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Texas Finance Commission Proposed Rules on Motor Vehicle Installment Sales
Wednesday, July 19, 2017 7:00 AM

The Finance Commission of Texas has posted proposed amendments to the Finance and Occupations Codes that will implement four bills passed during the 2017 Legislative Session concerning motor vehicle installment sales. The deadline for comment to the Finance commission is July 31, 2017.

HB 2339 by Rep. Senfronia Thompson/Sen. Judith Zaffirini adds the new §348.125 to the Texas Finance Code, authorizing "trade-in credit agreements" in connection with motor vehicle retail installment contracts. These agreements provide a credit to be applied toward the purchase or lease of a vehicle from the same dealer upon the trade-in of a vehicle that is damaged but not rendered a total loss as a result of a collision accident. It protects motor vehicle buyers in Texas against the diminished value of a vehicle as a result of damage due to a collision by providing for such agreements. The bill includes disclosure requirements, refunding requirements, a limitation on the amount charged, and a requirement that the seller be insured under a contractual liability reimbursement policy approved by the Texas Department of Insurance.

HB 2949 by Rep. Justin Holland/Sen. Brandon Creighton amends Texas Finance Code §348.006 to specify that a retail seller is not required to notify the agency of an increased documentary fee if the seller charges a documentary fee that is less than or equal to an amount presumed reasonable by rule of the commission.

SB 1052 by Sen. Bryan Hughes/Rep. Dan Flynn concerns debt cancellation agreements, a non-insurance product that motor vehicle consumers may purchase to cover the difference between a vehicle’s value and the amount owed to a lender in the event of theft or total loss.

SB 1052 moves provisions regarding the agreements that require insurance from Chapter 348 to a new Chapter 354 of the Texas Finance Code. It allows these agreements to be provided in a Chapter 345 retail installment transaction for certain covered vehicles, including a motorcycle, all-terrain vehicle, snowmobile, camper, boat, or personal watercraft trailer. The bill also allows the office of Consumer Credit Commissioner (OCCC) to agree to extend the 45-day approval period for debt cancellation agreements by an additional 45 days and specifies refunding and recordkeeping requirements when a debt cancellation agreement terminates due to early payoff of a retail installment contract.

SB 1052 also amends Texas Finance Code §348.114, which relates to deferment charges. The bill limits the deferment charge provision to contracts using the add-on method or scheduled installment earnings method. The bill adds §348.114(c), which provides that in a contract using the true daily earnings method, the holder may defer one or more installments, and time price differential continues to accrue on the unpaid balance at the rate agreed to in the contract. At the time of the deferment, the holder must provide a written notice stating that finance charge will continue to accrue.

SB 1199 amends Texas Occupations Code §1304.003 to authorize a depreciation benefit optional member program. The bill defines a depreciation benefit optional member program as "a service contract financed under Chapter 348 or 353, Finance Code, that pays to the buyer, as a credit toward the purchase of a replacement vehicle at a participating dealer, an amount less than or equal to the difference between the purchase price and actual cash value for a total constructive loss."

These depreciation benefit service contracts would be subject to the same requirements that currently apply to service contracts under Chapter 1304 of the Occupations Code, including the requirement that the provider be registered with the Texas Department of Licensing and Regulation, the requirement to maintain a reimbursement insurance policy, and a funded reserve account, disclosure requirements, and refunding requirements.

The proposed amendments are in the June 30, 2017, issue of the Texas Register.

For more information, please contact Texas Credit Union Association President Jeff Huffman at 469-385-6488 or jhuffman@txcua.coop.