BILL ANALYSIS C.S.H.B. 3101 By: Pitts 03-23-95 Committee Report (Substituted) BACKGROUND Advances in financial services have out-paced changes in the usury statute. This bill would exempt the accounts receivable service which is provided by an Account Service Provider from the usury statute. PURPOSE CSHB 3101 proposes to allow account service providers to purchase accounts receivables, service those accounts, and not run afoul of the usury statutes. This creates an alternative for a small businesses that are too small to go to factors and have grown too fast to qualify for a loan to sell their accounts receivable and access cash without it being considered a loan. 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 Chapter 1, Title 79, Revised Statutes, Article 5069-1.01 et seq., VTCS by adding Article 1.14. (1) defines "Account purchase transaction" as an agreement under which a person or entity engaged in commercial enterprise sells accounts, instruments, documents and/or chattel paper at a discount. (b) states that for the purposes of this chapter, the amount of any discount in, or charged under, an account purchase transaction is not compensation contracted for, charged, or received with respect to that transaction. (c) the transaction shall not be characterized as for the use, forbearance or detention of money. SECTION 2. Agreements made before, on or after the date of this Act are covered by this Act. SECTION 3. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The introduced version defined terms and excepted from the definition of "interest" fees paid for services provided by an account service provider in connection with an account service agreement and interest accrued on the actual accounts receivables. The substitute removes the definition of interest altogether and states that the amount of any discount is not compensation with respect to the transaction and defines "account service agreement". SUMMARY OF COMMITTEE ACTION The committee considered HB 3101 in a public hearing on March 27, 1995. The following people testified in favor of the bill: Rep. Pitts; Karen Neeley representing the Independent Bankers Association of Texas; and William F. Stutts representing Private Business, Inc. The bill was left pending. The committee considered HB 3101 in a public hearing on April 10, 1995. The following person testified in favor of the bill: Karen Neeley representing the Independent Bankers Association of Texas. The bill was left pending. The committee considered HB 3101 in a public hearing on April 19, 1995. The committee considered a complete committee substitute for the bill. The committee considered one amendment to the substitute which was adopted without objection. The substitute as amended was adopted and the bill was reported favorably as substituted, with the recommendation that it do pass and be printed, by a record vote of: 5 Ayes, 0 Nays, 0 PNV, 4 Absent.