Texas House Bill HB777

Texas 2021 - 87th Regular

Caption

Relating to the repossession of a motor vehicle after default on an agreement.

Impact

The enactment of HB 777 is expected to provide important protections to borrowers in Texas, especially those who may be struggling financially. By limiting the lender's ability to collect deficiency balances under certain circumstances, the bill aims to alleviate some of the financial burden from borrowers who are adversely affected by their inability to maintain vehicle payments. This change in law is applied to agreements entered into on or after the effective date of the act, which is set for September 1, 2021.

Summary

House Bill 777 introduces significant reform to the process of motor vehicle repossession in Texas. Under this bill, a lender who repossesses a motor vehicle after a borrower defaults on a loan or lease agreement would be restricted from collecting any deficiency balance from the borrower if the vehicle's fair market value is less than $2,000. This means that borrowers will be protected from having to pay additional sums beyond the sale price of the repossessed vehicle, unless they have either damaged the vehicle or failed to make it available for repossession as demanded by the lender.

Contention

While the bill has garnered support for its protective measures towards borrowers, there are likely concerns from lenders regarding the implications of restricting their ability to collect on loans. Some financial institutions may argue that these restrictions could lead to increased risk in lending, potentially limiting credit availability or increasing the costs associated with loans. The law's specific threshold of $2,000 for deficiency balances could also spark debate among stakeholders over the appropriateness of this limit in different economic contexts.