SRC-AXB H.B. 2338 76(R)   BILL ANALYSIS


Senate Research Center   H.B. 2338
By: Ehrhardt (Carona)
Economic Development
5/12/1999
Engrossed


DIGEST 

In the last legislative session, an administrative fee was added to small
loans in the amount of $10 for loans under $1,000, or $25 for loans over
that amount. Many community banks located in small towns make loans as
small as one hundred dollars to their customers for emergency purposes.
Local banks want to continue to make these loans; however, the interest and
current administrative fee added together on such a small loan does not
cover the costs of making the loan. H.B. 2338 increases the sliding rate to
$25 for a loan of more than $1,000 or $20 for a loan of $1,000 or less.
This bill also requires fifty cents of each administrative fee to be
deposited with the comptroller for use in carrying out the finance
commission's responsibilities, and deletes the authority of the consumer
credit commissioner to administer oaths and examine any person under oath
during an examination of lenders. 

PURPOSE

As proposed, H.B. 2338 increases the sliding rate to $25 for a loan of more
than $1,000 or $20 for a loan of $1,000 or less. This bill also requires
fifty cents of each administrative fee to be deposited with the comptroller
for use in carrying out the finance commission's responsibilities, and
deletes the authority of the consumer credit commissioner to administer
oaths and examine any person under oath during an examination of lenders. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

ARTICLE 1. AMENDMENTS TO TITLE 79, REVISED STATUTES

SECTION 1.01. Amends Article 3A.301, Title 79, Article
5069-3A.301,V.T.C.S., by adding Subsection (e), as follows: (e) Authorizes
a loan contract under this subchapter to provide for an administrative fee
in an amount not to exceed $25 for a loan of more than$1,000 or $20 for a
loan of $1,000 or less. Provides that the administrative fee is considered
earned when the loan is made or refinanced and is not subject to refund.
Prohibits a lender refinancing the loan from contracting for or receiving
an administrative fee for the loan more than once in any 180-day period.
Requires fifty cents of each administrative fee to be deposited with the
comptroller for use in carrying out the finance commission's
responsibilities under Section 11.305 (Research),Finance Code.  

SECTION 1.02. Amends Section 3A.508, Title 79, Article 5069-3A.508,
V.T.C.S., by amending Subsection (a) and adding Subsection (c), as follows:
(a) Authorizes a lender or a person who is assigned a secondary mortgage to
collect on or before the closing of the loan, or include in the principal
of the loan an administrative fee, subject to Subsection (c), in an amount
not to exceed $25 for a loan of more than $1,000 or $20 for a loan of
$1,000 or less. (c) Provides that an administrative fee is considered
earned when the loan is made or refinanced and is not subject to refund.
Prohibits a lender refinancing the loan from contracting for or receiving
an administrative fee for the loan more than once in any 180-day period.
Requires fifty cents of each administrative fee to be deposited with the
comptroller for use in carrying out the finance commission's
responsibilities under Section11.305, Finance Code. Makes a conforming
change.  

 ARTICLE 2. AMENDMENTS TO FINANCE CODE

SECTION 2.01. Amends Section 342.201, Finance Code, by adding
Subsection(e), to make conforming changes.  

SECTION 2.02. Amends Section 342.308, Finance Code, by amending
Subsection(a) and adding Subsection (c), to make conforming changes.  

SECTION 2.03. Amends Section 342.502(b), Finance Code, to delete text
referring to an administrative fee in an amount not to exceed $25 for a
loan of more than $1,000, or $10 for a loan of $1,000 or less.
Redesignates Paragraphs (A)-(F) to Subdivisions (1)-(6). Makes a conforming
change.  

SECTION 2.04. Repealer: Section 342.502(c), Finance Code. This section
relates to the authority of the consumer credit commissioner to administer
oaths and examine any person under oath during an examination of lenders.  

ARTICLE 3. EFFECTIVE DATE; EMERGENCY 

SECTION 3.01. (a) Provides that except as provided by Subsections (b)
and(c) of this section, this Act takes effect September 1, 1999. (b)
Provides that Article 1 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. (c)
Provides that Article 2 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 takes effect.  

SECTION 3.02. Emergency clause.