BILL ANALYSIS


                                                        H.B. 1259
                                              By: Carona (Rosson)
                                             Economic Development
                                                          5-24-95
                              Senate Committee Report (Unamended)
BACKGROUND

Current law requires that all Sale of Checks Act licensees have on
hand permissible investments in an amount equal to the aggregate
face amount of all checks sold in the U.S., except travelers
checks. Licensees with a net worth of $5,000,000 or more are
specifically exempted from compliance with this section.

The theory behind the exemption for companies with a substantial
net worth is that purchasers of checks from these licensees are
adequately protected without a permissible investment requirement.
Experience has shown that economic downturns and other marketplace
factors which can affect net worth occur very rapidly. A licensee
with a net worth in excess of $5,000,000 today may show a negative
net worth of an equally significant amount tomorrow. When that
occurs, it is too late to subject them to the permissible
investment requirement because they no longer have sufficient
liquid, unencumbered resources available to meet the statutory
requirements.

PURPOSE

As proposed, H.B. 1259 provides security obligations of a licensed
seller of checks.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 9, Article 489d, V.T.C.S. (Sale of Checks
Act), as follows:

     Sec. 9. OBLIGATIONS OF LICENSEE. Requires each person holding
     a license under this Act to at all times when the license is
     in effect:
     
     (a) if the licensee does not have on file or deposit a bond
       or securities in the undiminished principal sum of at least
       $500,000, file quarterly reports with the commissioner
       setting forth the locations at which the licensee sells
       checks in this state not later than the 45th day after the
       date of the last day of each quarter of the licensee's
       fiscal year, rather than as of January 1, April 1, July 1,
       and October 1 in each year, the report for each such date
       being due on or before the 15th day thereafter. Makes
       nonsubstantive changes.
       
       (b) Redesignates existing Subsection (c).
       
       (c) if the licensee has a net worth of less than $5 million,
       maintain a surety bond or letter of credit, or have on hand
       permissible investments, in an amount equal to the aggregate
       face amount of all outstanding checks, without exception,
       sold in the U.S. for which the licensee is liable for
       payment, less the amount of the surety bond or deposit
       maintained under Section 7(c) of this Act; and
       
       (d) if the licensee has a net worth of $5 million or more,
       maintain a surety bond or letter of credit, or have on hand
       permissible investments, in an amount equal to at least 50
       percent of the aggregate face amount of all outstanding
       checks sold in the U.S. for which the licensee is liable for
       payment, less the amount of the surety bond or deposit
       maintained under Section 7(c) of this Act.
       
       (e) if the licensee maintains a surety bond or letter of
       credit under Subsection (c) or (d) of this section, the
       surety bond or letter of credit must meet certain
       provisions. Deletes the provision that this subsection does
       not apply to any licensee with a net worth of not less than
       $5 million and that statements filed under Section 9B of
       this Act may be used to satisfy this requirement.
       
       SECTION 2.   Sets forth amount that, notwithstanding Section 9d,
Article 489d, V.T.C.S., as added by this Act, a person who is
subject to that subsection and who held a license under that Act on
January 1, 1995, is required to maintain for the license
permissible investments or a bond under that section.

SECTION 3. Effective date: September 1, 1995.

SECTION 4. Emergency clause.