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.