HBA-TYH H.B. 2338 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 2338
By: Ehrhardt
Financial Institutions
4/8/1999
Introduced



BACKGROUND AND PURPOSE 

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 creates a flat $20
administrative fee on consumer loans and deletes the sliding scale fee of
$10 for loans under $1,000, or $25 for loans over that amount.  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

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

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 $20.  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 $20. 

(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 Section
11.305, 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.  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.