By: Lucio III (Senate Sponsor - Menéndez) H.B. No. 4120
(In the Senate - Received from the House April 26, 2019;
April 29, 2019, read first time and referred to Committee on
Business & Commerce; May 20, 2019, reported adversely, with
favorable Committee Substitute by the following vote: Yeas 7,
Nays 0; May 20, 2019, sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR H.B. No. 4120 By: Menéndez
A BILL TO BE ENTITLED
AN ACT
relating to the financial security requirement for providers
obligated under certain service contracts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 1304.151, Occupations Code, is amended
by amending Subsection (b) and adding Subsections (b-1), (b-2), and
(b-3) to read as follows:
(b) If the provider ensures its obligations under
Subsection (a)(2), the amount maintained in the reserve account may
not be less than an amount equal to 40 percent of the gross
consideration the provider received from consumers from the sale of
all service contracts issued and outstanding in this state, minus
any claims paid. The executive director may review and examine the
reserve account. Except as provided by Subsection (b-1), the [The]
amount of the security deposit may not be less than $250,000. The
provider must submit to the executive director on request a copy of
the provider's financial statements that must be prepared in
accordance with generally accepted accounting principles, be
without qualification as to the going concern status of the
provider, and be audited by an independent certified public
accountant. The commission by rule may require the provider to
submit additional financial reports.
(b-1) Subject to Subsection (b-2), the amount of the
security deposit required under Subsection (b) may not be less than
$25,000 if the provider:
(1) is a motor vehicle dealer licensed under Chapter
2301; and
(2) offers to sell service contracts only on motor
vehicles sold by the provider.
(b-2) The amount of the security deposit required under
Subsection (b-1) is:
(1) $25,000 for a motor vehicle dealer that generated
$1,125,000 or less in annual gross revenue in this state from the
sale of service contracts in the preceding year;
(2) $50,000 for a motor vehicle dealer that generated
more than $1,125,000 and not more than $2,500,000 in annual gross
revenue in this state from the sale of service contracts in the
preceding year; and
(3) $75,000 for a motor vehicle dealer that generated
more than $2,500,000 in annual gross revenue in this state from the
sale of service contracts in the preceding year.
(b-3) If a motor vehicle dealer described by Subsection
(b-1) has no gross revenue in this state from the sale of service
contracts in the preceding year, the security deposit shall be
$25,000.
SECTION 2. This Act takes effect September 1, 2019.
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