H.B. No. 1598
1-1 AN ACT
1-2 relating to types of credit insurance and collateral protection
1-3 insurance in loan contracts.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section (1), Article 3.18, Title 79, Revised
1-6 Statutes (Article 5069-3.18, Vernon's Texas Civil Statutes), is
1-7 amended to read as follows:
1-8 (1) On any loan having a cash advance of One Hundred Dollars
1-9 or more, made under the authority of this Chapter, a lender may
1-10 request, offer, but not require, <or require> a borrower to provide
1-11 credit life insurance and credit health and accident insurance as
1-12 additional protection for such a loan. In addition, the lender
1-13 may offer, but not require, involuntary unemployment insurance to
1-14 the borrower at the time of making the loan and may include the
1-15 premium for such insurance in the loan contract. Policies of
1-16 credit life insurance or credit health and accident insurance, or
1-17 involuntary unemployment insurance, may not be in force with
1-18 respect to any one obligor on any one loan contract at any one time
1-19 that in combination exceed:
1-20 (i) as to credit life insurance, the total amount
1-21 repayable under the contract of indebtedness and, where an
1-22 indebtedness is repayable in substantial equal installments, the
1-23 amount of insurance shall at no time exceed the scheduled or actual
1-24 amount of unpaid indebtedness, whichever is greater, or
2-1 (ii) as to credit accident and health insurance, the
2-2 total amount repayable under the contract of indebtedness and the
2-3 amount of each periodic indemnity payment shall not exceed the
2-4 scheduled periodic installment payment on the indebtedness, or
2-5 (iii) as to involuntary unemployment insurance, the
2-6 total amount repayable under the contract of indebtedness, and the
2-7 amount of each periodic indemnity payment shall not exceed the
2-8 scheduled periodic installment payment on the indebtedness.
2-9 SECTION 2. Section (1), Article 4.02, Title 79, Revised
2-10 Statutes (Article 5069-4.02, Vernon's Texas Civil Statutes), is
2-11 amended to read as follows:
2-12 (1) On any loan made under the authority of this Chapter, a
2-13 lender may request, offer, but not require, <or require> a borrower
2-14 to provide credit life insurance and credit health and accident
2-15 insurance as additional protection for such a loan. In addition,
2-16 the lender may offer, but not require, involuntary unemployment
2-17 insurance to the borrower at the time of making the loan and may
2-18 include the premium for such insurance in the loan contract.
2-19 Policies of credit life insurance or credit health and accident
2-20 insurance, or involuntary unemployment insurance, may not be in
2-21 force with respect to any one obligor on any one loan contract at
2-22 any one time that in combination exceed:
2-23 (i) as to credit life insurance, the total amount
2-24 repayable under the contract of indebtedness and, where an
2-25 indebtedness is repayable in substantial equal installments, the
2-26 amount of insurance shall at no time exceed the scheduled or actual
2-27 amount of unpaid indebtedness, whichever is greater, or
3-1 (ii) as to credit accident and health insurance, the
3-2 total amount repayable under the contract of indebtedness and the
3-3 amount of each periodic indemnity payment shall not exceed the
3-4 scheduled periodic installment payment on the indebtedness, or
3-5 (iii) as to involuntary unemployment insurance, the
3-6 total amount repayable under the contract of indebtedness, and the
3-7 amount of each periodic indemnity payment shall not exceed the
3-8 scheduled periodic installment payment on the indebtedness.
3-9 SECTION 3. Chapter 2, Title 79, Revised Statutes (Article
3-10 5069-2.01 et seq., Vernon's Texas Civil Statutes), is amended by
3-11 adding Article 2.09 to read as follows:
3-12 Art. 2.09. COLLATERAL PROTECTION INSURANCE. (1) In this
3-13 article:
3-14 (a) "Creditor" means a lender or other person
3-15 extending or collecting a loan or other credit transaction for
3-16 personal, family, or household use.
3-17 (b) "Collateral protection insurance" means any
3-18 insurance required and arranged by or for a creditor in connection
3-19 with and subsequent to the inception of a loan or other credit
3-20 transaction for personal, family, or household use.
3-21 (2) Any creditor who causes the initiation of collateral
3-22 protection insurance must comply with this article as well as other
3-23 applicable law.
3-24 (3) This article shall apply only to insurance for which the
3-25 premium is required to be paid by the debtor, either directly or
3-26 indirectly.
3-27 (4) When collateral protection insurance is procured, the
4-1 creditor arranging such transaction shall give written notice to
4-2 the debtor at the debtor's last known address that:
4-3 (a) describes the type of insurance procured, the
4-4 extent of coverage, and whom it is designed to protect;
4-5 (b) defines the policy period by beginning and ending
4-6 dates;
4-7 (c) discloses the total cost to the borrower of the
4-8 policy;
4-9 (d) discloses the annual rate of interest to be
4-10 charged on the insurance premium if different from the rate charged
4-11 in the related loan or credit transaction;
4-12 (e) discloses the manner in which the premium and
4-13 interest or other financing charge is to be paid; and
4-14 (f) at the option of the creditor, notifies the debtor
4-15 of other repayment options to which the debtor may agree or has
4-16 previously agreed to in the original loan or credit transaction
4-17 agreement.
4-18 (5) The creditor may collect the premium and any authorized
4-19 interest or other financing charge during the policy period in
4-20 addition to and simultaneously with any scheduled payment or
4-21 payments of principal or charges or in such other manner as may be
4-22 provided for in the loan or credit transaction agreement. If
4-23 there are no payments scheduled on the debt during the policy
4-24 period, then collection shall be in substantially equal successive
4-25 monthly installments.
4-26 (6) A creditor is authorized to charge the debtor the actual
4-27 postage and fees paid to the United States Postal Service for
5-1 mailing the required notice. If the notice is returned to the
5-2 creditor undelivered, the creditor shall use its normal procedures
5-3 for locating debtors and mail a second notice when the debtor is
5-4 located.
5-5 SECTION 4. Article 2.09, Title 79, Revised Statutes (Article
5-6 5069-2.09, Vernon's Texas Civil Statutes), as added by this Act, is
5-7 cumulative of and in addition to any other statutory provisions,
5-8 and in case of any conflict or inconsistency with any provision
5-9 less favorable to a debtor, Article 2.09, Title 79, Revised
5-10 Statutes (Article 5069-2.09, Vernon's Texas Civil Statutes), as
5-11 added by this Act shall prevail and control. Notwithstanding
5-12 Article 1.10, Title 79, Revised Statutes (Article 5069-1.10,
5-13 Vernon's Texas Civil Statutes), or other law, a credit union is
5-14 subject to Article 2.09, Title 79, Revised Statutes (Article
5-15 5069-2.09, Vernon's Texas Civil Statutes), as added by this Act.
5-16 SECTION 5. This Act takes effect September 1, 1993.
5-17 SECTION 6. The importance of this legislation and the
5-18 crowded condition of the calendars in both houses create an
5-19 emergency and an imperative public necessity that the
5-20 constitutional rule requiring bills to be read on three several
5-21 days in each house be suspended, and this rule is hereby suspended.