HBA-RBT H.B. 391 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 391
By: Tillery
Financial Institutions
2/10/1999
Introduced



BACKGROUND AND PURPOSE 

Currently, Texas law makes no provision for the regulation of check-holding
or sale-leaseback operations.  A check-holding transaction generally is one
in which a person leaves a post-dated check with a quick cash business in
exchange for cash.  Typically, the terms of the agreement include a
provision that the cash is given for some sort of consideration in addition
to the agreement to pay the lender back.  A sale-leaseback transaction is
one in which a person enters into an agreement which involves the "sale" of
personal property followed by a "lease-back" of the same personal property.
In either case, money is advanced and a post-dated check is left with the
quick cash business.  If the post-dated check is not redeemed within the
time agreed, the quick cash business cashes the check.  If the check is
returned NSF, the quick cash business turns the check over for criminal
prosecution.  H.B. 391 regulates these types of quick cash businesses and
prevents them from using the criminal justice system as their collection
agency. 

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

SECTION 1.  Amends Subchapter A, Chapter 342, Finance Code, by adding
Sections 342.007 and 342.008, as follows: 

Sec.  342.007.  DELAYED DEPOSIT OF CERTAIN INSTRUMENTS.  Provides that in
this section, "check" includes a negotiable order of withdrawal or share
draft.  Provides that a transaction is a loan subject to this subtitle if
the transaction involves a cash advance made in exchange for a check and an
agreement to delay negotiation of the check for a definite period of time.
Provides that a charge or other amount received by the person making a cash
advance other than repayment of the cash advance is interest.  Prohibits a
person from avoiding the application of this section by subterfuge,
including a claim that the transaction is a retail sale or involves a
service fee.  Provides that this section does not apply to an actual retail
sale of merchandise that does not involve a cash advance and an agreement
to delay negotiation of a check. 

Sec.  342.008.  CERTAIN SALES OF PERSONAL PROPERTY.  Provides that a
purported sale of personal property used primarily for personal, family, or
household use is a loan if the buyer agrees to lease or sell the property
back to the seller for payments that in the aggregate are as much or more
than the amount paid by the buyer or the seller gives the buyer a check,
negotiable order of withdrawal, or share draft for an amount that equals or
exceeds the price paid for the property by the buyer and agrees that the
instrument may be negotiated if the seller does not make payments or buy it
back.  Provides that if the total amount received by the buyer is more than
the price paid for the property, any amount over the price paid is
interest.  Provides that a purported taking of title to or a security
interest or other lien in property by a buyer is a deceptive trade practice
under Subchapter E, Chapter 17, Business & Commerce Code (Deceptive Trade
Practices and Consumer Protection), and title to the property is not
transferred and the security interest or other lien does not attach.
Provides that this section does not apply to a sale or purported sale of
personal property used for  business, commercial, investment, agricultural,
or similar purposes. 

SECTION 2.  Amends Subchapter D, Chapter 392, Finance Code, by adding
Section 392.307, as follows: 

Sec.  392.307.  THREATENING OR PURSUING ACTION TO COLLECT CERTAIN CHECKS.
Defines "check."  Prohibits a person from filing or threatening to file a
charge, complaint, or criminal prosecution under Sections 31.03 (Theft),
31.04 (Theft of Service), or 32.41 (Issuance of Bad Check), Penal Code,
based on the nonpayment of a check if the person from whom collection is
sought gave the check in exchange for a cash advance and the person making
the advance received compensation exceeding five percent of the amount of
the check or if the person from whom collection is sought gave the check as
the seller in a transaction described by Section 342.008, Finance Code. 

SECTION 3.  Effective date: September 1, 1999.

SECTION 4.  Emergency clause.