HBA-BSM, CCH H.B. 2182 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2182 By: Brimer Business & Industry 3/26/2001 Introduced BACKGROUND AND PURPOSE In 1993, the legislature authorized merchants and consumers to agree to sale-leaseback transactions in which a consumer sells a consumer good to a merchant who then leases the consumer good back to the consumer. In a series of court cases, there have been disputes as to whether sale/leaseback transactions are a type of loan or a type of lease. House Bill 2182 codifies sale-leaseback transactions and provides consumer protections. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS House Bill 2182 amends the Business & Commerce Code to define "sale-leaseback transaction" and provides that a sale-leaseback transaction is not a loan, credit sale, or other extension of credit (Sec. 35.202). The bill prohibits a merchant from buying, offering to buy, or arranging to buy consumer goods under a sale-leaseback transaction unless the merchant has registered with the secretary of state by filing a statement that discloses outstanding ownership interests and a statement of any litigation or unresolved complaints, or a notarized statement that there are no unresolved legal proceedings or complaints. The bill requires the merchant to keep a copy of the registration statement, and prohibits the secretary of state from requiring a merchant to provide any other information in the registration statement. The bill sets forth provisions regarding the expiration, renewal, modification, and administration of the registration statement. The bill requires a merchant to allow a consumer to inspect the registration statement on request. The bill sets forth penalties that the secretary of state may assess a merchant for a failure to register or renew a registration. A merchant's failure to register or renew a registration does not affect the validity of a saleleaseback transaction (Sec. 35.203). The bill requires a merchant to establish and maintain a surety bond and to file with the secretary of state a copy of the bond, or the name of the depository and the trustee, and the account number of the surety account. The bill requires a separate surety bond or account of $10,000 to be established and maintained for each office at which the merchant conducts sale-leaseback transactions. The bill prohibits a depository from paying money in a surety account to the merchant that established the account or a representative of the merchant unless the merchant or representative presents a statement issued by the secretary of state indicating that the merchant has maintained the bond or account for the appropriate time period. A merchant's failure to establish or maintain a surety bond or account does not affect the validity of a saleleaseback transaction (Sec. 35.204). The bill sets forth provisions that the purchase of consumer goods by a merchant must be written clearly and printed conspicuously, and the bill sets forth the content of the written bill of sale. The consumer is considered not to provide any express or implied warranties not set forth in the bill of sale (Sec. 35.205). The bill authorizes a merchant and consumer to enter into a lease under which the consumer leases from the merchant the consumer goods that the consumer originally sold to the merchant, for the rental and on the terms agreed on in writing between the consumer and merchant. The bill sets forth provisions for the content of the lease agreement including notice of cancellation and termination issues, and provides that the lease agreement must be clear and conspicuously printed. The bill also sets forth provisions regarding the consumer's financial and administrative obligations related to a cancellation or termination; the return, repair, or replacement of consumer goods; late fees; charges for insufficiently funded checks; rights regarding the reinstatement of a lease; the renewal, extension, or modification of a lease agreement; the repurchase of goods by a consumer; and provisions for the content of the bill of sale (Secs. 35.206, 35.207, and 35.208). The bill prohibits a bill of sale or lease agreement associated with a sale-leaseback agreement from containing a provision that requires a confession of judgment, authorizes a merchant or anyone acting on the merchant's behalf to commit a breach of the peace in the repossession of the consumer goods, or waives any claim or defense the consumer may have arising out of the transaction. The bill also prohibits a merchant from taking a security deposit without disclosing in writing the amount and terms involving the security deposit. A security deposit that is a check, draft, share draft, or other instrument drawn by a consumer on a depository account of the consumer must be made payable to the merchant and dated as of the date of transaction. The bill prohibits criminal proceedings from being instituted if the security deposit instrument is returned or dishonored due to insufficient funds, closed account, or stop payment order, but the merchant may pursue all available civil process for collection of the instrument (Sec. 35.211). The bill provides that an advertisement for a sale-leaseback transaction must clearly state that the transaction is a sale-leaseback transaction and that the business is registered with the secretary of state. The bill provides that a consumer damaged by a violation of the provisions of this bill may recover actual damages, reasonable attorney's fees and court costs, but an action must be brought within two years of the date of a violation. The bill also provides that a violation of a provision constitutes a deceptive trade practice. The bill authorizes, as part of the consumer's recovery, a consumer to proceed against a merchant's surety bond or surety account (Sec. 35.212). Merchants are also subject to civil penalties (Sec. 35.204). The provisions of this bill do not apply to transactions involving real property or a manufactured home. The bill provides that a sale-leaseback transaction is subject to other federal and state laws involving sales or leases of personal property. If the provisions of this bill conflict with other state law, the provisions of this bill are controlling. If, however, the provisions of this bill conflict with federal law, federal law is controlling (Sec. 35.202). EFFECTIVE DATE September 1, 2001.