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Relating to the financial security requirement for providers
obligated under certain service contracts.
No fiscal implication to the State is anticipated.
HB 4120 would reduce the required amount for a security deposit paid by a car dealer who sells service contracts to customers for repair and maintenance. The current amount is no less than $250,000.
The bill establishes a sliding scale for the required security deposit that is pegged to the gross revenue of the dealer. The amount of the deposit would start at $25,000 for qualifying dealers and incrementally increase based on gross revenue of the dealership.
Texas Action supports HB 4120 for promoting the principles of limited government and free markets. This bill seeks to address a change made in 2011 which significantly increased the required security deposit for car dealers offering certain service contracts, and has had a negative effect on the ability of car dealers to compete and participate in offering such contracts. This bill would help reverse the negative effects on service contract providers and service contract rates by providing for a more reasonable security deposit amount.