82R24647 ATP-F
By: Woolley H.B. No. 2931
A BILL TO BE ENTITLED
AN ACT
relating to certain debt cancellation agreements made in connection
with retail installment contracts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 348.124(a), Finance Code, is amended to
read as follows:
(a) In connection with a retail installment transaction
under this chapter, a retail seller may offer to the retail buyer a
debt cancellation agreement, including a guaranteed asset
protection waiver or similarly named agreement. The retail seller
may not require that the purchase of a debt cancellation agreement
by the retail buyer be made in order to enter into a retail
installment transaction.
SECTION 2. Chapter 348, Finance Code, is amended by adding
Subchapter G to read as follows:
SUBCHAPTER G. CERTAIN DEBT CANCELLATION AGREEMENTS
Sec. 348.601. LIMITATION ON CERTAIN DEBT CANCELLATION
AGREEMENTS. (a) This subchapter applies only to a debt
cancellation agreement that includes insurance coverage as part of
the retail buyer's responsibility to the holder.
(b) The amount charged for a debt cancellation agreement
made in connection with a retail installment contract must be
created in good faith and be commercially reasonable. Section
348.124(c) does not apply to a debt cancellation agreement
regulated under this subchapter.
(c) Notwithstanding any other provision of this code, the
commissioner may not directly or indirectly set rates for a debt
cancellation agreement to which this subchapter applies.
(d) The debt cancellation agreement becomes a part of or a
separate addendum to the retail installment contract and remains a
term of the retail installment contract on the assignment, sale, or
transfer by the holder.
Sec. 348.602. DEBT CANCELLATION AGREEMENTS EXCLUSION
LANGUAGE. (a) In addition to the provisions required by Section
348.603, a debt cancellation agreement must fully disclose all
provisions permitting the exclusion of loss or damage including, if
applicable:
(1) an act occurring after the original maturity date
or date of the holder's acceleration of the retail installment
contract;
(2) any dishonest, fraudulent, illegal, or
intentional act of any authorized driver that directly results in
the total loss of the motor vehicle;
(3) any act of gross negligence by an authorized
driver that directly results in the total loss of the motor vehicle;
(4) conversion, embezzlement, or concealment by any
person in lawful possession of the motor vehicle;
(5) lawful confiscation by an authorized public
official;
(6) the operation, use, or maintenance of the motor
vehicle in any race or speed contest;
(7) war, whether or not declared, invasion,
insurrection, rebellion, revolution, or an act of terrorism;
(8) normal wear and tear, freezing, or mechanical or
electrical breakdown or failure;
(9) use of the motor vehicle for primarily commercial
purposes;
(10) damage that occurs after the motor vehicle has
been repossessed;
(11) damage to the motor vehicle before the purchase
of the debt cancellation agreement;
(12) unpaid insurance premiums and salvage, towing,
and storage charges relating to the motor vehicle;
(13) damage related to any personal property attached
to or within the motor vehicle;
(14) damages associated with falsification of
documents by any person not associated with the retail seller or
other person canceling the retail buyer's obligation;
(15) any unpaid debt resulting from exclusions in the
retail buyer's primary physical damage coverage not included in the
debt cancellation agreement;
(16) abandonment of the motor vehicle by the retail
buyer only if the retail buyer voluntarily discards, leaves behind,
or otherwise relinquishes possession of the motor vehicle to the
extent that the relinquishment shows intent to forsake and desert
the motor vehicle so that the motor vehicle may be appropriated by
any other person;
(17) any amounts deducted from the primary insurance
carrier's settlement due to prior damages; and
(18) any loss occurring outside the United States or
outside the United States and Canada.
(b) An exclusion of loss or damage not listed in Subsection
(a) may be included in a debt cancellation agreement only if the
exclusion is disclosed in plain, easy to read language.
Sec. 348.603. REQUIRED DEBT CANCELLATION AGREEMENT
LANGUAGE. A debt cancellation agreement must state:
(1) the contact information of the retail seller, the
holder, and any administrator of the agreement;
(2) the name and address of the retail buyer;
(3) the cost and term of the debt cancellation
agreement;
(4) the procedure the retail buyer must follow to
obtain benefits under the terms of the debt cancellation agreement,
including a telephone number and address where the retail buyer may
provide notice under the debt cancellation agreement;
(5) the period during which the retail buyer is
required to notify the retail seller, the holder, or any
administrator of the agreement, of any potential loss under the
debt cancellation agreement for total loss or theft of the motor
vehicle;
(6) that in order to make a claim, the retail buyer
must provide or complete some or all of the following documents and
provide those documents to the retail seller, the holder, or any
administrator of the agreement:
(A) a debt cancellation request form;
(B) proof of loss and settlement payment from the
retail buyer's primary comprehensive, collision, or uninsured or
underinsured motorist policy or other parties' liability insurance
policy for the settlement of the insured total loss of the motor
vehicle;
(C) verification of the retail buyer's primary
insurance deductible;
(D) a copy of any police report filed in
connection with the total loss or theft of the motor vehicle; and
(E) a copy of the damage estimate;
(7) that documentation not described by Subdivision
(6) or required by the retail seller, the holder, or any
administrator of the agreement is not required to substantiate the
loss or determine the amount of debt to be canceled;
(8) that notwithstanding the collection of the
documents under Subdivision (6), on reasonable advance notice the
retail seller, the holder, or any administrator of the agreement
may inspect the retail buyer's motor vehicle;
(9) that the retail seller or holder will cancel all or
part of the retail buyer's obligation as provided in the debt
cancellation agreement on the occurrence of total loss or theft of
the motor vehicle;
(10) the method to be used to calculate refunds;
(11) the method for calculating the amount to be
canceled under the debt cancellation agreement on the occurrence of
total loss or theft of a motor vehicle;
(12) that purchase of a debt cancellation agreement is
not required for the retail buyer to obtain an extension of credit
and will not be a factor in the credit approval process;
(13) that in order to cancel the debt cancellation
agreement and receive a refund, the retail buyer must provide a
written request to cancel to the retail seller, the holder, or any
administrator of the agreement;
(14) that if total loss or theft of the motor vehicle
has not occurred, the retail buyer has 30 days from the date of the
retail installment contract or the issuance of the debt
cancellation agreement, whichever is later, or a longer period as
provided under the debt cancellation agreement, to cancel the debt
cancellation agreement and receive a full refund; and
(15) that the retail buyer may file a complaint with
the commissioner, and include the address, phone number, and
Internet website of the Office of Consumer Credit Commissioner.
Sec. 348.604. APPROVAL OF FORMS FOR DEBT CANCELLATION
AGREEMENTS. (a) Debt cancellation agreement forms must be
submitted to the commissioner for approval. Debt cancellation
agreement forms may include additional language to supplement the
terms of the debt cancellation agreement as required by this
subchapter.
(b) If a debt cancellation agreement form is provided to the
commissioner for approval, the commissioner has 45 days to approve
the form or deny approval of the form. If after the 45th day the
commissioner does not deny the form, the form is considered
approved.
(c) If the debt cancellation agreement form is approved by
the commissioner or considered approved as provided by Subsection
(b), the terms of the debt cancellation agreement are considered to
be in compliance with this subchapter.
(d) The commissioner may deny approval of a form only if the
form excludes the language required by Sections 348.602 and 348.603
or contains any inconsistent or misleading provisions. All form
denials may be appealed to the finance commission.
(e) Debt cancellation agreement forms that have been
approved by the commissioner or considered approved as provided by
Subsection (b) shall be posted on the Office of Consumer Credit
Commissioner's Internet website and are not confidential under
Chapter 552, Government Code, or other law.
Sec. 348.605. ADDITIONAL REQUIREMENTS FOR DEBT
CANCELLATION AGREEMENTS. (a) If a retail buyer purchases a debt
cancellation agreement, the retail seller must provide to the
retail buyer a true and correct copy of the agreement not later than
the 10th day after the date of the retail installment contract.
(b) A holder must comply with the terms of a debt
cancellation agreement not later than the 60th day after the date of
receipt of all necessary information required by the holder or
administrator of the agreement to process the request.
(c) A debt cancellation agreement may not knowingly be
offered by a retail seller if:
(1) the retail installment contract is already
protected by gap insurance; or
(2) the purchase of the debt cancellation agreement is
required for the retail buyer to obtain the extension of credit.
(d) This section does not apply to a debt cancellation
agreement offered in connection with the purchase of a commercial
vehicle.
(e) The sale of a debt cancellation agreement must be for a
single payment.
(f) A holder that offers a debt cancellation agreement must
report the sale of and forward money received on all such agreements
to any designated party as prescribed in any applicable
administrative services agreement, contractual liability policy,
other insurance policy, or other specified program documents.
(g) Money received or held by a holder or any administrator
of a debt cancellation agreement and belonging to an insurance
company, holder, or administrator under the terms of a written
agreement must be held by the holder or administrator in a fiduciary
capacity.
Sec. 348.606. REFUND FOR DEBT CANCELLATION AGREEMENTS. (a)
A refund or credit of the debt cancellation agreement fee must be
based on the earliest date of:
(1) the prepayment of the retail installment contract
in full before the original maturity date;
(2) a demand by the holder for payment in full of the
unpaid balance or acceleration;
(3) a request by the retail buyer for cancellation of
the debt cancellation agreement; or
(4) the total denial of a debt cancellation request
based on one of the exclusions listed in Section 348.602, except in
the case of a partial loss of the covered motor vehicle.
(b) The refund or credit for the debt cancellation agreement
can be rounded to the nearest whole dollar. A refund or credit is
not required if the amount of the refund or credit calculated is
less than $5.
(c) If total loss or theft has not occurred, the retail
buyer may cancel the debt cancellation agreement not later than the
30th day after the date of the retail installment contract or the
issuance of the debt cancellation agreement, whichever is later, or
a later date as provided under the debt cancellation agreement. On
cancellation, the holder or any administrator of the agreement
shall refund or credit the entire debt cancellation agreement fee.
A retail buyer may not cancel the debt cancellation agreement and
subsequently receive any benefits under the agreement.
(d) A holder may in good faith rely on a computation by any
administrator of the agreement of the balance waived, unless the
holder has knowledge that the computation is not correct. If a
computation by the administrator of the balance waived is not
correct, the holder must within a reasonable time of learning that
the computation is incorrect make the necessary corrections or
cause the corrections to be made to the retail buyer's account. This
subsection does not prevent the holder from obtaining reimbursement
from the administrator or another responsible for the debt
cancellation agreement or computation.
SECTION 3. The changes in law made by this Act apply only to
debt cancellation agreements subject to Subchapter G, Chapter 348,
Finance Code, as added by this Act, entered into on or after
September 1, 2011.
SECTION 4. This Act takes effect September 1, 2011.