85R5228 EES-F
 
  By: Hughes S.B. No. 1052
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to debt cancellation agreements offered in connection with
  certain loans and retail installment contracts and to amounts
  charged for certain agreements offered in connection with certain
  loans and retail installment contracts.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Sections 342.4021(a) and (e), Finance Code, are
  amended to read as follows:
         (a)  In connection with a loan made under this chapter that
  is subject to Section 342.201(d) or 342.301(c), a lender may offer
  to the borrower:
               (1)  a debt suspension agreement or debt cancellation
  agreement under similar terms and conditions as such an agreement
  may be offered by a bank or savings association; or
               (2)  a debt cancellation agreement under Chapter 354.
         (e)  The amount charged for a product authorized by
  Subsection (a) or (b) may not exceed five percent of the amount
  financed pursuant to the loan made under this chapter [must be
  reasonable].
         SECTION 2.  Subchapter H, Chapter 345, Finance Code, is
  amended by adding Section 345.358 to read as follows:
         Sec. 345.358.  DEBT CANCELLATION AGREEMENT. A debt
  cancellation agreement under Chapter 354 may be offered in
  connection with a retail installment contract or retail charge
  agreement.
         SECTION 3.  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 under Chapter 354, 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 4.  Subchapter G, Chapter 348, Finance Code, is
  redesignated as Chapter 354, Finance Code, and amended to read as
  follows:
  CHAPTER 354 [SUBCHAPTER G].  CERTAIN DEBT CANCELLATION AGREEMENTS
         Sec. 354.001.  DEFINITIONS. In this chapter:
               (1)  "Contract" means a retail installment contract
  made under Chapter 345 or 348.
               (2)  "Covered item" includes a motor vehicle.
               (3)  "Loan" means:
                     (A)  a loan made under Chapter 342; or
                     (B)  a loan to which Chapter 342 does not apply
  solely because the loan provides for a rate of interest that is 10
  percent a year or less.
               (4)  "Motor vehicle" includes a self-propelled or towed
  vehicle designed for personal use, including an automobile, truck,
  motorcycle, recreational vehicle, all-terrain vehicle, snowmobile,
  camper, boat, personal watercraft, and personal watercraft
  trailer.
         Sec. 354.002 [348.601].  LIMITATION ON CERTAIN DEBT
  CANCELLATION AGREEMENTS. (a) This chapter [subchapter] applies
  only to a debt cancellation agreement that includes insurance
  coverage as part of the borrower's or retail buyer's responsibility
  to the lender or holder.
         (b)  The amount charged for a debt cancellation agreement
  made in connection with a loan or [retail installment] contract may
  not exceed five percent of the amount financed pursuant to the loan
  or [retail installment] contract. [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 loan or [retail installment] contract and
  remains a term of the loan or [retail installment] contract on the
  assignment, sale, or transfer by the lender or holder.
         Sec. 354.003 [348.602].  DEBT CANCELLATION AGREEMENTS
  EXCLUSION LANGUAGE. (a) In addition to the provisions required by
  Section 354.004 [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 lender's or holder's acceleration of the loan or
  [retail installment] contract;
               (2)  if the covered item is a motor vehicle, any
  dishonest, fraudulent, illegal, or intentional act of any
  authorized driver that directly results in the total loss of the
  motor vehicle;
               (3)  if the covered item is a motor vehicle, 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 covered item [motor vehicle];
               (5)  lawful confiscation by an authorized public
  official;
               (6)  if the covered item is a motor vehicle, 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 covered item [motor vehicle] for
  primarily commercial purposes;
               (10)  damage that occurs after the covered item [motor
  vehicle] has been repossessed;
               (11)  damage to the covered item [motor vehicle] before
  the purchase of the debt cancellation agreement;
               (12)  if the covered item is a motor vehicle, 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 covered item [motor vehicle];
               (14)  damages associated with falsification of
  documents by any person not associated with the lender or retail
  seller or other person canceling the borrower's or retail buyer's
  obligation;
               (15)  any unpaid debt resulting from exclusions in the
  borrower's or retail buyer's primary physical damage coverage not
  included in the debt cancellation agreement;
               (16)  abandonment of the covered item [motor vehicle]
  by the borrower or retail buyer only if the borrower or retail buyer
  voluntarily discards, leaves behind, or otherwise relinquishes
  possession of the covered item [motor vehicle] to the extent that
  the relinquishment shows intent to forsake and desert the covered
  item [motor vehicle] so that the covered item [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. 354.004 [348.603].  REQUIRED DEBT CANCELLATION
  AGREEMENT LANGUAGE. A debt cancellation agreement must state:
               (1)  the contact information of the lender or the
  retail seller and [, the] holder, and any administrator of the
  agreement;
               (2)  the name and address of the borrower or retail
  buyer;
               (3)  the cost and term of the debt cancellation
  agreement;
               (4)  the procedure the borrower or retail buyer must
  follow to obtain benefits under the terms of the debt cancellation
  agreement, including a telephone number and address where the
  borrower or retail buyer may provide notice under the debt
  cancellation agreement;
               (5)  the period during which the borrower or retail
  buyer is required to notify the lender or the retail seller or [,
  the] holder, or any administrator of the agreement, of any
  potential loss under the debt cancellation agreement for total loss
  or theft of the covered item [motor vehicle];
               (6)  if the covered item is a motor vehicle, that in
  order to make a claim, the borrower or retail buyer must provide or
  complete some or all of the following documents and provide those
  documents to the lender or the retail seller or [, the] holder, or
  any administrator of the agreement:
                     (A)  a debt cancellation request form;
                     (B)  proof of loss and settlement payment from the
  borrower's or 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 borrower's or 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) but [or] required by the lender or the retail seller or [, 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
  lender or the retail seller or [, the] holder, or any administrator
  of the agreement, may inspect the borrower's or retail buyer's
  covered item [motor vehicle];
               (9)  that the lender or the retail seller or holder will
  cancel all or part of the borrower's or retail buyer's obligation as
  provided in the debt cancellation agreement on the occurrence of
  total loss or theft of the covered item [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 covered item [motor vehicle];
               (12)  that purchase of a debt cancellation agreement is
  not required for the borrower or 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 borrower or retail buyer must
  provide a written request to cancel to the lender or the retail
  seller or [, the] holder, or any administrator of the agreement;
               (14)  that if total loss or theft of the covered item
  [motor vehicle] has not occurred, the borrower or retail buyer has
  30 days from the date of the loan or [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 borrower or 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 lender or holder will cancel certain
  amounts under the debt cancellation agreement for total loss or
  theft of a covered item [motor vehicle], in the following or
  substantially similar language: "YOU WILL CANCEL CERTAIN AMOUNTS I
  OWE UNDER THIS LOAN OR CONTRACT IN THE CASE OF A TOTAL LOSS OR THEFT
  OF THE COVERED ITEM [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. 354.005 [348.605].  ADDITIONAL REQUIREMENTS FOR DEBT
  CANCELLATION AGREEMENTS. (a) If a borrower or retail buyer
  purchases a debt cancellation agreement, the lender or retail
  seller must provide to the borrower or retail buyer a true and
  correct copy of the agreement not later than the 10th day after the
  date of the loan or [retail installment] contract.
         (b)  A lender or 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 lender,
  holder, or administrator of the agreement to process the request.
         (c)  A debt cancellation agreement may not knowingly be
  offered by a lender or retail seller if:
               (1)  the loan or [retail installment] contract is
  already protected by gap insurance; or
               (2)  the purchase of the debt cancellation agreement is
  required for the borrower or 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 lender or 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 lender or holder or any
  administrator of a debt cancellation agreement and belonging to an
  insurance company, lender or holder, or administrator under the
  terms of a written agreement must be held by the lender, holder, or
  administrator in a fiduciary capacity.
         (h)  A lender or retail seller that negotiates a debt
  cancellation agreement and subsequently assigns the loan or
  contract shall:
               (1)  maintain documents relating to the agreement that
  come into the lender's or 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 lender's or retail
  seller's possession.
         Sec. 354.006 [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 loan or [retail installment]
  contract in full before the original maturity date;
               (2)  a demand by the lender or holder for payment in
  full of the unpaid balance or acceleration;
               (3)  a request by the borrower or 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 354.003 [348.602],
  except in the case of a partial loss of the covered item [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 borrower or
  retail buyer may cancel the debt cancellation agreement not later
  than the 30th day after the date of the loan or [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 lender or holder, or
  any administrator of the agreement, shall refund or credit the
  entire debt cancellation agreement fee. A borrower or retail buyer
  may not cancel the debt cancellation agreement and subsequently
  receive any benefits under the agreement.
         (d)  A lender or holder may in good faith rely on a
  computation by any administrator of the agreement of the balance
  waived, unless the lender or holder has knowledge that the
  computation is not correct. If a computation by the administrator
  of the balance waived is not correct, the lender or 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 borrower's or retail buyer's account. This
  subsection does not prevent the lender or holder from obtaining
  reimbursement from the administrator or another responsible for the
  debt cancellation agreement or computation.
         SECTION 5.  Section 348.124(c), Finance Code, is repealed.
         SECTION 6.  This Act takes effect September 1, 2017.