BILL ANALYSIS C.S.H.B. 1227 By: Bosse 3-28-95 Committee Report (Substituted) BACKGROUND A 1985 state law allows mechanics to repossess vehicles from people who pay repair bills with bad checks. Although the law was designed to protect mechanics, the unintended consequence of the bill has been repossession companies engaging in unscrupulous business practices. In the typical situation, the bad check is transferred to the repossession company and the repossession company pays the repair debt to the mechanic and takes possession of the vehicle in lieu of repossession costs. Once they have repossessed the vehicles, these repossession companies make demands for outrageous amounts of money from the vehicle owners. Although the law requires that any monetary difference between the sale of the car, the repair debt and repossession and storage costs be returned to the vehicle's owner, the law, as amended in 1993, only limits the cost of repossession charged to the consumer to a "reasonable fair market value" of the cost of repossessing vehicles - a rather ambiguous provision that can be manipulated to the advantage of repossession companies. In addition, the law gives the repossession company the right to sell vehicles after giving owners 31 days of notice. As a result, motorists have lost their vehicles, often never to be found should a lawsuit arise, for being tardy on simple repair bills. PURPOSE H.B. 1227 attempts to curtail abuses by unscrupulous repossession companies who manipulate to their advantage a law designed to protect mechanics by allowing mechanics to repossess vehicles from people who paid repair bills with bad checks. To accomplish this, the bill would 1) amend the existing bad check repossession law by prohibiting the transfer of the bad check from the named party to a third party and 2) require that an auto repossessor bring the repossessed vehicle only to a licensed storage lot or to the location where the repairs were performed in the first place. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Section 70.001, Property Code, Subsection (b). Substitutes "check or money order" for "written order for payment" to conform the language of subsection (b) to the language changes in subsection (e). Section 70.001, Property Code, Subsection (e). Substitutes "money order" for "other written order for payment" and changes the language of the bill to indicate that a worker may not transfer a check or money order to a third party, and a person who performs repossession services may not accept such check or money order that is received as payment for vehicle repair that is returned to the mechanic. This change covers those situations in which a worker transfers the check or money order to a third party who turns around and transfers the check to the repossessor. In addition, the modified language prohibiting the repossessor from accepting the check places some of the onus on the repossessor. Section 70.001, Property Code, Subsection (f). Substitutes "money order" for "other written order" to conform the language of subsection (f) to the language changes in subsection (e). Section 70.001, Property Code, Subsection (g). Adds new section, requiring that the repossessed vehicle remain at the repair location or a vehicle storage facility licensed under the Vehicle Storage Facility Act until the vehicle is lawfully returned to its owner or a lienholder, or is disposed of in accordance with this subchapter. SECTION 2. Effective date September 1, 1995. SECTION 3. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The Committee substitute amends Subsection (b) of Section 70.001, Property Code, by substituting "check or money order" for "written order for payment" to conform the language of subsection (b) to the language changes in subsection (e). Subsection (e) substitutes "money order" for "other written order for payment" and changes the language of the bill to indicate that a worker may not transfer a check or money order to a third party, and a person who performs repossession services may not accept such check or money order that is received as payment for vehicle repair that is returned to the mechanic. This change covers those situations in which a worker transfers the check or money order to a third party who turns around and transfers the check to the repossessor. In addition, the modified language prohibiting the repossessor from accepting the check places some of the onus on the repossessor. Subsection (f) of Section 70.001, Property Code substitutes "money order" for "other written order" to conform the language of subsection (f) to the language changes in subsection (e). SUMMARY OF COMMITTEE ACTION The Business and Industry Committee considered H.B. 1227 in a public hearing on February 28, 1995. Testifying in favor of the bill were Larry Cernosek, representing Texas Towing and Storage Association; Russell Turbeville, representing Harris County District Attorney's Office; Tom Smith, representing Public Citizens. Testifying on the bill was Pamela Perkins, representing the Office of the Attorney General. There were no witnesses to testify in opposition to H.B. 1227. H.B. 1227 was referred to a subcommittee consisting of Eiland-chair, Crabb, Giddings. The subcommittee on H.B. 1227 held a formal meeting on March 21, 1995. At that meeting, a substitute was offered, adopted and sent to the full committee for consideration. H.B. 1227, as substituted, was reported favorably to the full committee by a record vote of 3 (three) ayes, 0 (zero) nays, 0 (zero) present-not-voting, 0 (zero) absent. H.B. 1227, as substituted, was considered on subcommittee report by the committee in a public hearing on March 28, 1995. The committee considered a complete committee substitute for H.B. 1227. The substitute was adopted without objection. H.B. 1227, as substituted, was reported favorably with the recommendation that it do pass and be printed, by a record vote of 9 (nine) ayes, 0 (zero) nays, 0 (zero) present-not-voting, 0 (zero) absent.