H.B. No. 735
 
 
 
 
AN ACT
  relating to service contracts for leased or purchased motor
  vehicles.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Sections 1304.003(a)(2) and (3), Occupations
  Code, are amended to read as follows:
               (2)  "Service contract" means an agreement that is
  entered into for a separately stated consideration and for a
  specified term under which a provider agrees to:
                     (A)  repair, replace, or maintain a product, or
  provide indemnification for the repair, replacement, or
  maintenance of a product, for operational or structural failure or
  damage caused by a defect in materials or workmanship or by normal
  wear;
                     (B)  provide identity recovery, if the service
  contract is financed under Chapter 348 or 353, Finance Code; or
                     (C)  provide compensation to the lessee or buyer
  of a vehicle on the total constructive loss under a depreciation
  benefit optional member program.
               (3)  "Depreciation benefit optional member program"
  means a service contract for a vehicle, regardless of whether the
  vehicle is purchased for cash, financed, or leased [financed under
  Chapter 348 or 353, Finance Code], that pays to the lessee or buyer
  a specified amount, as a credit that may be used toward the lease or
  purchase of a replacement vehicle at a participating dealer after
  [, an amount less than or equal to the difference between the
  purchase price and actual cash value for] a total constructive loss
  of the vehicle.
         SECTION 2.  Section 1304.003(e), Occupations Code, is
  amended to read as follows:
         (e)  A service contract described by Subsection (a)(2)(C):
               (1)  may not be required as a condition of approval of a
  lease of a vehicle or a loan for the purchase of a vehicle;
               (2)  may not be offered by a dealer who requires a loan
  for the purchase of a vehicle to be financed exclusively with the
  dealer;
               (3)  may be canceled by the buyer of the service
  contract not later than the 30th day after the [a] buyer enters into
  the contract, without a penalty;
               (4)  may be canceled by the buyer of the service
  contract later than the 30th day after the [a] buyer enters into the
  contract, with a pro rata refund to be provided to the buyer; and
               (5)  may only charge a fee that is reasonable in
  relation to the benefit provided by the service contract.
         SECTION 3.  The changes in law made by this Act apply only to
  a service contract entered into or renewed on or after the effective
  date of this Act.  A service contract entered into or renewed before
  the effective date of this Act is governed by the law in effect
  immediately before the effective date of this Act, and that law is
  continued in effect for that purpose.
         SECTION 4.  This Act takes effect September 1, 2021.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 735 was passed by the House on April
  9, 2021, by the following vote:  Yeas 143, Nays 1, 2 present, not
  voting.
 
  ______________________________
  Chief Clerk of the House   
 
 
         I certify that H.B. No. 735 was passed by the Senate on April
  29, 2021, by the following vote:  Yeas 31, Nays 0.
 
  ______________________________
  Secretary of the Senate    
  APPROVED:  _____________________
                     Date          
   
            _____________________
                   Governor