BILL ANALYSIS



H.B. 2674
By: Hunter, T.
03-23-95
Committee Report (Unamended)


BACKGROUND

Article 1.03 of the Consumer Credit Code (Article 5069-1.03, VTCS)
establishes the rate of interest applicable to a contract when no
specified rate of interest is agreed upon by the parties to the
agreement.  In that situation it also prohibits the charging of
interest until the 30th day after  the sum is due and payable. It
is the only provision in the Consumer Credit Code that provides
that statutory interest-free "window" after the debt is due.  The
standard Chapter 1 penalties for violation apply.

The problem presented by Article 1.03 arises as a result of its
application to "open accounts". Although this practice is very
uncommon, the application of Article 1.03 presents a problem
because the standard business practice with respect to these
accounts is to begin charging interest on the day payment is due. 
Thus a person who conducts business via the "open account" method
is subject to the draconian Chapter 1 penalties even though the
person does not charge interest at a rate greater than the six
percent limit imposed by Article 1.03.

PURPOSE

The purpose of HB 2674 is to amend Article 1.03 to delete the
current prohibition against charging interest in the 30 day
"window."  The bill would not affect the interest rate and would
apply only to a contract with respect to which the parties have not
agreed to an interest rate.

RULEMAKING AUTHORITY

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

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Article 1.03 of the Consumer Credit Code (Article
5069-1.03, VTCS) to delete the language providing that, with
respect to the limited number of contracts to which it applies, a
creditor may not charge interest until 30 days after payment is
due. The bill would in no way affect the legal interest ceiling and
it would apply only to an account with respect to which the parties
have not agreed to an interest rate.

SECTION 2. Emergency clause.

SUMMARY OF COMMITTEE ACTION

The committee convened in a public hearing on March 27, 1995 to
consider HB 2674.

The following people testified in favor of the bill:
Rep. Hunter; and
Sam Kelley.

The motion to report HB 2674 favorably without amendments, with the
recommendation that it do pass and be printed, prevailed by a
record vote of:  5 Ayes, 0 Nays, 0 PNV, 4 Absent.