S.B. 774 78(R)    BILL ANALYSIS


S.B. 774
By: Averitt
Financial Institutions
Committee Report (Unamended)



BACKGROUND AND PURPOSE 

Current Texas law is unclear concerning procedures for revolving lines of
credit secured by real property.  S.B. 774 provides the necessary
statutory framework to ensure that transactions involving a line of credit
secured by real property are handled appropriately by lending
institutions.  

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS

S.B. 774 expressly permits a creditor to take real or personal property as
collateral.  The bill limits the interest rate of a revolving credit
account to the greater of 18 percent or the applicable alternative rate
ceiling under Chapter 303, Finance Code.  A creditor is permitted to
receive certain fees or charges as if the revolving credit account were a
secondary mortgage loan.  The bill prohibits a creditor from accelerating
or demanding immediate payment unless the customer is in default under the
terms of a revolving credit account secured by real property. 

The bill requires creditors in a revolving credit account to hold a
license under Chapter 342, Finance Code unless specifically exempted.   

EFFECTIVE DATE

September 1, 2003