By:  Brown                                             S.B. No. 957
         2001S0612/1                            
                                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.  Subchapter F, Chapter 35, Business & Commerce
 2-8     Code, is amended by adding Section 35.721 to read as follows:
 2-9           Sec. 35.721.  LOSS DAMAGE WAIVER.  (a)  In addition to other
2-10     charges permitted by this subchapter, a consumer may contract for a
2-11     loss damage waiver.  A loss damage waiver is not insurance.
2-12           (b)  A merchant may not sell a loss damage waiver unless the
2-13     consumer agrees to the waiver in writing at or before the time the
2-14     rental-purchase agreement is executed.  A merchant may not impose
2-15     or require the purchase of a loss damage waiver as a mandatory
2-16     charge.
2-17           (c)  A loss damage waiver may exclude loss or damage to the
2-18     merchandise caused by moisture, scratches, mysterious
2-19     disappearance, vandalism, abandonment of the merchandise or any
2-20     other damage intentionally caused by the consumer or that results
2-21     from the consumer's willful or wanton misconduct or negligence.
2-22           (d)  A loss damage waiver agreement must include a statement
2-23     of the total charge for the loss damage waiver.  The loss damage
2-24     waiver amount may not exceed:
2-25                 (1)  in the case of a rental-purchase agreement with
2-26     weekly or biweekly renewal dates, the greater of:
 3-1                       (A)  ten percent of a periodic lease payment; or
 3-2                       (B)  $2; or
 3-3                 (2)  in the case of a rental-purchase agreement with
 3-4     monthly renewal dates, the greater of:
 3-5                       (A)  ten percent of a periodic lease payment; or
 3-6                       (B)  $5.
 3-7           (e)  The loss damage waiver agreement must display the
 3-8     following disclosure notice:
 3-9               "NOTICE:  THIS CONTRACT OFFERS, FOR AN
3-10               ADDITIONAL CHARGE, AN OPTIONAL LOSS DAMAGE
3-11               WAIVER TO COVER YOUR RESPONSIBILITY FOR
3-12               DAMAGE TO THE PROPERTY.  BEFORE DECIDING
3-13               WHETHER TO PURCHASE THE OPTIONAL LOSS DAMAGE
3-14               WAIVER, YOU MAY WISH TO DETERMINE WHETHER
3-15               YOUR OWN HOMEOWNERS OR CASUALTY INSURANCE
3-16               AFFORDS YOU COVERAGE FOR DAMAGE TO THE RENTAL
3-17               PROPERTY AND DETERMINE THE AMOUNT OF ANY
3-18               DEDUCTIBLE UNDER YOUR OWN INSURANCE COVERAGE.
3-19               THE PURCHASE OF THIS OPTIONAL LOSS DAMAGE
3-20               WAIVER IS NOT MANDATORY AND MAY BE DECLINED.
3-21               THE LOSS DAMAGE WAIVER IS NOT INSURANCE."
3-22           (f)  No oral or written representations may be made by an
3-23     employee or agent of the merchant that contradict the provisions of
3-24     this section.  No coercive language or action may be used by an
3-25     employee or agent of the merchant in an attempt to persuade a
3-26     consumer to purchase a loss damage waiver.  For the purposes of
 4-1     this subsection, if the consumer has declined a loss damage waiver,
 4-2     further statements or questions by an employee or agent of the
 4-3     merchant making reference to the loss damage waiver, other than a
 4-4     statement that the waiver has been declined, made in conjunction
 4-5     with a review of the rental-purchase agreement shall be deemed
 4-6     coercive.
 4-7           SECTION 3.  The change in law made by this Act applies only
 4-8     to a rental-purchase agreement entered into on or after the
 4-9     effective date of this Act.  A rental-purchase agreement entered
4-10     into before the effective date of this Act is governed by the law
4-11     in effect when the rental-purchase agreement was entered into, and
4-12     the former law is continued in effect for that purpose.
4-13           SECTION 4.  This Act takes effect September 1, 2001.