CHAPTER 2306. VEHICLE PROTECTION PRODUCT WARRANTORS

State Codes and Statutes

Statutes > Texas > Occupations-code > Title-14-regulation-of-motor-vehicles-and-transportation > 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

(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.

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.

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.

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.

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.

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.

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.

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."

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.

State Codes and Statutes

State Codes and Statutes

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State Codes and Statutes

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