SRC-AAA C.S.S.B. 1162 75(R)BILL ANALYSIS


Senate Research CenterC.S.S.B. 1162
By: Carona
Economic Development
4-2-97
Committee Report (Substituted)


DIGEST 

Currently, demand drafts are being used by merchants, telemarketers and
out-of-state collection agencies as a way of directly debiting a
consumer's bank account without the consumer writing a check.  Because of
the volume of such transactions banks cannot determine which drafts are
authorized, and so the bank typically pays these drafts.  This bill would
allow a bank that pays an unauthorized demand draft to return it to the
originating bank or other financial institution for restitution. 

PURPOSE

As proposed, C.S.S.B. 1162 allows a bank that pays an unauthorized demand
draft to return it to the originating bank or other financial institution
for restitution. 

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 Section 3.103(b), Business & Commerce Code, to provide
that the definition of demand draft in Section 3.104, Business & Commerce
Code, applies to this chapter. 

SECTION 2. Amends Section 3.014, Business & Commerce Code, to define
"demand draft."  

SECTION 3. Amends Section  3.416, Business & Commerce Code, by amending
Subsection (a) and adding Subsection (e), to provide that a person
warrants that the creation of the instrument according to the terms on its
face was authorized by the person identified as drawer, if the instrument
is a demand draft.  Provides that if the warranty in Subsection (a)(6) is
not given by a transferor under applicable conflict of law rules, the
warranty is not given to that transferor when the transferor is a
transferee. 

SECTION 4. Amends Section 3.417, Business & Commerce Code, to provide that
certain persons warrant to the drawee making payment or accepting the
draft in good faith that if the instrument is a demand draft, the creation
of the draft according to the terms on its face was authorized by the
person identified as drawer. Provides that if the warranty under
Subsection (a)(4) is not given by a transferor under applicable conflict
of laws rules, the warranty is not given to that transferor when that
transferor is a transferee. 

SECTION 5. Amends Section 4.207, Business & Commerce Code, by amending
Subsection (a) and adding Subsection (f), to provide that if the warranty
under Subsection (a)(6) is not given by a transferor or collecting bank
under applicable conflict of law rules, a warranty is not given to that
transferor when that transferor is a transferee or to any prior collecting
bank of that transferee. Makes a conforming change.  

SECTION 6. Amends Section 4.208, Business and Commerce Code, to make
conforming changes. 

SECTION 7. Effective date: September 1, 1997.

 SECTION 8. Emergency clause.

SUMMARY OF COMMITTEE CHANGES

SECTION 2. 

Amends Section 3.014, Business & Commerce Code, to define "demand draft." 

SECTION 4.

Amends  Section 3.417, Business & Commerce Code, to delete a provision
that a demand draft is a check.   

SECTION 6.

Amends Section 4.208, Business & Commerce Code, to make conforming changes.