Texas Automobile Dealers Association

Transcription

1 Austin, Texas Fax; (512) (512) Serving the franchised new car and truck dealers of Texas since 1916 A D A Pagel T buyer when there is a total loss or theft of the motor vehicle. of the contract under which the holder agrees to cancel all or a part of an obligation of the retail is not insurance and when it is sold in connection with a retail installment contract, it becomes a part of the deductible, according to the Texas Department of Insurance. A debt cancellation agreement the amount still be paid on the retail installment contract. A GAP policy may also cover the amount (GAP) insurance. GAP insurance pays the difference between the actual cash value ofa vehicle and There are differences in a debt cancellation agreement and Guaranteed Auto Protection recently adopted rules concerning the product (7 TAC , , ). contract, effective September 1, The Office of Consumer Credit Commissioner (OCCC) A debt cancellation agreement may be offered for sale in connection with a retail installment or holder on the occurrence of the total loss or theft ofthe motor vehicle that is the subject of the retail installment contract but does not include an offer to pay a specified amount on the buyer or holder agrees to cancel all or part of an obligation of the retail buyer to repay an extension of credit from the retail seller A retail installment contract term or a contractual arrangement modifying a retail installment contract term under which a retail total loss or theft of the motor vehicle. (Texas Finance Code (1-a) (Vernon Supp. 2009)) A debt cancellation agreement is: cancellation agreement. in connection with a motor vehicle retail installment transaction, to offer a retail buyer a debt In the 81St Legislative Session, the legislature passed S.B which allows a retail seller, DEBT CANCELLATION AGREEMENTS From: Karen Phillips Date: June 18,2010 To: TADA Members Re: Debt Cancellation Agreements MEMORANDUM 1108 Lavaca, Suite 800 Texas Automobile Dealers Association

2 required to accept or provide a debt cancellation agreement in order to purchase the motor vehicle under a retail installment contract. Page 2 buyer, a retail seller must provide the retail buyer a notice that a debt cancellation agreement for total If a retail seller offers to sell a debt cancellation agreement for total loss or theft to a retail Disclosure (7 TAC ) amount on the total loss or theft ofthe motor vehicle. The fee amount of the retail buyer to repay an extension of credit on the occurrence ofthe total loss any other party designated by the retail seller or holder. of the debt cancellation agreement may be paid to the retail seller, holder, or debt cancellation agreement may be paid to the retail seller, holder, or any other party designated by the retail seller or holder. between the amount owed under a retail installment contract and the amount paid under a physical damage insurance policy maintained by the retail buyer or its assignee in the event the motor vehicle is a total loss. The fee amount B. Commercial Vehicle A holder agrees to waive all or part ofthe difference or theft of the motor vehicle but does not include an offer to pay a specified a retail seller or holder agrees to cancel all or part of an obligation of the A. Ordinary Vehicle Modifies a retail installment contract term under which 3. Debt Cancellation Agreement for Total Loss or Theft of a Motor Vehicle contract in the event ofthe disability ofthe retail buyer. The fee amount of the debt cancellation agreement may be paid to the retail seller, holder, or any other party designated by the retail seller or holder. a holder agrees to waive one or more payments owed under the retail installment the retail buyer and the retail seller or holder of a retail installment contract in which 2. Debt Cancellation Agreement for Disability ofretail Buyer An agreement between the retail seller, holder, or any other party designated by the retail seller or holder. a holder agrees to waive all or part ofthe amount owed under the retail installment retail buyer and the retail seller or the holder of a retail installment contract in which contract in the event of the death of the retail buyer. The fee amount may be paid to 1. Debt Cancellation Agreement for Death of Retail Buyer An agreement between the Debt Cancellation Agreement Rules separate notice in connection with the retail installment contract stating that the retail buyer is not A retail seller may not require a retail buyer to purchase a debt cancellation agreement in order to enter into a retail installment contract. In addition, a retail seller is required to provide a

3 The notice can be provided to the retail buyer either in a debt cancellation agreement for total Page3 Commission and is the maximum fees that are reasonable for a debt cancellation agreement for insurance coverage as part of the retail buyer s responsibility to the holder may charge a reasonable debt cancellation agreement fee. The following is the rate schedule adopted by the Finance total loss or theft ofany ordinary vehicle that includes insurance coverage as part ofthe retail buyer s responsibility to holder: A debt cancellation agreement for total loss or theft of an ordinary vehicle that includes fee for a debt cancellation agreement under this subsection is $50. The amount of the fee for a debt cancellation agreement 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 or Rate for Debt Cancellation Agreement for Total Loss or Theft of an Ordinary Vehicle (7 TAC 308(d)) AS STATED IN THE DEBT CANCELLATION AGREEMENT. 5. A statement that the holder will cancel certain amounts under the debt cancellation 4. The terms, including the limitations, exclusions and restrictions. 2. The amount and term of the debt cancellation agreement for total loss or theft of 3. The cost of the debt cancellation agreement for total loss or theft of an ordinary place where requests for debt cancellation are processed. agreement for total loss or theft of an ordinary vehicle, substantially similar to the CONTRACT in THE CASE OF A TOTAL LOSS OR THEFT OF THE VEHICLE 1. The name of the retail buyer and the name, address, and phone number of the a reasonable time, not to exceed ten (10) days from the date of the retail installment contract. The A copy of the debt cancellation agreement must be provided by the seller to the buyer within agreement must include: vehicle. following: YOU WILL CANCEL CERTAIN AMOUNTS I OWE UNDER TIlTS an ordinary vehicle. (7 TAC (b)) agreement for total loss or theft of an ordinary vehicle notice to one of the applicants. If there are multiple applicants, the seller is only required to deliver the debt cancellation separately from the retail installment contract. The seller may request that the buyer sign the agreement acknowledging the receipt of the disclosure or notice. The seller may rely upon a verifiable procedure to show that the agreement was provided to the applicant. loss or theft of an ordinary vehicle or in a separate disclosure; however, it must be provided loss or theft of an ordinary vehicle is required in order to purchase the motor vehicle.

4 (Months) Financing Term Contract Sales ContractiLease Original Retail Installment Sales Balloon Retail Installment Page 4 original maturity date; acceleration; B. A demand by the holder for payment in full of the unpaid balance or A refund or credit ofthe debt cancellation agreement fee, if any, must be based on the earlier A. The prepayment of the retail installment sales contract in full prior to the date of: Upon the termination of a debt cancellation agreement prior to the scheduled maturity date cancellation agreement is fully earned and no refund or credit is due. In the event of a cancelled debt under the debt cancellation agreement, the fee paid for the debt refimd or credit calculated using a method that is at least as favorable to the buyer as the Rule of78s. of a retail installment sales contract, the holder or administrator must provide the retail buyer a any administrator appointed by the holder, if the retail buyer decides to cancel the debt cancellation agreement. A holder may require a retail buyer to send written notification to the holder, retail seller, or Refund or Credit of Unearned Debt Cancellation Agreement Fee (7 TAC (e)(2)) 36+ $ $ $4.75 Original Financing Term (Months) Rate per $100 or Percentage of Amount Financed rate schedule of maximum fees that are deemed reasonable : holder has complete responsibility for cancelling the debt after a total loss or theft has the following A debt cancellation agreement for total loss or theft of an ordinary vehicle in which the (7 TAC (e)(l)) 61 + $26.00 $ $15.00 $ $8.00 $ $4.00 $ $2.00 $6.50 RATE per $1,000 of AMOUNT FINANCED

5 except in the case of a partial loss of the covered motor vehicle. D. The total denial ofa debt cancellation request based on an allowed exclusion, Page 5 If you have any question, please call me at Please check with a lender to verify that the lender will finance a debt cancellation agreement prior to offering the product for sale. (7 TAC (k)) an extension of credit. 2. The purchase of the debt cancellation agreement is required for the retail buyer to obtain 1. The retail installment sales contract is already protected by GAP insurance; A debt cancellation agreement cannot be offered if: Prohibited Practices (7 TAC j)(3) and (4)) into its possession or upon request by the OCCC, cooperate in requesting and obtaining access to contract, the seller is to maintain a copy. A licensee is required to maintain documents that come documents not in its possession. If a retail seller negotiates a debt cancellation agreement and assigns the retail installment Document Retention (7 TAC (f)) The refund or credit can be rounded to the nearest whole dollar; a refund or credit is not required if the amount of the refund or credit is less than $1.00. agreement; or, C. A request by the retail buyer for cancellation of the debt cancellation