      _   --.




                      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




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