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A BILL TO BE ENTITLED
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AN ACT
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relating to service contracts for leased or purchased motor |
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vehicles. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Sections 1304.003(a)(2) and (3), Occupations |
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Code, are amended to read as follows: |
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(2) "Service contract" means an agreement that is |
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entered into for a separately stated consideration and for a |
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specified term under which a provider agrees to: |
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(A) repair, replace, or maintain a product, or |
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provide indemnification for the repair, replacement, or |
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maintenance of a product, for operational or structural failure or |
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damage caused by a defect in materials or workmanship or by normal |
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wear; |
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(B) provide identity recovery, if the service |
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contract is financed under Chapter 348 or 353, Finance Code; or |
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(C) provide compensation to the lessee or buyer |
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of a vehicle on the total constructive loss under a depreciation |
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benefit optional member program. |
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(3) "Depreciation benefit optional member program" |
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means a service contract for a vehicle, regardless of whether the |
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vehicle is purchased for cash, financed, or leased [financed under |
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Chapter 348 or 353, Finance Code], that pays to the lessee or buyer |
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a specified amount, as a credit that may be used toward the lease or |
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purchase of a replacement vehicle at a participating dealer after |
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[, an amount less than or equal to the difference between the |
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purchase price and actual cash value for] a total constructive loss |
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of the vehicle. |
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SECTION 2. Section 1304.003(e), Occupations Code, is |
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amended to read as follows: |
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(e) A service contract described by Subsection (a)(2)(C): |
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(1) may not be required as a condition of approval of a |
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lease of a vehicle or a loan for the purchase of a vehicle; |
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(2) may not be offered by a dealer who requires a loan |
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for the purchase of a vehicle to be financed exclusively with the |
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dealer; |
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(3) may be canceled by the buyer of the service |
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contract not later than the 30th day after the [a] buyer enters into |
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the contract, without a penalty; |
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(4) may be canceled by the buyer of the service |
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contract later than the 30th day after the [a] buyer enters into the |
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contract, with a pro rata refund to be provided to the buyer; and |
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(5) may only charge a fee that is reasonable in |
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relation to the benefit provided by the service contract. |
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SECTION 3. The changes in law made by this Act apply only to |
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a service contract entered into or renewed on or after the effective |
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date of this Act. A service contract entered into or renewed before |
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the effective date of this Act is governed by the law in effect |
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immediately before the effective date of this Act, and that law is |
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continued in effect for that purpose. |
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SECTION 4. This Act takes effect September 1, 2021. |