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Court asked to resolve how Texas computes interest for usury claims in certified question from 5th Circuit
Summary
Justices considered whether Texas’s usury statute requires amortizing interest on the declining principal (actuarial method) or whether the district court correctly spread interest without accounting for declining principal; the outcome will affect calculation of maximum lawful interest and potential remedies in a commercial loan dispute.
The court heard argument in a certified question from the U.S. Court of Appeals for the Fifth Circuit in American Pearl Group v. National Payment Systems, a dispute over how to compute maximum allowable interest under Texas Finance Code §306.004 when a loan schedule requires periodic principal payments.
Why it matters: The question—whether the statutory phrase “amortizing or spreading using the actuarial method” requires courts to compute interest on a declining principal balance (crediting payments first to interest, then principal) or permits the simpler spreading calculation applied by the district court—affects when a commercial loan is…
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