               THEA'ITORNEYGENERAT~
                          OF TEXAS
                     AUS-~IN. T-s 787ll

                                         May 2,   1975


The Honorable John P. Pareons                             Opinion No.     H-   599
Commissioner
Texas Credit Union Department                             Re:    Maximum rate of interest
1106 Clayton Lane, Suite 206-East                                which may be charged by
Austin, Texas 78723                                              state chartered credit
                                                                 unions on first mortgage
Dear Mr.      Parsons:                                           real estate loans

    You have requested our opinion regarding the maximum      rate of interest
which may be charged by state chartered    credit unions on first mortgage
real estate    loans.

    Article 16, section 11 of the Texas Constitution              sets   out the basic   Texas
usury law.   It provides.  in pertinent part:

          The Legislature    shall have authority 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 usurious:     provided, further,  that in contracts
          where no rate,of interest is agreed upon, the rate shall
          not exceed six per cent-urn (6%) per annum.

Article   5069-l.   02.   V. T. C. S.,    implements     this constitutional   provision:

          Except as otherwise fixed by law, the maximum     rate
          of interest shall be ten percent per annum.  A greater
          rate of interest than ten percent per annum unless
          otherwise authorized by law shall be deemed usurious.                      _
          . . .

    Both article 5069-L 02 and the constitutional  provision declare any annual
percentage   rate in excess of ten percent to be usurious,  but permit statutory




                                            p. 2662
The Honorable   John P.   Parsons,   page    2   (H- 599)




exceptions.  The Credit Union Act provides    such an exception         for “credit
unions” as defined by article 2461- 1. V. T. C. S. :

        No loan shall bear an interest rate in excess of one
        percent per month on the unpaid monthly balance.
        V. T.C.S.,   art. 2461-15(e).

     By Acts 1973, 63rd Leg.,  ch. 440. sec. 6, p.          1217. there was deleted
from article 2461-15 of the Texas Credit Union Act           a provision which first
appeared in 1969 when the new Texas Credit Union            Act, (V. T. C. S., art. 2461-L
et seq. ) replaced the former credit union statute.         (V. T. C. S., art. 2462).  The
deleted provision  read:

            (i) No credit union may charge more        than ten
        percent simple interest on loans secured       by‘a
        mortgage  on real estate.

     Prior to the insertion of the above language in the 1969 Credit Union Act,
credit unions had apparently been authorized to charge rm percent per month
on the unpaid balance of first mortgage loans.     The Legislature  recognized
this in the title of Acts 1969, 61st Leg., R. S., ch. 186, p. 540, which replaced
the old credit union statute with the new Texas Credit Union Act.      The title
read:

            An Act relating to the organization   and regulation
        of credit unions; reducing the interest to be charged
        on loans secured by real estate: repealing certain
        laws; and declaring an emergency.       (Emphasis  added)

Also see, V. T. C. S., art. 5069-2.05       of the Texas Consumer      Code enacted in
1967, and the former V. T.C.S.,     art.    2462, sec. 5.

     We are thus compelled to conclude that the deletion of the reference    to real
estate loans by the 1973 amendment restored to credit unions their authority
to charge a higher~rate of interest for real estate loans.   The Legislature
must have intended that real estate loans made by credit unions once again
were to be subject to the article 2461-15(e) maximum    rate of one percent per
month of the unpaid monthly balance.




                                     p. 2663
.   ’




The Honorable      John P.    Parsons,     page 3        (H- 599)




                                SUMMARY

            One    percent per month on the unpaid monthly
        balance    is the maximum    rate of interest which
        may be     charged by state chartered credit unions
        on first   mortgage  real estate loans.

                                                  Very   truly yours,




                                                  Attorney   General    of Texas

APPROVED:




DAVID   M.   KENDALL,         First   Assistant




C. ROBERT HEATH,             Chairman
Opinion Committee




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