract provisions encourage uniformity and provide benefits to consumers by making contracts easier to understand. A creditor is not limited to the contract provisions contained in these rules and retains flexibility to design contract forms suitable for the creditor's use. These multi-purpose contract provisions are intended for use by franchised dealers, independent dealers, holders of motor vehicle retail installment sales contracts, and individuals who sell less than five motor vehicles per year.

Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the rule is in effect there will be no fiscal implications for state or local government as a result of administering the rule.

Commissioner Pettijohn has also determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of the relocated rule will be enhanced compliance with the credit laws and consistency in credit contracts.

There is no anticipated cost to persons who are required to comply with the rule as proposed. There is no anticipated adverse economic effect on small or micro businesses. There will be no effect on individuals required to comply with the rule as proposed.

Comments on the proposed new rule may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by e-mail to laurie.hobbs@occc.state.tx.us. To be considered, a written comment must be received on or before the 31st day after the date the proposed rules are published in the Texas Register . At the conclusion of the 31st day after the proposed rules are published in the Texas Register, no further written comments will be considered or accepted by the commission.

This new section 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, §348.513 grants the Finance Commission the authority to adopt rules to enforce the motor vehicle installment sales chapter.

This rule affects Texas Finance Code, Chapter 348.

§84.808.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 §84.808(1)(A) (.pdf)

(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 §84.808(5) (.pdf)

(6) Trade-in vehicle description. The model clause regarding trade-in vehicle description reads:

Figure: 7 TAC §84.808(6) (.pdf)

(7) Truth in Lending Act disclosure. The model clause regarding Truth in Lending Act disclosure reads:

Figure: 7 TAC §84.808(7) (.pdf)

(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 §84.808(8)(A) (.pdf)

(B) The model clause regarding itemization of amount financed-sales tax deferred reads:

Figure: 7 TAC §84.808(8)(B) (.pdf)

(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 §84.808(10) (.pdf)

(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 §84.808(11) (.pdf)

(12) Optional insurance coverages. The model clause regarding optional insurance coverages reads:

Figure: 7 TAC §84.808(12) (.pdf)

(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 §84.808(13) (.pdf)

(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 §84.808(15) (.pdf)

(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."

(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 §84.808(18)(B) (.pdf)

(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 §84.808(21) (.pdf)

(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 §84.808(31) (.pdf)

(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 §84.808(34)(A) (.pdf)

(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 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 April 18, 2008.

TRD-200802034

Leslie L. Pettijohn

Commissioner

Office of Consumer Credit Commissioner

Earliest possible date of adoption: June 1, 2008

For further information, please call: (512) 936-7611