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