HBA-TYH C.S.H.B. 744 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 744 By: Eiland Financial Institutions 3/25/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE In 1983, legislation was enacted to cap the interest rate on credit cards at 14 percent and to prohibit all fees not authorized by statute. Texas banks are unable to issue credit cards at rates that are comparable to other issuers, and major credit card issuers have moved out of state and then exported the rates back to Texas. Consequently, consumers may pay 21 to 24 percent more because of the usury laws of other states, and approximately 10,000 jobs in this business sector have left Texas. C.S.H.B. 744 provides an interest rate identical to the interest rate on consumer installment loans and establishes several authorized fees with a cap on each fee. This makes credit card operations more attractive in Texas and, also, provides caps on fees and rates. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 346.101(a), Finance Code, to authorize a revolving credit account to provide for interest on an account at an annual rate that does not exceed 18 percent a year. Deletes a portion of the text of Subdivision (a)(1)(A), Paragraphs (B) and (C), and Subsection (a)(2), which state the various annual percentage rates, depending on the amount of the average daily balance of the account. Makes nonsubstantive changes. SECTION 2. Amends Section 346.103, Finance Code, as follows: Sec. 346.103. FEES. (a) Authorizes the following fees to be charged to or collected from a customer in connection with an account under this chapter: (1) an annual fee not to exceed $50 a year on an account with a credit limit of $5,000 or less, $75 a year on an account with a credit limit exceeding $5,000 but not exceeding $25,000, and $125 a year on an account with a credit limit exceeding $25,000; (2) a late charge not to exceed the lesser of $15 or five percent of the payment due after the payment becomes delinquent for 10 or more days, including Sundays and holidays; (3) a cash advance charge not to exceed the greater of $2 or two percent of the cash advance; (4) a returned check fee as provided for a loan agreement under Chapter 342 (Certain Cash Advance Loans) by Section 1, Chapter 617, Acts of the 68th Legislature, Regular Session, 1983 (Article 9022, V.T.C.S.); and (5) a fee for exceeding a credit limit not to exceed the greater of $15 or five percent of the amount by which the credit limit is exceeded. (b) Prohibits a creditor from charging, contracting for, or receiving interest on fees authorized under this section. Deletes existing text relating to a revolving credit account in which a person is prohibited from charging a fee not authorized by statute. SECTION 3. Amends Section 346.103, Finance Code, as follows: Sec. 346.103. FEES. (a) Authorizes the following fees to be charged to or collected from a customer in connection with an account under this chapter: (1) an annual fee not to exceed $50 a year on an account with a credit limit of $5,000 or less, $75 a year on an account with a credit limit exceeding $5,000 but not exceeding $25,000, and $125 a year on an account with a credit limit exceeding $25,000; (2) a late charge not to exceed the lesser of $15 or five percent of the payment due after the payment becomes delinquent for 10 or more days, including Sundays and holidays; (3) a cash advance charge not to exceed the greater of $2 or two percent of the cash advance; (4) a returned check fee as provided for a loan agreement under Chapter 3A, Title 79, V.T.C.S. (Consumer Loans), by Section 1, Chapter 617, Acts of the 68th Legislature, Regular Session, 1983 (Article 9022, V.T.C.S.); and (5) a fee for exceeding a credit limit not to exceed the greater of $15 or five percent of the amount by which the credit limit is exceeded. (b) Prohibits a creditor from charging, contracting for, or receiving interest on fees authorized under this section. Deletes existing text relating to a revolving credit account in which a person is prohibited from charging a fee not authorized by statute. SECTION 4. Amends Section 345.157, Finance Code, by amending Subsection (b) and adding Subsection (d), as follows: (b) Prohibits the amount of a delinquency charge from exceeding $15, rather than $10. (d) Requires the holder to remit 50 cents of each delinquency charge in excess of $10 collected under this section to the comptroller, in the time and manner established by the comptroller, for deposit to the credit of an account in the general revenue fund. Authorizes one-half of the money in the account to be appropriated only to finance research conducted by the finance commission under Section 11.305 (Research) and the other one-half of the money in the account to be appropriated only to finance educational activities and counseling services funded under Section 394.001 (Duties of Commissioner). SECTION 5. Repealer: Section 303.009(e), Finance Code. SECTION 6. (a) Effective date: September 1, 1999, except as provided by Subsections (b) and (c). (b) Provides that Sections 2 and 5 of this Act take effect only if the Act of the 76th Legislature, Regular Session, 1999, relating to nonsubstantive additions to and corrections in enacted codes, takes effect. (c) Provides that Section 3 of this Act takes effect only if the Act of the 76th Legislature, Regular Session, 1999, relating to nonsubstantive additions to and corrections in enacted codes, does not take effect. SECTION 7. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE In SECTION 1, C.S.H.B. 744 differs from the original by removing reference to "the greater of the highest authorized rate for an installment loan subject to Chapter 342," and instead sets the maximum annual rate for a revolving credit account at 18 percent. In SECTION 2, C.S.H.B. 744 differs from the original by prohibiting a late charge from exceeding the lesser of, rather than the greater of, $15 or five percent of the payment. C.S.H.B. 744 also adds a new Subsection (b) prohibiting interest from being charged on the fees. In SECTION 3, C.S.H.B. 744 differs from the original by deleting SECTION 3 of the original bill, and redesignating SECTION 4 of the original bill to SECTION 3. C.S.H.B. 744 prohibits a late charge from exceeding the lesser of, rather than the greater of, $15 or five percent of the payment. C.S.H.B. 744 also adds a new Subsection (b) prohibiting interest from being charged on the fees. In SECTION 4, C.S.H.B. 744 differs from the original by adding new SECTION 4, which prohibits the amount of a delinquency charge from exceeding $15, rather than $10, and requires the holder to remit 50 cents of each delinquency charge in excess of $10 collected under this section to the comptroller, in the time and manner established by the comptroller, for deposit to the credit of an account in the general revenue fund. Authorizes one-half of the money in the account to be appropriated only to finance research conducted by the finance commission under Section 11.305 (Research) and the other one-half of the money in the account to be appropriated only to finance educational activities and counseling services funded under Section 394.001 (Duties of Commissioner). In SECTION 5, C.S.H.B. 744 differs from the original by adding new SECTION 5, which repeals Section 303.009(e), Finance Code, which currently does not exist in the Finance Code. It will exist upon passage of a new bill. Once it exists it will be repealed upon passage of C.S.H.B. 744. In SECTION 6, C.S.H.B. 744 differs form the original by providing that Sections 2 and 5, rather than Sections 1 and 2, of this Act take effect only if the Act of the 76th Legislature, Regular Session, 1999 relating to nonsubstantive additions to and corrections in enacted codes takes effect. C.S.H.B. 744 also provides that Sections 3, rather than Sections 3 and 4, of this Act take effect only if the Act of the 76th Legislature, Regular Session, 1999 relating to nonsubstantive additions to and corrections in enacted codes takes effect. C.S.H.B. 744 redesignates SECTION 5 of the original bill to SECTION 6. In SECTION 7, C.S.H.B. 744 redesignates SECTION 6 of the original bill to SECTION 7.