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A BILL TO BE ENTITLED
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AN ACT
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relating to trade-in credit agreements offered in connection with |
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certain motor vehicle retail installment contracts. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 348.001, Finance Code, is amended by |
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adding Subdivision (11) to read as follows: |
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(11) "Trade-in credit agreement" means a contractual |
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arrangement under which a retail seller agrees to provide a |
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specified amount as a vehicle trade-in credit for diminished value |
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of that vehicle in the event the vehicle is damaged, but not |
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rendered a total loss, as a result of a collision accident, with the |
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credit to be applied to the purchase or lease of a different vehicle |
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from that retail seller. A trade-in agreement is a separate |
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agreement from the retail installment contract and is not a term of |
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the retail installment contract. |
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SECTION 2. Section 348.005, Finance Code, is amended to |
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read as follows: |
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Sec. 348.005. ITEMIZED CHARGE. An amount in a retail |
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installment contract is an itemized charge if the amount is not |
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included in the cash price and is the amount of: |
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(1) fees for registration, certificate of title, and |
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license and any additional registration fees charged by a full |
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service deputy under Section 520.008, Transportation Code. |
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(2) any taxes; |
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(3) fees or charges prescribed by law and connected |
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with the sale or inspection of the motor vehicle; and |
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(4) charges authorized for insurance, service |
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contracts, warranties, automobile club memberships, trade-in |
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credit agreements, or a debt cancellation agreement by Subchapter |
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C. |
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SECTION 3. Subchapter B, Chapter 348, Finance Code is |
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amended by adding Section 348.125 to read as follow: |
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Sec. 348.125. TRADE-IN CREDIT AGREEMENT OFFERED IN |
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CONNECTION WITH RETAIL INSTALLMENT CONTRACT. (a) A retail seller |
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may, at the time a retail installment contract is executed, offer to |
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sell to the retail buyer a trade-in credit agreement or similarly |
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named agreement. |
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(b) A trade-in credit agreement is not considered an |
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insurance product. |
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(c) To ensure the faithful performance of a retail seller's |
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obligations to the retail buyer under a trade-in credit agreement, |
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the retail seller must be insured under a contractual liability |
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reimbursement policy approved by the commissioner of insurance, |
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issued for the benefit of Texas residents. |
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(d) In addition to other disclosures required by state or |
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federal law, the retail seller shall give the retail buyer a copy of |
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the written trade-in agreement and written notice at the time the |
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retail installment contract is executed that the retail buyer: |
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(1) is not required to purchase the trade-in credit |
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agreement as a condition for approval of the contract; |
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(2) is entitled to cancel the trade-in credit |
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agreement and receive full refund before the 31st day after the date |
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the contract is executed; |
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(3) is able to terminate the trade-in agreement at any |
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time after the 30th day after the date the contract is executed and |
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receive a pro-rata refund less any applicable cancellation fee |
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which may not exceed $50; and |
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(4) has been provided a clear and concise disclosure |
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as to the amount of the credit available during the term of the |
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trade-in credit agreement. |
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(e) The amount charged for a trade-in credit agreement made |
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in connection with a retail installment contract may not exceed |
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five percent of the cash price of the vehicle that is the subject of |
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the retail installment contract, including any attached |
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accessories and excluding the price of services related to the |
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sale, the price of service contracts, taxes, and fees for license, |
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title, and registration. |
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(f) A trade-in credit agreement shall require the retail |
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buyer to provide proof of insurance settlement documents in order |
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to obtain a credit. A trade-in credit agreement may not require the |
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retail buyer to provide any other documentation in order to obtain a |
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credit. |
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(g) If a retail seller enters a trade-in credit agreement |
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with a retail buyer, then the retail seller must comply with the |
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terms of the trade-in agreement in connection with the purchase or |
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lease of a subsequent motor vehicle. A retail seller must provide |
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any credit required under a trade-in credit agreement at the time of |
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the purchase or lease of a subsequent motor vehicle. |
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(h) The benefit to be provided in connection with a trade-in |
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credit agreement must bear a reasonable relationship to the amount |
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charged for the agreement and the amount, term, and conditions of |
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the retail installment contract. |
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SECTION 4. Sections 348.208 (b) and (c), Finance Code, are |
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amended to read as follows: |
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(b) A retail installment contract may include as a separate |
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charge an amount for: |
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(1) motor vehicle property damage or bodily injury |
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liability insurance; |
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(2) mechanical breakdown insurance; |
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(3) participation in a motor vehicle theft protection |
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plan; |
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(4) insurance to reimburse the retail buyer for the |
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amount computed by subtracting the proceeds of the buyer's basic |
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collision policy on the motor vehicle from the amount owed on the |
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vehicle if the vehicle has been rendered a total loss; |
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(5) a warranty or service contract relating to the |
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motor vehicle; |
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(6) an identity recovery service contract; [or] |
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(7) a debt cancellation agreement if the agreement is |
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included as a term of a retail installment contract under Section |
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348.124; or |
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(8) a trade-in credit agreement. |
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(c) Notwithstanding any other law, service contracts, |
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[and] |
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debt cancellation agreements, and trade-in credit agreements sold |
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by a retail seller of a motor vehicle to a retail buyer are not |
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subject to Chapter 101 or 226, Insurance Code. |
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SECTION 5. This Act takes effect September 1, 2017. |