| (a) Purpose and scope. The Texas Finance Code allows
a debt cancellation agreement to be included in a motor vehicle retail
installment sales contract involving an ordinary vehicle subject to
Texas Finance Code, Chapter 348 as an itemized charge. This section
outlines the parameters under which a retail seller or holder may
provide a debt cancellation agreement for total loss or theft of an
ordinary vehicle in connection with a Chapter 348 retail installment
sales contract. This section applies only to debt cancellation agreements
that do not require insurance coverage. This section does not apply
to a debt cancellation agreement under Texas Finance Code, Chapter
354.
(b) Disclosure under Texas Finance Code, §348.124.
(1) Delivery. A retail seller must provide the retail
buyer with a notice that a debt cancellation agreement for total loss
or theft of an ordinary vehicle is not required in order to purchase
the motor vehicle if a retail seller offers to sell a debt cancellation
agreement for total loss or theft to a retail buyer. This notice can
be provided to the retail buyer either in a debt cancellation agreement
for total loss or theft of an ordinary vehicle or in a separate disclosure.
The notice under this section must be provided separately from the
retail installment sales contract. A retail seller may request that
the retail buyer authenticate the debt cancellation agreement for
total loss or theft of an ordinary vehicle disclosure acknowledging
the applicant's receipt of the disclosure or notice. A retail seller
may rely upon a verifiable procedure to show that a debt cancellation
agreement for total loss or theft of an ordinary vehicle notice was
provided to an applicant.
(2) Multiple applicants. In the case of multiple applicants,
it is only necessary for the retail seller to deliver the debt cancellation
agreement for total loss or theft of an ordinary vehicle notice to
one applicant.
(c) Authorized debt cancellation agreement for total
loss or theft of an ordinary vehicle provisions. A debt cancellation
agreement under this section may only contain provisions or exclusions
from either paragraph (1) or (2) of this subsection, language to implement
any of the provisions or exclusions of either paragraph (1) or (2)
of this subsection, and language to identify and obligate the parties
to the debt cancellation agreement under Texas law if that language
does not conflict with this subsection.
(1) Debt cancellation agreement for total loss or theft
of ordinary vehicle in which holder bears complete responsibility
for canceling the debt after total loss or theft must:
(A) contain a statement that the holder will cancel
the amount currently owed by the retail buyer on the date of total
loss or theft of the motor vehicle;
(B) permit the exclusion of loss or damage only as
a result of one or more of the following:
(i) an act occurring after the original maturity date
or date of holder's acceleration of the retail installment sales contract;
(ii) any dishonest, fraudulent, criminal, illegal or
intentional act of any authorized driver that directly results in
the total loss;
(iii) conversion, embezzlement, or secretion by any
person in lawful possession of the motor vehicle;
(iv) lawful confiscation by an authorized public official;
(v) the operation, use, or maintenance of the motor
vehicle in any race or speed contest;
(vi) war, whether or not declared, invasion, civil
war, insurrection, rebellion, revolution, or act of terrorism;
(vii) normal wear and tear, freezing, mechanical or
electrical breakdown or failure;
(viii) use of the motor vehicle for primarily commercial
purposes;
(ix) loss that occurs after the motor vehicle has been
repossessed;
(x) damage to the motor vehicle prior to the purchase
of the debt cancellation agreement for total loss or theft of an ordinary
vehicle;
(xi) damage related to any personal property attached
to or within the vehicle;
(xii) damages associated with falsification of documents
by any person not associated with the retail seller or the debt cancellation
provider;
(xiii) abandonment of the motor vehicle by the retail
buyer only if the retail buyer voluntarily discards, or leaves behind,
or otherwise relinquishes possession of the motor vehicle to the extent
that the relinquishment shows intent to forsake and desert the motor
vehicle so that the motor vehicle may be appropriated by any other
person;
(xiv) any loss occurring outside the continental United
States of America, Alaska, or Hawaii (holder may opt to cover losses
in Canada);
(xv) any exclusion or limitation approved in writing
by the commissioner;
(C) contain a statement that the retail buyer is required
to notify the holder within 75 days, or a longer period as agreed
to in the debt cancellation agreement, of any potential loss under
the debt cancellation agreement for total loss or theft of an ordinary
vehicle;
(D) contain a statement that requests the retail buyer
to provide or complete a debt cancellation request form and a copy
of the police report, if any, filed in connection with the total loss
or theft of the motor vehicle and provide those documents to the holder;
(E) contain a statement that the holder will cancel
amounts as provided under the debt cancellation agreement for total
loss or theft of an ordinary vehicle;
(F) contain a statement naming the refunding method
to be used to calculate refunds under subsection (f) of this section;
(G) contain a statement that the holder may not be
named as loss payee on any insurance policy covering the motor vehicle
or receive any of the proceeds from an insurance policy on the motor
vehicle;
(H) contain a statement that the holder may not require
property insurance on the motor vehicle;
(I) contain a statement that the debt cancellation
agreement is not required to obtain credit and will not be a factor
in the credit approval process;
(J) contain a statement that a partial loss of the
motor vehicle is not subject to relief under the debt cancellation
agreement;
(K) contain a statement that upon request of the commissioner,
the administrator will make its records relating to the creation,
processing, and resolution of the debt cancellation agreement available
to the commissioner;
(L) contain a statement that the retail buyer should
consider contacting a tax advisor regarding possible tax consequences;
and
(M) contain, at the election of the drafter, contract
provisions pertaining to the following issues, so long as the provisions
comply with state and federal law and implementing regulations:
(i) a notice provision regarding how notice may be
given or delivered by either party under the debt cancellation agreement;
(ii) a severability provision;
(iii) an arbitration provision;
(iv) any contract provision approved in writing by
the commissioner.
(2) Debt cancellation agreement for total loss or theft
of used ordinary vehicle with a cash price of $15,000 or less in which
the retail seller does not assign the retail installment sales contract
to any party other than a related finance company as defined by Texas
Tax Code, §152.0475(a), and in which the retail seller bears
complete responsibility for canceling the debt after total loss or
theft whether the retail buyer elects to obtain property insurance,
must:
(A) contain a statement that:
(i) if the retail buyer does not have property insurance
for the motor vehicle that is in force and effect at the time of the
total loss or theft of the motor vehicle, the retail seller will cancel
the amount currently owed by the retail buyer on the date of total
loss or theft of the motor vehicle; or
(ii) if the retail buyer has property insurance for
the motor vehicle that is in force and effect at the time of the total
loss or theft of the motor vehicle or the motor vehicle is involved
in a total loss involving another responsible party's liability insurance
policy, the retail seller will apply any settlement payment from the
retail buyer's primary comprehensive, collision, or uninsured/underinsured
motorist policy or other parties' liability insurance policy to the
retail buyer's account and cancel the remaining balance;
(B) permit the exclusion of loss or damage only as
a result of one or more of the following:
(i) an act occurring after the original maturity date
or date of retail seller's acceleration of the retail installment
sales contract;
(ii) any dishonest, fraudulent, criminal, illegal or
intentional act of any authorized driver that directly results in
the total loss;
(iii) conversion, embezzlement, or secretion by any
person in lawful possession of the motor vehicle;
Cont'd... |
