Untitled Texas Attorney General Opinion ( 1979 )

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The Attorney General of Texas
May 3, 1979
MARK WHITE
AttorneyGeneral
Honorable Jerry (Nub) Donaldson Opinion No. MW-17
Chairman
House Committee on Financial Re: Whether House Bill 1212 is
Institutions constitutionaL
State Capitol
Austin, Texas
Dear Representative Donaldson:
You have asked if House Bill 1212is constitutionat The bill would
amend article 5069-L.02,V.T.C.S., to provide, in pertinent part:
Art. L02. MAXIMUM RATES OF INTEREST. (a)
Except as otherwise fixed by law, the maximum rate
of interest is:
(1) one percent more than the discount rate on 90-
day commercial paper in effect on the day the loan is
made at the federal reserve bank in the federal
reserve district where the lender is located;
(2) 12 percent a year if the rate described by
Subsection (1)of this section is more than 12 percent a
year; or
(3) 10 percent a year if the rate described by
Subsection (1) of this section is less than 10 percent a
Ye=--
(b) A rate of interest that is greater than that
allowed by Section (a) of this article is usuriousUnless
it is otherwise authorized by law.
Article 16, section ll of the Texas Constitution authorizes the legislature to
classify loans and lenders, ~license and regulate
lenders, define interest and fix maximum rates of
interest; provided, however, in the absence of
legislation fixing maximum rates of interest all
contracts for a greater rate of interest than ten per
centum (10%) per annum shall be deemed
usurmus.. . .
p. 49
Honorable Jerry (Nub) Donaldson - Page Two (MVJ-17)
This bill fixes an absolute maximum rate of interest, in that in no instance may the
rate exceed 12 percent a year. Fixing such a rate is clearly within the legislature’s
authority under section 11of article 16 of the constitution.
We do not believe that the provisions of the bill suffer from the same defects which
led the court in Gonzales County Savings and Loan Ass’n v. Freeman, 534 S.W.2d 903 (Tex.
19761,to hold that the legislature had not fixed a maximum rate of interest. See San
Antonio Ind. Sch. Dist. v. City of San Antonio, 550 S.W.2d 262 (Tex. 1976). HoweverTf the
legislature wants to insure that it has set a maximum rate of interest under any
construction by the courts, it can draft a severability clause to clarify that the absolute
maximumof 12percent is applicable regardless of the validity of the other provisions.
SUMMARY
House Bii 1212fixes a maximumrate of interest.
Attorney General of Texas
JOHN W. FAINTER,JR.
First Assistant Attorney General
TED L. HARTLEY
Executive Assistant Attorney General
I
Prepared by William G Reid
Assiitant Attorney General
APPROVED:
OPINIONCOMMITTEE
C. Robert Heath, Chairman
David B. Brooks
Tom Pollan
William G Reid
p. 50