1-1 By: Cain S.B. No. 921
1-2 (In the Senate - Filed March 6, 1995; March 6, 1995, read
1-3 first time and referred to Committee on Economic Development;
1-4 April 5, 1995, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 10, Nays 0; April 5, 1995,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 921 By: Madla
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the regulation of certain persons engaged in the
1-11 business of motor vehicle leasing.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Section 1.03, Texas Motor Vehicle Commission Code
1-14 (Article 4413(36), Vernon's Texas Civil Statutes), is amended to
1-15 read as follows:
1-16 Sec. 1.03. Definitions. In this Act:
1-17 (1) "Motor vehicle" means:
1-18 (A) every fully self-propelled vehicle which has
1-19 as its primary purpose the transport of a person or persons, or
1-20 property, on a public highway, and having two or more wheels;
1-21 (B) every two or more wheeled fully
1-22 self-propelled, titled vehicle which has as its primary purpose the
1-23 transport of a person or persons or property and is not
1-24 manufactured for use on public streets, roads, or highways; or
1-25 (C) an engine, transmission, or rear axle
1-26 manufactured for installation in a vehicle having as its primary
1-27 purpose the transport of a person or persons or property on a
1-28 public highway and having a gross vehicle weight rating of more
1-29 than 16,000 pounds, whether or not attached to a vehicle chassis.
1-30 (2) "New motor vehicle" means a motor vehicle which
1-31 has not been the subject of a "retail sale" without regard to the
1-32 mileage of the vehicle.
1-33 (3) "Person" means a natural person, partnership,
1-34 corporation, association, trust, estate, or any other legal entity.
1-35 (4) "Dealer" means any person engaged in the business
1-36 of buying, selling or exchanging new motor vehicles at an
1-37 established and permanent place of business pursuant to a franchise
1-38 in effect with a manufacturer or distributor.
1-39 (5) "Manufacturer" means any person who manufactures
1-40 or assembles new motor vehicles either within or without this
1-41 State.
1-42 (6) "Distributor" means any person who distributes
1-43 and/or sells new motor vehicles to dealers and who is not a
1-44 manufacturer.
1-45 (7) "Representative" means any person who is or acts
1-46 as an agent, employee or representative of a manufacturer,
1-47 distributor, or converter who performs any duties in this State
1-48 relating to promoting the distribution and/or sale of new motor
1-49 vehicles or contacts dealers in this State on behalf of a
1-50 manufacturer, distributor, or converter.
1-51 (8) "Franchise" means one or more contracts between a
1-52 dealer as franchisee, and either a manufacturer or a distributor as
1-53 franchisor under which (A) the franchisee is granted the right to
1-54 sell new motor vehicles manufactured or distributed by the
1-55 franchisor; (B) the franchisee as an independent business is a
1-56 component of franchisor's distribution system; (C) the franchisee
1-57 is substantially associated with franchisor's trademark, tradename
1-58 and commercial symbol; (D) the franchisee's business is
1-59 substantially reliant on franchisor for a continued supply of motor
1-60 vehicles, parts, and accessories for the conduct of its business;
1-61 or (E) any right, duty, or obligation granted or imposed by this
1-62 Act is affected. The term includes a written communication from a
1-63 franchisor to a franchisee by which a duty is imposed on the
1-64 franchisee.
1-65 (10) "Broker" means a person who, for a fee,
1-66 commission, or other valuable consideration, arranges or offers to
1-67 arrange a transaction involving the sale, for purposes other than
1-68 resale, of a new motor vehicle, and who is not:
2-1 (A) a dealer or bona fide employee of a dealer
2-2 when acting on behalf of a dealer;
2-3 (B) a representative or bona fide employee of a
2-4 representative when acting on behalf of a representative;
2-5 (C) a distributor or bona fide employee of a
2-6 distributor when acting on behalf of a distributor; or
2-7 (D) at any point in the transaction the bona
2-8 fide owner of the vehicle involved in the transaction.
2-9 (11) "Motor home" means a motor vehicle which is
2-10 designed to provide temporary living quarters and which:
2-11 (A) is built onto as an integral part of, or is
2-12 permanently attached to, a motor vehicle chassis; and
2-13 (B) contains at least four of the following
2-14 independent life support systems if each is permanently installed
2-15 and designed to be removed only for purposes of repair or
2-16 replacement and meets the standards of the American National
2-17 Standards Institute, Standards for Recreational Vehicles:
2-18 (i) a cooking facility with an on-board
2-19 fuel source;
2-20 (ii) a gas or electric refrigerator;
2-21 (iii) a toilet with exterior evacuation;
2-22 (iv) a heating or air conditioning system
2-23 with an on-board power or fuel source separate from the vehicle
2-24 engine;
2-25 (v) a potable water supply system that
2-26 includes at least a sink, a faucet, and a water tank with an
2-27 exterior service supply connection;
2-28 (vi) a 110-125 volt electric power supply.
2-29 (12) "Conversion" means a motor vehicle, other than a
2-30 motor home, which has been substantially modified by a person other
2-31 than the manufacturer or distributor of the chassis of the motor
2-32 vehicle and which has not been the subject of a retail sale.
2-33 (13) "Motor home manufacturer" means a person other
2-34 than the manufacturer of the chassis of a motor vehicle who, prior
2-35 to the retail sale of the motor vehicle, performs modifications on
2-36 the chassis that result in the finished product being classified as
2-37 a motor home.
2-38 (14) "Chassis manufacturer" means a person who
2-39 manufactures and produces the frame upon which is mounted the body
2-40 of a motor vehicle.
2-41 (15) "Converter" means a person who prior to the
2-42 retail sale of a motor vehicle, assembles, installs, or affixes a
2-43 body, cab, or special equipment to a chassis, or who substantially
2-44 adds, subtracts from, or modifies a previously assembled or
2-45 manufactured motor vehicle.
2-46 (16) "Rule" means a statement by the Commission of
2-47 general and future applicability that implements, interprets, or
2-48 prescribes law or policy or describes the organization or
2-49 procedural practice requirements of the Commission. The term
2-50 includes the amendment or repeal of a prior rule, but does not
2-51 include statements concerning only the internal management of the
2-52 Commission which do not affect the rights of a person not connected
2-53 with the Commission.
2-54 (17) "Party" means each person or agency named or
2-55 admitted as a party and whose legal rights, duties, or privileges
2-56 are to be determined by the Commission after an opportunity for
2-57 adjudicative hearing.
2-58 (18) "Relocation" means the transfer of an existing
2-59 dealership operation to facilities at a different location,
2-60 including a transfer which results in a consolidation or dualing of
2-61 an existing dealer's operation.
2-62 (19) "Retail sale" means the sale of a motor vehicle
2-63 except:
2-64 (A) a sale in which the purchaser acquires a
2-65 vehicle for the purpose of resale; or
2-66 (B) a sale of a vehicle that is operated under
2-67 and in accordance with Article 6686, Revised Statutes.
2-68 (20) "Warranty work" means parts, labor, and any other
2-69 expenses incurred by a dealer in complying with the terms of a
2-70 manufacturer's or distributor's warranty.
3-1 (21) "Department" means the Texas Department of
3-2 Transportation.
3-3 (22) "Transportation Commission" means the Texas
3-4 Transportation Commission of the Texas Department of
3-5 Transportation.
3-6 (23) "Lease" means a transfer of the right to
3-7 possession and use of a motor vehicle for a term in excess of 180
3-8 days in return for consideration.
3-9 (24) "Lessor" means a person who acquires title to a
3-10 new motor vehicle for the purpose of leasing the vehicle to another
3-11 person.
3-12 (25) "Lease facilitator" means a person, other than a
3-13 dealer or a bona fide employee of a dealer, or a vehicle lessor or
3-14 a bona fide employee of a vehicle lessor, who:
3-15 (A) holds himself out to any person as a "motor
3-16 vehicle leasing company" or "motor vehicle leasing agent" or uses a
3-17 similar title, for the purpose of soliciting or procuring a person
3-18 to enter into a contract or agreement to become the lessee of a
3-19 vehicle that is not, and will not be, titled in the name of and
3-20 registered to the lease facilitator; or
3-21 (B) otherwise solicits a person to enter into a
3-22 contract or agreement to become a lessee of a vehicle that is not,
3-23 and will not be, titled in the name of and registered to the lease
3-24 facilitator, or who is otherwise engaged in the business of
3-25 securing lessees or prospective lessees of motor vehicles that are
3-26 not, and will not be, titled in the name of and registered to the
3-27 facilitator.
3-28 (26) "Manufacturer's statement of origin" means a
3-29 certificate on a form prescribed by the Department showing the
3-30 original transfer of a new motor vehicle from the manufacturer to
3-31 the original purchaser.
3-32 SECTION 2. Subsection (a), Section 3.01, Texas Motor Vehicle
3-33 Commission Code (Article 4413(36), Vernon's Texas Civil Statutes),
3-34 is amended to read as follows:
3-35 (a) The Commission has <is hereby delegated and vested with,
3-36 in the exercise of the State's police power,> the general and
3-37 original power and jurisdiction to regulate all aspects of the
3-38 distribution, <and> sale, and leasing of new motor vehicles and to
3-39 do all things, whether specifically designated in this Act or
3-40 implied herein, or necessary or convenient to the exercise of this
3-41 power and jurisdiction, including the original jurisdiction to
3-42 determine questions of its own jurisdiction.
3-43 SECTION 3. Subsection (a), Section 3.02, Texas Motor Vehicle
3-44 Commission Code (Article 4413(36), Vernon's Texas Civil Statutes),
3-45 is amended to read as follows:
3-46 (a) The Commission shall, in accordance with this Act,
3-47 administer the provisions of this Act, establish the qualifications
3-48 of licensees <manufacturers, distributors, converters, and
3-49 dealers>, ensure that the distribution, <and> sale, and leasing of
3-50 motor vehicles is conducted as provided herein and under the
3-51 Commission's rules, provide for compliance with warranties, and
3-52 otherwise prevent fraud, unfair practices, discriminations,
3-53 impositions, and other abuses in connection with the distribution
3-54 and sale of new motor vehicles.
3-55 SECTION 4. Section 4.01, Texas Motor Vehicle Commission Code
3-56 (Article 4413(36), Vernon's Texas Civil Statutes), is amended to
3-57 read as follows:
3-58 Sec. 4.01. License Required. Except as provided by this
3-59 Section, no <No> person shall engage in business as, serve in the
3-60 capacity of, or act as a dealer, manufacturer, distributor,
3-61 converter, <or> representative, lessor, or lease facilitator in
3-62 this State without obtaining a license therefor as provided in this
3-63 Act and the rules of the Commission. All new license applications
3-64 shall be reviewed and, in the discretion of the Commission,
3-65 investigated to determine compliance with the provisions of this
3-66 Act. License renewals may be administratively granted unless
3-67 protested. Licenses issued by the Commission shall expire one year
3-68 from date of issuance. Notwithstanding the effective date of any
3-69 franchise agreement, all licenses and renewals thereof are issued
3-70 subject to all provisions of this Act and rules of the Commission
4-1 in effect upon the date of issuance as well as all future
4-2 provisions of this Act and rules which may become effective during
4-3 the term of the license. A lessor or lease facilitator is not
4-4 required to obtain a lessor or lease facilitator license or pay a
4-5 license fee under this code if the lessor or lease facilitator is a
4-6 state or federally chartered financial institution or a regulated
4-7 subsidiary of a state or federally chartered financial institution.
4-8 A trust or other entity that owns an interest in a lease and the
4-9 vehicle that is the subject of the lease is not required to obtain
4-10 a lessor license or lease facilitator license or pay a license fee
4-11 with respect to a lease initiated, managed, serviced, and
4-12 administered by a licensed lessor.
4-13 SECTION 5. The Texas Motor Vehicle Commission Code (Article
4-14 4413(36), Vernon's Texas Civil Statutes), is amended by adding
4-15 Sections 4.03A and 4.03B to read as follows:
4-16 Sec. 4.03A. LESSOR APPLICATION. An application for a lessor
4-17 license shall be on a form prescribed by the Commission and shall
4-18 contain evidence of compliance with Article 6686, Revised Statutes,
4-19 if applicable, and other information prescribed by the Commission.
4-20 This Act does not require a separate license for each individual
4-21 employee of a lessor.
4-22 Sec. 4.03B. LEASE FACILITATOR APPLICATION. An application
4-23 of a lease facilitator license shall be on a form prescribed by the
4-24 Commission and shall contain the information prescribed by the
4-25 Commission. This Act does not require a separate license for each
4-26 individual employee of a lease facilitator.
4-27 SECTION 6. Subsection (a), Section 4.05, Texas Motor Vehicle
4-28 Commission Code (Article 4413(36), Vernon's Texas Civil Statutes),
4-29 is amended to read as follows:
4-30 (a) The annual license fees for licenses issued hereunder
4-31 shall be as follows:
4-32 (1) For each manufacturer and distributor, $825.
4-33 (2) For each dealer who sold 200 or fewer new motor
4-34 vehicles during the preceding calendar year, $165.
4-35 (3) For each dealer who sold more than 200, but not
4-36 more than 500, new motor vehicles during the preceding calendar
4-37 year, $275.
4-38 (4) For each dealer who sold more than 500, but not
4-39 more than 1,000, new motor vehicles during the preceding calendar
4-40 year, $385.
4-41 (5) For each dealer who sold more than 1,000 new motor
4-42 vehicles during the preceding calendar year, $495.
4-43 (6) For each representative, $85.
4-44 (7) For each converter, $275.
4-45 (8) For each amendment to a dealer's license, $25.
4-46 (9) For each lessor who leased 200 or fewer motor
4-47 vehicles during the preceding calendar year, $175.
4-48 (10) For each lessor who leased more than 200 but not
4-49 more than 400 motor vehicles during the preceding calendar year,
4-50 $275.
4-51 (11) For each lessor who leased more than 400 but not
4-52 more than 800 motor vehicles during the preceding calendar year,
4-53 $400.
4-54 (12) For each lessor who leased more than 800 but not
4-55 more than 1,200 motor vehicles during the preceding calendar year,
4-56 $500.
4-57 (13) For each lessor who leased more than 1,200 but
4-58 not more than 1,600 motor vehicles during the preceding calendar
4-59 year, $625.
4-60 (14) For each lessor who leased more than 1,600 motor
4-61 vehicles during the preceding calendar year, $750.
4-62 (15) For each lease facilitator, $375.
4-63 SECTION 7. Section 5.01, Texas Motor Vehicle Commission Code
4-64 (Article 4413(36), Vernon's Texas Civil Statutes), is amended to
4-65 read as follows:
4-66 Sec. 5.01. Dealers. It shall be unlawful for any dealer to:
4-67 (1) Require a retail purchaser of a new motor vehicle
4-68 as a condition of sale and delivery thereof to purchase special
4-69 features, equipment, parts, or accessories not ordered or desired
4-70 by the purchaser, provided such features, equipment, parts, or
5-1 accessories are not already installed on the new motor vehicle at
5-2 the time of sale.
5-3 (2) Use false, deceptive, or misleading advertising.
5-4 (3) Fail to perform the obligations placed on the
5-5 selling dealer in connection with the delivery and preparation of a
5-6 new motor vehicle for retail sale as provided in the manufacturer's
5-7 preparation and delivery agreements on file with the Commission and
5-8 applicable to such vehicle.
5-9 (4) Fail to perform the obligations placed on the
5-10 dealer in connection with the manufacturer's warranty agreements on
5-11 file with the Commission.
5-12 (5) Operate as a dealer without a currently valid
5-13 license from the Commission or otherwise violate this Act or rules
5-14 promulgated by the Commission hereunder.
5-15 (6) Operate without appropriate signs readily and
5-16 easily visible to the public, identifying the dealer's place of
5-17 business and the products the dealer offers for sale. In the event
5-18 of a conflict with another law or ordinance, this Subdivision
5-19 prevails, and in the event of a dispute, the Board has exclusive
5-20 jurisdiction to determine whether a sign or signs are in compliance
5-21 with the terms of this Subdivision. In the event of a dispute, the
5-22 Board shall uphold local ordinances of a home-rule city and protect
5-23 dealers from retribution by manufacturers for having complied with
5-24 local ordinances.
5-25 (7) Directly or indirectly pay a fee to a lessor or
5-26 lease facilitator.
5-27 SECTION 8. The Texas Motor Vehicle Commission Code (Article
5-28 4413(36), Vernon's Texas Civil Statutes), is amended by adding
5-29 Sections 5.03A and 5.03B to read as follows:
5-30 Sec. 5.03A. LESSORS. (a) A lessor may not directly or
5-31 indirectly accept a fee from a dealer.
5-32 (b) A lessor may not pay a fee to any person in return for
5-33 the solicitation, procurement, or production by that person of
5-34 prospective lessees of motor vehicles unless the person receiving
5-35 the fee is a lease facilitator who holds a valid license as
5-36 provided by this code and a valid appointment from the lessor as
5-37 provided by this section.
5-38 (c) A lessor may appoint one or more lease facilitators
5-39 licensed pursuant to the terms of this code to represent the lessor
5-40 in obtaining prospective lease customers. An appointment complies
5-41 with the requirements of this subsection if it is in writing,
5-42 discloses its terms, and otherwise complies with rules of the
5-43 Commission.
5-44 (d) In a lease contract or agreement between a lessor and a
5-45 lessee solicited, procured, or produced by a lease facilitator, the
5-46 lessor shall disclose to the lessee that a fee was paid, or will be
5-47 paid to the lease facilitator for the solicitation, procurement, or
5-48 production of the lessee or the lease. The lessor shall include
5-49 the disclosure required by this subsection in a prominent position
5-50 either:
5-51 (1) on the face of the written memorandum of the lease
5-52 contract or agreement; or
5-53 (2) on a separate instrument signed by the lessee at
5-54 the same time as the signing of the lease contract or agreement.
5-55 (e) Except as provided by this subsection or by law of the
5-56 United States or a rule duly promulgated by an agency of the United
5-57 States, a lessor may not, and the terms of a lease agreement may
5-58 not, prohibit the lessee from taking the vehicle that is the
5-59 subject of the lease agreement into a specific foreign nation
5-60 unless the lease agreement prohibits the lessee from taking the
5-61 vehicle into all foreign nations. In the interests of justice and
5-62 giving deference to standard national business practices, the
5-63 Commission may adopt a rule by which a lease agreement may prohibit
5-64 the lessee from taking the leased vehicle into a foreign nation
5-65 whether or not it prohibits the lessee from taking the vehicle into
5-66 another foreign nation. In adopting a rule under this subsection
5-67 the Commission shall give due consideration to the proximity of
5-68 international borders to prospective Texas lessees.
5-69 Sec. 5.03B. LEASE FACILITATORS. (a) No person may hold
5-70 himself out to any person as a "leasing company," "leasing agent,"
6-1 "lease facilitator," or similar title, directly or indirectly
6-2 engaged in the business of lease facilitator, or otherwise engage
6-3 in the solicitation or procurement of prospective lessees for motor
6-4 vehicles not titled in the name of and registered to the person,
6-5 unless the person holds a valid lease facilitator license and is in
6-6 compliance with the terms of this code.
6-7 (b) A lease facilitator may not:
6-8 (1) sell or offer to sell a new motor vehicle;
6-9 (2) accept a fee from a dealer;
6-10 (3) sign a motor vehicle manufacturer's statement of
6-11 origin to a vehicle, accept an assignment of a manufacturer's
6-12 statement of origin to a vehicle, or otherwise assume any element
6-13 of title to a new motor vehicle;
6-14 (4) procure or solicit prospective lessees for or on
6-15 behalf of any person other than a lessor; or
6-16 (5) act in the capacity of or engage in the business
6-17 of lease facilitator without a valid license issued as provided by
6-18 this code and a valid appointment from a lessor to act on behalf of
6-19 the lessor in soliciting prospective lease clients or customers as
6-20 provided by this code.
6-21 (c) Except as provided by Subsection (b)(2) of this section,
6-22 a lease facilitator may accept a fee for procuring a vehicle lessee
6-23 or prospective vehicle lessee for or on behalf of a lessor.
6-24 (d) This section does not limit the ability of a lease
6-25 facilitator to accept an appointment from more than one lessor.
6-26 (e) This section does not prohibit a lease facilitator from
6-27 representing a lessor or lessee in the acquisition of a motor
6-28 vehicle for the purpose of leasing the vehicle to another person.
6-29 SECTION 9. Except as specifically provided by state law, the
6-30 Texas Motor Vehicle Commission may not impose regulations on the
6-31 contents of a motor vehicle lease contract that are more stringent
6-32 or more comprehensive than the minimum standards imposed by a law
6-33 of the United States or regulation promulgated by an agency of the
6-34 United States.
6-35 SECTION 10. The importance of this legislation and the
6-36 crowded condition of the calendars in both houses create an
6-37 emergency and an imperative public necessity that the
6-38 constitutional rule requiring bills to be read on three several
6-39 days in each house be suspended, and this rule is hereby suspended,
6-40 and that this Act take effect and be in force from and after its
6-41 passage, and it is so enacted.
6-42 * * * * *