HBA-NLM S.B. 88 76(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 88 By: Carona Financial Institutions 4/28/1999 Engrossed 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. S.B. 88 regulates this type of quick cash business and prohibits such a business from filing or threatening to file a complaint, charge, or criminal prosecution based on the nonpayment of a check if the entity making the advance in exchange for the check received compensation exceeding five percent of the amount of the check or the check was given by the seller in a sale-leaseback transaction. 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, as follows: Sec. 342.007. CERTAIN SALES OF PERSONAL PROPERTY. Provides that a sale or 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.