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November 14, 2007
VIA E-MAIL
Laurie Hobbs
Assistant General Counsel
Office of Consumer Credit Commissioner
2601 North Lamar Boulevard
Austin, Texas 78705
Re: 7 TAC Chapter 89.501 - 89.601
Dear Ms. Hobbs:
On behalf of the Independent Bankers Association of Texas (“IBAT”) I would like to make the following comments on proposed new 7 TAC Chapter 89. These comments are directed to Subchapter F relating to costs and fees.
First, we would suggest that a loan origination fee is not a fee but rather is interest under Texas usury law. Permitting a loan origination fee in the fee category could result in a transaction exceeding the maximum rate authorized in Section 32.06 Texas Tax Code for these transactions. Therefore, we strongly urge you to delete loan origination fees from the category of permissible fees.
Next, we would suggest that you clarify that fees paid to third parties be limited to the actual charges of those third parties with no up-charge by the lender. There are several reasons for this concern. First, under 12 CFR § 226.4(a)(1)(ii) an up-charge of a third-party charge is a finance charge under the Truth in Lending Act rules. Next, under the Real Estate Settlement Procedures Act, it is a violation of § 8(b) for any person to accept a split of a fee where services are not performed by that person. Thus, up-charging a third-party fee would arguably violate the anti-kickback rules of RESPA. Admittedly, RESPA may not apply to all property tax lenders. However, we believe that it will apply to some. Finally, the up-charge may arguably constitute interest under a strict analysis of the Texas usury law. Accordingly, the up-charge again could result in inadvertent violation of the interest rate cap specified in § 32.06 Texas Tax Code.
Thank you for this opportunity to comment.
Sincerely,
Karen M. Neeley
KMN:egw
CIRCULAR 230 DISCLOSURE: Pursuant to Department of Treasury Circular 230, this correspondence is not intended or written to be used, and may not be used by the recipient, for the purposes of avoiding any federal tax penalty which may be asserted.
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