Rental Agreement Loss Damage Waivers Law

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RENTAL-PURCHASE AGREEMENTS
Business and Commerce Code, Chapter 92
Title 5, Subtitle B, Rental Practices
Administered by the Texas Department of Licensing and Regulation
(Effective September 1, 2013)

Table of Contents

Subchapter A. GENERAL PROVISIONS

Sec. 92.001. Definitions
Sec. 92.002. Advertisement Requirements

Subchapter B. FORM AND CONTENT OF AGREEMENTS

Sec. 92.051. Form of Agreement
Sec. 92.052. Required Disclosures
Sec. 92.053. Other Required Provisions
Sec. 92.054. Prohibited Provisions
Sec. 92.055. Restrictions on Late Charges and Reinstatement Fees

Subchapter C. REPOSSESSION AND REINSTATEMENT

Sec. 92.101. Merchant’s Repossession Right
Sec. 92.102. Effect of Repossession During Reinstatement Period
Sec. 92.103. Effect on Reinstatement Period of Merchandise Return
Sec. 92.104. Merchant’s Duties on Reinstatement

Subchapter D. LOSS DAMAGE WAIVERS

Sec. 92.151. Contract for Waiver
Sec. 92.152. Charge for Waiver
Sec. 92.153. Restrictions on Merchant Concerning Waiver
Sec. 92.154. Required Notice in Waiver
Sec. 92.155. Statement of Total Charge
Sec. 92.156. Authorized Exclusions
Sec. 92.157. Relationship to Insurance

Subchapter E. CIVIL ENFORCEMENT

Sec. 92.201. Action for Violation of Chapter
Sec. 92.202. Deceptive Trade Practice

Subchapter A.  GENERAL PROVISIONS

 

Sec. 92.001. Definitions.

In this chapter:

(1) "Advertisement" means a commercial message in any medium that directly or indirectly promotes or assists a rental-purchase agreement.

(3) "Consumer" means an individual who leases personal property under a rental-purchase agreement.

(5) "Loss damage waiver" means a merchant's agreement to not hold a consumer liable for loss from all or part of any damage to merchandise.

(6) "Merchandise" means the personal property that is the subject of a rental-purchase agreement.

(7) "Merchant" means a person who, in the ordinary course of business, regularly leases, offers to lease, or arranges for the leasing of merchandise under a rental-purchase agreement. The term includes a person who is assigned an interest in a rental-purchase agreement.

(8) "Rental-purchase agreement" means an agreement under which a consumer may use merchandise for personal, family, or household purposes for an initial period of four months or less, and that:

(A) is automatically renewable with each payment after the initial period; and

(B) permits the consumer to become the owner of the merchandise.

Sec. 92.002. Advertisement Requirements.

An advertisement for a rental-purchase agreement that refers to or states the amount of a payment or the right to acquire ownership of any one particular item under the agreement must clearly and conspicuously state:

(1) that the transaction advertised is a rental-purchase agreement;

(2) the total amount and number of payments necessary to acquire ownership; and

(3) that the consumer does not acquire ownership rights unless the merchandise is rented for a specified number of payment periods.

Subchapter B. FORM AND CONTENT OF AGREEMENTS

 

Sec. 92.051. Form of Agreement.

(a) A rental-purchase agreement must be written in:

(1) plain English; and

(2) any other language used by the merchant in an advertisement related to the agreement.

(b) A numerical amount included in a rental-purchase agreement must be stated in figures.

(c) A disclosure required by this chapter must be printed or typed in each rental-purchase agreement in a size equal to at least 10-point boldfaced type.

(d) The attorney general shall provide a form agreement that may be used to satisfy the requirements of a rental-purchase agreement under this chapter.

Sec. 92.052. Required Disclosures.

(a) A rental-purchase agreement must disclose:

(1) whether the merchandise is new or used;

(2) the price for which the merchant would have sold the merchandise to the consumer for cash on the date of the agreement;

(3) the amount and timing of payments;

(4) the total number of payments necessary and the total amount to be paid to acquire ownership of the merchandise;

(5) that the consumer does not acquire ownership rights unless the consumer complies with the ownership terms of the agreement;

(6) the amount and purpose of any payment, charge, or fee in addition to the regular periodic payments; and

(7) whether the consumer is liable for loss or damage to the merchandise and, if so, the maximum amount for which the consumer may be liable.

(b) Notice of the right to reinstate the agreement must be disclosed in the agreement.

Sec. 92.053. Other Required Provisions.

A rental-purchase agreement must provide that:

(1) any charge in addition to periodic payments must be reasonably related to the service performed; and

(2) a consumer who fails to make a timely payment may reinstate an agreement, without losing any right or option previously acquired, by taking the required action before the later of:

(A) one week after the due date of the payment; or

(B) the number of days after the due date of the payment that is equal to half the number of days in a regular payment period.

Sec. 92.054. Prohibited Provisions.

(a) rental-purchase agreement may not:

(1) require a consumer to:

(A) pay a late charge or reinstatement fee except as provided by Section 92.055(b);

(B) make a payment at the end of the scheduled rental-purchase term in excess of or in addition to a regular periodic payment to acquire ownership of the merchandise; or

(C) purchase insurance or a loss damage waiver from the merchant to cover the merchandise;

(2) require a confession of judgment;

(3) authorize a merchant or an agent of the merchant to commit a breach of the peace in repossessing merchandise; or

(4) waive a defense, counterclaim, or right the consumer may have against the merchant or an agent of the merchant.

(b) A consumer may not in any event be required to pay a sum greater than the total amount to be paid to acquire ownership of the merchandise as disclosed under Section 92.052(a)(4).

Sec. 92.055. Restrictions on Late Charges and Reinstatement Fees.

(a) Only one late charge or reinstatement fee may be collected on a payment regardless of the period during which the payment remains in default.

(b) A rental-purchase agreement may require the consumer to pay a late charge or reinstatement fee only if:

(1) a periodic payment is delinquent for more than:

(A) seven days, if the payment is due monthly; or

(B) three days, if the payment is due more frequently than monthly; and

(2) the charge or fee is in an amount not less than $5 and not more than the lesser of:

(A) $10; or

(B) 10 percent of the delinquent payment.

Subchapter C. REPOSSESSION AND REINSTATEMENT

 

Sec. 92.101. Merchant’s Repossession Right.

This chapter does not prevent a merchant from attempting repossession of merchandise during the reinstatement period.

Sec. 92.102. Effect of Repossession During Reinstatement Period.

A consumer's right to reinstate a rental-purchase agreement is not affected by the merchant's repossession of the merchandise during the reinstatement period.

Sec. 92.103. Effect on Reinstatement Period of Merchandise Return.

If merchandise is returned during the applicable reinstatement period, other than through judicial process, the right to reinstate the rental-purchase agreement is extended for a period of not less than 30 days after the date of return.

Sec. 92.104. Merchant’s Duties on Reinstatement.

(a) On reinstatement, the merchant shall provide the consumer with:

(1) the same merchandise; or

(2) substitute merchandise of comparable quality and condition.

(b) A merchant who provides the consumer with substitute merchandise shall also provide the consumer with the disclosures required by Section 92.052(a).

Subchapter D. LOSS DAMAGE WAIVERS

 

Sec. 92.151. Contract for Waiver.

In addition to other charges permitted by this chapter, a consumer may contract for a loss damage waiver.

Sec. 92.152. Charge for Waiver.

A merchant may charge a periodic fee for a loss damage waiver in an amount not to exceed 10 percent of the periodic rental payment.

Sec. 92.153. Restrictions on Merchant Concerning Waiver.

A merchant may not:

(1) sell a loss damage waiver unless:

(A) the contract containing the waiver complies with this chapter; and

(B) the consumer agrees to the waiver in writing; or

(2) impose or require the purchase of a loss damage waiver as a mandatory charge.

Sec. 92.154. Required Notice in Waiver.

A contract that offers a loss damage waiver must include the following notice:

"This contract offers an optional loss damage waiver for an additional charge to cover your responsibility for loss of or damage to the merchandise. You do not have to purchase this coverage. Before deciding whether or not to purchase this loss damage waiver, you may consider whether your homeowners' or casualty insurance policy affords you coverage for loss of or damage to rental merchandise and the amount of the deductible you would pay under your policy."

Sec. 92.155. Statement of Total Charge.

A loss damage waiver agreement must include a statement of the total charge for the loss damage waiver.

Sec. 92.156. Authorized Exclusions.

A loss damage waiver may exclude:

(1) loss or damage to the merchandise that is caused by an unexplained disappearance or abandonment of the merchandise;

(2) damage that is intentionally caused by the consumer; or

(3) damage that results from the consumer's wilful or wanton misconduct.

Sec. 92.157. Relationship to Insurance.

A loss damage waiver is not insurance.

Subchapter E. CIVIL ENFORCEMENT

 

Sec. 92.201. Action for Violation of Chapter.

(a) A consumer damaged by a merchant's violation of this chapter is entitled to recover from the merchant:

(1) actual damages;

(2) an amount equal to 25 percent of the total amount of payments required to obtain ownership of the merchandise, except that the amount recovered under this subdivision may not be less than $250 or more than $1,000; and

(3) reasonable attorney's fees and court costs.

(b) A merchant is not liable under this section for a violation of this chapter caused by the merchant's error if, subject to Subsection (c), the merchant:

(1) provides the consumer written notice of the error; and

(2) makes adjustments in the consumer's account as necessary to ensure:

(A) the consumer will not be required to pay an amount in excess of the amount disclosed; and

(B) the agreement otherwise complies with this chapter.

(c) A merchant must take action under Subsection (b) before:

(1) the 31st day after the date the merchant discovers the error; and

(2) the merchant receives written notice of the error from the consumer or an action under this section is filed.

Sec. 92.202. Deceptive Trade Practice.

A violation of this chapter is a deceptive trade practice under Subchapter E, Chapter 17.

NOTE: AS AMENDED BY ACTS 2013, 83rd LEG., SB 289, SECTION 3 (a), (b), and (c) READS:

(a) An administrative proceeding pending on the effective date of this Act that is related to a complaint filed under Section 92.160, Business & Commerce Code, as that section existed immediately before the effective date of this Act, is dismissed.

(b)  An administrative penalty assessed under Chapter 92, Business & Commerce Code, as that chapter existed immediately before the effective date of this Act, and Chapter 51, Occupations Code, may be collected as provided by Chapter 51, Occupations Code, may be collected as provided by Chapter 51, Occupations Code.

(c) The Texas Department of Licensing and regulation shall return a prorated portion of the fee paid by a merchant to the department under Section 92.159, business & Commerce Code, as that section existed immediately before the effective date of this Act.

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