| 1 | 1 | | 87R1545 JES-D |
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| 2 | 2 | | By: Campbell S.B. No. 1080 |
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| 3 | 3 | | |
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| 4 | 4 | | |
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| 5 | 5 | | A BILL TO BE ENTITLED |
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| 6 | 6 | | AN ACT |
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| 7 | 7 | | relating to service contracts for leased or purchased motor |
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| 8 | 8 | | vehicles. |
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| 9 | 9 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 10 | 10 | | SECTION 1. Sections 1304.003(a)(2) and (3), Occupations |
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| 11 | 11 | | Code, are amended to read as follows: |
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| 12 | 12 | | (2) "Service contract" means an agreement that is |
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| 13 | 13 | | entered into for a separately stated consideration and for a |
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| 14 | 14 | | specified term under which a provider agrees to: |
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| 15 | 15 | | (A) repair, replace, or maintain a product, or |
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| 16 | 16 | | provide indemnification for the repair, replacement, or |
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| 17 | 17 | | maintenance of a product, for operational or structural failure or |
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| 18 | 18 | | damage caused by a defect in materials or workmanship or by normal |
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| 19 | 19 | | wear; |
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| 20 | 20 | | (B) provide identity recovery, if the service |
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| 21 | 21 | | contract is financed under Chapter 348 or 353, Finance Code; or |
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| 22 | 22 | | (C) provide compensation to the lessee or buyer |
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| 23 | 23 | | of a vehicle on the total constructive loss under a depreciation |
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| 24 | 24 | | benefit optional member program. |
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| 25 | 25 | | (3) "Depreciation benefit optional member program" |
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| 26 | 26 | | means a service contract for a vehicle, regardless of whether the |
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| 27 | 27 | | vehicle is purchased for cash, financed, or leased [financed under |
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| 28 | 28 | | Chapter 348 or 353, Finance Code], that pays to the lessee or buyer |
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| 29 | 29 | | a specified amount, as a credit that may be used toward the lease or |
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| 30 | 30 | | purchase of a replacement vehicle at a participating dealer after |
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| 31 | 31 | | [, an amount less than or equal to the difference between the |
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| 32 | 32 | | purchase price and actual cash value for] a total constructive loss |
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| 33 | 33 | | of the vehicle. |
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| 34 | 34 | | SECTION 2. Section 1304.003(e), Occupations Code, is |
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| 35 | 35 | | amended to read as follows: |
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| 36 | 36 | | (e) A service contract described by Subsection (a)(2)(C): |
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| 37 | 37 | | (1) may not be required as a condition of approval of a |
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| 38 | 38 | | lease of a vehicle or a loan for the purchase of a vehicle; |
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| 39 | 39 | | (2) may not be offered by a dealer who requires a loan |
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| 40 | 40 | | for the purchase of a vehicle to be financed exclusively with the |
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| 41 | 41 | | dealer; |
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| 42 | 42 | | (3) may be canceled by the buyer of the service |
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| 43 | 43 | | contract not later than the 30th day after the [a] buyer enters into |
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| 44 | 44 | | the contract, without a penalty; |
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| 45 | 45 | | (4) may be canceled by the buyer of the service |
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| 46 | 46 | | contract later than the 30th day after the [a] buyer enters into the |
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| 47 | 47 | | contract, with a pro rata refund to be provided to the buyer; and |
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| 48 | 48 | | (5) may only charge a fee that is reasonable in |
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| 49 | 49 | | relation to the benefit provided by the service contract. |
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| 50 | 50 | | SECTION 3. The changes in law made by this Act apply only to |
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| 51 | 51 | | a service contract entered into or renewed on or after the effective |
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| 52 | 52 | | date of this Act. A service contract entered into or renewed before |
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| 53 | 53 | | the effective date of this Act is governed by the law in effect |
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| 54 | 54 | | immediately before the effective date of this Act, and that law is |
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| 55 | 55 | | continued in effect for that purpose. |
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| 56 | 56 | | SECTION 4. This Act takes effect September 1, 2021. |
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