BILL ANALYSIS C.S.S.B. 921 By: Cain Economic Development 04-05-95 Committee Report (Substituted) 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.