1-1 By: Brown S.B. No. 957
1-2 (In the Senate - Filed February 27, 2001; February 28, 2001,
1-3 read first time and referred to Committee on Business and Commerce;
1-4 April 24, 2001, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 6, Nays 0; April 24, 2001,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 957 By: Sibley
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to loss damage waivers in certain rental-purchase
1-11 agreements.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Section 35.71, Business & Commerce Code, is
1-14 amended to read as follows:
1-15 Sec. 35.71. DEFINITIONS. In this subchapter:
1-16 (1) "Advertisement" means a commercial message in any
1-17 medium that directly or indirectly promotes or assists a
1-18 rental-purchase agreement.
1-19 (2) "Cash price" means the price for which the
1-20 merchant would have sold the merchandise to the consumer for cash
1-21 on the date of the rental-purchase agreement.
1-22 (3) "Consumer" means an individual who leases personal
1-23 property under a rental-purchase agreement.
1-24 (4) "Loss damage waiver" means a merchant's agreement
1-25 not to hold a consumer liable for loss from all or a part of any
1-26 damage to merchandise.
1-27 (5) "Merchandise" means the personal property that is
1-28 the subject of a rental-purchase agreement.
1-29 (6) [(5)] "Merchant" means a person who, in the
1-30 ordinary course of business, regularly leases, offers to lease, or
1-31 arranges for the leasing of merchandise under a rental-purchase
1-32 agreement, and includes a person who is assigned an interest in a
1-33 rental-purchase agreement.
1-34 (7) [(6)] "Rental-purchase agreement" means an
1-35 agreement for the use of merchandise by a consumer for personal,
1-36 family, or household purposes, for an initial period of four months
1-37 or less that is automatically renewable with each payment after the
1-38 initial period, and that permits the consumer to become the owner
1-39 of the merchandise.
1-40 SECTION 2. Subsection (c), Section 35.72, Business &
1-41 Commerce Code, is amended to read as follows:
1-42 (c) A rental-purchase agreement may not contain a provision:
1-43 (1) requiring a confession of judgment;
1-44 (2) authorizing a merchant or an agent of the merchant
1-45 to commit a breach of the peace in the repossession of merchandise;
1-46 (3) waiving a defense, counterclaim, or right the
1-47 consumer may have against the merchant or an agent of the merchant;
1-48 (4) requiring the purchase of insurance from the
1-49 merchant to cover the merchandise;
1-50 (5) requiring the payment of a late charge or
1-51 reinstatement fee unless a periodic payment is delinquent for more
1-52 than seven days and the charge or fee is in an amount equal to not
1-53 more than the lesser of five percent of the delinquent payment or
1-54 $5, and not less than $2; [or]
1-55 (6) requiring a payment at the end of the scheduled
1-56 rental-purchase term in excess of or in addition to a regular
1-57 periodic payment in order to acquire ownership of the merchandise.
1-58 In no event shall the consumer be required to pay a sum greater
1-59 than the total amount to be paid to acquire ownership, as disclosed
1-60 in Subsection (g)(3) of this section; or
1-61 (7) requiring the purchase of a loss damage waiver.
1-62 SECTION 3. Subchapter F, Chapter 35, Business & Commerce
1-63 Code, is amended by adding Section 35.721 to read as follows:
1-64 Sec. 35.721. LOSS DAMAGE WAIVER. (a) In addition to other
2-1 charges permitted by this subchapter, a consumer may contract for a
2-2 loss damage waiver. A loss damage waiver is not insurance.
2-3 (b) A merchant may not sell a loss damage waiver unless the
2-4 consumer agrees to the waiver in writing at or before the time the
2-5 rental-purchase agreement is executed. A merchant may not impose
2-6 or require the purchase of a loss damage waiver as a mandatory
2-7 charge.
2-8 (c) A loss damage waiver may exclude loss or damage to the
2-9 merchandise caused by moisture, scratches, or vandalism, mysterious
2-10 disappearance of the merchandise, abandonment of the merchandise,
2-11 or any other damage that is intentionally caused by the consumer or
2-12 that results from the consumer's wilful or wanton misconduct or
2-13 negligence.
2-14 (d) A loss damage waiver agreement must include a statement
2-15 of the total periodic charge for the loss damage waiver. The
2-16 periodic charge for a loss damage waiver may not exceed:
2-17 (1) in the case of a rental-purchase agreement with
2-18 weekly or biweekly renewal dates, the greater of:
2-19 (A) 10 percent of a periodic lease payment; or
2-20 (B) $2; or
2-21 (2) in the case of a rental-purchase agreement with
2-22 monthly renewal dates, the greater of:
2-23 (A) 10 percent of a periodic lease payment; or
2-24 (B) $5.
2-25 (e) The loss damage waiver agreement must display the
2-26 following disclosure notice:
2-27 NOTICE: THIS CONTRACT OFFERS, FOR AN ADDITIONAL
2-28 CHARGE, AN OPTIONAL LOSS DAMAGE WAIVER TO COVER YOUR
2-29 RESPONSIBILITY FOR DAMAGE TO THE PROPERTY. BEFORE
2-30 DECIDING WHETHER TO PURCHASE THE OPTIONAL LOSS DAMAGE
2-31 WAIVER, YOU MAY WISH TO DETERMINE WHETHER YOUR OWN
2-32 HOMEOWNERS OR CASUALTY INSURANCE AFFORDS YOU COVERAGE
2-33 FOR DAMAGE TO THE RENTAL PROPERTY AND DETERMINE THE
2-34 AMOUNT OF ANY DEDUCTIBLE UNDER YOUR OWN INSURANCE
2-35 COVERAGE. THE PURCHASE OF THIS OPTIONAL LOSS DAMAGE
2-36 WAIVER IS NOT MANDATORY AND MAY BE DECLINED. THE LOSS
2-37 DAMAGE WAIVER IS NOT INSURANCE, NOR IS THE PURCHASE OF
2-38 INSURANCE MANDATORY.
2-39 (f) An employee or agent of the merchant may not make oral
2-40 or written representations that contradict the provisions of this
2-41 section. An employee or agent may not use coercive language or
2-42 action in an attempt to persuade a consumer to purchase a loss
2-43 damage waiver. For the purposes of this subsection, if the
2-44 consumer has declined a loss damage waiver, any further statement
2-45 or question by an employee or agent of the merchant making
2-46 reference to the loss damage waiver, other than a statement that
2-47 the waiver has been declined, made in conjunction with a review of
2-48 the rental-purchase agreement is considered coercive.
2-49 (g) A merchant may not sell a loss damage waiver unless the
2-50 merchant:
2-51 (1) annually registers with the Texas Department of
2-52 Licensing and Regulation; and
2-53 (2) files with the Texas Department of Licensing and
2-54 Regulation a copy of each loss damage waiver agreement form used by
2-55 the merchant.
2-56 (h) The Texas Department of Licensing and Regulation may:
2-57 (1) charge a merchant a fee for registration under
2-58 Subsection (g) in an amount designed to recover the department's
2-59 costs in issuing the registration;
2-60 (2) set the amount of the registration fee by rule;
2-61 and
2-62 (3) by rule adopt procedures for applying for
2-63 registration under Subsection (g).
2-64 (i) The commissioner of licensing and regulation shall
2-65 enforce this section and may investigate any consumer complaint
2-66 concerning the amount of loss damage waiver fees charged by a
2-67 merchant.
2-68 SECTION 4. The change in law made by this Act applies only
2-69 to a rental-purchase agreement entered into on or after the
3-1 effective date of this Act. A rental-purchase agreement entered
3-2 into before the effective date of this Act is governed by the law
3-3 in effect when the rental-purchase agreement was entered into, and
3-4 the former law is continued in effect for that purpose. The
3-5 registration and filing requirements apply on and after the
3-6 effective date of this Act.
3-7 SECTION 5. This Act takes effect September 1, 2001.
3-8 * * * * *