BILL ANALYSIS
By: Averitt
BACKGROUND 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.
S.J.R. 21 proposes a constitutional amendment to allow the Texas Legislature to create exemptions from the maximum rate of interest for commercial loans, defined to be those made primarily for business, commercial, investment, agricultural or similar purposes and not primarily for personal, family, or household purposes.
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.J.R. 21 amends Section 11, Article XVI, Texas Constitution, as follows:
The bill creates Subsection (a) from existing text that defines the maximum rates of interest.
The bill authorizes the Legislature to create exemptions from the maximum rates of interest, notwithstanding Subsection (a). It also defines “commercial loan” as a loan made primarily for business, commercial, investment, agricultural, or similar purposes, not for personal, family, or household purposes.
FOR ELECTION
This proposed constitutional amendment shall be submitted to the voters at an election on November 8, 2005.