81R8591 KFF-F

By: Geren H.B. No. 4361

A BILL TO BE ENTITLED

AN ACT

relating to the regulation of retail installment contracts for commercial vehicles.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 307.051(f), Finance Code, is amended to read as follows:

(f) Collateral protection insurance does not include insurance coverage that:

(1) is purchased by the creditor for which the debtor is not charged;

(2) is purchased at the inception of a credit transaction in which the debtor is a party or to which the debtor agrees, whether or not costs are included in a payment plan under the credit transaction;

(3) is maintained by the creditor for the protection of collateral that comes into the possession or control of the creditor through foreclosure, repossession, or a similar event;

(4) is credit insurance, mortgage protection insurance, insurance issued to cover the life or health of the debtor, or any other insurance maintained to cover the inability or failure of the debtor to make payment under the credit agreement;

(5) is title insurance; [or]

(6) is flood insurance required to be placed by creditors under Section 102, National Flood Insurance Act of 1968 (42 U.S.C. Section 4012a); or

(7) is insurance on a commercial vehicle securing a retail installment contract under Chapter 348.

SECTION 2. Section 341.502(a), Finance Code, is amended to read as follows:

(a) A contract for a loan under Chapter 342, a retail installment transaction under Chapter 348 other than a contract for a commercial vehicle, or a home equity loan regulated by the Office of Consumer Credit Commissioner must be:

(1) written in plain language designed to be easily understood by the average consumer; and

(2) printed in an easily readable font and type size.

SECTION 3. Section 348.001, Finance Code, is amended by adding Subdivision (1-a) to read as follows:

(1-a) "Commercial vehicle" means a motor vehicle that is not used primarily for personal, family, or household use.

SECTION 4. Subchapter A, Chapter 348, Finance Code, is amended by adding Section 348.0051 to read as follows:

Sec. 348.0051. CONTRACTS FOR COMMERCIAL VEHICLES; ADDITIONAL CHARGES PERMITTED. (a) Notwithstanding Sections 348.004 and 348.005 and in addition to the amounts allowed under those sections, the following amounts may be included as an itemized charge or in the cash price in a retail installment contract for a commercial vehicle:

(1) any fees prescribed by law;

(2) any amounts charged by a titling service relating to the sale;

(3) any other amount agreed to by the retail buyer and retail seller, including amounts payable to the retail seller or another person for the provision of goods or services relating to:

(A) the commercial vehicle;

(B) the sale or use of the commercial vehicle; or

(C) the retail buyer's business in which the commercial vehicle will be used; and

(4) an amount paid to the retail seller or other person as consideration for the agreement of the holder of the retail installment contract to waive:

(A) the difference between the amount owed under a retail installment contract and the amount paid under a physical damage insurance policy maintained by the retail buyer or its assign, in the event the vehicle is a total loss;

(B) the amount owed under the retail installment contract, in the event of the death of the retail buyer; or

(C) one or more payments owed under the retail installment contract, in the event of the disability of the retail buyer.

(b) If a charge under Subsection (a)(4) is included in the contract, the contract must disclose that the waiver is optional.

(c) Notwithstanding any other law, the amount described by Subsection (a)(4) is not a charge for insurance, and the sale, provision, or the waiving of a balance owed or other action relating to a waiver of all or part of the amount owed under a retail installment contract for a commercial vehicle is not considered insurance or engaging in the business of insurance.

SECTION 5. Sections 348.006(c) and (d), Finance Code, are amended to read as follows:

(c) For a documentary fee to be included in the principal balance of a retail installment contract:

(1) the retail seller must charge the documentary fee to cash buyers and credit buyers;

(2) the documentary fee may not exceed:

(A) $50 for a motor vehicle retail installment contract; or

(B) an [a reasonable] amount agreed to in writing by the retail seller and retail buyer for a [heavy] commercial vehicle retail installment contract; and

(3) the buyer's order and the retail installment contract must include:

(A) a statement of the amount of the documentary fee; and

(B) except for a buyer's order or retail installment contract for a commercial vehicle, in reasonable proximity to the place in each where the amount of the documentary fee is disclosed, the following notice in type that is bold-faced, capitalized, underlined, or otherwise conspicuously set out from surrounding written material:

"A DOCUMENTARY FEE IS NOT AN OFFICIAL FEE. A DOCUMENTARY FEE IS NOT REQUIRED BY LAW, BUT MAY BE CHARGED TO BUYERS FOR HANDLING DOCUMENTS AND PERFORMING SERVICES RELATING TO THE CLOSING OF A SALE. A DOCUMENTARY FEE MAY NOT EXCEED $50 FOR A MOTOR VEHICLE CONTRACT [OR A REASONABLE AMOUNT AGREED TO BY THE PARTIES FOR A HEAVY COMMERCIAL VEHICLE CONTRACT]. THIS NOTICE IS REQUIRED BY LAW."

(d) Except for a retail installment contract for a commercial vehicle, if [If] the language primarily used in an oral sales presentation is not the same as the language in which the retail installment contract is written, the retail seller shall furnish to the retail buyer a written statement containing the notice set out in Subsection (c)(3)(B) in the language primarily used in the oral sales presentation.

SECTION 6. Section 348.007, Finance Code, is amended by amending Subsection (a) and adding Subsection (a-2) to read as follows:

(a) Except as otherwise provided by this section, each [Each] retail installment transaction is subject to this chapter.

(a-2) A retail installment transaction in which a retail buyer purchases a commercial vehicle is only subject to the following provisions of this chapter:

(1) Subchapter A, unless expressly stated otherwise;

(2) Subchapter B, except Sections 348.102 and 348.123;

(3) Subchapter C, except Sections 348.204(b), 348.206, 348.209, and 348.210;

(4) Subchapter D; and

(5) Subchapter E, except Section 348.407.

SECTION 7. Section 348.102(c), Finance Code, is amended to read as follows:

(c) A retail installment contract that provides for a variable contract rate must set out the method by which the rate is computed. [A contract for a heavy commercial vehicle is not required to set out the total amount of the time price differential.]

SECTION 8. Section 348.109, Finance Code, is amended to read as follows:

Sec. 348.109. ACCELERATION OF DEBT MATURITY. A retail installment contract may not authorize the holder to accelerate the maturity of all or a part of the amount owed under the contract unless:

(1) the retail buyer is in default in the performance of any of the buyer's obligations; [or]

(2) the holder believes in good faith that the prospect of buyer's payment or performance is impaired; or

(3) if the retail installment contract is for a commercial vehicle, the retail buyer or an affiliate of the retail buyer is in default in its obligations under another financing agreement or leasing agreement held by the same holder or an affiliate of the holder.

SECTION 9. Section 348.208, Finance Code, is amended by adding Subsections (d), (e), and (f) to read as follows:

(d) In addition to a charge for insurance coverage under Subsection (a) or (b), a retail installment contract for a commercial vehicle may include a charge for insurance coverage:

(1) relating to the commercial vehicle;

(2) relating to use of the commercial vehicle; or

(3) otherwise agreed to by the retail buyer and retail seller in the contract.

(e) Insurance coverage under Subsection (d) may be provided only by:

(1) an insurer authorized under the Insurance Code to engage in the business of insurance in this state; or

(2) if permitted under the Insurance Code, a surplus lines insurer eligible to provide the insurance under Chapter 981, Insurance Code.

(f) A retail installment contract for a commercial vehicle must set forth the amount of each charge for insurance coverage under Subsection (d) and the type of the coverage provided for that charge.

SECTION 10. Section 348.213(b), Finance Code, is amended to read as follows:

(b) A policy of insurance described by Subsection (a) must comply with the applicable requirements of Sections 348.201, 348.203, and 348.208, and, except if the policy relates to a retail installment contract for a commercial vehicle, Section 348.209.

SECTION 11. The changes in law provided by this Act apply only to a retail installment contract entered into on or after the effective date of this Act. A retail installment contract entered into before the effective date of this Act is governed by the law in effect on the date the contract was entered into, and the former law remains in effect for that purpose.

SECTION 12. This Act takes effect September 1, 2009.