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.