SRC-AAA H.B. 1277 75(R)   BILL ANALYSIS


Senate Research Center   H.B. 1277
By: Eiland (Lucio)
Economic Development
5-7-97
Engrossed


DIGEST 

Currently, the Consumer Credit Code limits credit card interest rates that
may be charged by banks and other creditors based in Texas. A creditor may
charge up to 14.4 percent interest on the entire average daily balance
(ADB), or 18 percent interest on an ADB of up to $1,500, 12 percent on an
ADB between $1,500 and $2,500, and 10 percent on an ADB of more than
$2,500.  Any additional fee for credit cards must be authorized by
statute. HB 1277 would allow creditors to charge interest rates on credit
cards of up to 18 percent. It would allow credit card issuers to charge
certain annual fees: up to $50 on accounts with a credit limit of $5,000
or less, $75 on accounts between $5,000 and $25,000, and $125 for accounts
of more than $25,000. The creditor also could collect fees for late
charges, cash advances, dishonored checks, and overextended accounts.  
                                                       
PURPOSE

As proposed, H.B. 1277 increases the interest rates on revolving loan and
revolving tri-party accounts (primarily credit cards) to the same rate as
is permissible on all other written, lending transactions in Texas.  In
addition, reasonable fees are authorized in line with those commonly found
in other states. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Article 15.02, Title 79, Article 5069-15.02, V.T.C.S.,
to delete existing Subsection  (a).  Prohibits the interest rate on a
merchant discount account in excess of 18 percent. Deletes text regarding
the interest rate on a merchant account. Authorizes a creditor to  charge
and collect certain charges and fees. Deletes text regarding an agreement
to a rate of interest. Makes conforming changes.  

SECTION 2. Amends Chapter 15, Title 79, Article 5069-15.01 et seq.,
V.T.C.S., by adding Articles 15.12-15.14, as follows: 

Art. 15.12. VARIATION IN PERIODIC PERCENTAGE RATE.  Sets forth
requirements for variations in the periodic rate. 

Art. 15.13. NOTICE OF VARIATION IN PERIODIC PERCENTAGE RATE. Sets forth
notice requirements regarding variations in the periodic rate. 

Art. 15.14. ACCOUNT CONNECTED WITH DEMAND DEPOSIT ACCOUNT. Sets forth
requirements for the maintenance of an account offered and extended by a
creditor connected with a demand deposit account. 

SECTION 3. Amends Chapter 15, Title 79, Article 5069-15.01 et seq.,
V.T.C.S., by adding Article 15.15, as follows: 

Art. 15.15. APPLICATION OF PAYMENT. Requires a payment toward  the account
to be applied to the repayment of a loan or purchase posted to the
customer's account.  
 
SECTION 4. Amends Article 1.04, Title 79, Article 5069-1.04, V.T.C.S., by
adding Subsection (s), to provide that this article does not apply to a
credit card transaction or other open-end accounts. 

SECTION 5. Amends Article 5069-1.11(d), to make a conforming change.

SECTION 6. Makes application of this Act prospective.

SECTION 7. Provides that SECTION 1 applies only to credit card operations
in this state at the time the interest rates are increased by the
financial institution operating a credit card operation. 

SECTION 8. Emergency clause.
  Effective date: upon passage.