Acceleration Clauses

"This issue still appears to be governed primarily by common law rather than statute. However, Section 306.005 of Title 4 of the state code does state that:

With respect to a loan subject to this chapter, a creditor and an obligor may agree to a prepayment premium, make-whole premium, or similar fee or charge, whether payable in the event of voluntary prepayment, involuntary prepayment, acceleration of maturity, or other cause that involves premature termination of the loan, and those amounts do not constitute interest."

"It is very easy to have a lease or loan contract be otherwise proper in every respect, only to have the contract held to be usurious due to the acceleration clause. If the acceleration clause effectively would require unearned interest being charged, said clause is usurious. Examples of acceleration clauses held to be usurious:

""all payments become immediately due and payable upon default""; ""all payments required under the lease become immediately due and payable"".

Point being, if an acceleration clause requires the lessee/maker to pay unearned interest, it will be usurious. A poorly worded acceleration clause almost always invokes the more severe penalties under the Texas usury laws, so great care should be taken in drafting said clauses.

Acceleration clauses which Texas Courts have held to be non-usurious include:

""Upon default, the holder may ""collect all payments due thereunder""; ""the note calls for ""acceleration of all sums herein to be paid"".

That type of language has been held to be lawful in acceleration clauses."