Parties may agree to a variable interest-rate formula, but the resulting rate cannot exceed the contract’s rate ceiling.
Sec. 303.015. VARIABLE RATE. (a) The parties to a contract, including a contract for an open-end account, may agree to any index, formula, or provision of law by which the interest rate or amount of time price differential will be determined, but the agreed rate of interest or yield from an amount of time price differential may not exceed the amount that would be produced by the rate ceiling applicable to the contract. (b) A variable contract rate described by this section may not be used in a contract in which the interest or time price differential is precomputed and added into the amount of the contract at the time the contract is made. (c) A variable rate agreement for credit extended primarily for personal, family, or household use must include the disclosures identified for variable rate contracts required by regulations issued by the Federal Reserve Board and the Consumer Financial Protection Bureau under the Truth in Lending Act (15 U.S.C. Section 1601 et seq.), as amended, except that if that Act does not apply because of the amount of the transaction, the following disclosure must be included in a size equal to at least 10-point type that is boldface, capitalized, underlined, or otherwise set out from surrounding material so as to be conspicuous: "NOTICE TO CONSUMER: UNDER TEXAS LAW, IF YOU CONSENT TO THIS AGREEMENT, YOU MAY BE SUBJECT TO A FUTURE RATE AS HIGH AS 24 PERCENT PER YEAR." Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept. 1, 1999. Amended by: Acts 2023, 88th Leg., R.S., Ch. 159 (S.B. 1371), Sec. 5, eff. September 1, 2023.