HBA-ATS, TYH H.B. 2338 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 2338 By: Ehrhardt Financial Institutions 6/7/1999 Enrolled BACKGROUND AND PURPOSE The 75th Texas Legislature passed a law that imposed an administrative fee in an amount not to exceed $25 for a loan of more than $1,000 or $10 for a loan of $1,000 or less. Many community banks located in small towns make loans as small as one hundred dollars to their customers for emergency purposes. Although local banks want to continue to make these loans, the interest and current administrative fee added together on such small loans do not cover the costs of making the loans. H.B. 2338 increases the sliding rate to $25 for a loan of more than $1,000 or $20 for a loan of $1,000 or less. This bill also requires fifty cents of each administrative fee to be deposited with the comptroller of public accounts for use in carrying out the responsibilities of the Finance Commission of Texas, and deletes the authority of the consumer credit commissioner to administer oaths and examine any person under oath during an examination of lenders. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS ARTICLE 1. AMENDMENTS TO TITLE 79, REVISED STATUTES SECTION 1.01. Amends Article 3A.301, Title 79, Article 5069-3A.301, V.T.C.S., by adding Subsection (e), as follows: (e) Authorizes a loan contract under this subchapter (Interest Charges on Non-Real Property Loans) to provide for an administrative fee in an amount not to exceed $25 for a loan of more than $1,000 or $20 for a loan of $1,000 or less. Provides that the administrative fee is considered earned when the loan is made or refinanced and is not subject to refund. Prohibits a lender refinancing the loan from contracting for or receiving an administrative fee for the loan more than once in any 180-day period. Requires fifty cents of each administrative fee to be deposited with the comptroller of public accounts (comptroller) for use in carrying out the responsibilities of the Finance Commission of Texas (finance commission) under Section 11.305 (Research), Finance Code. SECTION 1.02. Amends Section 3A.508, Title 79, Article 5069-3A.508, V.T.C.S., by amending Subsection (a) and adding Subsection (c), as follows: (a) Authorizes a lender or a person who is assigned a secondary mortgage to collect on or before the closing of the loan, or include in the principal of the loan an administrative fee, subject to Subsection (c), in an amount not to exceed $25 for a loan of more than $1,000 or $20 for a loan of $1,000 or less. (c) Provides that an administrative fee is considered earned when the loan is made or refinanced and is not subject to refund. Prohibits a lender refinancing the loan from contracting for or receiving an administrative fee for the loan more than once in any 180-day period. Requires fifty cents of each administrative fee to be deposited with the comptroller for use in carrying out the finance commission's responsibilities under Section 11.305, Finance Code. Makes a conforming change. ARTICLE 2. AMENDMENTS TO FINANCE CODE SECTION 2.01. Amends Section 342.201, Finance Code, by adding Subsection (e), to make conforming changes. SECTION 2.02. Amends Section 342.308, Finance Code, by amending Subsection (a) and adding Subsection (c), to make conforming changes. SECTION 2.03. Amends Section 342.502(b), Finance Code, to delete text referring to an administrative fee in an amount not to exceed $25 for a loan of more than $1,000, or $10 for a loan of $1,000 or less. Redesignates Paragraphs (A)-(F) to Subdivisions (1)-(6). Makes a conforming change. SECTION 2.04. Repealer: Section 342.502(c), Finance Code. This section relates to the authority of the consumer credit commissioner to administer oaths and examine any person under oath during an examination of lenders. ARTICLE 3. EFFECTIVE DATE; EMERGENCY SECTION 3.01. (a) Provides that except as provided by Subsections (b) and (c) of this section, this Act takes effect September 1, 1999. (b) Provides that Article 1 of this Act takes effect only if the Act of the 76th Legislature, Regular Session, 1999, relating to nonsubstantive additions to and corrections in enacted codes does not take effect. (c) Provides that Article 2 of this Act takes effect only if the Act of the 76th Legislature, Regular Session, 1999, relating to nonsubstantive additions to and corrections in enacted codes takes effect. SECTION 3.02. Emergency clause.