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Texas Bills Would Allow New Insurance Product for CUs Doing Indirect Lending
Wednesday, April 12, 2017 7:05 AM

SB 1199/HB 2816 creates a new service contract called a "depreciation benefit member optional protection" product with which credit unions can contract car dealers to sell with retail installment contracts.

The Senate Business and Commerce Committee heard SB 1199 by Sen. Donna Campbell (R-New Braunfels), which would allow auto dealers to sell an optional service contract to buyers that provides credit toward the purchase of a replacement vehicle in the event of total loss or theft.

The contract provides a benefit of up to $10,000 that a consumer can apply toward the replacement of their vehicle at the same dealer or auto group. This differs from GAP insurance, which covers the difference between the remaining loan balance and the total loss value of a vehicle when a borrower owes more on a loan than the vehicle is worth.

The companion bill in the House, HB 2816 by Rep. Ina Minjarez (D-San Antonio), received a hearing in the House Licensing and Administrative Procedures Committee. A committee substitute was offered that clarified consumer protections for this new type of service contract. The product is optional, not a prerequisite to get a loan, refundable within 30 days without penalty, and refundable after that time on a pro-rata basis.
The bills were left pending.

For more information, please contact Texas Credit Union Association President Jeff Huffman at 469-385-6488 or