Texas Attorney General Opinion: V-804 Page: 2 of 11
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Hon. Keith Kelly - Page 2 (V-804)
\ Section 11 of Article XVI of the Constitution
of Texas provides:
"All contracts for a greater rate of in-
terest than ten per centum (10%) per annum
shall be deemed usurious, and the first Leg-
islature, after this amendment is adopted,
shall provide appropriate pains and penalties
to prevent the same . . .
Whil "usury is defined and denounced by the
Constitution", the term "interest" is not there defined;
and it follows that the word "interest" was used in its
common law sense. "'Interest', as known to the common Oe
law, is defined as 'a compensation usually reckoned by a
percentage for the lqan,.use, or forbearance of money'",
and it is in this sense that we must apply the term. The
vice of H.B. 334, if there be one, would seem to'be in
those provisions of Section 12 which allOw the licensee
to charge,.in addition to interest at 10% per annlm, a
fee at the time,,pt the loan for "reasonable expenses in-
curred" and "services rendered" in connection with the
loan, as well as a subsequent fee for services rendered
or expenses incurred in connection with this loan, all
within specified limits. If this provision authorizes an
additional charge "for the loan, use, or forbearance of
money", that charge is "interest" and this section would
be unconstitutional in attempting to authorize usurious
The general rule respecting a distinction be-
tween "interest" and &other charges to the borrower has
been stated thus:
"The weight of authority is clearly to the
effect that payment by the borrower of reason-
able expenses incident to the loan, and of rea-
sonable compensationn for trouble and services
involved in, or necessitated by, it, when paid
and received in good faith, for such purposes
only, and not as consideration for the loan, do
not'constitute usury, even though they make the
4. Watts v Manh, 187 S.W.2d 917 (Tex. Civ. App. 1945,
error ref.) at p. 925.
5. Parks v. Lubbock, 92 Tex. 635, 51 S.W. 322 (1899)
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Texas. Attorney-General's Office. Texas Attorney General Opinion: V-804, text, 1949; (texashistory.unt.edu/ark:/67531/metapth265623/m1/2/: accessed February 23, 2019), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; crediting UNT Libraries Government Documents Department.