BILL ANALYSIS
S.B. 921
By: Cain (Bosse)
04-19-95
Committee Report (Unamended)
BACKGROUND
Neither motor vehicle lessors nor independent motor vehicle leasing
companies are included in the state's regulation of the
distribution of motor vehicles. Current state law requires the
licensing of the financing departments of motor vehicle
manufacturers and major financial institutions that have been
traditional vehicle lessors. However, the increasing popularity of
leasing caused a substantial growth in the number of independent
lessors and leasing companies to which state policies have not yet
reacted.
PURPOSE
As proposed, C.S.S.B. 921 grants authority to the Motor Vehicle
Board of the Texas Department of Transportation to regulate motor
vehicle leasing and to license motor vehicle lessors and lease
facilitators.
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 1.03, Article 4413(36), V.T.C.S. (Texas
Motor Vehicle Commission Code), to define "lease," "lessor," "lease
facilitator," and "manufacturer's statement of origin."
SECTION 2. Amends Section 3.01(a), Article 4413(36), V.T.C.S., to
provide that the Motor Vehicle Board of the Texas Department of
Transportation (commission) has the general and original power and
jurisdiction to regulate all aspects of the distribution, sale, and
leasing of new motor vehicles (vehicles). Makes a nonsubstantive
change.
SECTION 3. Amends Section 3.02(a), Article 4413(36), V.T.C.S., to
require the commission, in accordance with this Act, to fulfill
specific duties including establishing the qualifications of
licensees and ensuring that the distribution, sale and leasing of
vehicles are conducted as provided herein and under the
commission's rules. Deletes language requiring the commission to
establish the qualifications of manufacturers, distributors,
converters, and dealers. Makes nonsubstantive and conforming
changes.
SECTION 4. Amends Section 4.01, Article 4413(36), V.T.C.S., to
prohibit any person, except as provided by this section, from
engaging in business as, serve in the capacity of, or act as a
dealer, manufacturer, distributor, convertor, representative,
lessor, or lease facilitator (facilitator) in this state without
obtaining a license as provided in this Act and the rules of the
commission. Provides that a lessor or facilitator is not required
to obtain a lessor or facilitator license or pay a license fee
under this code if the lessor or facilitator is a state or
federally chartered financial institution or a regulated subsidiary
of a state or federally chartered financial institution. Provides
that a trust or other entity that owns an interest in a lease and
the vehicle that is the subject of the lease is not required to
obtain a lessor or facilitator license or pay a license fee with
respect to a lease initiated, managed, serviced, and administered
by a licensed lessor.
SECTION 5. Amends Article 4413(36), V.T.C.S., by adding Sections
4.03A and 4.03B, as follows:
Sec. 4.03A. LESSOR APPLICATION. Requires an application for
a lessor license to be on a form prescribed by the commission
and to contain evidence of compliance with Article 6686,
V.T.C.S., if applicable, and other information prescribed by
the commission. Provides that this Act does not require a
separate license for each individual employee of a lessor.
Sec. 4.03B. LEASE FACILITATOR APPLICATION. Requires an
application of a facilitator license to be on a form
prescribed by the commission and to contain the information
prescribed by the commission. Provides that this Act does not
require a separate license for each individual employee of a
facilitator.
SECTION 6. Amends Section 4.05(a), Article 4413(36), V.T.C.S., to
include in the list of required annual fees for licenses, the
annual fee of $175 for a lessor who leased 200 or fewer motor
vehicles during the preceding calendar year, the annual fee of $275
for a lessor who leased between 201 and 400 vehicles, the annual
fee of $400 for lessor who leased between 401 and 800 vehicles, the
annual fee of $500 for a lessor who leased between 801 and 1200
vehicles, the annual fee of $625 for a lessor who leased between
1201 and 1600 vehicles, the annual fee of $750 for a lessor who
leased more than 1600 vehicles, and the annual fee of $375 for each
facilitator license.
SECTION 7. Amends Section 5.01, Article 4413(36), V.T.C.S., to
require it to be unlawful for any dealer to directly or indirectly
pay a fee to a lessor or facilitator.
SECTION 8. Amends Article 4413(36), V.T.C.S., by adding Sections
5.03A and 5.03B, as follows:
Sec. 5.03A. LESSORS. (a) Prohibits a lessor from directly
or indirectly accepting a fee from a dealer.
(b) Prohibits a lessor from paying a fee to any person in
return for the solicitation, procurement, or production by
that person of prospective lessees of vehicles unless the
person receiving the fee is a facilitator who has a valid
license and a valid appointment from the lessor.
(c) Authorizes a lessor to appoint one or more licensed
facilitators to represent the lessor in obtaining
prospective lease customers. Provides that an appointment
complies with the requirements of this subsection if it is
in writing, discloses its terms, and otherwise complies with
rules of the commission.
(d) Requires the lessor, in a lease contract between a
lessor and a lessee solicited, procured, or produced by a
lease facilitator, to disclose to the lessee that a fee was
paid or will be paid to the facilitator for the
solicitation, procurement, or production of the lessee or
the lease. Requires the lessor to include the disclosure in
a prominent position either on the face of the written
memorandum of the lease agreement or on a separate
instrument signed by the lessee at the same time as the
signing of the lease.
(e) Prohibits a lessor and terms of a lease agreement,
except as provided by this subsection, law of the U.S., or
a rule promulgated by an agency of the U.S., from
prohibiting the lessee from taking a motor vehicle that is
the subject of a lease agreement into a specific foreign
nation unless the agreement prohibits the lessee from taking
the vehicle into all foreign nations. Authorizes the
commission, in the interests of justice and giving deference
to standard national business practices, to adopt a rule by
which a lease agreement may prohibit the lessee from taking
the leased vehicle into a foreign nation whether or not it
prohibits the lessee from taking the vehicle into another
foreign nation in the interest of justice and giving
deference to standard national practices. Requires the
commission to give due consideration to the proximity of
international borders to prospective Texas lessees.
Sec. 5.03B. LEASE FACILITATORS. (a) Prohibits any person
from holding himself out to any person as a "leasing company,"
"leasing agent," "lease facilitator," or similar title,
directly or indirectly engage in the business of facilitator,
or otherwise engage in the solicitation or procurement of
prospective lessees for vehicles not titled in the name of and
registered to the person unless the person has a valid
facilitator license and is in compliance with the terms of
this code.
(b) Prohibits a facilitator from selling or offering to sell
a new vehicle; accepting a fee from a dealer; signing a
vehicle manufacturer's statement of origin to a vehicle,
accepting an assignment of a manufacturer's statement of
origin to a vehicle, or otherwise assuming any element of
title to a new vehicle; procuring or soliciting prospective
lessees for or on behalf of any person other than a lessor;
or acting in the capacity of or engaging in the business of
facilitator without a valid license and a valid appointment
from a lessor to act on behalf of the lessor in soliciting
prospective lease clients or customers provided by this
code.
(c) Authorizes a facilitator to accept a fee for procuring
a vehicle lessee or prospective vehicle lessee for or on
behalf of the lessor, except as provided by Subsection
(b)(2).
(d) Provides that this section does not limit the ability of
a facilitator to accept an appointment from more than one
lessors.
(e) Provides that this section does not prohibit a
facilitator from representing a lessor or lessee in the
acquisition of a motor vehicle for the purpose of leasing
the vehicle to another person.
SECTION 9. Prohibits the Texas Motor Vehicle Commission from
imposing regulations on the contents of a motor vehicle lease
contract that are more stringent than the minimum standards imposed
by a law of the U.S. or regulation promulgated by an agency of the
U.S.
SECTION 10. Emergency clause.
Effective date: upon passage.
SUMMARY OF COMMITTEE ACTION
Pursuant to a public notice posed on April 13, 1995 at 4:14 p.m.,
the House Committee on Transportation met in a public hearing on
Wednesday, April 19, 1995 at 2:00 p.m., or upon adjournment, in
Room E1.014 of the Capitol Extension and was called to order at
2:16 p.m. by the Chair, Representative Clyde Alexander.
Representative Bosse moved to lay out S.B. 921 which is the
companion document to H.B. 1571 (heard on March 8, 1995), and
without objection S.B. 921 was laid out before the Committee.
Representative Bosse read the following statement into the record:
Mr. Chairman, and members of the Committee, as the author of H.B.
1571, and the House sponsor of its companion, S.B. 921, I want to
clarify one provision of the bill for the record.
On page 7, lines 24-25, the Senate engrossment deletes the
following language from Section 3.01(a) of the Texas motor Vehicle
Commission Code: "[The Commission] is hereby delegated and vested
with, in the exercise of the State's police power,..." [The
underlined language would be deleted by the bill] The same deletion
may be found in H.B. 1571, the House version of the bill.
Because questions have arisen as to the meaning of this deletion I
want to make very clear for the record that removing this language
in no way limits or reduces the authority of the Motor Vehicle
Board of the Texas Department of Transportation. That is not the
intent of the bill and that is not the effect of this deletion. My
intent in removing this language is simply to remove surplusage in
the existing law. Clearly the quoted language being removed is,
from a legal standpoint, a mere statement of the obvious and serves
absolutely no purpose in the law. Thus, its removal has no effect
on the authority of the Board and certainly in no way may be
construed to reduce the authority of the Board.
Thank you Mr. Chairman and members of the Committee.
Representative Edwards moved that the Committee report S.B. 921,
without amendments, to the full House with the recommendation that
it do pass. The motion prevailed by the following vote: Ayes (7),
Nayes (0), Absent (2), Present not voting (0).