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TITLE 7BANKING AND SECURITIES
PART 5OFFICE OF CONSUMER CREDIT COMMISSIONER
CHAPTER 84MOTOR VEHICLE INSTALLMENT SALES
SUBCHAPTER CINSURANCE AND DEBT CANCELLATION AGREEMENTS
RULE §84.308Debt Cancellation Agreements Not Requiring Insurance

      (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.

(d) Copy of debt cancellation agreement for total loss or theft of ordinary vehicle provided to retail buyer. If a retail buyer purchases a debt cancellation agreement for total loss or theft of an ordinary vehicle, the retail seller must provide the retail buyer, within a reasonable amount of time not to exceed 10 days from the date of the retail installment sales contract, a true and correct copy of the agreement that clearly sets forth:

  (1) the name of the retail buyer, and the name, address, and telephone number of the place where requests for debt cancellation are processed;

  (2) the amount and term of the debt cancellation agreement for total loss or theft of an ordinary vehicle;

  (3) the cost of the debt cancellation agreement for total loss or theft of an ordinary vehicle;

  (4) the terms, including the limitations, exclusions and restrictions; and

  (5) a statement that the holder will cancel certain amounts under the debt cancellation agreement for total loss or theft of an ordinary vehicle substantially similar to the following: "YOU WILL CANCEL CERTAIN AMOUNTS I OWE UNDER THIS CONTRACT IN THE CASE OF A TOTAL LOSS OR THEFT OF THE VEHICLE AS STATED IN THE DEBT CANCELLATION AGREEMENT."

(e) Fee or rate for debt cancellation agreement for total loss or theft of an ordinary vehicle. The amount of the fee is based upon the amount financed. The fee for a debt cancellation agreement can be adjusted to the nearest whole dollar. The fee may be included in the amount financed and a finance charge may be charged on the fee. The minimum fee for a debt cancellation agreement under this subsection is $50.

  (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. The following figure contains a rate schedule of maximum fees that are deemed to be reasonable for debt cancellation agreements for total loss or theft of an ordinary vehicle that are in compliance with subsection (c)(1) of this section.

Attached Graphic

  (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. The following figure contains a rate schedule of maximum fees that are deemed to be reasonable for debt cancellation agreements for total loss or theft of an ordinary vehicle that are in compliance with subsection (c)(2) of this section.

Attached Graphic

(f) Refund or credit of unearned debt cancellation agreement fee.

  (1) Notification of cancellation triggering refund or credit. A holder may require that the retail buyer notify the holder, retail seller, or any administrator appointed by the holder in writing should the retail buyer decide to cancel the debt cancellation agreement.

  (2) Refunding method. Upon termination of a debt cancellation agreement prior to the scheduled maturity date of a retail installment sales contract, the holder or administrator will provide the retail buyer a refund or credit calculated using a method that is at least as favorable to the buyer as the Rule of 78s. In the event of a canceled debt under the debt cancellation agreement, the fee paid for the debt cancellation agreement is fully earned and no refund or credit is due.

  (3) Cancellation date. The refund or credit of the debt cancellation agreement fee, if any, must be based upon the earlier date of:

    (A) the prepayment of the retail installment sales contract in full prior to the original maturity date;

    (B) a demand by the holder for payment in full of the unpaid balance or acceleration;

    (C) a request by the retail buyer for cancellation of the debt cancellation agreement; or

    (D) the total denial of a debt cancellation request based on one of the exclusions contained in subsection (c)(1)(B) or (2)(B) of this section, except in the case of a partial loss of the covered motor vehicle.

  (4) Rounding of unearned debt cancellation agreement fee. The refund or credit for the unearned debt cancellation agreement fee can be rounded to the nearest whole dollar.

  (5) Refund or credit less than $1.00 not required. A refund or credit is not required if the amount of the refund or credit is less than $1.00.

  (6) Flat cancellation within 30 days. If no total loss or theft has occurred, the retail buyer may cancel the debt cancellation agreement within 30 days from the date of the retail installment sales contract or the issuance of the debt cancellation agreement, whichever is later, or such later day as may be provided under the debt cancellation agreement. Upon such cancellation, the holder or administrator will refund or credit the entire debt cancellation agreement fee. A retail buyer may not cancel the debt cancellation agreement and then receive any benefits under the agreement.

(g) Prompt cancellation under debt cancellation agreement. A holder must comply with the terms of a debt cancellation agreement within 60 days of receiving a debt cancellation request form and all necessary information needed by the holder or administrator to process the request. If the administrator has all of the information that a retail buyer would provide in the completion of a debt cancellation request form, the administrator must comply with the terms of the debt cancellation agreement within 60 days of receipt of all the necessary information needed by the holder or administrator to process the request.

(h) Calculation of amount to be cancelled under debt cancellation agreement for total loss or theft of ordinary vehicle. The calculation of the amount to be canceled under this section will be figured in compliance with one of the following methods:

  (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. The amount currently owed by the retail buyer on the date of total loss or theft of the motor vehicle on the retail installment sales contract will be the amount canceled under the debt cancellation agreement for total loss or theft of an ordinary vehicle.

  (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.

    (A) If the retail buyer did not have property insurance at the time of the total loss or theft of the motor vehicle or the total loss of the vehicle was not covered by another responsible party's liability insurance policy, the amount to be canceled will be the amount currently owed by the retail buyer as of the date of total loss or theft of the motor vehicle.

    (B) If the retail buyer had property insurance at the time of the total loss or theft of the motor vehicle or the total loss of the vehicle was covered by another responsible party's liability insurance policy, the retail seller or related finance company will calculate the amount to be canceled by determining:

      (i) the current balance owed by the retail buyer as of the date of total loss or theft of the motor vehicle;

      (ii) subtracting the total loss payment made by the primary insurance carrier or other responsible party's liability insurance carrier; and

      (iii) subtracting any refunds received by the retail seller or related finance company as of the date of total loss or theft of the motor vehicle.

(i) Prepayment of retail installment sales contract by debt cancellation agreement. If the debt cancellation agreement is triggered by the total loss or theft of the motor vehicle, all refunds should be calculated as of the date of loss.

Cont'd...

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