HBA-TYH H.B. 3515 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 3515
By: Marchant
Financial Institutions
3/31/1999
Introduced



BACKGROUND AND PURPOSE 

Historically, a service contract sold by the retail seller of a motor
vehicle has not been considered insurance and is not subject to regulation
by the Texas Department of Insurance.  Buyers and sellers have long relied
on this interpretation of the law.  H.B. 3515 codifies this interpretation
by establishing that a warranty or service contract sold by the retail
seller of a motor vehicle to a retail buyer is not insurance. 

When a motor vehicle is rendered a total loss while the owner owes more
against the vehicle than the vehicle is worth, the owner still owes the
lienholder the difference.  With the recent lengthening of the of the term
of motor retail vehicle installment sales contracts, this may become a
severe hardship for owners in a total loss situation.  A debt cancellation
contract can provide an owner of a vehicle with protection by guaranteeing
that the owner would owe nothing on the  vehicle rendered a total loss,
even if the vehicle was worth less than the amount owed on it at the time
of the loss. Current law does not specifically authorize the seller of a
motor vehicle to offer this kind of debt cancellation contract.  H.B. 3515
authorizes the buyer and seller of a motor vehicle to agree on a
contractual provision for the cancellation of any outstanding obligation
the buyer may have over and above the insurance settlement in the event
that the vehicle is rendered a total loss.  This bill also provides that
such a debt cancellation contract is not insurance. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 348.208, Finance Code, by adding Subsections (c)
and (d), as follows:  

(c)  Provides that notwithstanding other law, a warranty or service
contract sold by the retail seller of a motor vehicle to a retail buyer is
not insurance.  
 
(d)  Authorizes a buyer and seller, notwithstanding other law, to agree to
include in a contract for the sale of a motor vehicle a separate charge for
a debt cancellation contract or waiver by which the seller or holder agrees
that, if the vehicle is rendered a total loss because of theft or
collision, the seller or holder will waive the difference, if any, between
the actual cash value of the vehicle immediately before the loss and the
amount owed on the vehicle.  Authorizes a seller or holder, in addition to
other liability incurred under a debt cancellation contract or waiver, to
agree to waive the deductible amount, if any, the buyer is required to pay
under the buyer's personal auto policy.  Provides that a debt cancellation
contract or waiver included in a contract is not insurance or an insurance
product or service and is not subject to regulation by the commissioner of
insurance or the Texas Department of Insurance. 

SECTION 2.  Emergency clause.
  Effective date: upon passage.