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

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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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-Introduced.html

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By: Woolley H.B. No. 2931

A BILL TO BE ENTITLED
AN ACT
relating to debt cancellation agreements.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 348.124, Finance Code, is amended to
read as follows:
Sec. 348.124. DEBT CANCELLATION AGREEMENTS. (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 but not limited to a guaranteed
asset protection waiver or other 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.
(b) A debt cancellation agreement, including a guaranteed
asset protection waiver, is not considered an insurance product.
(c) The commissioner may not promulgate rates, adopt rules,
or issue interpretation letters for debt cancellation agreements,
including guaranteed asset protection waivers, that include
insurance coverage as part of retail buyer's responsibility to
holder sold in this state. [The amount charged for a debt
cancellation agreement made in connection with a retail installment
contract must be reasonable.]
SECTION 2. Chapter 348, Finance Code, is amended by adding
Subchapter G to read as follows:
SUBCHAPTER G. GUARANTEED ASSET PROTECTION WAIVERS
Sec. 348.601. DEFINITIONS.
(A) "Creditor" means:
(i) the lender in a loan or credit transaction;
(ii) the lessor in a lease transaction;
(iii) any retail seller, as defined in 348.001(8), of
motor vehicles that provides credit to "retail buyers," as defined
in 348.001(5), of such motor vehicles provided that such entities
comply with the provisions of this section;
(iv) the seller in commercial retail installment
transactions; or
(v) the assignees of any of the foregoing to whom the
credit obligation is payable.
(B) "Finance agreement" means a loan, lease or retail
installment sales contract for the purchase or lease of a motor
vehicle.
(C) "Free look period" means the period of time from the
effective date of the guaranteed asset protection waiver until the
date the borrower may cancel the contract without penalty, fees or
costs to the borrower. This period of time must not be shorter than
30 days.
(D) "Guaranteed asset protection waiver" or "GAP waiver"
means a contractual agreement, regardless of how the agreement is
titled, wherein a creditor agrees for a separate charge to cancel or
waive all or part of amounts due on a borrower's finance agreement
in the event of a total physical damage loss or unrecovered theft of
the motor vehicle, which agreement must be part of, or a separate
addendum to, the finance agreement.
(E) For purposes of this subchapter, "Motor vehicle" means
self-propelled or towed vehicles designed for personal or
commercial use, including but not limited to automobiles, trucks,
motorcycles, recreational vehicles, all-terrain vehicles,
snowmobiles, campers, boats, personal watercraft, and personal
watercraft trailers.
Sec. 348.6011. SCOPE OF SUBCHAPTER. This subchapter only
applies to debt cancellation agreements, including guaranteed
asset protection waivers, that include insurance coverage as part
of retail buyer's responsibility to holder sold in this state.
Sec. 348.602. REQUIREMENTS FOR OFFERING GUARANTEED ASSET
PROTECTION WAIVERS.
(A) A guaranteed asset protection waiver maybe offered,
sold or provided to borrowers in this state in compliance with this
Act.
(B) A guaranteed asset protection waiver may, at the option
of the creditor, be sold for a single payment or may be offered with
a monthly or periodic payment option.
(C) Notwithstanding any other provision of law, any cost to
the borrower for a guaranteed asset protection waiver entered into
in compliance with The Truth in Lending Act (15 USC 1601 et. seq.)
and its implementing regulations, as they may be amended from time
to time, must be separately stated and is not to be considered a
finance charge or interest.
(D) A guaranteed asset protection waiver remains a part of
the finance agreement upon the assignment, sale or transfer of such
finance agreement by the creditor.
(E) Neither the extension of credit, the term of credit, nor
the term of the related motor vehicle sale or lease may be
conditioned upon the purchase of a GAP waiver.
Sec. 348.603. DISCLOSURES FOR GUARANTEED ASSET PROTECTION
WAIVER.
(A) A guaranteed asset protection waiver must disclose, as
applicable, in writing and in clear, understandable language that
is easy to read, the following:
(1) The name and address of the initial creditor and
the borrower at the time of sale, and the identity of any
administrator if different from the creditor.
(2) The purchase price and the terms of the guaranteed
asset protection waiver, including without limitation, the
requirements for protection, conditions, or exclusions associated
with the Debt cancellation agreement.
(3) That the borrower may cancel the guaranteed asset
protection waiver within a free look period as specified in the
waiver, and will be entitled to a full refund of the purchase
price, so long as no benefits have been provided. In the event
benefits have been provided, the borrower may receive a full or
partial refund pursuant to the terms of the waiver.
(4) The procedure the borrower must follow, if any, to
obtain the guaranteed asset protection waiver benefits under the
terms and conditions of the waiver, including a telephone number
and address where the borrower may apply for waiver benefits.
(5) Whether or not the guaranteed asset protection
waiver is cancellable after the free look period and the conditions
under which it may be cancelled or terminated including the
procedures for requesting any refund due.
(6) In order to receive any refund due in the event of
a borrower's cancellation of the guaranteed asset protection waiver
or early termination of the finance agreement after the free look
period of the guaranteed asset protection waiver, the borrower, in
accordance with terms of the waiver, must provide a written request
to cancel to the creditor, administrator or such other party,
within ninety days of the occurrence of the event terminating the
finance agreement.
(7) The methodology for calculating any refund of the
unearned purchase price of the guaranteed asset protection waiver
due, in the event of cancellation of the guaranteed asset
protection waiver or early termination of the finance agreement.
(8) That neither the extension of credit, the terms of
the credit, nor the terms of the related motor vehicle sale or
lease, may be conditioned upon the purchase of the guaranteed asset
protection waiver.
Sec. 348.604. CANCELLATION OF GUARANTEED ASSET PROTECTION
WAIVER.
(A) A guaranteed asset protection waiver may be cancellable
or non-cancellable after a free look period. A guaranteed asset
protection waiver must provide that if a borrower cancels a waiver
within the free look period, the borrower will be entitled to a
full refund of the purchase price, so long as no benefits have been
provided; or in the event benefits have been provided, the borrower
may receive a full or partial refund pursuant to the terms of the
waiver.
(B) In the event of a borrower's cancellation of the
guaranteed asset protection waiver or early termination of the
finance agreement, after the agreement has been in effect beyond
the free look period, the borrower may be entitled to a refund of
any unearned portion of the purchase price of the waiver unless the
waiver provides otherwise. In order to receive a refund, the
borrower, in accordance with any applicable terms of the waiver,
must provide a written request to the creditor, administrator or
other party, within ninety days of the event terminating the
finance agreement.
(C) If the cancellation of the guaranteed asset protection
waiver occurs as a result of a default under the finance agreement
or the repossession of the motor vehicle associated with the
finance agreement, or any other termination of the finance
agreement, any refund due may be paid directly to the creditor or
administrator and applied as set forth in paragraph (D).
(D) Any cancellation refund under this section may be
applied by the creditor as a reduction of the amount owed under the
finance agreement, unless the borrower can show that the finance
agreement has been paid in full.
Sec. 348.605. ENFORCEMENT. A guaranteed asset protection
waivers that meets the requirements of this section is presumed
compliant. The Commissioner may, after proper notice and
opportunity for hearing:
(A) Order the creditor, administrator or any other person
not in compliance with this section to cease and desist from further
guaranteed asset protection waiver related operations that are in
violation of this section.
(B) Impose a penalty of not more than five hundred dollars
($500.00) per violation and no more than ten thousand dollars
($10,000) in the aggregate for all violations of similar nature.
For purposes of this section, violations must be of a similar nature
if the violation consists of the same or similar course of conduct,
action or practice, irrespective of the number of times the
section, conduct or practice which is determined to be a violation
of the Section occurred.
SECTION 3. This Act applies to all guaranteed asset
protection waivers entered info on and after September 1, 2011.
SECTION 4. This Act takes effect September 1, 2011.