85R5228 EES-F     By: Flynn H.B. No. 1985       A BILL TO BE ENTITLED   AN ACT   relating to debt cancellation agreements offered in connection with   certain loans and retail installment contracts and to amounts   charged for certain agreements offered in connection with certain   loans and retail installment contracts.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Sections 342.4021(a) and (e), Finance Code, are   amended to read as follows:          (a)  In connection with a loan made under this chapter that   is subject to Section 342.201(d) or 342.301(c), a lender may offer   to the borrower:                (1)  a debt suspension agreement or debt cancellation   agreement under similar terms and conditions as such an agreement   may be offered by a bank or savings association; or                (2)  a debt cancellation agreement under Chapter 354.          (e)  The amount charged for a product authorized by   Subsection (a) or (b) may not exceed five percent of the amount   financed pursuant to the loan made under this chapter [must be   reasonable].          SECTION 2.  Subchapter H, Chapter 345, Finance Code, is   amended by adding Section 345.358 to read as follows:          Sec. 345.358.  DEBT CANCELLATION AGREEMENT. A debt   cancellation agreement under Chapter 354 may be offered in   connection with a retail installment contract or retail charge   agreement.          SECTION 3.  Section 348.124(a), Finance Code, is amended to   read as follows:          (a)  In connection with a retail installment transaction   under this chapter, a retail seller may offer to the retail buyer a   debt cancellation agreement under Chapter 354, including a   guaranteed asset protection waiver or similarly named agreement.   The retail seller may not require that the purchase of a debt   cancellation agreement by the retail buyer be made in order to enter   into a retail installment transaction.          SECTION 4.  Subchapter G, Chapter 348, Finance Code, is   redesignated as Chapter 354, Finance Code, and amended to read as   follows:   CHAPTER 354 [SUBCHAPTER G].  CERTAIN DEBT CANCELLATION AGREEMENTS          Sec. 354.001.  DEFINITIONS. In this chapter:                (1)  "Contract" means a retail installment contract   made under Chapter 345 or 348.                (2)  "Covered item" includes a motor vehicle.                (3)  "Loan" means:                      (A)  a loan made under Chapter 342; or                      (B)  a loan to which Chapter 342 does not apply   solely because the loan provides for a rate of interest that is 10   percent a year or less.                (4)  "Motor vehicle" includes a self-propelled or towed   vehicle designed for personal use, including an automobile, truck,   motorcycle, recreational vehicle, all-terrain vehicle, snowmobile,   camper, boat, personal watercraft, and personal watercraft   trailer.          Sec. 354.002 [348.601].  LIMITATION ON CERTAIN DEBT   CANCELLATION AGREEMENTS. (a) This chapter [subchapter] applies   only to a debt cancellation agreement that includes insurance   coverage as part of the borrower's or retail buyer's responsibility   to the lender or holder.          (b)  The amount charged for a debt cancellation agreement   made in connection with a loan or [retail installment] contract may   not exceed five percent of the amount financed pursuant to the loan   or [retail installment] contract. [Section 348.124(c) does not   apply to a debt cancellation agreement regulated under this   subchapter.]          (c)  The debt cancellation agreement becomes a part of or a   separate addendum to the loan or [retail installment] contract and   remains a term of the loan or [retail installment] contract on the   assignment, sale, or transfer by the lender or holder.          Sec. 354.003 [348.602].  DEBT CANCELLATION AGREEMENTS   EXCLUSION LANGUAGE. (a) In addition to the provisions required by   Section 354.004 [348.603], a debt cancellation agreement must fully   disclose all provisions permitting the exclusion of loss or damage   including, if applicable:                (1)  an act occurring after the original maturity date   or date of the lender's or holder's acceleration of the loan or   [retail installment] contract;                (2)  if the covered item is a motor vehicle, any   dishonest, fraudulent, illegal, or intentional act of any   authorized driver that directly results in the total loss of the   motor vehicle;                (3)  if the covered item is a motor vehicle, any act of   gross negligence by an authorized driver that directly results in   the total loss of the motor vehicle;                (4)  conversion, embezzlement, or concealment by any   person in lawful possession of the covered item [motor vehicle];                (5)  lawful confiscation by an authorized public   official;                (6)  if the covered item is a motor vehicle, the   operation, use, or maintenance of the motor vehicle in any race or   speed contest;                (7)  war, whether or not declared, invasion,   insurrection, rebellion, revolution, or an act of terrorism;                (8)  normal wear and tear, freezing, or mechanical or   electrical breakdown or failure;                (9)  use of the covered item [motor vehicle] for   primarily commercial purposes;                (10)  damage that occurs after the covered item [motor   vehicle] has been repossessed;                (11)  damage to the covered item [motor vehicle] before   the purchase of the debt cancellation agreement;                (12)  if the covered item is a motor vehicle, unpaid   insurance premiums and salvage, towing, and storage charges   relating to the motor vehicle;                (13)  damage related to any personal property attached   to or within the covered item [motor vehicle];                (14)  damages associated with falsification of   documents by any person not associated with the lender or retail   seller or other person canceling the borrower's or retail buyer's   obligation;                (15)  any unpaid debt resulting from exclusions in the   borrower's or retail buyer's primary physical damage coverage not   included in the debt cancellation agreement;                (16)  abandonment of the covered item [motor vehicle]   by the borrower or retail buyer only if the borrower or retail buyer   voluntarily discards, leaves behind, or otherwise relinquishes   possession of the covered item [motor vehicle] to the extent that   the relinquishment shows intent to forsake and desert the covered   item [motor vehicle] so that the covered item [motor vehicle] may be   appropriated by any other person;                (17)  any amounts deducted from the primary insurance   carrier's settlement due to prior damages; and                (18)  any loss occurring outside the United States or   outside the United States and Canada.          (b)  An exclusion of loss or damage not listed in Subsection   (a) may be included in a debt cancellation agreement only if the   exclusion is disclosed in plain, easy to read language.          Sec. 354.004 [348.603].  REQUIRED DEBT CANCELLATION   AGREEMENT LANGUAGE. A debt cancellation agreement must state:                (1)  the contact information of the lender or the   retail seller and [, the] holder, and any administrator of the   agreement;                (2)  the name and address of the borrower or retail   buyer;                (3)  the cost and term of the debt cancellation   agreement;                (4)  the procedure the borrower or retail buyer must   follow to obtain benefits under the terms of the debt cancellation   agreement, including a telephone number and address where the   borrower or retail buyer may provide notice under the debt   cancellation agreement;                (5)  the period during which the borrower or retail   buyer is required to notify the lender or the retail seller or [,   the] holder, or any administrator of the agreement, of any   potential loss under the debt cancellation agreement for total loss   or theft of the covered item [motor vehicle];                (6)  if the covered item is a motor vehicle, that in   order to make a claim, the borrower or retail buyer must provide or   complete some or all of the following documents and provide those   documents to the lender or the retail seller or [, the] holder, or   any administrator of the agreement:                      (A)  a debt cancellation request form;                      (B)  proof of loss and settlement payment from the   borrower's or retail buyer's primary comprehensive, collision, or   uninsured or underinsured motorist policy or other parties'   liability insurance policy for the settlement of the insured total   loss of the motor vehicle;                      (C)  verification of the borrower's or retail   buyer's primary insurance deductible;                      (D)  a copy of any police report filed in   connection with the total loss or theft of the motor vehicle; and                      (E)  a copy of the damage estimate;                (7)  that documentation not described by Subdivision   (6) but [or] required by the lender or the retail seller or [, the]   holder, or any administrator of the agreement, is [not] required to   substantiate the loss or determine the amount of debt to be   canceled;                (8)  that notwithstanding the collection of the   documents under Subdivision (6), on reasonable advance notice the   lender or the retail seller or [, the] holder, or any administrator   of the agreement, may inspect the borrower's or retail buyer's   covered item [motor vehicle];                (9)  that the lender or the retail seller or holder will   cancel all or part of the borrower's or retail buyer's obligation as   provided in the debt cancellation agreement on the occurrence of   total loss or theft of the covered item [motor vehicle];                (10)  the method to be used to calculate refunds;                (11)  the method for calculating the amount to be   canceled under the debt cancellation agreement on the occurrence of   total loss or theft of a covered item [motor vehicle];                (12)  that purchase of a debt cancellation agreement is   not required for the borrower or retail buyer to obtain an extension   of credit and will not be a factor in the credit approval process;                (13)  that in order to cancel the debt cancellation   agreement and receive a refund, the borrower or retail buyer must   provide a written request to cancel to the lender or the retail   seller or [, the] holder, or any administrator of the agreement;                (14)  that if total loss or theft of the covered item   [motor vehicle] has not occurred, the borrower or retail buyer has   30 days from the date of the loan or [retail installment] contract   or the issuance of the debt cancellation agreement, whichever is   later, or a longer period as provided under the debt cancellation   agreement, to cancel the debt cancellation agreement and receive a   full refund;                (15)  that the borrower or retail buyer may file a   complaint with the commissioner, and include the address, phone   number, and Internet website of the Office of Consumer Credit   Commissioner; and                (16)  that the lender or holder will cancel certain   amounts under the debt cancellation agreement for total loss or   theft of a covered item [motor vehicle], in the following or   substantially similar language: "YOU WILL CANCEL CERTAIN AMOUNTS I   OWE UNDER THIS LOAN OR CONTRACT IN THE CASE OF A TOTAL LOSS OR THEFT   OF THE COVERED ITEM [VEHICLE] AS STATED IN THE DEBT CANCELLATION   AGREEMENT."          [Sec.   348.604.     APPROVAL OF FORMS FOR DEBT CANCELLATION   AGREEMENTS. (a) Debt cancellation agreement forms must be   submitted to the commissioner for approval. Debt cancellation   agreement forms may include additional language to supplement the   terms of the debt cancellation agreement as required by this   subchapter.          [(b)     If a debt cancellation agreement form is provided to   the commissioner for approval, the commissioner has 45 days to   approve the form or deny approval of the form. If after the 45th day   the commissioner does not deny the form, the form is considered   approved.          [(c)     If the debt cancellation agreement form is approved by   the commissioner or considered approved as provided by Subsection   (b), the terms of the debt cancellation agreement are considered to   be in compliance with this subchapter.          [(d)     The commissioner may deny approval of a form only if   the form excludes the language required by Sections 348.602 and   348.603 or contains any inconsistent or misleading provisions. All   form denials may be appealed to the finance commission.          [(e)     If after approval of a form the Office of Consumer   Credit Commissioner discovers that approval could have been denied   under Subsection (d), the commissioner may order a retail seller,   any administrator of the debt cancellation agreement, or a holder   to submit a corrected form for approval. Beginning as soon as   reasonably practicable after approval of the corrected form, the   retail seller, administrator, or holder shall use the corrected   form for all sales.          [(f)     A debt cancellation agreement form that has been   approved by the commissioner is public information subject to   disclosure under Chapter 552, Government Code. Section 552.110,   Government Code, does not apply to a form approved under this   subchapter.]          Sec. 354.005 [348.605].  ADDITIONAL REQUIREMENTS FOR DEBT   CANCELLATION AGREEMENTS. (a) If a borrower or retail buyer   purchases a debt cancellation agreement, the lender or retail   seller must provide to the borrower or retail buyer a true and   correct copy of the agreement not later than the 10th day after the   date of the loan or [retail installment] contract.          (b)  A lender or holder must comply with the terms of a debt   cancellation agreement not later than the 60th day after the date of   receipt of all necessary information required by the lender,   holder, or administrator of the agreement to process the request.          (c)  A debt cancellation agreement may not knowingly be   offered by a lender or retail seller if:                (1)  the loan or [retail installment] contract is   already protected by gap insurance; or                (2)  the purchase of the debt cancellation agreement is   required for the borrower or retail buyer to obtain the extension of   credit.          (d)  This section does not apply to a debt cancellation   agreement offered in connection with the purchase of a commercial   vehicle.          (e)  The sale of a debt cancellation agreement must be for a   single payment.          (f)  A lender or holder that offers a debt cancellation   agreement must report the sale of and forward money received on all   such agreements to any designated party as prescribed in any   applicable administrative services agreement, contractual   liability policy, other insurance policy, or other specified   program documents.          (g)  Money received or held by a lender or holder or any   administrator of a debt cancellation agreement and belonging to an   insurance company, lender or holder, or administrator under the   terms of a written agreement must be held by the lender, holder, or   administrator in a fiduciary capacity.          (h)  A lender or retail seller that negotiates a debt   cancellation agreement and subsequently assigns the loan or   contract shall:                (1)  maintain documents relating to the agreement that   come into the lender's or retail seller's possession; and                (2)  on request of the Office of Consumer Credit   Commissioner, cooperate in requesting and obtaining access to   documents relating to the agreement not in the lender's or retail   seller's possession.          Sec. 354.006 [348.606].  REFUND FOR DEBT CANCELLATION   AGREEMENTS. (a) A refund or credit of the debt cancellation   agreement fee must be based on the earliest date of:                (1)  the prepayment of the loan or [retail installment]   contract in full before the original maturity date;                (2)  a demand by the lender or holder for payment in   full of the unpaid balance or acceleration;                (3)  a request by the borrower or retail buyer for   cancellation of the debt cancellation agreement; or                (4)  the total denial of a debt cancellation request   based on one of the exclusions listed in Section 354.003 [348.602],   except in the case of a partial loss of the covered item [motor   vehicle].          (b)  The refund or credit for the debt cancellation agreement   can be rounded to the nearest whole dollar. A refund or credit is   not required if the amount of the refund or credit calculated is   less than $5.          (c)  If total loss or theft has not occurred, the borrower or   retail buyer may cancel the debt cancellation agreement not later   than the 30th day after the date of the loan or [retail installment]   contract or the issuance of the debt cancellation agreement,   whichever is later, or a later date as provided under the debt   cancellation agreement. On cancellation, the lender or holder, or   any administrator of the agreement, shall refund or credit the   entire debt cancellation agreement fee. A borrower or retail buyer   may not cancel the debt cancellation agreement and subsequently   receive any benefits under the agreement.          (d)  A lender or holder may in good faith rely on a   computation by any administrator of the agreement of the balance   waived, unless the lender or holder has knowledge that the   computation is not correct. If a computation by the administrator   of the balance waived is not correct, the lender or holder must   within a reasonable time of learning that the computation is   incorrect make the necessary corrections or cause the corrections   to be made to the borrower's or retail buyer's account. This   subsection does not prevent the lender or holder from obtaining   reimbursement from the administrator or another responsible for the   debt cancellation agreement or computation.          SECTION 5.  Section 348.124(c), Finance Code, is repealed.          SECTION 6.  This Act takes effect September 1, 2017.