By: Brown S.B. No. 957
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to loss damage waivers in certain rental-purchase
1-3 agreements.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 35.71, Business & Commerce Code, is
1-6 amended to read as follows:
1-7 Sec. 35.71. DEFINITIONS. In this subchapter:
1-8 (1) "Advertisement" means a commercial message in any
1-9 medium that directly or indirectly promotes or assists a
1-10 rental-purchase agreement.
1-11 (2) "Cash price" means the price for which the
1-12 merchant would have sold the merchandise to the consumer for cash
1-13 on the date of the rental-purchase agreement.
1-14 (3) "Consumer" means an individual who leases personal
1-15 property under a rental-purchase agreement.
1-16 (4) "Loss damage waiver" means a merchant's agreement
1-17 not to hold a consumer liable for loss from all or a part of any
1-18 damage to merchandise.
1-19 (5) "Merchandise" means the personal property that is
1-20 the subject of a rental-purchase agreement.
1-21 (6) [(5)] "Merchant" means a person who, in the
1-22 ordinary course of business, regularly leases, offers to lease, or
1-23 arranges for the leasing of merchandise under a rental-purchase
1-24 agreement, and includes a person who is assigned an interest in a
1-25 rental-purchase agreement.
2-1 (7) [(6)] "Rental-purchase agreement" means an
2-2 agreement for the use of merchandise by a consumer for personal,
2-3 family, or household purposes, for an initial period of four months
2-4 or less that is automatically renewable with each payment after the
2-5 initial period, and that permits the consumer to become the owner
2-6 of the merchandise.
2-7 SECTION 2. Subsection (c), Section 35.72, Business &
2-8 Commerce Code, is amended to read as follows:
2-9 (c) A rental-purchase agreement may not contain a provision:
2-10 (1) requiring a confession of judgment;
2-11 (2) authorizing a merchant or an agent of the merchant
2-12 to commit a breach of the peace in the repossession of merchandise;
2-13 (3) waiving a defense, counterclaim, or right the
2-14 consumer may have against the merchant or an agent of the merchant;
2-15 (4) requiring the purchase of insurance from the
2-16 merchant to cover the merchandise;
2-17 (5) requiring the payment of a late charge or
2-18 reinstatement fee unless a periodic payment is delinquent for more
2-19 than seven days and the charge or fee is in an amount equal to not
2-20 more than the lesser of five percent of the delinquent payment or
2-21 $5, and not less than $2; [or]
2-22 (6) requiring a payment at the end of the scheduled
2-23 rental-purchase term in excess of or in addition to a regular
2-24 periodic payment in order to acquire ownership of the merchandise.
2-25 In no event shall the consumer be required to pay a sum greater
2-26 than the total amount to be paid to acquire ownership, as disclosed
3-1 in Subsection (g)(3) of this section; or
3-2 (7) requiring the purchase of a loss damage waiver.
3-3 SECTION 3. Subchapter F, Chapter 35, Business & Commerce
3-4 Code, is amended by adding Section 35.721 to read as follows:
3-5 Sec. 35.721. LOSS DAMAGE WAIVER. (a) In addition to other
3-6 charges permitted by this subchapter, a consumer may contract for a
3-7 loss damage waiver. A loss damage waiver is not insurance.
3-8 (b) A merchant may not sell a loss damage waiver unless the
3-9 consumer agrees to the waiver in writing at or before the time the
3-10 rental-purchase agreement is executed. A merchant may not impose
3-11 or require the purchase of a loss damage waiver as a mandatory
3-12 charge.
3-13 (c) A loss damage waiver may exclude loss or damage to the
3-14 merchandise caused by moisture, scratches, or vandalism, mysterious
3-15 disappearance of the merchandise, abandonment of the merchandise,
3-16 or any other damage that is intentionally caused by the consumer or
3-17 that results from the consumer's wilful or wanton misconduct or
3-18 negligence.
3-19 (d) A loss damage waiver agreement must include a statement
3-20 of the total periodic charge for the loss damage waiver. The
3-21 periodic charge for a loss damage waiver may not exceed:
3-22 (1) in the case of a rental-purchase agreement with
3-23 weekly or biweekly renewal dates, the greater of:
3-24 (A) 10 percent of a periodic lease payment; or
3-25 (B) $2; or
3-26 (2) in the case of a rental-purchase agreement with
4-1 monthly renewal dates, the greater of:
4-2 (A) 10 percent of a periodic lease payment; or
4-3 (B) $5.
4-4 (e) The loss damage waiver agreement must display the
4-5 following disclosure notice:
4-6 NOTICE: THIS CONTRACT OFFERS, FOR AN ADDITIONAL
4-7 CHARGE, AN OPTIONAL LOSS DAMAGE WAIVER TO COVER YOUR
4-8 RESPONSIBILITY FOR DAMAGE TO THE PROPERTY. BEFORE
4-9 DECIDING WHETHER TO PURCHASE THE OPTIONAL LOSS DAMAGE
4-10 WAIVER, YOU MAY WISH TO DETERMINE WHETHER YOUR OWN
4-11 HOMEOWNERS OR CASUALTY INSURANCE AFFORDS YOU COVERAGE
4-12 FOR DAMAGE TO THE RENTAL PROPERTY AND DETERMINE THE
4-13 AMOUNT OF ANY DEDUCTIBLE UNDER YOUR OWN INSURANCE
4-14 COVERAGE. THE PURCHASE OF THIS OPTIONAL LOSS DAMAGE
4-15 WAIVER IS NOT MANDATORY AND MAY BE DECLINED. THE LOSS
4-16 DAMAGE WAIVER IS NOT INSURANCE, NOR IS THE PURCHASE OF
4-17 INSURANCE MANDATORY.
4-18 (f) An employee or agent of the merchant may not make oral
4-19 or written representations that contradict the provisions of this
4-20 section. An employee or agent may not use coercive language or
4-21 action in an attempt to persuade a consumer to purchase a loss
4-22 damage waiver. For the purposes of this subsection, if the
4-23 consumer has declined a loss damage waiver, any further statement
4-24 or question by an employee or agent of the merchant making
4-25 reference to the loss damage waiver, other than a statement that
4-26 the waiver has been declined, made in conjunction with a review of
5-1 the rental-purchase agreement is considered coercive.
5-2 (g) A merchant may not sell a loss damage waiver unless the
5-3 merchant:
5-4 (1) annually registers with the Texas Department of
5-5 Licensing and Regulation; and
5-6 (2) files with the Texas Department of Licensing and
5-7 Regulation a copy of each loss damage waiver agreement form used by
5-8 the merchant.
5-9 (h) The Texas Department of Licensing and Regulation may:
5-10 (1) charge a merchant a fee for registration under
5-11 Subsection (g) in an amount designed to recover the department's
5-12 costs in issuing the registration;
5-13 (2) set the amount of the registration fee by rule;
5-14 and
5-15 (3) by rule adopt procedures for applying for
5-16 registration under Subsection (g).
5-17 (i) The commissioner of licensing and regulation shall
5-18 enforce this section and may investigate any consumer complaint
5-19 concerning the amount of loss damage waiver fees charged by a
5-20 merchant.
5-21 SECTION 4. The change in law made by this Act applies only
5-22 to a rental-purchase agreement entered into on or after the
5-23 effective date of this Act. A rental-purchase agreement entered
5-24 into before the effective date of this Act is governed by the law
5-25 in effect when the rental-purchase agreement was entered into, and
5-26 the former law is continued in effect for that purpose. The
6-1 registration and filing requirements apply on and after January 1,
6-2 2002.
6-3 SECTION 5. This Act takes effect September 1, 2001.