Published: 2015

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(a) Precomputed retail installment sales contracts. A retail installment sales contract may not contain a time price differential charge that exceeds both the add-on rates authorized by Texas Finance Code, §348.104 and the alternative simple time price differential rate authorized by Texas Finance Code, §348.105 as calculated by the add-on method or scheduled installment earnings method. A retail installment sales contract may be in compliance with either statutory rate specified in this subsection. Prepaid time price differential in the form of points is not permitted. (b) Time price differential-bearing retail installment sales contracts. A retail installment sales contract may not contain a time price differential charge that exceeds both the maximum annualized daily rate authorized by Texas Finance Code, §348.104 and the alternative simple time price differential rate authorized by Texas Finance Code, §348.105 as calculated by the true daily earnings method. A retail installment sales contract may be in compliance with either statutory rate specified in this subsection. Prepaid time price differential in the form of points is not permitted. (c) Minimum time price differential. In lieu of the time price differential charge specified under subsections (a) and (b), a retail seller may charge a minimum time price differential charge of $25. (d) Method of calculation. (1) Regular payment contract using sum of the periodic balances method. The time price differential charge is computed using the add-on rates authorized by Texas Finance Code, §348.104 or the alternative time price differential rate authorized by Texas Finance Code, §348.105 converted to an equivalent add-on rate per $100 per annum. (A) Base time price differential charge. The base time price differential charge is determined by multiplying the principal balance subject to a finance charge, as defined by §84.102(13) of this title (regarding Definitions), by the applicable add-on rate per $100 per year for the corresponding term of the contract. If the retail installment contract is payable for a period that is shorter or longer than a year or is for an amount that is less or greater than $100, the amount of the time price differential charge is decreased or increased proportionately. (B) Add-on rates. The applicable add-on rate per $100 per year is determined by the model year designated by the manufacturer of the vehicle. (C) Deferred sales tax. For usury purposes, the deferred sales tax is allocated on a straight line basis. A straight line basis is calculated by dividing the original gross deferred sales tax amount by the original term of the contract. The allocation of the deferred sales tax for the final payment must be adjusted for any rounding differences. The payment amount disclosed on the retail installment sales contract must include the straight line allocation of the deferred sales tax per installment. (D) Conversion of the alternative time price differential rate to an add-on rate per $100 per annum. If the maximum time price differential rate is the rate specified by Texas Finance Code, §348.105, the maximum add-on rate per $100 per annum cannot exceed the add-on rate contained in Figure: 7 TAC §84.201(d)(1)(D). The add-on rate per $100 per annum is determined by converting the current maximum alternative rate authorized by Texas Finance Code, §348.105 to an equivalent add-on rate for the given monthly term of the contract. The alternative simple time price differential rate authorized by Texas Finance Code, §348.105 displayed as an example in Figure: 7 TAC §84.201(d)(1)(D) is 18% per annum. If the alternative simple time price differential rate is adjusted according to Texas Finance Code, Chapter 303 and is greater than 18% per annum, the add-on rates shown in Figure: 7 TAC §84.201(d)(1)(D) should be adjusted accordingly. Attached Graphic (2) Scheduled installment earnings method. The scheduled installment earnings method can be used for both regular and irregular payment contracts. (A) Maximum time price differential. The maximum time price differential charge is computed by applying the applicable maximum daily rate to the unpaid principal balance subject to a finance charge, as defined by §84.102(13) of this title, as if each payment will be made on its scheduled installment date. A payment received before or after the due date does not affect the amount of the scheduled reduction in the unpaid principal subject to a finance charge. The computation of the time price differential must comply with the U.S. Rule as defined by §84.102(21) of this title. (B) Maximum annualized daily rate. (i) Sales tax advanced transactions. On sales tax advanced transactions using the scheduled installment earnings method, the annualized daily rate is either: (I) the annual percentage rate disclosed on the retail installment sales contract; or (II) the contract rate if the retail seller requires the retail buyer to purchase credit life or credit accident and health insurance. (ii) Sales tax deferred transactions. On sales tax deferred transactions using the scheduled installment earnings method, the annualized daily rate is the contract rate. (iii) Effective rate. The maximum annualized daily rate cannot exceed the effective rate contained in Figure: 7 TAC §84.201(d)(2)(B)(iii) for the equivalent monthly period and appropriate add-on rate per $100 determined by the model year designated by the manufacturer of the vehicle. The effective rates contained in Figure: 7 TAC §84.201(d)(2)(B)(iii) are the current maximum annualized daily rate authorized by Texas Finance Code, §348.104 or the alternative simple time price differential rate authorized by Texas Finance Code, §348.105. The alternative simple time price differential rate authorized by Texas Finance Code, §348.105 displayed as an example in Figure: 7 TAC §84.201(d)(2)(B)(iii) is 18% per annum. If the alternative simple time price differential rate is adjusted according to Texas Finance Code, Chapter 303 and is greater than effective rate contained in Figure: 7 TAC §84.201(d)(2)(B)(iii), the published rate will be highest effective rate. Attached Graphic (iv) Irregular payment contract effective rate. On a retail installment sales contract that is an irregular payment contract, the highest effective rate is determined by taking the closest monthly effective rate as shown in Figure: 7 TAC §84.201(d)(2)(B)(iii) assuming that the contract was payable in substantially equal successive monthly installments beginning one month from the date of the contract. (I) The closest monthly period is determined as follows: (-a-) Count the number of days from the date of the contract to the originally scheduled maturity date; (-b-) Divide the results of item (-a-) of this subclause by 365; (-c-) Multiply the results of item (-b-) of this subclause by 12. (II) If the results of subclause (I) of this clause are exactly .5333 or more between the two monthly periods, the closest monthly period is rounded up to the next monthly period. For example, if the closest monthly period is determined to be 14.5333 months, the maximum annualized daily rate is the effective rate for 15 months. (III) If the results of subclause (I) of this clause are less than .5333 between the two monthly periods, the closest monthly period is rounded down to the previous monthly period. For example, if the closest monthly period is determined to be 14.50 months, the maximum annualized daily rate is the effective rate for 14 months. (C) Deferred sales tax. For usury purposes, the deferred sales tax is allocated on a straight line basis. A straight line basis is calculated by dividing the original gross deferred sales tax amount by the original term of the contract. The allocation of the deferred sales tax for the final payment must be adjusted for any rounding differences. The payment amount disclosed on the retail installment sales contract must include the straight line allocation of the deferred sales tax per installment. (D) Contract rate less than the maximum annualized daily rate. If a retail seller consummates a retail installment sales contract with a contract rate that is less than the maximum annualized daily rate, the retail seller must compute the time price differential charge at the disclosed contract rate. (3) True daily earnings method. The true daily earnings method can be used for both regular and irregular payment contracts. (A) Maximum time price differential. The maximum time price differential charge is computed by applying the applicable daily rate to the unpaid principal balance subject to a finance charge, as defined by §84.102(13) of this title. The computation of the time price differential must comply with the U.S. Rule as defined by §84.102(21) of this title. The earned time price differential charge is computed as follows: (i) multiply the unpaid principal balance subject to a finance charge by the applicable daily rate; and (ii) multiply the results of clause (i) of this subparagraph by the number of days the actual unpaid principal balance subject to a finance charge is outstanding. (B) Maximum annualized daily rate. (i) Sales tax advanced transactions. On sales tax advanced transactions using the true daily installment earnings method, the annualized daily rate is either: (I) the annual percentage rate disclosed on the retail installment sales contract; or (II) the contract rate if the retail seller requires the retail buyer to purchase credit life or credit accident and health insurance. (ii) Sales tax deferred transactions. On sales tax deferred transactions using the true daily installment earnings method, the annualized daily rate is the contract rate. (iii) Effective rate. The maximum annualized daily rate cannot exceed the effective rate contained in Figure: 7 TAC §84.201(d)(2)(B)(iii) for the equivalent monthly period and appropriate add-on rate per $100 determined by the model year designated by the manufacturer of the vehicle. The effective rates contained in Figure: 7 TAC §84.201(d)(2)(B)(iii) are the current maximum annualized daily rate authorized by Texas Finance Code, §348.104 or the alternative simple time price differential rate authorized by Texas Finance Code, §348.105. The alternative simple time price differential rate authorized by Texas Finance Code, §348.105 displayed as an example in Figure: 7 TAC §84.201(d)(2)(B)(iii) is 18% per annum. If the alternative simple time price differential rate is adjusted according to Texas Finance Code, Chapter 303 and is greater than effective rate contained in Figure: 7 TAC §84.201(d)(2)(B)(iii), the published rate will be highest effective rate. (iv) Irregular payment contract effective rate. On a retail installment sales contract that is an irregular payment contract, the highest effective rate is determined by taking the closest monthly effective rate as shown in Figure: 7 TAC §84.201(d)(2)(B)(iii) assuming that the contract was payable in substantially equal successive monthly installments beginning one month from the date of the contract. (I) The closest monthly period is determined as follows: (-a-) Count the number of days from the date of the contract to the originally scheduled maturity date; (-b-) Divide the results of item (-a-) of this subclause by 365; (-c-) Multiply the results of item (-b-) of this subclause by 12. (II) If the results of subclause (I) of this clause are exactly .5333 or more between the two monthly periods, the closest monthly period is rounded up to the next monthly period. For example, if the closest monthly period is determined to be 14.5333 months, the maximum annualized daily rate is the effective rate for 15 months. (III) If the results of subclause (I) of this clause are less than .5333 between the two monthly periods, the closest monthly period is rounded down to the previous monthly period. For example, if the closest monthly period is determined to be 14.50 months, the maximum annualized daily rate is the effective rate for 14 months. (C) Deferred sales tax. For usury purposes, the deferred sales tax is allocated on a straight line basis. A straight line basis is calculated by dividing the original gross deferred sales tax amount by the original term of the contract. The allocation of the deferred sales tax for the final payment must be adjusted for any rounding differences. The payment amount disclosed on the retail installment sales contract must include the straight line allocation of the deferred sales tax per installment. (D) Contract rate less than the maximum annualized daily rate. If a retail seller consummates a retail installment sales contract with a contract rate that is less than the maximum annualized daily rate, the retail seller must compute the time price differential charge at the disclosed contract rate. (E) Application of payments. (i) General requirements if no payment application specified in contract. If the retail installment sales contract does not prescribe the method for the application of the payment, the payment should be applied in the following order: (I) earned but unpaid time price differential charge; and Cont'd...