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 usurious under Texas law and the magnitude of statutory remedies available to borrowers.

Argument summary: Appellants argued the statute unambiguously requires an actuarial amortization: payments must be applied first to interest and then to principal so the outstanding balance (and interest accruing on it) declines each period. Counsel emphasized that failing to account for declining principal permits gaming of the usury ceiling and cited statutory history and academic commentary advocating an amortization approach.

Appellees responded that Texas precedent and post‑1990 statutory language endorse spreading using the actuarial method and that the legislature’s 1990s revisions harmonized prior case law; under that reading, the district court’s calculation—which effectively compared a fixed schedule against a simple total‑interest calculation—was permissible. The parties and the court also discussed a potential conflict of law: the loan documents include an Oregon choice‑of‑law clause and the district court noted that Oregon commercial‑loan rules differ; the Fifth Circuit certified the Texas statutory interpretation question as determinative.

Justices pressed counsel on practical consequences: whether answering the statutory question would resolve the case given the choice‑of‑law issue, how the statutory amendment that replaced “in equal parts” with “using the actuarial method” should be read, and whether amortizing and spreading are distinct computations or near‑synonyms in the statutory context. Counsel for appellants pointed to an amortization schedule in the record and urged the court adopt a rule that credits interest payments first, with principal amortization reducing the outstanding balance for subsequent interest computations.

The court submitted the question. A ruling will guide lower courts and commercial lenders on how to compute maximum lawful interest under Texas law and affect remedies for loans the court finds usurious.