HBA-NLM H.B. 562 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 562 By: Giddings Financial Institutions 2/19/1999 Introduced BACKGROUND AND PURPOSE Under current law, it is a criminal offense if a person presents a check for payment with knowledge that the funds in the account on which the check is written are insufficient to cover the check. However, if the payee of a check has knowledge of insufficient funds and makes certain arrangements with the issuer of the check, no crime is committed. H.B. 562 establishes that a transaction is a loan if it involves a cash advance made in exchange for a check and an agreement is made to defer the deposit or negotiation of the check. This bill is proposed in order to limit the ability of certain businesses that issue cash in exchange for undated checks to use justice of the peace courts to collect sums due. 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 Section 342.007 and Section 342.008, as follows: Sec. 342.007. DELAYED DEPOSIT OF CERTAIN INSTRUMENTS. Specifies that a "check" in this section includes a negotiable order of withdrawal or share draft. Provides that a transaction is a loan subject to this subtitle (Loans and Financed Transactions) if the transaction involves a cash advance made in exchange for a check and an agreement to delay or defer deposit or negotiation of the check for a fixed period. Establishes that interest is a charge or other amount received by a person making a cash advance, other than repayment of the amount of the cash advance, for transactions under this section which are subject to this subtitle. Prohibits a person from avoiding the application of this section by any untruthful action or device, including a claim or contract that a transaction is a retail sale or involves a service fee. Provides that this section does not apply to a bona fide retail sale of merchandise, if the sale does not involve a cash advance and an agreement to delay or defer deposit or negotiation of a check. Sec. 342.008. CERTAIN SALES OF PERSONAL PROPERTY. (a) Provides that a loan subject to this subtitle is a sale or the purported sale of personal property used primarily for personal, family, or household use, under the following provisions: (1) the buyer agrees to lease the property back to the seller for payments that equal or exceed the price of the property paid by the buyer; (2) the buyer agrees to resell the property to the seller for an amount which equals or exceeds the price of the property paid by the buyer; or (3) 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 deposited or negotiated if the seller does not exercise a purchase option or make lease payments. (b) Provides that any excess amount received by the buyer in a transaction under Subsection (a) is interest subject to this subtitle. (c) Provides that is it a deceptive trade practice under Subchapter E, Chapter 17, Business & Commerce Code, to purport to the taking of title or a security interest or other lien in property by a buyer in connection with a transaction described by Subsection (a). Specifies that title to the property is not transferred and the security interest or other lien does not attach. (d) Provides that a sale or purported sale of personal property used for business, commercial, investment, agricultural, or similar purposes is exempt from this section. SECTION 2. Amends Subchapter D, Chapter 392, Finance Code, by adding Section 392.307, to specify that "check" in this section includes a negotiable order of withdrawal or share draft. Prohibits a person from filing or threatening to file a charge, complaint, or a criminal prosecution under Section 31.03, 31.04, or 32.41, Penal Code (Theft, Theft of Service, and Issuance of Bad Check, respectively), based on nonpayment of a check, if the accused person gave the check in exchange for a cash advance and did not deposit the check in a financial institution or present the check for payment. SECTION 3. Effective date: September 1, 1999. SECTION 4. Emergency clause.