(a) In addition to the provisions required by Section 397.006, a debt cancellation agreement must fully disclose all provisions permitting the exclusion of loss or damage including, if applicable:
(1) an act occurring after the original maturity date or date of the holder’s acceleration of the lease;
(2) any dishonest, fraudulent, illegal, or intentional act of any authorized driver that directly results in the total loss of the covered vehicle;
(3) any act of gross negligence by an authorized driver that directly results in the total loss of the covered vehicle;
(4) conversion, embezzlement, or concealment by any person in lawful possession of the covered vehicle;
(5) lawful confiscation by an authorized public official;
(6) the operation, use, or maintenance of the covered vehicle in any race or speed contest;
(7) war, whether or not declared, invasion, insurrection, rebellion, revolution, or an act of terrorism;
(8) normal wear and tear, freezing, or mechanical or electrical breakdown or failure;
(9) use of the covered vehicle for primarily commercial purposes;
(10) damage that occurs after the covered vehicle has been repossessed;
(11) damage to the covered vehicle before the purchase of the debt cancellation agreement;
(12) unpaid insurance premiums and salvage, towing, and storage charges relating to the covered vehicle;
(13) damage related to any personal property attached to or within the covered vehicle;
(14) damages associated with falsification of documents by any person not associated with the lessor or other person canceling the lessee’s obligation;
(15) any unpaid debt resulting from exclusions in the lessee’s primary physical damage coverage not included in the debt cancellation agreement;
(16) abandonment of the covered vehicle by the lessee only if the lessee voluntarily discards, leaves behind, or otherwise relinquishes possession of the covered vehicle to the extent that the relinquishment shows intent to forsake and desert the covered vehicle so that the covered vehicle may be appropriated by any other person;
(17) any amounts deducted from the primary insurance carrier’s settlement due to prior damages; and
(18) any loss occurring outside the United States or outside the United States and Canada.
(b) An exclusion of loss or damage not listed in Subsection (a) may be included in a debt cancellation agreement only if the exclusion is disclosed in plain, easy to read language.

Terms Used In Texas Finance Code 397.005

  • Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
  • Embezzlement: In most states, embezzlement is defined as theft/larceny of assets (money or property) by a person in a position of trust or responsibility over those assets. Embezzlement typically occurs in the employment and corporate settings. Source: OCC
  • Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • Person: includes corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity. See Texas Government Code 311.005
  • Personal property: All property that is not real property.
  • Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
  • United States: includes a department, bureau, or other agency of the United States of America. See Texas Government Code 311.005