BILL ANALYSIS |
C.S.H.B. 2315 |
By: Villarreal |
Investments & Financial Services |
Committee Report (Substituted) |
BACKGROUND AND PURPOSE
Current law authorizes a regulated lender to impose a nonrefundable flat charge in addition to interest charges imposed by the lender based on the amount and term of a loan. This flat charge is referred to as the administrative fee for non-real property loans and as the acquisition charge for certain other loans. Interested parties report that the administrative fee has not been increased in more than 10 years and the acquisition charge has not been increased in more than 20 years. C.S.H.B. 2315 seeks to introduce more flexibility and promote competition by allowing the Finance Commission of Texas to set the maximum amount of the administrative fee and acquisition charge by rule and by making other related changes.
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RULEMAKING AUTHORITY
It is the committee's opinion that rulemaking authority is expressly granted to the Finance Commission of Texas in SECTIONS 3 and 4 of this bill.
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ANALYSIS
C.S.H.B. 2315 amends the Finance Code to authorize the Finance Commission of Texas by rule to prescribe a reasonable maximum amount of an administrative fee for a non-real property loan contract that is greater than the maximum amount authorized for the amount of the loan. The bill clarifies that an administrative fee is not interest.
C.S.H.B. 2315 authorizes the finance commission by rule to prescribe a reasonable maximum amount for an acquisition charge on a cash advance that is greater than the maximum amount authorized under statutory provisions prescribing such charges based on the amount of the cash advance. The bill clarifies that an acquisition charge under statutory provisions prescribing alternate charges for certain consumer loans is not interest.
C.S.H.B. 2315 authorizes a loan contract for a cash advance to provide for an interest charge computed using the true daily earnings method or the scheduled installment earnings method that does not exceed the equivalent rate or effective return of the installment account handling charge for the original scheduled term of the loan. The bill prohibits the compounding of interest under the scheduled installment earnings method or true daily earnings method. The bill prohibits the principal balance of such a loan contract from including the acquisition charge, installment account handling charge, default charges, deferment charges, or return check fees. The bill specifies that interest may accrue on the principal balance from time to time unpaid at the rate provided for by the contact until the date of payment in full or demand for payment in full.
C.S.H.B. 2315 requires a payment on a loan contract that provides for an alternate interest charge computation method as authorized by the bill to be applied to the borrower's account in the following order or, at the lender's option, under another method of applying a payment that is more favorable to the borrower: the straight line allocation of the acquisition charge using the original scheduled term of the loan based on the proportional scheduled payment that was paid or scheduled to be paid; default charges; return check fees; any other charges authorized under statutory provisions regulating cash advance loans; accrued interest authorized under these provisions relating to an alternate interest charge computation method; and principal. The bill applies statutory provisions providing for a refund of precomputed interest on certain consumer loan contracts to interest contracted for under the bill's provisions.
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EFFECTIVE DATE
September 1, 2013.
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COMPARISON OF ORIGINAL AND SUBSTITUTE
While C.S.H.B. 2315 may differ from the original in minor or nonsubstantive ways, the following comparison is organized and highlighted in a manner that indicates the substantial differences between the introduced and committee substitute versions of the bill.
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