Section 83.102 - DefinitionsWords and terms used in this subchapter that are defined in Texas Finance Code, Chapter 342 have the same meanings as defined in Chapter 342. The following words and terms, when used in this subchapter, will have the following meanings, unless the context clearly indicates otherwise.
(1) Acquisition charge--A charge authorized for making the cash advance under the authority of Texas Finance Code, § 342.252 and § 342.259.(2) Add-on interest--A method for calculating precomputed interest in which the borrower agrees to pay the total of payments, which includes both interest and principal, as opposed to agreeing to pay the principal plus interest as it accrues at a certain rate. Add-on interest is calculated at the outset of a loan on the cash advance for the full term, as if the principal did not decline over the course of the loan. For example, a $1,000 loan with 12 monthly installments and an add-on interest amount of $8.00 per hundred per annum would have a total charge of interest of $80 and monthly payments of $90, yielding an annual percentage rate ("APR") of 14.45%.(3) Amount financed--The amount calculated in accordance with Regulation Z, RSA 1026.18(b).(4) Authorized charge--Any charge authorized by applicable Texas law to be included in the credit transaction.(5) Authorized lender--A person who has obtained a regulated loan license from the Office of Consumer Credit Commissioner, or a bank, savings bank, savings and loan association, or credit union doing business under the laws of this state, another state, or the United States. Banks, savings banks, and savings and loan associations chartered in other states insured by the Federal Deposit Insurance Corporation, and credit unions chartered in other states insured through the National Credit Union Share Insurance Fund are included in this term. Separate entities that are subsidiaries or affiliates of licensees or authorized banks, savings banks, savings and loan associations, or credit unions are not authorized lenders unless they meet the required elements of the definition of an authorized lender in their own right.(6) Commissioner--The Consumer Credit Commissioner of the State of Texas.(7) Date of consummation--The date of closing or execution of a loan contract.(8) Default charge or late charge--The additional interest charge for late payment on a loan.(9) Deferment charge--The payment of an additional interest charge to defer the payment date of a scheduled payment on a contract.(10) Dual-interest coverage--Insurance that provides benefits to both the holder of a loan and the borrower in the event of a loss of the security covered by the policy. The policy contains a loss payable clause or endorsement that provides benefits that are payable at the discretion of the holder.(11) Installment account handling charge ("IAHC")--An interest charge authorized for making a loan under Texas Finance Code, § 342.252 and § 342.259.(12) Installment loan--Any type of closed-end loan with multiple scheduled payments.(13) Interest-bearing loan--A loan in which the borrower agrees to pay the principal and interest that accrues at a certain periodic rate.(14) Licensee--Any person who has been issued a regulated loan license pursuant to Texas Finance Code, Chapter 342. Another name for a "regulated loan license" is a "consumer loan license."(15) Making a loan--The act of making a loan is either the determination of the credit decision to provide the loan, or the act of funding the loan or transferring money from the lender to the borrower. A person whose name appears on the loan documents as the payee of the note is considered to have "made" the loan.(16) Negotiating a loan--The process of submitting and considering offers between a borrower and a lender with the objective of reaching agreement on the terms of a loan. The act of passing information between the parties can, by itself, be considered "negotiation" if it was part of the process of reaching agreement on the terms of a loan. "Negotiation" involves acts which take place before an agreement to lend or funding of a loan actually occurs.(17) OCCC--The Office of Consumer Credit Commissioner of the State of Texas.(18) Precomputed loan--A loan in which the borrower agrees to pay the total of payments that includes both principal and all anticipated interest through the full term of the loan. If a borrower prepays a precomputed loan, the borrower is entitled to a rebate of all unearned interest and unearned charges.(19) Prepaid interest--Interest paid separately in cash or by check before or at consummation in a transaction, or withheld from the proceeds of the credit at any time. Some common terms such as points, discounts, and origination fees have been used to identify this charge.(20) Principal--The capital sum of the debt, including any interest capitalized and added to the cash advance at the inception of the loan. Principal is the amount of money which is used, forborne, or detained and upon which interest is charged. The principal amount does not include any interest accrued after the inception of the loan, such as default charges.(21) Pro rata method--A formula for determining the amount of unearned interest or other charges, such as insurance, to be refunded following prepayment or acceleration by applying the amounts to equal unit periods. The formula for the pro rata method assumes that interest or other charges are earned in direct proportion to the time that a loan has been outstanding.(22) Rebate--A refund of all or part of a precomputed charge or interest.(23) Regulated loan--A loan made under the authority of Texas Finance Code, Chapter 342.(24) Renewal or refinance--A new loan contract that includes, in whole or in part, the net balance of one or more existing loan contracts.(25) Simple annual rate--The interest rate under the loan agreement expressed as a percentage rate per year employing the U.S. rule method.(26) Sum of the monthly balances or sum of the periodic balances method--A formula for determining the amount of unearned interest or other charges to be refunded. The sum of the balances method is a variant of the rule of 78s. This method provides that the fraction of the contract interest to be rebated at any given time in the loan term is the sum of the monthly loan balances for the months remaining in the originally scheduled loan term divided by the sum of the monthly balances for all of the months in the scheduled loan term. For example, for a six-month loan of $600 that is scheduled to be repaid in $100 monthly installments, the rebate fraction after two months would be: 400 + 300 + 200 + 100 divided by 600 + 500 + 400 + 300 + 200 + 100 = 1000/2100 = 10/21 = 0.476 (rounded). For any loan that is paid off in equal installments, the sum of the balances method and the rule of 78s will provide identical rebates. If, however, a loan schedule contains unequal payments, and especially where the debt is retired by a final balloon payment, the rebates under the two formulas will be different.(27) Term loan--A loan made repayable in a single payment.(28) Transacting a loan--Any of the significant events associated with the lending process through funding, including the preparation, negotiation and execution of loan documents and the transfer of money by the lender to the borrower or to a third party on the borrower's behalf. Transacting a loan also includes the act of arranging a loan.(29) United States rule--Ruling of United States Supreme Court in Story v. Livingston, 38 U.S. (13 Pet.) 359, 371 (1839) that, in partial payments on a debt, each payment is applied first to interest and any remainder reduces the principal. Under this rule, accrued but unpaid interest cannot be added to the principal, and interest cannot be compounded.7 Tex. Admin. Code § 83.102
The provisions of this §83.102 adopted to be effective January 4, 2007, 31 TexReg 10761; amended to be effective November 4, 2010, 35 TexReg 9698; amended to be effective July 10, 2014, 39 TexReg 5142; Amended by Texas Register, Volume 41, Number 36, September 2, 2016, TexReg 6678, eff. 9/8/2016; Amended by Texas Register, Volume 43, Number 44, November 2, 2018, TexReg 7340, eff. 11/8/2018