Sec. 1304.003. SERVICE CONTRACT. (a) In this chapter:

(1) "Identity recovery" means a process, through a limited power of attorney and the assistance of an identity recovery expert, that returns the identity of an identity theft victim to pre-identity theft event status.

(2) "Service contract" means an agreement that is entered into for a separately stated consideration and for a specified term under which a provider agrees to:

(A) repair, replace, or maintain a product, or provide indemnification for the repair, replacement, or maintenance of a product, for operational or structural failure or damage caused by a defect in materials or workmanship or by normal wear;

(B) provide identity recovery, if the service contract is financed under Chapter 348 or 353, Finance Code; or

(C) provide compensation to the buyer of a vehicle on the total constructive loss under a depreciation benefit optional member program.

(3) "Depreciation benefit optional member program" means a service contract financed under Chapter 348 or 353, Finance Code, that pays to the buyer, as a credit toward the purchase of a replacement vehicle at a participating dealer, an amount less than or equal to the difference between the purchase price and actual cash value for a total constructive loss.

(b) A service contract described by Subsection (a)(2)(A) may also provide for:

(1) incidental payment or indemnity under limited circumstances, including towing, rental, and emergency road service;

(2) the repair or replacement of a product for damage resulting from a power surge or for accidental damage incurred in handling the product;

(3) identity recovery, if the service contract is financed under Chapter 348 or 353, Finance Code; or

(4) the replacement of a motor vehicle key or key fob in the event the key or key fob is inoperable, lost, or stolen.

(c) For purposes of Subsection (a), normal wear for a motor vehicle may include minor and reasonable wear and tear that a vehicle sustains in everyday ordinary operation including:

(1) small dents, dings, and creases repairable by the process of paintless dent removal without affecting the existing paint finish and without replacing vehicle body panels or sanding, bonding, or painting;

(2) small windshield chips and cracks repairable without replacement of the entire windshield;

(3) worn tire tread;

(4) worn interior fabric or carpet items; and

(5) tire and wheel damage resulting from ordinary road hazards such as potholes, rocks, wood debris, metal parts, glass, plastic, or composite scraps.

(d) Subsection (c)(5) does not apply to tire damage covered under an agreement sold by a tire manufacturer.

(e) A service contract described by Subsection (a)(2)(C):

(1) may not be required as a condition of approval of a loan for the purchase of a vehicle;

(2) may not be offered by a dealer who requires a loan for the purchase of a vehicle to be financed exclusively with the dealer;

(3) may be canceled by the buyer not later than the 30th day after a buyer enters into the contract, without a penalty;

(4) may be canceled by the buyer later than the 30th day after a buyer enters into the contract, with a pro rata refund to be provided to the buyer; and

(5) may only charge a fee that is reasonable in relation to the benefit provided by the service contract.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1, 2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 1059 (H.B. 2261), Sec. 1, eff. September 1, 2007.

Acts 2009, 81st Leg., R.S., Ch. 36 (S.B. 778), Sec. 2, eff. September 1, 2009.

Acts 2011, 82nd Leg., R.S., Ch. 117 (H.B. 2559), Sec. 19, eff. September 1, 2011.

Acts 2013, 83rd Leg., R.S., Ch. 1207 (S.B. 1388), Sec. 3, eff. September 1, 2013.

Acts 2017, 85th Leg., R.S., Ch. 401 (S.B. 1199), Sec. 1, eff. September 1, 2017.

Acts 2017, 85th Leg., R.S., Ch. 473 (H.B. 2275), Sec. 1, eff. September 1, 2017.