By: Solomons H.B. No. 2556
A BILL TO BE ENTITLED
AN ACT
relating to the rights and duties of the parties to a motor vehicle
retail installment contract or a conditional delivery agreement
involving the sale or conditional delivery of a motor vehicle;
providing an administrative penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter A, Chapter 348, Finance Code, is
amended by adding Section 348.013 to read as follows:
Sec. 348.013. CONDITIONAL DELIVERY AGREEMENT. (a) In this
section, "conditional delivery agreement" means a contract between
a retail seller and prospective retail buyer under the terms of
which the retail seller allows the prospective retail buyer the use
and benefit of a motor vehicle for a specified term.
(b) Subject to this section, a retail seller and prospective
retail buyer may enter into a conditional delivery agreement.
(c) A conditional delivery agreement is:
(1) an enforceable contract; and
(2) void on the execution of a retail installment
contract between the parties of the conditional delivery agreement
for the sale of the motor vehicle that is the subject of the
conditional delivery agreement.
(d) A conditional delivery agreement may only confer rights
consistent with this section and may not confer any legal or
equitable rights of ownership, including ownership of the motor
vehicle that is the subject of the conditional delivery agreement.
(e) A conditional delivery agreement may not exceed a term
of 15 days.
(f) If a prospective retail buyer tenders to a retail seller
a trade-in motor vehicle in connection with a conditional delivery
agreement:
(1) the parties must agree on the value of the trade-in
motor vehicle;
(2) the conditional delivery agreement must contain
the agreed value of the trade-in motor vehicle described by
Subdivision (1); and
(3) the retail seller must use reasonable care to
conserve the trade-in motor vehicle while the vehicle is in the
retail seller's possession.
(g) If the parties to a conditional delivery agreement do
not subsequently enter into a retail installment contract for the
sale of the motor vehicle that is the subject of the conditional
delivery agreement, the retail seller shall, not later than the
seventh day after termination of the conditional delivery
agreement:
(1) deliver to the prospective retail buyer any
trade-in motor vehicle that the prospective retail buyer tendered
in connection with the conditional delivery agreement in the same
or substantially the same condition as it was at the time of
execution of the agreement and shall return any down payment or
other consideration received from the prospective retail buyer in
connection with the agreement; or
(2) if the trade-in motor vehicle cannot be returned
in the same or substantially the same condition as it was at the
time of execution of the conditional delivery agreement, deliver to
the prospective retail buyer a sum of money equal to the agreed
value of the trade-in motor vehicle as described by Subsection (f)
and shall return any down payment or other consideration described
by Subdivision (1).
(h) Any money that a retail seller is obligated to provide a
prospective retail buyer under Subsection (g) must be tendered at
the same time that the trade-in motor vehicle is delivered for
return to the prospective retail buyer or when the trade-in motor
vehicle would have been delivered if the vehicle was damaged or
could not be returned.
(i) If a prospective retail buyer returns a motor vehicle
under a conditional delivery agreement at the request of the retail
seller, the retail seller, notwithstanding the period prescribed by
Subsection (g), must return the trade-in vehicle at the same time
that the motor vehicle under the conditional delivery agreement is
returned by the prospective retail buyer.
(j) The prospective retail buyer shall return the motor
vehicle received under the conditional delivery agreement in the
same or substantially the same condition as it was at the time of
the execution of the conditional delivery agreement.
(k) An amount paid or required to be paid by the retail
seller under Subsection (g) is subject to review by the
commissioner. If the commissioner determines that the retail
seller in fact owes the prospective retail buyer a certain amount
under Subsection (g), the commissioner may order the retail seller
to pay the amount to the prospective retail buyer. If the trade-in
motor vehicle is not returned by the retail seller in accordance
with this section and the retail seller does not pay the prospective
retail buyer an amount equal to the agreed value of the trade-in
motor vehicle within the period prescribed by this section, the
commissioner may assess an administrative penalty against the
retail seller in an amount that is reasonable in relation to the
value of the trade-in motor vehicle. The commissioner shall
provide notice to the retail seller and the prospective retail
buyer of the commissioner's determination under this subsection.
(l) Not later than the 30th day after the date the parties
receive notice of the commissioner's determination under
Subsection (k), the retail seller or prospective retail buyer may
file with the commissioner an appeal of the commissioner's
determination requesting a time and place for a hearing before a
hearings officer designated by the commissioner. A hearing under
this subsection is governed by Chapter 2001, Government Code.
After the hearing, based on the findings of fact, conclusions of
law, and recommendations of the hearings officer, the commissioner
shall enter a final order.
(m) A person who requests an appeal under Subsection (l) is
required to pay a deposit to secure the payment of the costs of the
hearing in a reasonable amount as determined by the commissioner,
unless the person cannot afford to pay the deposit and files an
affidavit to that effect with the hearings officer in the form and
content prescribed by finance commission rule. The entire deposit
must be refunded to the person if the person prevails in the
hearing. If the person does not prevail, any portion of the deposit
in excess of the costs of the hearing assessed against the person is
refundable.
(n) Notice of the commissioner's final order under
Subsection (l), given to the person in accordance with Section
2001, Government Code, must include a statement of the person's
right to judicial review of the order.
(o) The hearings officer may order the retail seller or the
prospective retail buyer, or both, to pay reasonable expenses
incurred by the commissioner in connection with obtaining a final
order under Subsection (l), including attorney's fees,
investigative costs, and witness fees.
(p) This section does not:
(1) apply to a bailment agreement under Section
348.002; or
(2) create a private right of action.
(q) Except as otherwise provided by this section, the
commissioner has exclusive jurisdiction to enforce this section.
SECTION 2. Subchapter B, Chapter 348, Finance Code, is
amended by adding Section 348.1015 to read as follows:
Sec. 348.1015. CONTRACT CONDITIONED ON SUBSEQUENT
ASSIGNMENT PROHIBITED. (a) A retail installment contract may not be
conditioned on the subsequent assignment of the contract to a
holder.
(b) A provision in violation of this section is void. This
subsection does not affect the validity of other provisions of the
contract that may be given effect without the voided provision, and
to that extent those provisions are severable.
(c) This section does not create a private right of action.
(d) The commissioner has exclusive jurisdiction to enforce
this section.
SECTION 3. The changes in law made by this Act apply only to
a contract entered into on or after the effective date of this Act.
A contract entered into before the effective date of this Act is
governed by the law in effect when the contract was entered into,
and the former law is continued in effect for that purpose.
SECTION 4. This Act takes effect September 1, 2009.