From “Equal Parts” to the Actuarial Method: Texas Supreme Court Redefines Usury Calculations for Commercial Loans

I. Introduction

In American Pearl Group, L.L.C., et al. v. National Payment Systems, L.L.C., No. 24-0759 (Tex. May 23, 2025), the Supreme Court of Texas answered a certified question from the United States Court of Appeals for the Fifth Circuit that goes to the heart of how usury is calculated on commercial loans in Texas.

At issue was how to interpret Texas Finance Code § 306.004(a), which prescribes the method for determining whether a commercial loan is usurious. Specifically, when a loan provides for periodic principal payments, must courts compute the maximum lawful interest using the “actuarial method” based on the declining principal balance, or may they instead rely on the older “equal parts” approach that treats the entire original principal as outstanding for the full term?

The Court’s answer—an unequivocal “Yes” to the declining-balance, actuarial approach—marks a significant clarification and modernization of Texas usury law. It rejects the continued use, for these loans, of the older “equal parts” spreading doctrine derived from Nevels v. Harris and Tanner Development Co. v. Ferguson, and it ties Texas practice to the widely accepted financial meaning of the “actuarial method.”

This commentary explains the decision, places it in its doctrinal and statutory context, and explores its likely impact on commercial lending and usury litigation in Texas.

II. Background and Procedural Posture

A. Parties and Business Relationship

The dispute arises in the credit-card-payment-processing industry:

• National Payment Systems, L.L.C. (NPS) acts as an intermediary between merchants and payment processors/banks. It submits merchant processing applications and receives a percentage of transaction fees, known as residual payments.
• American Pearl Group, L.L.C., John Sarkissian, and Andrei Wirth (collectively, “Pearl”) market NPS’s services and receive a share of NPS’s residual payments. Pearl maintains similar arrangements with other intermediaries, yielding a portfolio of residual-payment streams.

These residuals provide a predictable, monetizable cash flow that parties can borrow against or trade. That background is important because part of the alleged usury involved an option to buy a slice of Pearl’s residuals portfolio.

B. The Loan and Option Agreements

In May 2019, NPS extended a commercial loan to Pearl:

• Principal: $375,100.85
• Term: 42 months (3.5 years)
• Total repayment obligation: $684,966.76

The Loan Agreement included a payment schedule that:

• Required monthly payments.
• Allocated a constant amount of principal to each monthly payment.
• Allocated a growing amount of interest to each payment, resulting in increasing total monthly payments over time.

In addition, the Loan Agreement incorporated a simultaneously executed Option Agreement. Under that agreement:

• NPS could pay Pearl a five-figure amount in exchange for a six-figure slice of Pearl’s residuals portfolio.
• Pearl alleged that this option effectively allowed NPS to acquire rights allegedly worth many times the scheduled interest charges, thus functioning as additional, disguised interest.

C. The Federal District Court’s Decision

In March 2022, Pearl filed a usury suit in the U.S. District Court for the Northern District of Texas, seeking a declaration that the Loan and Option Agreements violated Texas usury law. NPS moved to dismiss.

The district court granted the motion, holding:

1. The Loan’s scheduled interest payments were not usurious when “spread” over the life of the loan.
2. The value of the Option Agreement was too speculative to be treated as interest at the pleadings stage.
3. Pearl had not adequately alleged a scheme to conceal usury.

Critically, the district court computed the maximum lawful interest using the “equal parts” spreading doctrine derived from Nevels v. Harris (1937), later referenced in a 1975 usury statute, and reaffirmed in Tanner Development Co. v. Ferguson (1977). Under that method, the maximum lawful interest is calculated by:

multiplying the total principal by the statutory maximum annual interest rate and then by the total loan term in years.

Applying this:

• Principal: $375,100.85
• Maximum rate: 28% per year (Texas Finance Code § 303.009(c))
• Term: 3.5 years

The district court computed:

$375,100.85 × 0.28 × 3.5 = $367,598.83

Since the Loan Agreement called for $309,865.91 in scheduled interest—less than the computed maximum—the court held that the loan was not usurious.

D. Appeal and Certified Question

Pearl appealed to the Fifth Circuit, arguing that:

• The district court misapplied Texas law by using the equal parts method rather than the statutory “actuarial method” now mandated by Texas Finance Code § 306.004(a).
• When properly computed using the actuarial method on a declining principal balance, the maximum permissible interest would be only $207,277.80, making the actual $309,865.91 in interest usurious.
• The Option Agreement constituted additional disguised interest of $783,394, reflecting the difference between the alleged $832,320 value of the residuals portfolio interest NPS could acquire and the $48,926 NPS would pay Pearl.

The Fifth Circuit:

• Stated (without extended analysis) that Texas law governs Pearl’s usury claims.
• Remanded the Option Agreement issue for more factual development and a “closer evaluation” of whether it constituted disguised interest.
• Expressed doubt about whether the district court had correctly interpreted § 306.004(a) in using the equal-parts method for the Loan Agreement.
• Certified to the Texas Supreme Court the precise question:

  If the loan in question provides for periodic principal payments during the loan term, does computing the maximum allowable interest rate “by amortizing or spreading, using the actuarial method” require the court to base its interest calculations on the declining principal balance for each payment period, rather than the total principal amount of the loan proceeds?

The Texas Supreme Court accepted the certified question, ordered briefing, and heard argument.

III. Summary of the Opinion

Justice Sullivan, writing for a unanimous Court, answered the certified question with a clear “Yes.” The Court held:

When a commercial loan provides for periodic principal payments during its term, § 306.004(a)’s command to compute the interest rate “by amortizing or spreading, using the actuarial method” requires courts to: base interest calculations on the declining principal balance for each payment period, not on the original total principal for the full term.

Key points of the holding:

• The Legislature’s 1997/1999 shift from “in equal parts” to “using the actuarial method” in the usury computation statute was deliberate and signaled a change in legal meaning.
• The term “actuarial method” has a well-established financial and legal meaning that inherently involves:
  • Allocating each payment first to interest and then to principal, and
  • Computing interest based on the current outstanding principal, not the original loan amount.
• The prior “equal parts” approach from Nevels, Tanner, and the 1975 statute cannot be imported into the current statute, because the text no longer uses “in equal parts” and instead specifies the “actuarial method.”
• In a loan with periodic principal reductions, applying the equal-parts method can produce wildly inflated effective interest rates in later periods (e.g., more interest than remaining principal in the final payment), which the Legislature chose to avoid by mandating the actuarial method.

The Court did not itself calculate whether the NPS loan is usurious; that task remains for the federal courts applying the clarified method. But it unequivocally fixed the legal standard by which that determination must be made.

IV. Detailed Analysis

A. The Legal Framework of Texas Usury Law

Texas law tightly regulates interest charges:

• “Interest” means “compensation for the use, forbearance, or detention of money.” (Tex. Fin. Code § 301.002(a)(4)).
• A transaction is usurious when the interest exceeds the maximum amount allowed by law (id. § 301.002(a)(17)).
• A usurious transaction has three elements, from Holley v. Watts, 629 S.W.2d 694 (Tex. 1982):
  1. A loan of money;
  2. An absolute obligation to repay the principal; and
  3. The exaction of greater compensation than allowed by law for the use of the money.
• Usury statutes are penal and thus strictly construed (First Bank v. Tony’s Tortilla Factory, Inc., 877 S.W.2d 285, 287 (Tex. 1994)).

For the loan in this case, the relevant maximum lawful rate was 28% per year, as provided in Texas Finance Code § 303.009(c).

Crucially, a loan is not usurious merely because the interest charged exceeds 28% in a single year. Texas applies the “spreading doctrine”: the interest is spread over the full term of the loan to determine whether the average rate over the contract’s term exceeds the cap. See Tanner, 561 S.W.2d at 787; Pentico v. Mad-Wayler, Inc., 964 S.W.2d 708, 714 (Tex. App.—Corpus Christi–Edinburg 1998, pet. denied).

Section 306.004(a) addresses how that spreading must be done for commercial loans:

§ 306.004(a): “To determine whether a commercial loan is usurious, the interest rate is computed by amortizing or spreading, using the actuarial method during the stated term of the loan, all interest at any time contracted for, charged, or received in connection with the loan.”

The interpretive fight in this case centers on the meaning and implications of “using the actuarial method.”

B. Statutory Interpretation: Text as “Alpha and Omega”

The Court proceeds from a firmly textualist stance:

• “The text is the alpha and omega of the interpretive process.” (BankDirect Capital Finance, LLC v. Plasma Fab, LLC, 519 S.W.3d 76, 86 (Tex. 2017)).
• Courts give words their plain meaning, in context, and refrain from interpretations that render any statutory language meaningless or redundant. See, e.g., Whole Woman’s Health v. Jackson, 642 S.W.3d 569, 581 (Tex. 2022); Pruski v. Garcia, 594 S.W.3d 322, 325 (Tex. 2020).
• When text is unambiguous, the judicial inquiry ends with its application.

The phrase “actuarial method” is not defined in § 306.004 or elsewhere in the Texas Finance Code, so the Court looks to:

• Dictionary definitions;
• Other statutes and regulations using the same term; and
• How courts and regulators commonly use the term.

C. The Meaning of “Actuarial Method”

The Court surveys multiple sources and finds a tight consensus:

• Black’s Law Dictionary (7th ed. 1999) defines “actuarial method” as:

  “[A] means of determining the amount of interest on a loan by using the loan’s annual percentage rate to separately calculate the finance charge for each payment period, after crediting each payment, which is credited first to interest and then to principal.”

• Texas Department of Banking regulation, 7 Tex. Admin. Code § 12.33(a)(1), defines it, in substance, as:

  A method of allocating payments between principal (amount financed) and finance charge, under which each payment is applied first to the accumulated finance charge and only then to the unpaid principal balance (the “amount financed”).

• The federal Truth in Lending Act (TILA), at 15 U.S.C. § 1615(d)(1), uses materially identical language.
• Numerous other states adopt similar definitions by statute (cited in a footnote), underscoring a nationwide standard meaning for the term.

Common themes in these definitions:

• Interest accrues on the current outstanding principal for each period.
• Each payment is applied:
  1. First to satisfy the interest that has accrued for that period; and
  2. Only then to reduce principal.
• Over time, as principal declines, the dollar amount of interest per period also decreases (for a fixed rate), because it is computed as rate × remaining principal × length of period.

Thus, “actuarial method” inherently implies a declining-balance approach to computing interest over time; it does not match an “equal parts” approach that treats the original principal as if it were outstanding for the full term irrespective of actual repayments.

D. Statutory History: From “Equal Parts” to “Actuarial Method”

NPS’s principal argument was that the Court should retain the equal-parts spreading method used in Nevels and Tanner, and once codified in a 1975 usury statute. That statute, governing loans secured by real property, instructed courts to:

determine the interest rate “by amortizing, prorating, allocating, and spreading, in equal parts during the period of the full stated term of the loan, all interest at any time contracted for, charged, or received….”
(Act of Mar. 12, 1975, 64th Leg., R.S., ch. 26, § 1, 1975 Tex. Gen. Laws 47, 47 (repealed 1997))

However, in 1997 and 1999 the Legislature enacted new statutes addressing computation of interest for:

• Commercial loans, and
• Loans secured by real property.

Those new enactments replaced the “in equal parts” language with what is now in § 306.004(a):

“[T]he interest rate is computed by amortizing or spreading, using the actuarial method during the stated term of the loan, all interest at any time contracted for, charged, or received….”

The Court emphasizes a key interpretive point, drawn from Brown v. City of Houston, 660 S.W.3d 749 (Tex. 2023), and from Scalia & Garner’s Reading Law:

• While legislative history (debates, committee reports) is disfavored, statutory history—the evolution of enacted text over time—is part of the law’s context.
• “A change in the language of a prior statute presumably connotes a change in meaning.” (quoting Scalia & Garner).

Thus, the Legislature’s deliberate substitution of “using the actuarial method” for “in equal parts” must be treated as meaningful. Courts may not simply continue using the equal-parts method that the Legislature explicitly removed from the statutory text.

E. Treatment of Precedents: Nevels and Tanner

NPS relied heavily on two prior Texas Supreme Court decisions:

• Nevels v. Harris, 102 S.W.2d 1046 (Tex. 1937)
• Tanner Development Co. v. Ferguson, 561 S.W.2d 777 (Tex. 1977)

Those cases stood for the spreading doctrine and described the equal-parts computation method, later codified in the 1975 statute. But the Court finds them not controlling in the present context, for several reasons.

1. Different Factual and Contractual Settings

Both Nevels and Tanner dealt with “interest-only” loans during the period relevant to the usury analysis:

• In Nevels, interest was withheld up front from the principal loan proceeds.
• In Tanner, interest for a specific year was advanced prior to the start of that repayment period.
• In both, the borrower’s payments during the period in question consisted only of interest—no scheduled principal reduction.

Because principal did not decline during the relevant periods, there was no need to account for a shrinking principal balance in evaluating the overall usury question. In such a static-principal context, spreading interest “in equal parts” over the loan term did not create the kinds of distortions that arise when principal is actually being repaid.

2. Statutory Context Has Changed

When Tanner was decided, the 1975 usury statute still expressly mandated computation “in equal parts” and was understood (correctly at that time) as codifying Nevels. That statutory background no longer exists. The Court underscores:

• The statutory text governing usury calculations for commercial loans today is § 306.004(a), which does not use the phrase “in equal parts.”
• Instead, it uses the distinct—and widely understood—term “actuarial method.”

Thus, the equal-parts language in Nevels and Tanner was linked to statutory text that has since been repealed and replaced. Those decisions are therefore not a sound guide to interpreting the current statute.

3. Distinguishing, Not Overruling

The Court does not expressly overrule Nevels or Tanner. Rather, it:

• Limits them to their statutory and factual contexts;
• Clarifies that they cannot override the Legislature’s new choice of language; and
• Emphasizes that they involved interest-only structures where the actuarial method and equal-parts method would not meaningfully diverge.

In other words, the Court implicitly recognizes that in a loan with no principal reduction during the relevant period, calculating maximum allowable interest on the original principal can coincide with actuarial thinking—but where principal does decline, the equal-parts method is inconsistent with the mandated actuarial method.

F. Application to the NPS Loan: Why Equal Parts Fails

To illustrate the problem, the Court highlights the end-of-loan anomaly that would arise if the equal-parts method were used here. If interest were calculated without regard to principal reductions:

• By the time of the final monthly payment, Pearl’s remaining principal under the schedule would be only $8,930.97.
• Yet the final payment would include $11,871.09 in interest alone.

This implies a single-month interest charge greater than the entire outstanding principal—an effective monthly interest rate of over 130%, and an annualized rate many times the 28% statutory cap. While Texas law allows high front-loaded interest so long as the average rate over the entire term stays under the maximum, the statutory switch to the “actuarial method” reflects a decision not to permit this kind of structural distortion where principal is being repaid periodically.

Under § 306.004(a) as now interpreted, the lawful-interest calculation for such a loan is:

The sum of each period’s maximum permitted interest, with the interest for each period computed based on the principal actually outstanding during that period—i.e., the declining balance.

Put formally (assuming a fixed annual cap R, principal balances Pt at the start of each period, and period length Δt in years):

Maximum total interest = Σ [ Pt × R × Δt ] over all payment periods.

If the interest contracted for, charged, or received over the loan’s term exceeds that sum, the loan is usurious.

G. Rejection of Simplicity-Based Policy Arguments

NPS argued that:

• The equal-parts method is simpler to apply.
• It provides greater predictability for lenders and borrowers.

The Court does not dispute these potential policy virtues but insists that they cannot trump the statute’s enacted text:

• Courts must apply the law the Legislature actually wrote, not what would be simpler or more convenient for regulated parties.
• Because “actuarial method” is a term of art with a settled meaning, courts must give effect to that meaning, especially when the Legislature has affirmatively abandoned the contrary “equal parts” formulation.

Put bluntly: simplicity is not a license to ignore statutory language or erase a deliberate statutory revision.

V. Clarifying Complex Concepts

A. Usury, Interest, and “Spreading” in Plain Terms

To understand the significance of the Court’s decision, it helps to unpack some core concepts in accessible terms.

1. What is “interest” in this context?

Interest is the price of borrowing money—the compensation the lender receives for allowing the borrower to use the lender’s funds. Texas defines it broadly as any compensation for the “use, forbearance, or detention” of money. That can include:

• Stated interest charges in a promissory note;
• Discounts (interest withheld from loan proceeds at origination);
• Certain fees or profit interests that function as additional compensation tied to the loan.

2. What is “usury”?

A loan is usurious when:

• There is a loan and an obligation to repay principal; and
• The total compensation the lender extracts for allowing the borrower to use the money exceeds the maximum lawful rate.

For this case, the cap is 28% per year. If, when properly calculated over the entire life of the loan, the effective interest rate exceeds 28%, the transaction is usurious—even if the loan documents never use that number.

3. What does it mean to “spread” interest over the term?

“Spreading” is a way of averaging interest over the full term of the loan. Instead of looking at one year in isolation (which could be high or low due to front-loading or back-loading of interest), courts spread all the interest contracted for, charged, or received across the total time the borrower has the lender’s money.

The crucial question here is: over what principal amount do we spread the interest?

• Equal-parts method: Treat all the interest as if it were earned on the original principal amount for the full contract term, even though the borrower repaid principal along the way.
• Actuarial method: Recognize that as principal is repaid, the lender has less money “at risk,” so the amount of interest that can be lawfully charged in later periods should be computed on the remaining (reduced) principal only.

B. Actuarial Method vs. Equal-Parts Method: A Simplified Comparison

Consider a simplified hypothetical:

• Principal: $100,000
• Maximum lawful annual interest rate: 10%
• Term: 2 years
• Borrower repays $50,000 principal at the end of year 1.

Equal-Parts Method (Old Approach)

Maximum lawful interest over 2 years:

$100,000 × 10% × 2 years = $20,000

Here, the law acts as if the lender had $100,000 outstanding for all 2 years, even though in year 2 the borrower only owed $50,000.

Actuarial/Declining-Balance Concept

Instead, under a declining-balance approach:

• Year 1: outstanding principal $100,000 → max interest = $100,000 × 10% = $10,000
• Year 2: outstanding principal $50,000 → max interest = $50,000 × 10% = $5,000

Total maximum lawful interest = $10,000 + $5,000 = $15,000.

The difference ($20,000 vs. $15,000) reflects the core economic principle behind the actuarial method: when a borrower pays down principal early, the lender’s risk and opportunity cost fall, so the total permissible compensation over the life of the loan should adjust accordingly.

The Texas Supreme Court’s decision effectively mandates this declining-balance logic for commercial loans with periodic principal payments.

C. Certified Questions and the Erie Context

This case also illustrates how federal and state courts interact on state-law questions.

• Under Erie Railroad Co. v. Tompkins, federal courts applying state law (as here, in a diversity case or related context) must follow how the state’s highest court interprets that law.
• When the state’s highest court has not yet resolved a controlling issue, a federal appellate court sometimes makes an “Erie guess”—its best prediction of what the state court would do.
• But many states, including Texas, have procedures allowing federal appellate courts to send (“certify”) questions of state law to the state’s highest court for an authoritative answer. Texas’s authority for this is in Tex. Const. art. V, § 3-c.

Here, the Fifth Circuit chose certification rather than guessing, and the Texas Supreme Court accepted and answered the question. The answer now governs not only this case but all future applications of § 306.004(a) in Texas courts.

VI. Implications and Potential Impact

A. Immediate Effect on the American Pearl–NPS Dispute

The Court’s opinion does not decide whether the NPS loan is in fact usurious. Instead:

• It clarifies the method by which the federal courts must compute the effective interest rate under § 306.004(a).
• The Fifth Circuit and the district court must now:
  • Apply the actuarial method on the declining principal balance for each of the 42 monthly periods; and
  • Sum the lawful interest for each period at the 28% annual cap (appropriately prorated monthly) to determine the maximum permissible total interest.
• If the total interest contracted for ($309,865.91) exceeds that actuarially computed maximum (which Pearl asserts is $207,277.80), then the loan would be usurious.

Separately, the Fifth Circuit’s remand on the Option Agreement remains live:

• If the option’s economics effectively yield NPS a large additional return tied to the loan, a court might treat that return as disguised interest.
• In that event, the total interest for usury purposes could include both the scheduled interest and the economic value of the option.

The Texas Supreme Court’s opinion does not speak directly to how to value or treat the Option Agreement; it only clarifies the method for calculating the maximum lawful interest under § 306.004(a).

B. For Lenders and Borrowers: Drafting and Compliance

For practitioners, the decision has several practical consequences:

• Loan design and modeling. Lenders must ensure that their interest schedules for commercial loans with periodic principal payments comply with § 306.004(a) when interest is computed using the actuarial/declining-balance method.
  • Internal loan-calculation models may need adjustment where they had previously relied on an equal-parts analysis.
  • Front-loaded or back-loaded structures become riskier if they result in total contracted interest that exceeds the sum of period-by-period maximums on the declining principal balance.
• “Creative” compensation structures. Participation interests, options, profit-sharing arrangements, or portfolio-purchase rights may be scrutinized as potential disguised interest.
  • Although not directly decided here, coupling high stated interest with valuable options tied to the loan may more frequently trigger usury challenges.
• Documentation disclosures. To reduce litigation risk, lenders may want to:
  • Explicitly state the effective annual percentage rate (APR);
  • Demonstrate in closing files that, under actuarial computations, the total contracted interest is below the statutory maximum; and
  • Include savings clauses or refund/credit provisions similar to those contemplated in § 306.004(b)–(c) (which mitigate penalties if excess interest is timely refunded or credited upon early payoff).

Borrowers and their counsel, conversely, now have a clearer pathway to challenge loans that were structured under an implicit equal-parts assumption and that may overshoot the cap when recalculated using the actuarial method.

C. For Litigation Strategy and Evidence

Litigating usury claims will likely become more technical:

• Expert testimony. Parties may need financial experts who can:
  • Reconstruct the amortization schedule;
  • Compute, for each period, the maximum permissible interest at the statutory rate on the then-outstanding principal; and
  • Compare that to all forms of interest-like compensation actually contracted for, charged, or received.
• Summary judgment practice. Clearer statutory direction might:
  • Simplify resolution in straightforward cases (where the numbers are clear and undisputed); but
  • Complicate cases involving embedded options, profit interests, or variable payment schedules.
• Pleading disguised interest. Plaintiffs asserting that additional arrangements (like the Option Agreement here) constitute interest must allege with some specificity:
  • The economic value of the right or option;
  • How that value is tied to the loan; and
  • Why it qualifies as compensation “for the use, forbearance, or detention of money.”

D. Interaction with Federal Law and Multi-State Lenders

A notable aspect of the Court’s reasoning is its alignment with the:

• Truth in Lending Act’s definition of “actuarial method” (15 U.S.C. § 1615(d)(1)), and
• Parallel state definitions across numerous jurisdictions.

For lenders operating in multiple states or under federal disclosure regimes, this harmonization:

• Reduces interpretive uncertainty; and
• Makes it easier to build uniform compliance systems, because the meaning of “actuarial method” in Texas now matches the widely accepted national standard.

However, lenders who built Texas-specific usury analyses on the older equal-parts assumption will need to revisit those frameworks.

E. Broader Impact on Texas Statutory Interpretation

Beyond usury law, the opinion reinforces several interpretive principles that will matter in future Texas cases:

• Textual primacy. The Court continues to emphasize that statutory text is the controlling guide and that unambiguous terms must be applied as written.
• Weight of statutory history. While eschewing legislative history, the Court embraces statutory history—the sequence of enacted texts—as a legitimate interpretive tool. The opinion:
  • Relies on the deletion of “in equal parts” and the insertion of “using the actuarial method” to infer a real change in legal meaning;
  • Cites Scalia & Garner’s presumption that a change in language generally signals an intent to change the law.
• Use of technical terms. When the Legislature uses a term of art like “actuarial method” without defining it, courts may—and should—look to:
  • Specialized dictionaries;
  • Agency regulations; and
  • Other statutes and jurisdictions that employ the same term.
  to discern its established meaning.

This opinion thus forms part of a continuing trend in Texas jurisprudence toward principled textualism grounded in both ordinary and technical usage.

VII. Key Takeaways and Conclusion

A. Core Rule Announced

The central holding of American Pearl v. NPS is:

For commercial loans governed by Texas Finance Code § 306.004(a), when the loan provides for periodic principal payments, the maximum lawful interest must be calculated using the actuarial method on the declining principal balance for each payment period, not by applying the statutory rate to the original principal over the full term “in equal parts.”

B. Doctrinal Significance

• The decision clarifies and modernizes Texas usury calculations for commercial loans.
• It effectively displaces the continued use of the old “equal-parts” method in this context, tying Texas law to the financial and federal understanding of the actuarial method.
• It distinguishes prior Texas Supreme Court cases (Nevels, Tanner) as limited to their statutory and factual settings, especially where loans were interest-only and principal did not decline.

C. Practical Significance

• Lenders must structure and audit commercial loans assuming that interest will be tested against the usury cap on a period-by-period, declining-balance basis.
• Borrowers have a clearer standard for challenging allegedly usurious loans.
• Complex loan structures involving options or residual interests may be subject to enhanced scrutiny as potential disguised interest.

D. Broader Legal Importance

• The opinion reinforces a robust textualist approach, giving controlling weight to:
  • Plain language;
  • Technical meanings of terms of art; and
  • Changes in statutory wording over time.
• It aligns Texas practice with federal law and other states on what “actuarial method” means, fostering greater uniformity in financial regulation.

In sum, American Pearl Group, L.L.C. v. National Payment Systems, L.L.C. is a landmark clarification in Texas usury law. It firmly rejects the mechanical application of an “equal parts” method that no longer appears in the statutory text and demands instead a more economically accurate, declining-balance calculation grounded in the actuarial method. By doing so, the Court both vindicates legislative intent and provides a clearer, more precise framework for lenders, borrowers, and courts to assess the legality of commercial loan interest in Texas.