SECTION 83.703. Default Charges

(a) Precomputed loans. Additional interest for default may be charged on a precomputed secondary mortgage loan, whether regular or irregular, or on a secondary mortgage loan that employs the scheduled installment earnings method, to the extent it is authorized by Texas Finance Code, §342.302 or §342.305.

(b) Interest-bearing loans. Additional interest for default may be charged on an interest-bearing Texas Finance Code, Chapter 342, Subchapter G loan as authorized under Texas Finance Code, §342.302.

(c) Contract required. No default charge may be assessed, imposed, charged, or collected unless contracted for in writing by the parties.

(d) Default period. A default charge may not be assessed until after the 10th day after the installment due date. For example, if the installment due date is the 1st of the month, a default charge may not be assessed until the 12th of the month.

(e) Missed payment covered by insurance. If any payment or partial payment in default is later paid by some form of insurance, such as credit disability insurance or collateral protection insurance, any prior assessment of additional interest for default must be waived.

(f) Pyramiding prohibited. An authorized lender seeking to assess additional interest for default on a precomputed secondary mortgage loan under Texas Finance Code, §342.302 or §342.305 must comply with the prohibition on the pyramiding of late charges provided by the Federal Trade Commission's Credit Practices Rule at 16 C.F.R. §444.4.

Source Note: The provisions of this §83.703 adopted to be effective November 9, 2006, 31 TexReg 8994; amended to be effective November 4, 2010, 35 TexReg 9698; amended to be effective July 10, 2014, 39 TexReg 5142; amended to be effective May 12, 2022, 47 TexReg 2738