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.