Texas dealers which are involved with any type of installment sales transactions, whether it is buy here pay here or third-party financing, must be licensed with the Office of Consumer Credit Commissioner
If you intend to provide in-house or third-party motor vehicle financing sales, contact the Office of Consumer Credit Commissioner at 512-936-7600, toll free at 800-538-1579 or at www.occc.texas.gov to obtain the required sales finance license.
If the dealer is financing the vehicle the dealer is required to file the paperwork with the appropriate county tax assessor-collector’s office within 45 days of the sale. The dealer has 60 days if the customer is a military purchaser.
Dealers which offer installment sales transactions of motor vehicle sales in Texas are licensed and regulated by the Office of Consumer Credit Commissioner. Dealers who provide customer installment sales transactions or who arrange for customer installment sales transactions through a finance company are required to be licensed by the Office of Consumer Credit Commissioner. Licensing through the Office of Consumer Credit Commissioner was covered earlier in the course.
There are times which you may have a relationship with a financing company such as a bank or an online dealership lending service. When your customer wants to purchase a vehicle, you can log on to a financing company account on your computer, input your customer information, then click submit. Then the financing company assesses the applicant's credit quality, the deal structure, and if meets criteria, provides a preliminary or conditional approval so long as the contract and application verify out. The seller, in this case you the dealer, is at risk until assignment of the contract is accepted.
The transaction is always between the seller and the buyer and it is the seller's contract until the intended financing company accepts the contract on what is known as assignment. The financing company will then process the application and hopefully approve the installment sales transaction immediately or very shortly thereafter.
If the finance company approves your customer’s installment sales transaction, the customer will make payments to the financing company and the financing company transfer the purchase price into your account, normally within one to three business days.
A retail installment transaction is a transaction in which a retail buyer purchases a motor vehicle form a retail seller and agrees with the retail seller to pay part or all of the cash price in one or more deferred installments (payments).
A retail contract, or “bill of sale” is a separate document which must be completed on all vehicle transactions whether or not financing is involved. A retail installment contract is an additional document and is required on all transactions which involve financing. Failure to provide a retail installment contract on any motor vehicle transaction which involves financing is a violation of the Texas Finance Code and the Texas Business and Commerce Code.
Texas law requires all retail installment contracts to be in writing. It must be dated and signed by the buyer and seller. If you are using a finance company, be sure the paper work which is being printed during the installment sale application is compliant with all Texas laws in addition to all federal laws. If you are operating a buy here pay here dealership be sure the documents completed by your attorney for you to use on every transaction are compliant with all Texas and federal finance laws. Texas Finance Code Sec. 348.101 Texas laws require that the customer is given copies of all finance documents and will normally be asked to sign a document stating they have received copies of the documents. Dealers may give a copy at the time of the sale or by mail to the buyer on the address shown on the retail installment contract.
A statutory right to cancel a contract or return a purchase, such as a motor vehicle, because the customer changed their mind is not the norm in Texas. State law grants a right to cancel — also called a “right of rescission” in only a very few specific instances. Once a contract is signed by a buyer, a copy of the completed contract has been given to the buyer, and the buyer has accepted delivery of the vehicle, it is a legal binding contract between the buyer and dealer and which neither party may unilaterally rescind or cancel. If a dealer fails to provide the buyer a copy of a completed and signed contract, a buyer may rescind the contract. A finance company's refusal and return of a contract does not invalidate the contract; it remains binding between the buyer and seller.
Conditioning a contract on subsequent acceptance by a finance company is expressly prohibited by the Texas Finance Code Sec. 348.1015. In some scenarios the buyers right to rescind could allow your customer to return the vehicle they have purchased when financing is involved and you have not delivered a copy of the installment contract.
Many Texas dealers decide to finance their motor vehicles directly to the customer. A “Buy Here Pay Here” dealership allows a person to buy the vehicle directly from the dealer therefore bypassing a bank or finance company. It can also lead to increased dealer profits but does add another level of compliance to your dealership. If you do decide to finance the vehicles you sell it is imperative you seek further legal advice after this course as the state of Texas has strict vehicle repossession guidelines. When a dealer is offering buy here pay here financing there may be times when the customer cannot complete the terms of a signed retail installment contract. In this case, the dealer may have to repossess the vehicle. Many dealers will hire a professional recovery company to repossess vehicles however state law does allow a dealer to conduct their own repossession but it is imperative you follow every rule, law, and guideline.