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.