BWM C.S.H.B. 2924 75(R)BILL ANALYSIS


FINANCIAL INSTITUTIONS
C.S.H.B. 2924
By: Coleman
4-19-97
Committee Report (Substituted)



BACKGROUND 

Motor vehicles are sometimes purchased under retail installment contracts
which include a payment which is more than twice as large as the average
of all prior scheduled installments (commonly referred to as a balloon
payment).  Subject to limited exceptions, Chapter 7 of the Texas Credit
Code gives the retail buyer the right to refinance the balloon payment
without acquisition charge, in installments which are neither larger not
more frequent than the average amount and frequency of payments preceding
the refinanced payment, at a rate of time price differential no higher
than that originally agreed upon. 

Although Chapter 7 assures buyers that a refinancing option will be
available, it limits the retail installment contract holder's ability to
respond to buyer request for other refinancing terms, such as changes in
the amount or frequency of the payments.  Buyers may be able to obtain
such other terms from third parties, but a significantly higher rates of
time price differential, or may be ineligible for alternate refinancing
available from third parties. 

PURPOSE

HB 2924 provides a limited exemption from the refinancing requirements,
while continuing to assure buyers that refinancing will be available at
lawful, competitive rates of time price differential. 

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 Section (9)(b), Article 7.02, Title 79, Revised Statutes
(Article 50697.02, Vernon's Texas Civil Statutes), by adding subsection
(9)(b)(v) to exempt from the refinancing requirement of subsection (9)(a)
transactions under which the buyer has the right to:  (A) sell the vehicle
to the seller under terms agreed on by buyer and seller at the time of
entering into the transaction, and be released from liability  on the
balloon payment; 
 (B) pay off balloon payment; or
 (C) if not in default, refinance in equal monthly installment over a term
of not less than 24 months, at a rate of time price differential not more
than (1) the lesser of the maximum rate allowed under Article 7.03 for a
vehicle of like age and type; or (2) 5% per annum more than under the
original contract. 

SECTION 2. Effective date: September 1, 1997.

SECTION 3.  Emergency clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

The Committee Substitute to HB 2924 is a Texas Legislative Council draft
of the original bill.