American Pearl Group, L.L.C., a Texas Limited Liability Company; John Sarkissian; Andrei Wirth v. National Payment Systems, L.L.C.

Supreme Court of Texas
══════════
No. 24-0759
══════════

American Pearl Group, L.L.C., a Texas Limited Liability
Company; John Sarkissian; Andrei Wirth,
Petitioners,

v.

National Payment Systems, L.L.C.,
Respondent

═══════════════════════════════════════
On Certified Question from the
United States Court of Appeals for the Fifth Circuit
═══════════════════════════════════════

Argued January 13, 2025

JUSTICE SULLIVAN delivered the opinion of the Court.

When money is borrowed, it comes at a price. Texas usury law
sets a strict limit on just how high that price can go. See, e.g., TEX. FIN.
CODE § 306.004(a); cf. TEX. CONST. art. XVI, § 11. But how should courts
go about calculating that limit under Section 306.004(a) of the Texas
Finance Code? Recognizing that our interpretation of this state statute
could determine the outcome of a usury case now pending in the federal
courts, the U.S. Court of Appeals for the Fifth Circuit has certified the
following question to our Court:
Section 306.004(a) of the Texas Finance Code provides: “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.” 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?
Am. Pearl Grp., L.L.C. v. Nat’l Payment Sys., L.L.C., 2024 WL 4132409,
at *8 (5th Cir. Sept. 10, 2024) (per curiam).
Our answer is Yes, because the Legislature’s choice of words
matters. By deliberately changing the text of Section 306.004(a) from
an “equal parts” approach to the “actuarial method”—a term with a
well-established meaning in financial and legal contexts—the
Legislature called upon courts to calculate the maximum permissible
interest based on the declining principal balance for each payment
period.
I
Texas usury law prohibits lenders from charging excessive
interest on loans. “ ‘Interest’ means compensation for the use,
forbearance, or detention of money.” TEX. FIN. CODE § 301.002(a)(4). A
loan is “usurious” when the interest exceeds the maximum amount
allowed by law. Id. § 301.002(a)(17). A usurious transaction has three
components: “(1) a loan of money; (2) an absolute obligation that the

2
principal be repaid; and (3) the exaction of a greater compensation than
allowed by law for the use of . . . money by the borrower.” Holley v.
Watts, 629 S.W.2d 694, 696 (Tex. 1982). Usury statutes are penal in
nature and are therefore strictly construed. First Bank v. Tony’s Tortilla
Factory, Inc., 877 S.W.2d 285, 287 (Tex. 1994).
For purposes of this dispute, the maximum lawful interest rate is
28% per year. TEX. FIN. CODE § 303.009(c). But a loan is not usurious
just because the interest rate exceeds 28% in any particular year. See
Tanner Dev. Co. v. Ferguson, 561 S.W.2d 777, 787 (Tex. 1977). Instead,
we test for usury by “spreading” the interest over the contract’s entire
term. See id. at 786; Pentico v. Mad-Wayler, Inc., 964 S.W.2d 708, 714
(Tex. App.—Corpus Christi–Edinburg 1998, pet. denied) (defining
“spreading” as “a method of allocating the total interest provided for in
a loan agreement over the full term of the loan”).
That brings us to Section 306.004 of the Texas Finance Code,
which dictates how “spreading” is to be done when calculating the
interest rate of a commercial loan:
(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.
(b) If a commercial loan is paid in full before the end of the
stated term of the loan and the amount of interest
received for the period that the loan exists exceeds the
amount that produces the maximum rate authorized by
law for that period, the lender shall:
(1) refund the amount of the excess to the borrower;
or

3
(2) credit the amount of the excess against amounts
owing under the loan.
(c) A lender who complies with Subsection (b) is not subject
to any of the penalties provided by law for contracting
for, charging, or receiving interest in excess of the
maximum rate authorized.
TEX. FIN. CODE § 306.004. As we explain below, the parties disagree on
what “using the actuarial method” requires under Section 306.004(a).
American Pearl Group, L.L.C., John Sarkissian, and Andrei
Wirth (collectively, “Pearl”) and National Payment Systems, L.L.C.
(“NPS”) operate in the credit-card-payment-processing industry. NPS
serves as an intermediary between merchants and payment service
providers (i.e., payment processors and banks), submitting merchant
processing applications and receiving a percentage of the transaction
fees, referred to as residual payments. Pearl sells NPS’s services in
exchange for a share of the residual payments received by NPS. Pearl
has similar arrangements with other intermediaries and thus has a
stream of residual payments in its portfolio.
In May 2019, NPS loaned $375,100.85 to Pearl, to be repaid with
interest over forty-two months. The Loan Agreement obliged Pearl to
pay back $684,966.76, per a schedule allocating each month’s payment
between principal and interest. The schedule demanded increasing
total monthly payments with constant principal portions and escalating
interest portions. The Loan Agreement also incorporated a
simultaneously executed Option Agreement, under which NPS could
pay Pearl a five-figure sum in exchange for a six-figure slice of Pearl’s
residuals portfolio, allegedly worth some multiple of the scheduled
interest charges.

4
In March 2022, Pearl sued NPS in the U.S. District Court for the
Northern District of Texas, seeking a declaration that the NPS Loan and
Option Agreement violated Texas usury law. NPS moved to dismiss.
The district court granted the motion, concluding that: (1) under the
“spreading doctrine,” the scheduled interest payments were not
usurious; (2) the purchase option’s value was too uncertain to constitute
interest; and (3) Pearl had not adequately alleged a scheme to conceal
usury. 2024 WL 4132409, at *3.
The district court calculated the NPS Loan’s interest by spreading
the interest over the term of the loan in equal parts. This type of
spreading stems from our decision in Nevels v. Harris, 102 S.W.2d 1046,
1049 (Tex. 1937), which was supposedly codified in Act of Mar. 12, 1975,
64th Leg., R.S., ch. 26, § 1, 1975 Tex. Gen. Laws 47, 47 (repealed 1997),
and which we reaffirmed in Tanner, 561 S.W.2d at 787–88. Under the
“equal parts” method, interest is calculated by multiplying the total
principal by the statutory maximum interest rate and then by the term
of the loan in years. Applying that method here, the district court
multiplied $375,100.85 (the principal on the NPS Loan) by 28% (the
maximum legal interest rate under TEX. FIN. CODE § 303.009(c)), and by
3.5 years (the term of the NPS Loan), to calculate a maximum allowable
interest amount of $367,598.83. Because that figure was higher than
the $309,865.91 in interest payments actually specified in the Loan
Agreement’s schedule, the district court found no usury violation. 2024
WL 4132409, at *4–5.
Pearl appealed to the Fifth Circuit, arguing that the district court
erred by applying the “equal parts” method. Pearl contends that

5
Section 306.004(a) of the Texas Finance Code requires courts to apply
the actuarial method and make calculations based on declining principal
balances for each payment period, not based on the initial total principal
amount. Using Pearl’s proposed methodology, the total permissible
interest would be $207,277.80, rendering usurious the $309,865.91 in
interest charged by NPS. Pearl also maintains that the Option
Agreement constitutes additional disguised interest of $783,394, based
on the difference between the alleged $832,320 value of Pearl’s portfolio
and the $48,926 in combined payments from NPS.
Without elaborating on a lurking choice-of-law issue in the case,
which the parties had argued below but didn’t bother briefing on appeal,
the Fifth Circuit proclaimed that “Texas law governs Pearl’s usury
claims.” Id. at *1. With respect to the Option Agreement, the Fifth
Circuit remanded for a “closer evaluation” of Pearl’s usury claim
following discovery on the value of NPS’s purchase option. Id. at *10.
As for the Loan Agreement, the Fifth Circuit expressed
uncertainty over whether the district court accurately interpreted the
Texas Finance Code in calculating the interest rate NPS had charged.
Id. at *3–8. The Fifth Circuit found it noteworthy that, in the decades
since we decided Tanner, the Legislature had changed the statutory text
to go from spreading interest “in equal parts during the period of the full
stated term of the loan,” Act of Mar. 12, 1975, 64th Leg., R.S., ch. 26, § 1,
1975 Tex. Gen. Laws 47, 47 (repealed 1997), to making that computation
“by amortizing or spreading, using the actuarial method during the
stated term of the loan,” TEX. FIN. CODE § 306.004(a).

6
Our Court has “jurisdiction to answer questions of state law
certified from a federal appellate court.” TEX. CONST. art. V, § 3-c.
Rather than hazard an Erie guess, therefore, the Fifth Circuit certified
the question that is now before us. 2024 WL 4132409, at *8. On
September 20, 2024, this Court accepted the certified question, called
for merits briefing, and set the case for oral argument.
II
As with every question of statutory construction, “[t]he text is the
alpha and omega of the interpretive process.” BankDirect Cap. Fin.,
LLC v. Plasma Fab, LLC, 519 S.W.3d 76, 86 (Tex. 2017). We look to the
specific words chosen by the Legislature and give them their plain
meaning, as informed by the context in which the enacted text appears.
See, e.g., GEO Grp., Inc. v. Hegar, 709 S.W.3d 585, 591 (Tex. 2025); In
re Facebook, Inc., 625 S.W.3d 80, 87–88 (Tex. 2021). When the statute
is unambiguous, we apply it as written and without rendering any of it
meaningless. 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).
The phrase “actuarial method” is not defined in Section 306.004
or elsewhere in the Texas Finance Code. In such circumstances, “we
typically look first to dictionary definitions” to “determine a term’s
common, ordinary meaning.” Fort Worth Transp. Auth. v. Rodriguez,
547 S.W.3d 830, 838 (Tex. 2018). Black’s Law Dictionary 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

7
each payment, which is credited first to interest and then to principal.”
Actuarial Method, BLACK’S LAW DICTIONARY (7th ed. 1999).
To determine a term’s ordinary meaning, we may also “consider
the term’s usage in other statutes, court decisions, and similar
authorities.” Tex. State Bd. of Exam’rs of Marriage & Fam. Therapists
v. Tex. Med. Ass’n, 511 S.W.3d 28, 35 (Tex. 2017). By rule, the Texas
Department of Banking defines “actuarial method” as “the method of
allocating payments made on a debt between the amount financed and
the finance charge pursuant to which a payment is applied first to the
accumulated finance charge and any remainder is subtracted from, or
any deficiency added to, the unpaid balance of the amount financed.”
7 TEX. ADMIN. CODE § 12.33(a)(1). Likewise, the federal Truth in
Lending Act defines “actuarial method” as the “method of allocating
payments made on a debt between the amount financed and the finance
charge pursuant to which a payment is applied first to the accumulated
finance charge and any remainder is subtracted from, or any deficiency
is added to, the unpaid balance of the amount financed.” 15 U.S.C.
§ 1615(d)(1). Many States define “actuarial method” in similar terms. *
NPS urges us to ignore this widespread definitional overlap. It
argues that the interest should instead be calculated using the “equal

* See ARIZ. REV. STAT. § 6-601(1); COLO. REV. STAT. § 5-1-301(1); DEL.

CODE tit. 5, § 969(c)(1); IOWA CODE § 537.1301(1); KAN. STAT. § 16A-1-301(1);
ME. STAT. tit. 9-A, § 1-301(1); MD. CODE COM. LAW § 12-126(d)(1); MINN. STAT.
§ 56.001(2); N.H. REV. STAT. § 358-K:1(I); N.J. STAT. § 17:9A-59.25(f); OHIO
REV. CODE § 1349.25(A); OKLA. STAT. tit. 14A, § 1-301(1); S.C. CODE
§ 37-1-301(1); TENN. CODE § 45-5-102(1); VT. STAT. tit. 8, § 10405(b)(4); W. VA.
CODE § 46A-1-102(1); WIS. STAT. § 421.301(1); WYO. STAT. § 40-14-140(a)(i).

8
parts” method that we employed in Nevels and Tanner, as required by
Texas’s previous usury statute. See Act of Mar. 12, 1975, 64th Leg., R.S.,
ch. 26, § 1, 1975 Tex. Gen. Laws 47, 47 (repealed 1997) (requiring
“amortizing, prorating, allocating, and spreading, in equal parts during
the period of the full stated term of the loan” to determine whether a
loan was usurious). According to NPS, this method—under which courts
multiply the total loan proceeds by the maximum annual interest rate
and the loan term in years—provides a simpler calculation for courts to
perform and therefore creates a clear, predictable usury standard.
That may be. But NPS’s policy-driven argument cannot be
squared with the current statute’s text and history. Though we ought
not to consider legislative history in statutory interpretation, “statutory
history—the statutes repealed or amended by the statute under
consideration”—help “form part of the context of the statute” that is the
law. Brown v. City of Houston, 660 S.W.3d 749, 755 (Tex. 2023)
(emphasis omitted) (quoting ANTONIN SCALIA & BRYAN A. GARNER,
READING LAW: THE INTERPRETATION OF LEGAL TEXTS 256 (2012)); see also
Ojo v. Farmers Grp., Inc., 356 S.W.3d 421, 455 n.31 (Tex. 2011) (Willett,
J., concurring) (“[N]obody should quarrel with examining how an
enacted statute changes over time. . . . [T]his is the history of the
legislation, not legislative history.”). This statutory context “can
properly be presumed to have been before all the members of the
[L]egislature when they voted. So a change in the language of a prior
statute presumably connotes a change in meaning.” SCALIA & GARNER,
supra, at 256.

9
The 1975 usury statute, on which NPS relies, governed loans
secured by an “interest in real property” and provided:
[D]etermination of the rate of interest for the purpose of
determining whether the loan is usurious . . . shall be made
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, from the borrower in connection with the loan.

Act of Mar. 12, 1975, 64th Leg., R.S., ch. 26, § 1, 1975 Tex. Gen. Laws
47, 47 (repealed 1997) (emphasis added). In 1997 and 1999, however,
the Texas Legislature enacted new statutes addressing the computation
of interest rates for commercial loans and loans secured by real property,
adopting language different from that in the 1975 statute. Rather than
providing for the amortization or spreading of interest “in equal parts
during the period of the full stated term of the loan,” as the 1975 statute
did, the 1997 and 1999 enactments required that the interest rate be
“computed by amortizing or spreading, using the actuarial method
during the stated term of the loan.” TEX. FIN. CODE § 306.004(a)
(emphasis added); Act of June 2, 1997, 75th Leg., R.S., ch. 1396, § 1,
art. 1H.004(a), 1997 Tex. Gen. Laws 5202, 5217 (repealed 1999)
(emphasis added). In other words, the Legislature expressly changed
the computation method from the “equal parts” approach to the
“actuarial method.”
This change is telling. We’re to presume “the Legislature selected
language in [the] statute with care” and “with a purpose in mind.” Tex.
Lottery Comm’n v. First State Bank of DeQueen, 325 S.W.3d 628, 635
(Tex. 2010). True, the “equal parts” method pressed by NPS is simpler.
But the desire for simplicity is not a license to override the enacted text

10
of Section 306.004(a). “The Legislature’s voted-on language is what
constitutes the law, and when a statute’s words are unambiguous and
yield but one interpretation, the judge’s inquiry is at an end.” Pruski,
594 S.W.3d at 325 (internal quotation marks omitted). The text here is
clear enough: courts must use the actuarial method when calculating
the interest rate of a commercial loan. And the plain, common meaning
of “actuarial method” calls for interest amounts to be calculated for each
payment period, based on the declining principal balance.
NPS also relies heavily on our opinions in Nevels and Tanner.
Both are distinguishable. They examined distinct scenarios involving
interest that was either withheld initially from loan proceeds, see Nevels,
102 S.W.2d at 1048–49, or advanced before the loan’s repayment period
for a specific year, see Tanner, 561 S.W.2d at 779. Neither circumstance
is present here. Both cases also dealt exclusively with “interest-only”
loans, where payments during the relevant periods consisted solely of
interest with no periodic principal reduction occurring. As such, there
was no need to account for decreasing principal balances when
determining the maximum permissible interest over the loan term. It
made sense, in that context, to spread the interest in equal parts over
the term of the loan.
Not so here. And the numbers show why: If we were to apply the
“equal parts” method and calculate the interest owed by Pearl without
considering its principal payments, Pearl’s final monthly payment
would include $11,871.09 in interest on a principal balance of $8,930.97.
The Legislature, by requiring that interest be “computed by amortizing
or spreading, using the actuarial method,” has decreed that Pearl’s

11
declining principal balance must be factored into the calculation. See
TEX. FIN. CODE § 306.004(a). This conclusion is supported by both the
common meaning of the term “actuarial method” and the statutory
history of Section 306.004.
We therefore hold that if the loan provides for periodic principal
payments during the loan term, “using the actuarial method” requires
courts to base their interest calculations on the declining principal
balance for each payment period. Thus, the NPS Loan’s total lawful
interest amount is the sum of each payment period’s interest amount,
calculated based on the declining principal balance resulting from each
of Pearl’s principal payments.
III
Words matter in statutory interpretation, and the Legislature’s
deliberate choice to replace “equal parts” with “actuarial method” in the
Texas Finance Code cannot be dismissed as mere stylistic preference.
The plain meaning of “actuarial method,” consistently defined across
financial and legal authorities, requires interest calculations based on
declining principal balances. We therefore answer the Fifth Circuit’s
certified question in the affirmative: When a loan provides for periodic
principal payments, Section 306.004(a)’s mandate to use the “actuarial
method” requires courts to calculate maximum permissible interest
based on the declining principal balance for each payment period.

James P. Sullivan
Justice

OPINION DELIVERED: May 23, 2025

12