Texas Auto Loan Convenience Fees on Electronic Payments

The short answer

After you get a Texas auto loan, some lenders or their payment processors may charge a convenience fee when you pay electronically. Texas Finance Code § 348.416 (added by House Bill 4134, effective September 1, 2025) allows that fee only under tight limits: it must be reasonably related to the processing cost, it cannot exceed the lesser of $10 or 5% of the payment, and the lender must offer a free non-electronic way to pay and tell you the fee amount before you agree to pay online.

What the statute actually says

Section 348.416 applies to a holder of a motor-vehicle retail installment contract (or the holder's agent). "Electronic payment" means credit card, debit card, electronic funds transfer, electronic check, or another electronic method.

The fee is allowed only if all of these are true:

1. The fee is reasonably related to the expense of processing that electronic payment.
2. The fee does not exceed the lesser of $10 or five percent of the payment amount.
3. The holder or agent: - Lets you pay by a method that is not electronic and that does not incur a fee; - Does not establish electronic payment as the expected form of payment; and - Before you agree to pay electronically, informs you of (i) the fee amount, (ii) that you may pay by an alternative method with no fee (including check, cash, or money order), and (iii) that electronic payment cannot be set up as the expected method.

If any of those pieces is missing, the statute does not authorize the fee.

Why this belongs in pre-approval prep

TX Auto Approval helps Texans start a pre-approval path: a soft credit inquiry may be used as part of matching you with financing options, bad credit and no credit are welcome, and most customers hear back within minutes once the full application is in—timing is typical, not a promise of approval. Before you sign a retail installment contract, ask the same questions you would ask about APR and term:

• Will any electronic payment method add a convenience fee?
• What is the exact dollar amount (or percentage) per payment?
• What free payment methods are available every month (mail a check, pay in person, etc.)?
• Is autopay electronic-only, or can you set a free method as the default?

A $7–$10 fee on every monthly payment adds up over a 60- or 72-month loan. Knowing the rules up front is part of comparing offers—alongside APR vs. interest rate and how rate-shopping inquiries are counted.

What this statute does not do

• It does not set your interest rate or APR.
• It does not require every lender to charge a convenience fee—many will not.
• It does not replace federal Truth in Lending disclosures on the contract.
• It does not authorize junk fees at signing for optional add-ons; those are a separate conversation (see our note on optional GAP and add-ons).

A short checklist before you turn on autopay

1. Read the payment section of the retail installment contract and any online portal terms.
2. Confirm the free payment options in writing (email or contract language).
3. If a fee appears at checkout, check it against the $10 / 5% cap and the disclosure rules above.
4. Prefer a free method if the fee would apply every month and you can mail or deliver a payment on time.
5. Keep screenshots of fee disclosures in case a later statement does not match what you were told.

How TX Auto Approval helps

Start with name, phone, and ZIP—no SSN required to begin. A soft inquiry may be used during the process. Complete the full application when you are ready, and a specialist reviews it and contacts you with where you stand. This article is educational about Texas payment-fee rules; it is not a guarantee of approval, a rate quote, or legal advice.

Bottom line

Texas law capped and conditioned convenience fees on electronic auto-loan payments starting September 1, 2025. Ask about them before you lock the contract and before you enroll in autopay—alongside rate, term, and optional products.

Ready to see where you stand? Check your pre-approval. Getting started takes under a minute.