2005 Texas Finance Code CHAPTER 306. COMMERCIAL TRANSACTIONS

FINANCE CODE

CHAPTER 306. COMMERCIAL TRANSACTIONS

SUBCHAPTER A. GENERAL PROVISIONS


	§ 306.001. DEFINITIONS.  In this chapter:                                   
		(1)  "Account purchase transaction" means an agreement 
under which a person engaged in a commercial enterprise sells 
accounts, instruments, documents, or chattel paper subject to this 
subtitle at a discount, regardless of whether the person has a 
repurchase obligation related to the transaction.
		(2)  "Affiliate of an obligor" means a person who 
directly or indirectly, or through one or more intermediaries or 
other entities, owns an interest in, controls, is controlled by, or 
is under common control with the obligor, or a person in which the 
obligor directly or indirectly, or through one or more 
intermediaries or other entities, owns an interest.  In this 
subdivision "control" means the possession, directly or 
indirectly, or with one or more other persons, of the power to 
direct or cause the direction of the management and policies of a 
person, whether through the ownership of voting securities, by 
contract, or otherwise.
		(3)  "Asset-backed securities" means debt obligations 
or certificates of beneficial ownership that:
			(A)  are a part of a single issue or single series 
of securities in an aggregate of $1 million or more and issuable in 
one or more classes;
			(B)  are secured by a pledge of, or represent an 
undivided ownership interest in:
				(i)  one or more fixed or revolving 
financial assets that by their terms convert into cash within a 
definite period;  and
				(ii)  rights or other assets designed to 
assure the servicing or timely distribution of proceeds to security 
holders;  and
			(C)  are issued for a business, commercial, 
agricultural, investment, or similar purpose by a pass-through 
entity.
		(4)  "Business entity" means a partnership, 
corporation, joint venture, limited liability company, or other 
business organization or business association, however organized.
		(5)  "Commercial loan" means a loan that is made 
primarily for business, commercial, investment, agricultural, or 
similar purposes.  The term does not include a loan made primarily 
for personal, family, or household use.

Text of subd. (5-a) effective upon passage of Acts 2005, 79th Leg., 
S.J.R. 21.  See historical and statutory notes post.
		(5-a)  "Exempt commercial loan" means a commercial loan 
in which one or more persons as part of the same transaction lends, 
advances, borrows, or receives, or is obligated to lend or advance 
or entitled to borrow or receive, money or credit with an aggregate 
value of:
			(A)  $7 million or more if the commercial loan is 
primarily secured by real property;  or
			(B)  $500,000 or more if the commercial loan is 
not primarily secured by real property.
		(6)  "Guaranty" means an agreement under which a 
person:                    
			(A)  assumes, guarantees, or otherwise becomes 
primarily or contingently liable for the payment or performance of 
an obligation of another person;
			(B)  provides security, by creation of a lien or 
security interest or otherwise, for the payment or performance of 
an obligation of another person;  or
			(C)  agrees to purchase or to advance 
consideration to purchase an obligation of another person or 
property that is security for the payment or performance of the 
obligation.
		(7)  "Pass-through entity" means a business entity, 
association, grantor or common-law trust under state law, or 
segregated pool of assets under federal tax law that, on the date of 
original issuance of asset-backed securities, does not have 
significant assets other than:
			(A)  assets pledged to or held for the benefit of 
holders of the asset-backed securities;  or
			(B)  assets pledged to or held for the benefit of 
holders of other asset-backed securities previously issued.
		(8)  "Prepayment premium " means compensation paid by 
or that is or will become due from an obligor to a creditor solely as 
a result or condition of the payment or maturity of all or a portion 
of the principal amount of a loan before its stated maturity or a 
regularly scheduled date of payment, as a result of the obligor's 
election to pay all or a portion of the principal amount before its 
stated maturity or a regularly scheduled date of payment.

Text of subd. (9) effective until approval of Acts 2005, 79th Leg., 
S.J.R. 21.  See historical and statutory notes post.
		(9)  "Qualified commercial loan":                                             
			(A)  means:                                                                  
				(i)  a commercial loan in which one or more 
persons as part of the same transaction lends, advances, borrows, 
or receives, or is obligated to lend or advance or entitled to 
borrow or receive, money or credit with an aggregate value of:
					(a)  $3 million or more if the 
commercial loan is secured by real property;  or
					(b)  $250,000 or more if the commercial 
loan is not secured by real property and, if the aggregate value of 
the commercial loan is less than $500,000, the loan documents 
contain a written certification from the borrower that:
					(1)  the borrower has been advised by 
the lender to seek the advice of an attorney and an accountant in 
connection with the commercial loan;  and
					(2)  the borrower has had the 
opportunity to seek the advice of an attorney and accountant of the 
borrower's choice in connection with the commercial loan;  and
				(ii)  a renewal or extension of a commercial 
loan described by Paragraph (A), regardless of the principal amount 
of the loan at the time of the renewal or extension;  and
			(B)  does not include a commercial loan made for 
the purpose of financing a business licensed by the Motor Vehicle 
Board of the Texas Department of Transportation under Section 
2301.251(a), Occupations Code.

Text of subd. (9) effective upon approval of Acts 2005, 79th Leg., 
S.J.R. 21.  See historical and statutory notes post.
		(9)  "Qualified commercial loan":                                             
			(A)  means:                                                                  
				(i)  a commercial loan in which one or more 
persons as part of the same transaction lends, advances, borrows, 
or receives, or is obligated to lend or advance or entitled to 
borrow or receive, money or credit with an aggregate value of:
					(a)  $1 million or more but less than 
$7 million if the commercial loan is primarily secured by real 
property;  or
					(b)  $100,000 or more but less than 
$500,000 if the commercial loan is not primarily secured by real 
property and the loan documents contain a written certification 
from the borrower that:
						(1)  the borrower has been 
advised by the lender to seek the advice of an attorney and an 
accountant in connection with the commercial loan;  and
						(2)  the borrower has had the 
opportunity to seek the advice of an attorney and accountant of the 
borrower's choice in connection with the commercial loan;  and
				(ii)  a renewal or extension of a commercial 
loan described by this paragraph, regardless of the principal 
amount of the loan at the time of the renewal or extension;  and
			(B)  does not include a commercial loan made for 
the purpose of financing a business licensed by the Motor Vehicle 
Board of the Texas Department of Transportation under Section 
2301.251(a), Occupations Code.

Added by Acts 1999, 76th Leg., ch. 62, § 7.18(a), eff. Sept. 1, 
1999.  Amended by Acts 1999, 76th Leg., ch. 531, § 2, eff. Sept. 
1, 1999;  Acts 1999, 76th Leg., ch. 994, § 2, eff. Sept. 1, 1999;  
Acts 2003, 78th Leg., ch. 1276, § 14A.772, eff. Sept. 1, 2003;  
Acts 2005, 79th Leg., ch. 1018, § 2.08, eff. Sept. 1, 2005;  Acts 
2005, 79th Leg., ch. 1018, § 2.09.


	§ 306.002. INTEREST;  APPLICATION OF OTHER PROVISIONS OF 
SUBTITLE.        

Text of subsec. (a) effective until approval of Acts 2005, 79th 
Leg., S.J.R. 21.  See historical and statutory notes post.
	(a)  A creditor may contract for, charge, and receive from an 
obligor on a commercial loan a rate or amount of interest that does 
not exceed the applicable ceilings computed in accordance with 
Chapter 303.

Text of subsec. (a) effective upon approval of Acts 2005, 79th Leg., 
S.J.R. 21.  See historical and statutory notes post.
	(a)  Except as provided by Section 306.1015, a creditor may 
contract for, charge, and receive from an obligor on a commercial 
loan a rate or amount of interest that does not exceed the 
applicable ceilings computed in accordance with Chapter 303.
	(b)  All other applicable provisions, remedies, and 
penalties of this subtitle apply to a commercial loan unless this 
chapter expressly provides otherwise.

Text of subsec. (c) effective upon passage of Acts 2005, 79th Leg., 
S.J.R. 21.  See historical and statutory notes post.
	(c)  The provisions of this chapter do not affect 
transactions that are not subject to this chapter nor affect or 
negatively impact any rule of law applicable to transactions not 
subject to this chapter.

Added by Acts 1999, 76th Leg., ch. 62, § 7.18(a), eff. Sept. 1, 
1999.  Amended by Acts 2005, 79th Leg., ch. 1018, § 2.10.


	§ 306.003. COMPUTATION OF TERM.  A creditor and an 
obligor may agree to compute the term and rate of a commercial loan 
based on a 360-day year consisting of 12 30-day months.  For 
purposes of this chapter, each rate ceiling expressed as a rate per 
year may mean a rate per year consisting of 360 days and of 12 30-day 
months.

Added by Acts 1999, 76th Leg., ch. 62, § 7.18(a), eff. Sept. 1, 
1999.    


	§ 306.004. DETERMINING RATES OF INTEREST BY 
SPREADING.  (a) To determine whether a commercial loan is usurious, 
the interest rate is computed by amortizing or spreading, using the 
actuarial method during the stated term of the loan, all interest at 
any time contracted for, charged, or received in connection with 
the loan.
	(b)  If a commercial loan is paid in full before the end of 
the stated term of the loan and the amount of interest received for 
the period that the loan exists exceeds the amount that produces the 
maximum rate authorized by law for that period, the lender shall:
		(1)  refund the amount of the excess to the borrower;  
or                   
		(2)  credit the amount of the excess against amounts 
owing under the loan.  
	(c)  A lender who complies with Subsection (b) is not subject 
to any of the penalties provided by law for contracting for, 
charging, or receiving interest in excess of the maximum rate 
authorized.

Added by Acts 1999, 76th Leg., ch. 62, § 7.18(a), eff. Sept. 1, 
1999.    


	§ 306.005. PREPAYMENT PREMIUMS AND SIMILAR AMOUNTS.  With 
respect to a loan subject to this chapter, a creditor and an obligor 
may agree to a prepayment premium, make-whole premium, or similar 
fee or charge, whether payable in the event of voluntary 
prepayment, involuntary prepayment, acceleration of maturity, or 
other cause that involves premature termination of the loan, and 
those amounts do not constitute interest.

Added by Acts 1999, 76th Leg., ch. 62, § 7.18(a), eff. Sept. 1, 
1999.  Amended by Acts 2005, 79th Leg., ch. 1018, § 2.12, eff. 
Sept. 1, 2005.


	§ 306.006. CERTAIN AUTHORIZED CHARGES ON COMMERCIAL 
LOANS.  In addition to the interest authorized by this chapter, the 
parties to a commercial loan may agree and stipulate for:
		(1)  a delinquency charge on the amount of any 
installment or other amount in default for a period of not less than 
10 days in an amount not to exceed five percent of the total amount 
of the installment;  and
		(2)  a returned check fee in an amount that does not 
exceed the maximum fee authorized in Section 3.506, Business &
Commerce Code, on any check, draft, order, or other instrument or 
form of remittance that is returned unpaid or dishonored for any 
reason.

Added by Acts 1999, 76th Leg., ch. 62, § 7.18(a), eff. Sept. 1, 
1999.  Amended by Acts 2005, 79th Leg., ch. 1018, § 2.13, eff. 
Sept. 1, 2005.


	§ 306.007. GUARANTY, ASSUMPTION, PAYMENT, OR OTHER 
AGREEMENT.  With respect to a commercial loan, an obligor may be 
required to assume, pay, or provide a guaranty of another person's 
existing or future obligation as a condition of the obligor's own 
use, forbearance, or detention of money.  The amount of the other 
person's obligation required to be assumed, paid, or guaranteed 
does not constitute interest with respect to any obligation of the 
obligor.

Added by Acts 2005, 79th Leg., ch. 1018, § 2.14, eff. Sept. 1, 
2005.     

SUBCHAPTER B. PROVISIONS RELATING TO SPECIFIC TYPES OF COMMERCIAL 
LOANS OR TRANSACTIONS


	§ 306.101. QUALIFIED COMMERCIAL LOAN.  (a) The parties to 
a qualified commercial loan agreement may contract for a rate or 
amount of interest that does not exceed the applicable rate 
ceiling.
	(b)  The parties to a qualified commercial loan agreement may 
contract for the following charges:
		(1)  a discount or commission that an obligor has paid 
or agreed to pay to one or more underwriters of securities issued by 
the obligor;
		(2)  an option or right to exchange, redeem, or convert 
all or a portion of the principal amount of the loan, or interest on 
the principal amount, for or into capital stock or other equity 
securities of an obligor or of an affiliate of an obligor;
		(3)  an option or right to purchase capital stock or 
other equity securities of an obligor or of an affiliate of an 
obligor;
		(4)  an option or other right created by contract, 
conveyance, or otherwise, to participate in or own a share of the 
income, revenues, production, or profits:
			(A)  of an obligor or of an affiliate of an 
obligor;                       
			(B)  of any segment of the business or operations 
of an obligor or of an affiliate of an obligor;  or
			(C)  derived or to be derived from ownership 
rights of an obligor or of an affiliate of an obligor in property, 
including any proceeds of the sale or other disposition of 
ownership rights;  or
		(5)  compensation realized as a result of the receipt, 
exercise, sale, or other disposition of an option or other right 
described by this subsection.
	(c)  A charge under Subsection (b) is not interest.                            

Added by Acts 1999, 76th Leg., ch. 62, § 7.18(a), eff. Sept. 1, 
1999.    


	§ 306.1015. EXEMPT COMMERCIAL LOAN--RATE CEILINGS 
INAPPLICABLE.           

Text of section effective upon passage of Acts 2005, 79th Leg., 
S.J.R. 21.  See historical and statutory notes post.
	(a)   The parties to an exempt commercial loan agreement may 
contract for, charge, and receive any rate or amount of interest to 
which the parties agree, however computed.
	(b)  A rate ceiling provided by this title or another law of 
this state does not apply to an exempt commercial loan.

Added by Acts 2005, 79th Leg., ch. 1018, § 2.11.                           


	§ 306.102. ASSET-BACKED SECURITIES TRANSACTION.  An 
amount that is paid, passed through, or obligated to be paid or to 
be passed through in connection with asset-backed securities or 
that is not paid as a result of a discounted sale price to the 
holders of asset-backed securities by a pass-through entity is not 
interest.  This section does not affect interest that is agreed on 
and fixed by the parties to a written contract and paid, charged, or 
received on the ultimate underlying assets pledged to or held for 
the benefit of holders of asset-backed securities.

Added by Acts 1999, 76th Leg., ch. 62, § 7.18(a), eff. Sept. 1, 
1999.    


	§ 306.103. ACCOUNT PURCHASE TRANSACTION.  (a) An amount 
of a discount in, or charged under, an account purchase transaction 
is not interest.
	(b)  For the purposes of this chapter, the parties' 
characterization of an account purchase transaction as a purchase 
is conclusive that the account purchase transaction is not a 
transaction for the use, forbearance, or detention of money.

Added by Acts 1999, 76th Leg., ch. 62, § 7.18(a), eff. Sept. 1, 
1999.