CHAPTER 2306. VEHICLE PROTECTION PRODUCT WARRANTORS
OCCUPATIONS CODE
TITLE 14. REGULATION OF MOTOR VEHICLES AND TRANSPORTATION
SUBTITLE A. REGULATIONS RELATED TO MOTOR VEHICLES
CHAPTER 2306. VEHICLE PROTECTION PRODUCT WARRANTORS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2306.001. SHORT TITLE. This chapter may be cited as the
Vehicle Protection Product Regulatory Act.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.002. DEFINITIONS. In this chapter:
(1) "Commission" means the Texas Commission of Licensing and
Regulation.
(2) "Consumer" means a person in this state who purchases or
otherwise possesses a vehicle protection product.
(3) "Department" means the Texas Department of Licensing and
Regulation.
(4) "Executive director" means the executive director of the
department.
(5) "Person" means an individual or a partnership, company,
corporation, association, or other group, however organized.
(6) "Reimbursement insurance policy" means a policy of insurance
issued to a warrantor to:
(A) provide reimbursement to the warrantor under the terms of
the insured vehicle protection product issued or sold by the
warrantor; and
(B) pay on behalf of the warrantor, in the event of the
warrantor's nonperformance, all covered obligations incurred by
the warrantor under the terms of the insured vehicle protection
product issued or sold by the warrantor.
(7) "Seller" means a person engaged in the business of offering
a vehicle protection product for sale to a consumer.
(8) "Vehicle protection product" means a product or system,
including a written warranty, that is:
(A) installed on or applied to a vehicle;
(B) designed to prevent loss or damage to a vehicle from a
specific cause; and
(C) subject to the limitation of Section 2306.003.
(9) "Warrantor" means a person named under the terms of a
vehicle protection product warranty as the contractual obligor to
the consumer.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.003. APPLICABILITY OF CHAPTER. (a) This chapter
applies only to a vehicle protection product under which, after
installation or application of the vehicle protection product, if
loss or damage results from the failure of the vehicle protection
product to perform as represented in the warranty, the warrantor,
to the extent agreed on as part of the warranty, is required to
pay expenses to the consumer for the loss of or damage to the
vehicle.
(b) Loss of or damage to the vehicle under Subsection (a) may
also include unreimbursed incidental expenses that may be
incurred by the warrantor, including expenses for a replacement
vehicle, temporary vehicle rental expenses, and registration
expenses for replacement vehicles.
(c) A vehicle protection product may also include identity
recovery, as defined by Section 1306.002, if the vehicle
protection product is financed under Chapter 348, Finance Code.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
36, Sec. 4, eff. September 1, 2009.
Sec. 2306.004. EXEMPTIONS FROM CERTAIN OTHER LAWS. Marketing,
selling, offering for sale, issuing, making, proposing to make,
and administering a vehicle protection product are exempt from:
(1) Chapter 1304;
(2) the Insurance Code and other laws of this state regulating
the business of insurance; and
(3) Chapter 722, Transportation Code.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.005. EXEMPTIONS FROM CHAPTER. The following contracts
and agreements are exempt from this chapter and are only subject
to any other statute or law that specifically applies to them:
(1) warranties or guarantees, other than those provided as part
of a vehicle protection product;
(2) service contracts regulated by Chapter 1304; and
(3) agreements issued by an automobile service club that holds a
certificate of authority under Chapter 722, Transportation Code.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.006. APPLICABILITY OF OTHER LAW. Section 51.405 does
not apply to this chapter.
Added by Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(a), eff. September 1, 2005.
SUBCHAPTER B. ADMINISTRATIVE PROVISIONS
Sec. 2306.051. POWERS AND DUTIES OF EXECUTIVE DIRECTOR. (a)
The commission may adopt rules as necessary to implement this
chapter.
(b) The executive director may conduct investigations of
warrantors or other persons as reasonably necessary to enforce
this chapter and to protect consumers in this state.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(b), eff. September 1, 2005.
Sec. 2306.052. FEES. (a) The department shall develop a tiered
fee structure under which registration fees are assessed on
warrantors based on the number of vehicle protection products
sold within this state in the 12 months preceding the date of
registration.
(b) The information submitted to the department under this
section regarding the number of vehicle protection products sold
by a warrantor may only be used by the department in determining
the tiered fee structure. Information concerning the number of
vehicle protection products sold by a warrantor submitted under
this section is a trade secret and subject to Section 552.110,
Government Code.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
SUBCHAPTER C. ADVISORY BOARD
Sec. 2306.101. ADVISORY BOARD. (a) The Vehicle Protection
Product Warrantor Advisory Board is an advisory body to the
commission.
(b) The advisory board consists of six members appointed by the
presiding officer of the commission, with the commission's
approval, as follows:
(1) two members who are officers, directors, or employees of a
warrantor who has been approved or expects to be approved by the
department;
(2) two members who are officers, directors, or employees of a
retail outlet or other entity located in this state that sells
vehicle protection products and is approved or expected to be
approved by the department; and
(3) two members who are residents of this state and, at the time
of appointment, are consumers of vehicle protection products
issued by warrantors registered or expected to be registered
under this chapter.
(c) The executive director or the executive director's designee
serves as an ex officio nonvoting member of the advisory board.
(d) Chapter 2110, Government Code, does not apply to the
advisory board.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(c), eff. September 1, 2005.
Sec. 2306.102. ADVISORY BOARD DUTIES. The advisory board shall
advise the commission on adopting rules, enforcing and
administering this chapter, and setting fees.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(d), eff. September 1, 2005.
Sec. 2306.103. TERMS; VACANCY. (a) Members of the advisory
board serve staggered six-year terms, with the terms of two
members expiring on February 1 of each odd-numbered year.
(b) The presiding officer of the commission, with the
commission's approval, shall fill any vacancy on the advisory
board by appointing an individual who meets the qualifications
for the vacant advisory board position to serve the remainder of
the unexpired term.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(e), eff. September 1, 2005.
Sec. 2306.104. PRESIDING OFFICER. The presiding officer of the
commission, with the commission's approval, shall designate one
member of the advisory board to serve as presiding officer of the
board for two years.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(f), eff. September 1, 2005.
Sec. 2306.105. MEETINGS. (a) The advisory board shall meet at
least every six months and may meet at other times at the call of
the presiding officer of the board or the presiding officer of
the commission.
(b) The advisory board shall meet at a location in this state
designated by the advisory board.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(g), eff. September 1, 2005.
Sec. 2306.106. VOTE REQUIRED FOR ACTION. A decision of the
advisory board is not effective unless it receives the
affirmative vote of at least four members.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.107. COMPENSATION; REIMBURSEMENT. (a) Advisory board
members serve without compensation.
(b) A member of the advisory board appointed under Section
2306.101(b)(3) is entitled to reimbursement for actual and
necessary expenses incurred in performing functions as a member
of the advisory board, subject to any applicable limitation on
reimbursement provided by the General Appropriations Act.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
SUBCHAPTER D. REGISTRATION
Sec. 2306.151. REGISTRATION REQUIRED. (a) A person may not
operate as a warrantor or represent to the public that the person
is a warrantor unless the person is registered with the
department.
(b) A person who sells or solicits a vehicle protection product
but who is not a warrantor is not required to register with the
department as a warrantor.
(c) A seller is not a warrantor unless, in addition to acting as
a seller, the person is named under the terms of a vehicle
protection product warranty as the contractual obligor to the
consumer.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.152. APPLICATION. Each applicant for registration
must file an application on a form prescribed by the department
that includes evidence satisfactory to the department of
compliance with the financial security requirements adopted under
Section 2306.202.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.153. REGISTRATION FEE. Each registered warrantor must
pay an annual registration fee as set by the commission to cover
the costs of administering this chapter.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(h), eff. September 1, 2005.
Sec. 2306.154. RENEWAL OF REGISTRATION. The commission shall
adopt rules providing for the renewal of a warrantor's
registration.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(i), eff. September 1, 2005.
SUBCHAPTER E. PRACTICE BY WARRANTOR
Sec. 2306.201. GENERAL WARRANTOR OPERATION REQUIREMENTS. (a) A
warrantor may appoint a designee to be responsible for any or all
of the administration of vehicle protection products and for
compliance with this chapter.
(b) A vehicle protection product may not be issued, sold, or
offered for sale in this state unless at the time of sale the
warrantor provides to the consumer:
(1) a copy of the vehicle protection product warranty; or
(2) a receipt for, or other written evidence of, the purchase of
the vehicle protection product.
(c) A warrantor who complies with Subsection (b)(2) shall,
within a reasonable time after the date of purchase, provide to
the consumer a copy of the vehicle protection product warranty.
(d) A warrantor shall indemnify a seller who pays or is
obligated to pay a consumer any money the warrantor is obligated
to pay under the terms of the vehicle protection product
warranty, including damages, attorney's fees, and costs.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.202. FINANCIAL SECURITY REQUIREMENTS. (a) To ensure
the adequate performance of a warrantor's obligations to a
consumer, each warrantor must comply with financial security
requirements by:
(1) insuring its vehicle protection products under a
reimbursement insurance policy issued by an insurer authorized to
transact insurance in this state or by a surplus lines insurer
eligible to place coverage in this state under Chapter 981,
Insurance Code; or
(2) providing any other form of comparable financial security
approved by the executive director.
(b) The department may not require any other financial security
requirements or financial standards for warrantors.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.2025. FINANCIAL SECURITY REQUIREMENTS; VALET PARKING
SERVICES. (a) In this section, "valet parking service" has the
meaning assigned by Section 686.001(3), Transportation Code.
(b) A valet parking service must abide by the financial
responsibility requirements provided by Chapter 686,
Transportation Code.
(c) The department may coordinate with the Texas Department of
Insurance to assure consistency with the standard proof of motor
vehicle liability insurance form prescribed by Section 601.081,
Transportation Code.
Added by Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(j), eff. September 1, 2005.
Sec. 2306.203. REIMBURSEMENT INSURANCE POLICY. (a) In order
for a warrantor to comply with Section 2306.202(a)(1), the
warrantor's insurance policy must state that:
(1) the insurer that issued the policy shall:
(A) reimburse or pay on behalf of the warrantor any covered
amounts the warrantor is legally obligated to pay; or
(B) provide the service that the warrantor is legally obligated
to perform according to the warrantor's obligations under the
insured vehicle protection product issued or sold by the
warrantor; and
(2) if the covered amounts are not paid or the covered service
is not provided by the warrantor to a consumer before the 61st
day after the date the consumer provides proof of loss, payment
shall be made or the service shall be provided directly from the
reimbursement insurer to the consumer.
(b) An insurer who issues a reimbursement insurance policy under
this chapter may not cancel the policy until the insurer delivers
to the warrantor a written notice of cancellation that complies
with the notice requirements prescribed by Subchapters B and C,
Chapter 551, Insurance Code, for cancellation of an insurance
policy under those subchapters. The warrantor shall forward a
copy of the cancellation notice to the department not later than
the 15th business day after the date the notice is delivered to
the warrantor.
(c) The cancellation of a reimbursement insurance policy does
not reduce the insurer's responsibility for vehicle protection
products issued by the warrantor and insured under the policy
before the date of the cancellation.
(d) For purposes of this section, a warrantor is considered to
be the representative of the insurer who issues the reimbursement
insurance policy for purposes of obligating the insurer to
consumers in accordance with the vehicle protection product and
this chapter.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 11.156, eff. September 1, 2005.
Sec. 2306.204. WARRANTOR RECORDS. (a) Each warrantor shall
maintain accurate accounts, books, and other records regarding
transactions regulated under this chapter. The warrantor's
records must include:
(1) a copy of the warranty for each unique form of vehicle
protection product sold;
(2) the name and address of each consumer;
(3) a list of the locations where the warrantor's vehicle
protection products are marketed, sold, or offered for sale; and
(4) files that contain at least the dates and descriptions of
payments to consumers related to the vehicle protection product.
(b) On request of the executive director, a warrantor shall make
the warrantor's records maintained under this section regarding
vehicle protection products sold by the warrantor available to
the department as necessary to enable the department to
reasonably determine compliance with this chapter.
(c) The records required to be maintained under this section may
be maintained in an electronic medium or through another
recordkeeping technology. If a record is maintained in a format
other than paper, the warrantor must be able to reformat the
record into a legible paper copy at the request of the
department.
(d) Except as provided by Subsection (e), each warrantor shall
retain all records required under Subsection (a) until at least
the first anniversary of the expiration date of the obligations
under the vehicle protection product warranty.
(e) A warrantor who discontinues business in this state shall
maintain the warrantor's records until the date the warrantor
provides the department with proof satisfactory to the department
that the warrantor has discharged all obligations to consumers in
this state.
(f) The commission shall adopt rules governing how a warrantor
shall protect nonpublic personal information provided by a
consumer to the warrantor.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(k), eff. September 1, 2005.
Sec. 2306.205. FORM OF VEHICLE PROTECTION PRODUCT WARRANTY AND
REQUIRED DISCLOSURES. (a) Each Vehicle Protection product
warranty marketed, sold, offered for sale, issued, made, proposed
to be made, or administered in this state must be written,
printed, or typed, in clear, understandable, and easy-to-read
language and must disclose the applicable requirements set forth
in this section.
(b) A vehicle protection product warranty insured under a
reimbursement insurance policy must contain a statement
substantially similar to the following:
"Obligations of the warrantor under this vehicle protection
product are insured under a reimbursement insurance policy."
(c) The vehicle protection product warranty must state the name
and address of the insurer and state that if a covered service is
not provided by the warrantor before the 61st day after the date
the consumer provides proof of loss, the consumer may apply for
reimbursement directly to the vehicle protection product's
reimbursement insurer.
(d) A vehicle protection product warranty that is not insured
under a reimbursement insurance policy must contain a statement
substantially similar to the following:
"Obligations of the warrantor under this vehicle protection
product are backed by the full faith and credit of the
warrantor."
(e) Each vehicle protection product warranty must state the
name, address, and telephone number of the warrantor. All
warrantors shall report to the department before the 31st day
after the date of any change in the information required to be
provided in this subsection.
(f) Each vehicle protection product warranty must identify any
administrator, if different from the warrantor, the vehicle
protection product seller, and the consumer, if the name of the
consumer has been provided by the consumer. The identities of
those persons are not required to be preprinted on the warranty
and may be added to the warranty at the time of sale.
(g) Each vehicle protection product warranty must state the
product's purchase price, or the warrantor's suggested purchase
price, and the terms under which the product is sold. The
purchase price is not required to be preprinted on the vehicle
protection product warranty and may be negotiated with the
consumer at the time of sale.
(h) Each vehicle protection product warranty must:
(1) specify the products and services to be provided and any
limitations, exceptions, or exclusions;
(2) specify any restrictions governing the transferability of
the vehicle protection product;
(3) state the duties of the consumer, including any duty to
protect against any further damage and any requirement to follow
the warranty's instructions;
(4) state the name, mailing address, and telephone number of the
department; and
(5) include a statement that unresolved complaints concerning a
registered warrantor or questions concerning the regulation of a
warrantor may be addressed to the department.
(i) The requirements of Subsections (h)(4) and (5) may be
stamped on the vehicle protection product warranty.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.206. CANCELLATION OF WARRANTY. (a) Each vehicle
protection product warranty must state the terms, restrictions,
or conditions, if any, governing cancellation of the warranty by
the warrantor before the expiration date of the warranty.
Cancellation may only occur under this section for:
(1) nonpayment by the consumer for the vehicle protection
product;
(2) a material misrepresentation by the consumer to the seller
or warrantor;
(3) fraud by the consumer; or
(4) a substantial breach of duties by the consumer relating to
the warranty.
(b) A warrantor shall mail written notice of cancellation to the
consumer at the last address of the consumer contained in the
records of the warrantor before the fifth day preceding the
effective date of the cancellation. The notice must state the
effective date of the cancellation and the reason for the
cancellation.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.207. LIMITATIONS ON WARRANTOR'S NAME. (a) A
warrantor may not use a name that:
(1) includes "casualty," "surety," "insurance," or "mutual" or
any other word descriptive of the casualty, insurance, or surety
business; or
(2) is deceptively similar to the name or description of any
insurer or surety corporation or to the name of any other
warrantor.
(b) A warrantor may use the word "guaranty" or a similar word in
the warrantor's name.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.208. PROHIBITED ACTS. (a) A warrantor or a
warrantor's representative may not, in the warrantor's vehicle
protection product warranty or in an advertisement or literature
for the warranty:
(1) make, permit, or cause to be made any false or misleading
statement; or
(2) deliberately omit a material statement that would be
considered misleading if omitted.
(b) A warrantor may not require as a condition of sale or
financing that a retail purchaser of a motor vehicle purchase a
vehicle protection product that is not installed on the motor
vehicle at the time of sale.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
SUBCHAPTER F. ENFORCEMENT AND PENALTY PROVISIONS
Sec. 2306.252. INJUNCTION. The executive director may bring an
action against a warrantor for injunctive relief under Section
51.352 for a threatened or existing violation of this chapter or
of an order or rule adopted under this chapter.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(l), eff. September 1, 2005.
Sec. 2306.253. CIVIL PENALTY. (a) In addition to injunctive
relief under Section 2306.252, the executive director may bring
an action against a warrantor for a civil penalty as provided by
Section 51.352.
(b) A civil penalty assessed under this section may not exceed:
(1) $1,000 for each violation; or
(2) $50,000 in the aggregate for all violations of a similar
nature.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Sec. 2306.254. VIOLATIONS OF A SIMILAR NATURE. For purposes of
Section 2306.253, violations are of a similar nature if the
violations consist of the same or a similar course of conduct,
action, or practice, regardless of the number of times the
conduct, act, or practice determined to be a violation of this
chapter occurred.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.629(a), eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 15.010(m), eff. September 1, 2005.