Legislative Accomplishments

Since 1985, TARA has represented the Texas rent-to-own industry before the Texas Legislature and the various Texas state agencies that regulate the RTO industry. During that time, the association has participated in the passage of legislation that has benefited all rent-to-own dealers and consumers across the state. Here is a summary of some of TARA's major legislative accomplishments that have benefited the industry over the years.

2015 & 2013
Franchise Tax Relief/Clarification

During its 2013 session, the 83rd Texas Legislature passed a franchise tax bill - HB 500 - that included, among other things, language clarifying that RTOs will pay the state's franchise tax at the 0.5% "retail" rate, instead of the 1% rate applied to all other businesses. The clarification was TARA's top legislative goal that session and the main focus of the TARA Legislative Conference in Austin during the session. Before passage of the bill, the State Comptroller claimed RTO operations were not retail, requiring RTOs to apply the higher 1% tax rate on annual revenues.

In addition to clarifying that RTO activities fall under the 0.5% retail tax rate in the franchise tax code, HB 500 contained a further reduction in this rate for the years 2013 and 2014. For the full year 2013, taxable entities recognized as "retail" could elect to pay the tax at a rate of 0.4875% on their May 2014 reports. That rate dropped further to 0.475% for the full year 2014 when filing May 2015 reports. Both reductions expired at the end of 2015.

However, during the 2015 session, the 84th Texas Legislature incorporated the 2013 reductions into a further reduction of the tax rate that became effective Jan. 1, 2016. HB 32 permenantly reduced the franchise tax rate on retail businesses from 0.5% to 0.375% (25%). The 0.375% rate applies when filing 2016 franchise tax reports for full year 2015 revenues. HB 32 was TARA's main focus during the session.

Texas Bedding Act Repealed

Beginning Sept. 1, 2015, RTOs were no longer required to obtain a license from the Texas Department of State Health Services to sell bedding, or obtain a permit for "germicidal treatment" of used bedding. Also on that date, DSHS discontinued its inspections of retail bedding operations and its investigation of complaints from the public concerning bedding. In short, the bedding laws of the state of Texas were abolished.

The action was the result of the passage of SB 202 by the 84th Texas Legislature earlier that year. The so-called sunset bill for the Department of State Health Services dismantled the DSHS professional licensing unit and repealed several statues including the bedding act in Chapter 345 of the Texas Health and Safety Code and the bedding rules and regulations in Chapter 205 of the Texas Administrative Code effective Sept. 1, 2015. On that date, those holding a bedding license from DSHS could no longer display the license for public viewing or advertise in any manner that they held a license from the state to sell bedding. Despite the repeal of this law, TARA members were strongly urged to continue with their germicidal treatment programs at each store location.

Elimination of State Approval of Loss Damage Waivers

The 83rd Texas Legislature passed SB 289, which repealed the state's requirement that Rental Agreement Loss Damage Waivers must first be approved by the Texas Department of Licensing and Regulation. The bill repealed those sections of the Texas Business Code established in 2003 (see below) that required approval of LDWs by TDLR, however, the bill did not eliminate the required contents of LDWs set forth in the 2003 act. In short, the bill only eliminated an RTOs need to have its LDW approved by TDLR. LDWs still have to comply with the requirements of the statute.

Increase In Late Fees

In 2005, TARA successfully passed legislation that resulted in the first increase in late fees for the Texas RTO industry in 20 years. SB 709 increased the maximum late fee to not more than the lesser of 10% (from 5%) of the delinquent payment or $10 (from $5) and not less than $5 (from $2). In effect, the legislation doubled the late fee. This statutory change raised over $1.2 million in additional fee revenue to Texas RTO dealers in the first year alone.

Bed Bug Bill

In 2005, TARA played a key role in the passage of HB 1752, commonly referred to as the "Bed Bug Bill". This legislation exempted RTO dealers from certain onerous "premises" regulations regarding the germicidal treatment of used bedding. The specific exemption included in the bill is noted below in bold:

Texas Health and Safety Code
(a) The holder of a germicidal treatment permit must maintain the permit holder's place of business in a sanitary condition free from refuse, dirt contamination, insects, and vermin.
(b) The executive commissioner of the Health and Human Services Commission, by rule, may establish additional requirements regulating the sanitary condition of a permit holder's place of business. The holder of a germicidal treatment permit who germicidally treats not more than 10 items at the permit holder's place of business each week is exempt from any additional requirements regulating the sanitary condition of a permit holder's place of business adopted under this subsection.

Loss Damage Waivers/Definition of Delinquent Payment

SB 279, which was the 2003 sunset bill for the Texas Department of Licensing and Regulation, established provisions for Loss Damage Waivers in rental-purchase agreements and defined when late fees can be assessed to a customer.

TARA worked with the Consumers Union to pass the bill, which defined and legalized Loss Damage Waivers on rental agreements. Under the legislation, consumers who accept LDWs are not required to pay for merchandise destroyed by fire, windstorm or other act of God, or if the item is stolen. The statute requires language explaining and describing the fee and what it covers. In addition, the bill established the following criteria for loss damage waivers:

  • An LDW is not insurance.
  • The consumer must agree to the waiver, and the merchant may not require purchase of it.
  • The total cost of the waiver must be stated in the waiver.
  • The merchant may charge a fee for a waiver not to exceed 10% of the regular payment.
  • Rental contracts must include notice that an LDW is available.
  • All LDWs must be pre-approved by the Texas Department of Licensing and Regulation.

This legislation was necessary because several law suits had been filed claiming a Texas rental company was selling insurance without a license.

In addition, the bill further defined when late fees can be assessed. The bill allowed rental agreements to contain a provision requiring the payment of a late charge or reinstatement fee unless a regular payment is delinquent for more than seven days if the payment is due monthly, or is delinquent for more than three days if the payment is due more frequently than monthly.

Texas Rental-Purchase Agreements Act

In the 1985 session, TARA successfully passed the Texas Rental-Purchase Agreements Act. At the time, this legislation was only the second state law passed in the country to regulate and legitimize the rent to own business. The Texas bill is widely regarded as the most favorable RTO legislation in the country because it provides a fair guideline for the industry while protecting rental customers with full disclosure of total costs, rental rates, and terms.