H.B. No. 735
AN ACT
relating to service contracts for leased or purchased motor
vehicles.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Sections 1304.003(a)(2) and (3), Occupations
Code, are amended to read as follows:
(2) "Service contract" means an agreement that is
entered into for a separately stated consideration and for a
specified term under which a provider agrees to:
(A) repair, replace, or maintain a product, or
provide indemnification for the repair, replacement, or
maintenance of a product, for operational or structural failure or
damage caused by a defect in materials or workmanship or by normal
wear;
(B) provide identity recovery, if the service
contract is financed under Chapter 348 or 353, Finance Code; or
(C) provide compensation to the lessee or buyer
of a vehicle on the total constructive loss under a depreciation
benefit optional member program.
(3) "Depreciation benefit optional member program"
means a service contract for a vehicle, regardless of whether the
vehicle is purchased for cash, financed, or leased [financed under
Chapter 348 or 353, Finance Code], that pays to the lessee or buyer
a specified amount, as a credit that may be used toward the lease or
purchase of a replacement vehicle at a participating dealer after
[, an amount less than or equal to the difference between the
purchase price and actual cash value for] a total constructive loss
of the vehicle.
SECTION 2. Section 1304.003(e), Occupations Code, is
amended to read as follows:
(e) A service contract described by Subsection (a)(2)(C):
(1) may not be required as a condition of approval of a
lease of a vehicle or a loan for the purchase of a vehicle;
(2) may not be offered by a dealer who requires a loan
for the purchase of a vehicle to be financed exclusively with the
dealer;
(3) may be canceled by the buyer of the service
contract not later than the 30th day after the [a] buyer enters into
the contract, without a penalty;
(4) may be canceled by the buyer of the service
contract later than the 30th day after the [a] buyer enters into the
contract, with a pro rata refund to be provided to the buyer; and
(5) may only charge a fee that is reasonable in
relation to the benefit provided by the service contract.
SECTION 3. The changes in law made by this Act apply only to
a service contract entered into or renewed on or after the effective
date of this Act. A service contract entered into or renewed before
the effective date of this Act is governed by the law in effect
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.
SECTION 4. This Act takes effect September 1, 2021.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 735 was passed by the House on April
9, 2021, by the following vote: Yeas 143, Nays 1, 2 present, not
voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 735 was passed by the Senate on April
29, 2021, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor