The Texas Office of the Attorney General, Department of Banking and the Texas Office of the Consumer Credit Commissioner administer the consumer debt collection laws in Texas. Chapters 306 and 342 of the Texas Finance Code allow commercial loan lenders to enter into consumer loan agreements. However, consumer loan lenders are subject to usury limits set by the Texas Office of the Consumer Credit Commissioner.
According to Chapter 306 of the Texas Finance Code, commercial loans are those made for business, agricultural, investment or similar commercial purposes; they do not include loans for family or personal consumer purposes. The Texas Office of Consumer Credit Commissioner uses rate ceilings published weekly through the "Texas Credit Letter." The commissioner calculates the state’s weekly rate limits according to the formulaic statutory methods in the Texas Finance Code. Generally, the commissioner’s weekly rate limits for commercial loan transactions up to $250,000 are the same as those for personal consumer loan transactions. Commercial loan transactions exceeding $250,000 are subject to different rate ceilings than consumer loans and commercial loans of up to $250,000.
State Enforcement Agencies
The Texas Consumer Credit Commissioner regulates home equity loans, second mortgages, payday loans, retail credit loans, installment loans, payday loans, pawnshop loans and motor vehicle loans. The Texas Department of Banking regulates banks, trust companies, funeral contract loans for prepaid services, private child support agencies hired to collect delinquent support payments, and money service companies. The Texas Department of Banking sets the transaction limits that these lenders can charge borrowers for check-cashing services, late fees, insufficient fund fees and regulates collection practices. The Texas Attorney General’s Office is responsible for enforcing the Texas Consumer Credit Commissioner and Texas Department of Banking regulations.
The state’s usury laws establish the maximum interest rates that lenders can charge borrowers in Texas. The specific usury limits depend on the type of loan transaction borrowers enter into with lenders. According to Chapter 306 of the Texas Finance Code, commercial lenders cannot charge borrowers interest rates exceeding 18 percent annually. However, larger commercial loan lenders can charge more than 18 percent. Loans for over $250,000 can bear interest rates of up to 28 percent annually. Pawn shop lenders can charge consumers up to 240 percent annually. Motor vehicle loans can bear interest rates of up to 27 percent annually.
In addition to regulating loan interest rates, the Texas Office of the Consumer Credit Commissioner sets interest limits on judgments. Judgment enforcement collection laws allow creditors to obtain judicial judgments when borrowers default on their loans. Judgments allow creditors to lien property or garnish wages, in limited circumstances. However, judgment collection efforts are difficult in Texas because of the state’s Constitution, which limits collections to non-homestead property. The commissioner updates the effective judgment interest rate limits on a weekly basis. Generally, judgment interest limits for commercial loans are the same as the limits on personal loans.
Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your area.