SRC-JXG S.B. 88 76(R)   BILL ANALYSIS


Senate Research Center   S.B. 88
76R1676 DWS-FBy: Carona
Economic Development
3/21/1999
As Filed


DIGEST 

Currently, Texas law does not provide regulation for check-holding and
sale-leaseback operations. A check-holding transaction involves a person
leaving a post-dated check with a quick cash business in exchange for cash.
A sale-leaseback transaction involves a customer taking the serial number
of a piece of personal property, selling that property to a sale-leaseback
operation, and leaving a postdated check for a cash advance under the guise
of leasing the property back to the customer. A business can deposit checks
left with them, knowing that the checks will most likely be returned for
non-sufficient funds, if the customer is unable to repay. S.B. 88 would set
parameters for checkholding and sale-leaseback operations without using the
threat of criminal prosecution for enforcing civil contracts. 
  
PURPOSE

As proposed, S.B. 88 sets forth requirements for transactions subject to
regulation as loans. 

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 Chapter 342A, Finance Code, by adding Sections 342.007
and 342.008, as follows: 

Sec. 342.007. DELAYED DEPOSIT OF CERTAIN INSTRUMENTS. Defines "check."
Provides that a transaction is a loan subject to this subtitle if the
transaction involves certain actions. Provides that a charge or other
amount received by the person making a cash advance in a transaction
described by Subsection (b), other than repayment of the cash advance, is
interest subject to this subtitle. Prohibits a person from avoiding the
application of this section by any subterfuge or device, including a claim
or contract providing that a transaction described by Subsection (b) is a
retail sale or involves a service fee. Provides that this section does not
apply to a bona fide retail sale of merchandise that does not involve a
cash advance and an agreement to delay or defer deposit or negotiation of a
check.  

Sec. 342.008. CERTAIN SALES OF PERSONAL PROPERTY. Provides that a sale or
purported sale of personal property used primarily for personal, family, or
household use is a loan subject to this subtitle if it has certain
characteristics. Provides that if, in a transaction the total amount
received by the buyer exceeds the price paid for the property by the buyer,
the excess amount is interest subject to this subtitle. Provides that the
purported taking of title to or a security interest or other lien in
property by a buyer in connection with a transaction described by
Subsection (a) is a deceptive trade practice under Chapter 17E, Business &
Commerce Code. Provides that title to the property is not transferred and
the security interest or other lien does not attach. Provides that this
section does not apply to a sale or purported sale of personal property
used for business, commercial, investment, agricultural, or similar
purposes.  

SECTION 2. Amends Chapter 392D, Finance Code, by adding Section 392.307, as
follows: 

 Sec. 392.307. THREATENING OR PURSUING ACTION TO COLLECT CERTAIN CHECKS.
Defines "check." Prohibits a person from filing or threatening to file a
charge, complaint, or a criminal prosecution under Section 31.03, 31.04, or
32.41, Penal Code, based on nonpayment of a check, if the person from whom
collection is sought gave the check under certain conditions. 

SECTION 3. Effective date: September 1, 1999.

SECTION 4. Emergency clause.