BILL ANALYSIS


                                                        H.B. 1586
                                              By: Marchant (Cain)
                                             Economic Development
                                                         05-17-95
                                Senate Committee Report (Amended)
BACKGROUND

Long-term loans can cause the amount owed against a vehicle to
exceed its value over the life of the retail contract.  If the
vehicle is rendered a total loss while the debt exceeds the market
value, the owner is forced to pay an additional amount above the
insurance proceeds because an owner's basic insurance coverage is
tied to the vehicle's market coverage.  This "gap" represents a
cash outlay on the part of the purchaser.

The 73rd Legislature amended the Consumer Credit Code to allow the
sale of a collateral insurance product to insure that a purchaser
would not have to pay the "gap" if the vehicle is rendered a total
loss while the debt exceeds the market value.

PURPOSE

As proposed, H.B. 1586 authorizes a buyer and seller to agree to
include in a contract for the sale of a motor vehicle a separate
charge for a debt cancellation contract or waiver.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section (9), Article 5069-7.06, V.T.C.S., to
authorize a buyer and seller to agree to include in a contract for
the sale of a motor vehicle a separate charge for a debt
cancellation contract or waiver by which the seller or holder
agrees that, if the vehicle is rendered a total loss because of
theft or collision, the seller or holder will waive the difference,
if any, between the actual cash value of the vehicle immediately
before the loss and the amount owed on the vehicle.  Authorizes a
seller or holder to agree to waive the deductible amount, if any,
the buyer is required to pay under the buyer's personal auto
policy, in addition to other liability incurred under a debt
cancellation contract or waiver included in a contract as provided
by this section.  Provides that a debt cancellation contract or
waiver included in a contract provided by this section is not
insurance or an insurance product or service and is not subject to
regulation by the commissioner of insurance or the Texas Department
of Insurance.

SECTION 2. Emergency clause.
           Effective date: upon passage.