Bill Text: TX HB2931 | 2011-2012 | 82nd Legislature | Enrolled


Bill Title: Relating to certain debt cancellation agreements made in connection with retail installment contracts.

Spectrum: Bipartisan Bill

Status: (Passed) 2011-06-17 - Effective on 9/1/11 [HB2931 Detail]

Download: Texas-2011-HB2931-Enrolled.html
 
 
  H.B. No. 2931
 
 
 
 
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)  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;
               (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; and
               (16)  that the holder will cancel certain amounts under
  the debt cancellation agreement for total loss or theft of a motor
  vehicle, in the following or substantially similar language: "YOU
  WILL CANCEL CERTAIN AMOUNTS I OWE UNDER THIS CONTRACT IN THE CASE OF
  A TOTAL LOSS OR THEFT OF THE VEHICLE AS STATED IN THE DEBT
  CANCELLATION AGREEMENT."
         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)  If after approval of a form the Office of Consumer
  Credit Commissioner discovers that approval could have been denied
  under Subsection (d), the commissioner may order a retail seller,
  any administrator of the debt cancellation agreement, or a holder
  to submit a corrected form for approval. Beginning as soon as
  reasonably practicable after approval of the corrected form, the
  retail seller, administrator, or holder shall use the corrected
  form for all sales.
         (f)  A debt cancellation agreement form that has been
  approved by the commissioner is public information subject to
  disclosure under Chapter 552, Government Code. Section 552.110,
  Government Code, does not apply to a form approved under this
  subchapter.
         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.
         (h)  A retail seller that negotiates a debt cancellation
  agreement and subsequently assigns the contract shall:
               (1)  maintain documents relating to the agreement that
  come into the retail seller's possession; and
               (2)  on request of the Office of Consumer Credit
  Commissioner, cooperate in requesting and obtaining access to
  documents relating to the agreement not in the retail seller's
  possession.
         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.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 2931 was passed by the House on May
  13, 2011, by the following vote:  Yeas 143, Nays 1, 2 present, not
  voting; and that the House concurred in Senate amendments to H.B.
  No. 2931 on May 27, 2011, by the following vote:  Yeas 137, Nays 0,
  3 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 2931 was passed by the Senate, with
  amendments, on May 25, 2011, by the following vote:  Yeas 31, Nays
  0.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor       
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