Texas Finance Code Section 348: Regulated Loans

Chapter 348 of the Texas Finance Code, often referred to as the "Regulated Loan Act," governs specific types of consumer loans in Texas. It's crucial for both lenders and borrowers to understand the provisions within this chapter, as it establishes important regulations regarding interest rates, fees, loan terms, and disclosure requirements. The intent is to protect consumers from predatory lending practices while allowing legitimate lenders to operate within defined parameters.

A key aspect of Chapter 348 lies in defining what constitutes a "regulated loan." Generally, it applies to loans that are not secured by real property (e.g., personal loans, installment loans) and that fall within certain principal amount thresholds. These thresholds are subject to change, so referring to the current version of the statute is essential. Loans exceeding the specified principal amount, or those secured by real estate, typically fall under different sections of the finance code and are not subject to Chapter 348's restrictions.

One of the most significant areas covered by Chapter 348 is the regulation of interest rates and fees. The chapter sets maximum allowable rates that lenders can charge on regulated loans. This aims to prevent exorbitant interest charges that could trap borrowers in cycles of debt. The calculation of these rates can be complex and often involves tiered structures based on the loan's principal amount. Lenders must adhere strictly to these rate limitations. Furthermore, the chapter limits the types and amounts of fees that can be charged. Common prohibited fees include those not expressly authorized in the statute.

Disclosure requirements are another critical component of Chapter 348. Lenders are legally obligated to provide borrowers with clear and conspicuous disclosures about the loan's terms and conditions before the loan is finalized. These disclosures must include details about the interest rate, finance charges, total amount to be repaid, the number and amount of payments, and any prepayment penalties. Transparency is prioritized to empower borrowers to make informed decisions.

Chapter 348 also outlines specific rules regarding loan repayment and default. While prepayment penalties are often restricted or prohibited, late fees may be permitted under certain circumstances, with limitations on their amount. The statute also addresses the lender's remedies in the event of borrower default, including permissible collection practices. Lenders are expected to follow fair and lawful debt collection procedures, avoiding harassment or abusive tactics. Violations of Chapter 348 can lead to significant penalties for lenders, including fines, license revocation, and even potential civil liability.

It is important to consult the official Texas Finance Code for the most current and precise information on Chapter 348. This overview is for informational purposes only and does not constitute legal advice. Both lenders and borrowers contemplating regulated loans should seek qualified legal counsel to ensure full compliance with the law.