CHAPTER 305. PENALTIES AND REMEDIES
FINANCE CODE
TITLE 4. REGULATION OF INTEREST, LOANS, AND FINANCED TRANSACTIONS
SUBTITLE A. INTEREST
CHAPTER 305. PENALTIES AND REMEDIES
SUBCHAPTER A. CIVIL LIABILITY; CRIMINAL PENALTY
Sec. 305.001. LIABILITY FOR USURIOUS INTEREST. (a) A creditor
who contracts for, charges, or receives interest that is greater
than the amount authorized by this subtitle in connection with a
transaction for personal, family, or household use is liable to
the obligor for an amount that is equal to the greater of:
(1) three times the amount computed by subtracting the amount of
interest allowed by law from the total amount of interest
contracted for, charged, or received; or
(2) $2,000 or 20 percent of the amount of the principal,
whichever is less.
(a-1) A creditor who contracts for or receives interest that is
greater than the amount authorized by this subtitle in connection
with a commercial transaction is liable to the obligor for an
amount that is equal to three times the amount computed by
subtracting the amount of interest allowed by law from the total
amount of interest contracted for or received.
(b) This section applies only to a contract or transaction
subject to this subtitle.
(c) A creditor who charges or receives interest in excess of the
amount contracted for, but not in excess of the maximum amount
authorized by law, is not subject to penalties for usurious
interest but may be liable for other remedies and relief as
provided by law.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.05, eff. September 1, 2005.
Sec. 305.002. ADDITIONAL LIABILITY FOR MORE THAN TWICE
AUTHORIZED RATE OF INTEREST. (a) In addition to the amount
determined under Section 305.001, a creditor who charges and
receives interest that is greater than twice the amount
authorized by this subtitle is liable to the obligor for:
(1) the principal amount on which the interest is charged and
received; and
(2) the interest and all other amounts charged and received.
(b) This section applies only to a contract or transaction for
personal, family, or household use subject to this subtitle.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.06, eff. September 1, 2005.
Sec. 305.003. LIABILITY FOR USURIOUS LEGAL INTEREST. (a) A
creditor who charges or receives legal interest that is greater
than the amount authorized by this subtitle is liable to the
obligor for an amount that is equal to the greater of:
(1) three times the amount computed by subtracting the amount of
legal interest allowed by law from the total amount of interest
charged or received; or
(2) $2,000 or 20 percent of the amount of the principal,
whichever is less.
(b) This section applies only to a transaction subject to this
subtitle.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 305.004. ADDITIONAL LIABILITY FOR MORE THAN TWICE
AUTHORIZED RATE OF LEGAL INTEREST. (a) In addition to the
amount determined under Section 305.003, a creditor who charges
and receives legal interest that is greater than twice the amount
authorized by this subtitle is liable to the obligor for:
(1) the principal amount on which the interest is charged and
received; and
(2) the interest and all other amounts charged and received.
(b) This section applies only to a transaction subject to this
subtitle.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 305.005. ATTORNEY'S FEES. A creditor who is liable under
Section 305.001 or 305.003 is also liable to the obligor for
reasonable attorney's fees set by the court.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 305.006. LIMITATION ON FILING SUIT. (a) An action under
this chapter must be brought within four years after the date on
which the usurious interest was contracted for, charged, or
received. The action must be brought in the county in which:
(1) the transaction was entered into;
(2) the usurious interest was charged or received;
(3) the creditor resides at the time of the cause of action, if
the creditor is an individual;
(4) the creditor maintains its principal office, if the creditor
is not an individual; or
(5) the obligor resides at the time of the accrual of the cause
of action.
(b) Not later than the 61st day before the date an obligor files
a suit seeking penalties for a transaction in which a creditor
has contracted for, charged, or received usurious interest, the
obligor shall give the creditor written notice stating in
reasonable detail the nature and amount of the violation.
(c) A creditor who receives a notice under this section may
correct the violation as provided by Section 305.103 during the
period beginning on the date the notice is received and ending on
the 60th day after that date. A creditor who corrects a violation
as provided by this section is not liable to an obligor for the
violation.
(d) With respect to a defendant filing a counterclaim action
alleging usurious interest in an original action by the creditor,
the defendant shall provide notice complying with Subsection (b)
at the time of filing the counterclaim and, on application of the
creditor to the court, the action is subject to abatement for a
period of 60 days from the date of the court order. During the
abatement period the creditor may correct a violation. As part
of the correction of the violation, the creditor shall offer to
pay the obligor's reasonable attorney's fees as determined by the
court based on the hours reasonably expended by the obligor's
counsel with regard to the alleged violation before the
abatement. A creditor who corrects a violation as provided by
this subsection is not liable to an obligor for the violation.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch.
1018, Sec. 2.07, eff. September 1, 2005.
Sec. 305.007. PENALTIES EXCLUSIVE. The penalties provided by
this chapter are the only penalties for violation of this
subtitle for contracting for, charging, or receiving interest in
an amount that produces a rate in excess of the maximum rate
allowed by law. Common law penalties do not apply.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 305.008. CRIMINAL PENALTY. (a) A person commits an
offense if the person contracts for, charges, or receives
interest on a transaction for personal, family, or household use
that is greater than twice the amount authorized by this
subtitle.
(b) An offense under this section is a misdemeanor punishable by
a fine of not more than $1,000.
(c) Each contract or transaction that violates this section is a
separate offense.
(d) This section applies only to a contract or transaction
subject to this subtitle.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
SUBCHAPTER B. EXCEPTION FROM LIABILITY
Sec. 305.101. ACCIDENTAL AND BONA FIDE ERROR. A creditor is not
subject to penalty under this chapter for any usurious interest
that results from an accidental and bona fide error.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 305.102. LEGAL INTEREST DURING INTEREST-FREE PERIOD. A
person is not liable to an obligor solely because the person
charges or receives legal interest before the 30th day after the
date on which the debt is due.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 305.103. CORRECTION OF VIOLATION. (a) A creditor is not
liable to an obligor for a violation of this subtitle if:
(1) not later than the 60th day after the date the creditor
actually discovered the violation, the creditor corrects the
violation as to that obligor by taking any necessary action and
making any necessary adjustment, including the payment of
interest on a refund, if any, at the applicable rate provided for
in the contract of the parties; and
(2) the creditor gives written notice to the obligor of the
violation before the obligor gives written notice of the
violation or files an action alleging the violation.
(b) For the purposes of Subsection (a), a violation is actually
discovered at the time of the discovery of the violation in fact
and not at the time when an ordinarily prudent person, through
reasonable diligence, could or should have discovered or known of
the violation. Actual discovery of a violation in one transaction
may constitute actual discovery of the same violation in other
transactions if the violation is of such a nature that it would
necessarily be repeated and would be clearly apparent in the
other transactions without the necessity of examining all the
other transactions.
(c) For purposes of Subsection (a), written notice is given when
the notice is delivered to the person or to the person's
authorized agent or attorney of record personally, by telecopier,
or by United States mail to the address shown on the most recent
documents in the transaction. Deposit of the notice as registered
or certified mail in a postage paid, properly addressed wrapper
in a post office or official depository under the care and
custody of the United States Postal Service is prima facie
evidence of the delivery of the notice to the person to whom the
notice is addressed.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 305.104. CORRECTION EXCEPTION AVAILABLE TO ALL SIMILARLY
SITUATED. If in a single transaction more than one creditor may
be liable for a violation of this subtitle, compliance with
Section 305.103 by any of those creditors entitles each to the
same protection provided by that section.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.
Sec. 305.105. AMOUNTS PAYABLE PURSUANT TO A FINAL JUDGMENT. A
creditor is not liable to an obligor for a violation of this
subtitle if the creditor receives interest that has been awarded
pursuant to a final judgment that is no longer subject to
modification or reversal.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept.
1, 1999.