C.S.H.B. 3417 78(R)    BILL ANALYSIS


C.S.H.B. 3417
By: Marchant
Transportation
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

H.B. 3417 78(R)In some motor vehicle capital lease arrangements, the
lessee receives ownership of the vehicle and makes lower monthly payments
for several years followed by one final large payment. When the final
payment is due, the lessee has the option to purchase the vehicle by
paying or refinancing the final payment or return the vehicle to the
lessor. If the lessee chooses to return the vehicle to the lessor, it is
difficult to transfer the title of the vehicle back to the lessor. Until
the title transfer is properly completed, the lessee remains obligated on
the lease even though the lessee no longer has the vehicle. Meanwhile, the
lessor has the vehicle but does not have ownership on the title. 

House Bill 3417 prescribes terms under which an owner of a vehicle could
use a power of attorney to authorize an agent to execute title documents
for the owner when the owner is voluntarily transferring title to the
vehicle. 


RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 


ANALYSIS

House Bill 3417 adds Section 501.076 to the Transportation Code to provide
that an owner who has a contractual right to return a vehicle in full or
partial satisfaction of the amount owed on the purchase contract could
execute a power of attorney naming various categories of persons as agent
under a power of attorney with authority to complete the title transfer
documents. 

The bill includes safeguards to ensure the title work is properly
completed.  First, the power of attorney specifies the types of persons
who can be named as agent.  These include persons who already have
licenses from the State to perform actions that include completion of
title work, and similar persons with the necessary ability to complete the
title transfer.  Second, the creditor, employees of the creditor and any
person who is acting as the creditor's agent in the title transfer, are
prohibited from acting as the owner's agent.  Third, the power of attorney
can be used only when the owner of the vehicle elects to exercise the
owner's option under the contract and as provided in the Finance Code to
return the vehicle.  The creditor is prohibited from using the power of
attorney as part of a remedy for default. 

Part of the title transfer process is the completion of an odometer
disclosure statement.  This is required by both Texas and federal law.  In
the odometer disclosure statement, the owner is required to disclose the
odometer reading.  If the odometer has "rolled over" (e.g., gone past
100,000 miles and back to 1 mile) or been replaced by an odometer that
does not reflect the actual mileage, the owner must disclose this fact as
well.  The bill provides methods for the agent to complete the odometer
disclosure for the customer.  The agent can rely upon a written odometer
statement by the customer.  Alternatively, the agent can make a physical
inspection of the odometer and vehicle, or use other reasonable measures
to check the odometer and determine if it has rolled over or been
replaced.  If the agent is still uncertain about the  odometer, the agent
or holder of the contract can send a conspicuous notice to the owner
requesting the owner to notify the agent within twenty days if the
odometer reading was not accurate, and the owner is required to inform the
agent if the odometer is not accurate. 

The bill is consistent with federal law.  Federal law does not allow the
transferee or its employee, or a person acting as the transferee's agent,
to also act as the agent of the owner, unless a special form of power of
attorney is used.  The bill leaves that type of power of attorney to
federal law, and would only apply to situations in which the federal
regulation does not specify the form of power of attorney. 


EFFECTIVE DATE

The Act takes effect September 1, 2003.


COMPARISON of ORIGINAL to SUBSTITUTE

The original version of the bill was drafted by an outside attorney.  The
committee substitute is a Legislative Council draft and makes certain
nonsubstantive changes.