HBA-SEP, JLV H.B. 690 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 690
By: Thompson
Financial Institutions
2/12/2001
Introduced



BACKGROUND AND PURPOSE 

Under current law,  there is an established maximum interest charge
permitted on non-real property loans which varies depending on the loan
terms and borrowed amount.  The maximum interest rate for consumers who
qualify for larger loans is less than the maximum interest rate for
consumers who qualify for smaller loans.  There is concern that consumers
who only qualify for the minimum loan amounts may seek alternative means to
obtain additional funds, such as loans that originate outside the state.
House Bill 690 establishes an alternate maximum interest charge on a
consumer loan contract that is not secured by real property. 

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. 

ANALYSIS

House Bill 690 amends the Finance Code to establish an alternate maximum
interest charge on a consumer loan contract that is not secured by real
property.  The bill authorizes such a loan to provide for an interest
charge on a cash advance that does not exceed 30 percent per year.  On a
loan using the alternative interest  charge, the maximum cash advance is
the revised ceiling computed by the consumer credit commissioner by
dividing the reference base index into the consumer price index using the
reference base amount of $2,500.  The bill prohibits the interest from
being precomputed and requires the interest to be computed by the actuarial
method. 

EFFECTIVE DATE

September 1, 2001.