SRC-LBB S.B. 417 78(R)   BILL ANALYSIS


Senate Research Center   S.B. 417
78R3812 DWS-FBy: Harris
Business & Commerce
2/28/2003
As Filed


DIGEST AND PURPOSE 

Current state law provides interest rate ceilings for all loans, including
commercial loans.  Independent and community banks in Texas may be at a
competitive disadvantage in the area of commercial lending because of
constitutional  limitations on interest rates compared with lenders who
are headquartered outside of Texas, and therefore not subject to Texas
usury restrictions.  As proposed, S.B. 417 creates an exemption from the
applicable interest rate ceiling for qualified commercial loans.  S.B. 417
allows the parties to a qualified commercial loan to contract, charge and
receive a mutually agreeable rate of interest, however computed, and
deletes language regarding which charges may be contracted for in a
qualified commercial loan.  S.B. 417 would become effective only after a
constitutional amendment authorizing the Legislature to amend certain
provisions concerning commercial lending is approved by the voters. 

RULEMAKING AUTHORITY

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

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 306.002(a), Finance Code, to make a conforming
change. 

SECTION 2.  Amends Section 306.101, Finance Code, as follows: 

Sec.  306.101.  New Heading:  QUALIFIED COMMERCIAL LOAN--RATE CEILING
INAPPLICABLE.  (a)  Provides that the parties to a qualified commercial
loan agreement may contract for, charge, and receive any rate or amount of
interest to which the parties agree, however computed. 

(b)  Deletes existing Subsection (b) relating to the charges a party to a
qualified commercial loan agreement may contract for and adds language
that provides that a rate ceiling provided by this title or another law of
this state does not apply to a qualified commercial loan. 

(c)  Deletes existing Subsection (c), which provides that a charge under
Subsection (b) is not interest. 

SECTION 3.  Effective date:  January 1, 2004, but only if the proposed
constitutional amendment is approved by the voters: otherwise this Act has
no effect.