HBA-TYH H.B. 744 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 744 By: Eiland Financial Institutions 3/4/1999 Introduced 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. 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 the greater of the highest authorized rate for an installment loan subject to Chapter 342 (Certain Cash Advance Loans) or 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. 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 greater 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. 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 346.101(a), Finance Code, to authorize a revolving credit account to provide for interest on an account at an annual rate that does not exceed the greater of the highest authorized rate for an installment loan subject to Chapter 3A, Title 79, V.T.C.S. (Consumer Loans), or 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 4. Amends Section 346.103, Finance Code, as follows: Sec. 346.103. FEES. 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 greater 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. Deletes existing text relating to a revolving credit account in which a person is prohibited from charging a fee not authorized by statute. SECTION 5. (a) Effective date: September 1, 1999, except as provided by Subsections (b) and (c). (b) Provides that 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) Provides that 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, does not take effect. SECTION 6. Emergency clause.