H.B. No. 2499
1-1 AN ACT
1-2 relating to prepaid funeral services or merchandise.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 512, Acts of the 54th Legislature,
1-5 Regular Session, 1955 (Article 548b, Vernon's Texas Civil
1-6 Statutes), is amended to read as follows:
1-7 Sec. 1. PURPOSE; DEFINITIONS; PERMITS. (a) This Act
1-8 provides limits on the manner in which a person is permitted to
1-9 accept funds in prepayment of funeral services to be performed in
1-10 the future. The purpose of this Act is to:
1-11 (1) provide a regulatory framework so that members of
1-12 the public have an opportunity to arrange and pay for funerals for
1-13 themselves and their families in advance of need; and
1-14 (2) provide all safeguards to protect the prepaid
1-15 funds and to assure that the prepaid funds will be available to pay
1-16 for the prearranged funeral services.
1-17 (b) In this Act:
1-18 (1) "Affiliate" means a person or entity directly or
1-19 indirectly controlling, controlled by, or under common control with
1-20 a permit holder or the funeral provider.
1-21 (2) "Commissioner" means the Banking Commissioner of
1-22 Texas.
1-23 (3) "Department" means the Banking Department of
2-1 Texas.
2-2 (4) "Earnings" means the amount in an account in
2-3 excess of the amount paid by the purchaser of a prepaid funeral
2-4 benefits contract and deposited or placed in the account as
2-5 provided by Section 5(a)(2) of this Act. The term includes accrued
2-6 interest, accrued income, and enhanced or increased value.
2-7 (5) "Funeral provider" means the funeral home
2-8 designated in a prepaid funeral benefits contract that has agreed
2-9 and obligated itself to provide the specified prepaid funeral
2-10 benefits.
2-11 (6) "Insurance policy" means a life insurance policy
2-12 or annuity contract.
2-13 (7) "Permit holder" means a person having a valid
2-14 permit to sell prepaid funeral benefits.
2-15 (8) "Person" means any individual, firm, partnership,
2-16 corporation, or association.
2-17 (9) "Prepaid funeral benefits" means prearranged or
2-18 prepaid funeral or cemetery services or funeral merchandise,
2-19 including caskets, grave vaults, and all other articles of
2-20 merchandise incidental to a funeral service. The term does not
2-21 include a grave lot, grave space, grave marker, monument,
2-22 tombstone, crypt, niche, or mausoleum unless it is sold in
2-23 contemplation of trade or barter for services and merchandise to
2-24 which this Act applies.
2-25 (10) "Seller" means a person selling, accepting funds
3-1 or premiums for, or soliciting contracts for prepaid funeral
3-2 benefits or contracts or policies of insurance to fund prepaid
3-3 funeral benefits in this state.
3-4 (11) "Trustee" means the person named as trustee in
3-5 the instruments creating a prepaid funeral trust.
3-6 (c) Unless a person holds a permit issued under this Act,
3-7 the person may not:
3-8 (1) sell prepaid funeral benefits, or accept funds for
3-9 prepaid funeral benefits, in this state under any contract; or
3-10 (2) solicit the designations by an individual of the
3-11 prepaid funeral benefits to be provided out of any fund,
3-12 investment, security, or contract, including contracts or policies
3-13 of insurance authorized, and sold under a license issued, by the
3-14 State Board of Insurance, to be created or purchased by that
3-15 individual at the suggestion or solicitation of the seller.
3-16 (d) A seller who violates Subsection (c) of this section is
3-17 not entitled to enforce a prepaid funeral benefits contract but the
3-18 purchaser or the purchaser's heirs or legal representative is
3-19 entitled to recover:
3-20 (1) all amounts paid to the seller under that
3-21 contract; and
3-22 (2) all amounts paid to any fund or for any
3-23 investment, security, or contract, including contracts or policies
3-24 of insurance authorized by the State Board of Insurance.
3-25 (e) Delivery of funeral merchandise before death is not
4-1 performance or fulfillment, in whole or in part, of a prepaid
4-2 funeral benefits contract entered into after the effective date of
4-3 this Act.
4-4 (f) A seller may not increase the sales price of an item not
4-5 covered by this Act for the purpose of allocating a lesser sales
4-6 price to an item that is covered by this Act.
4-7 (g) All funds received in exchange for prepaid funeral
4-8 benefits shall be administered as prescribed by:
4-9 (1) Section 1A of this Act governing insurance-funded
4-10 prepaid funeral benefits; or
4-11 (2) Section 5 of this Act governing trust-funded
4-12 prepaid funeral benefits.
4-13 (h) Without the prior written consent of the Commissioner, a
4-14 holder of prepaid funeral funds designated under Section 5(a)(2) of
4-15 this Act may not use those funds to purchase, lease, or otherwise
4-16 invest in an asset owned by the seller or funeral provider or an
4-17 affiliate of the seller or funeral provider.
4-18 (i) The Commissioner by order may disapprove a transaction
4-19 described by Subsection (h) of this section on the ground that it
4-20 would materially adversely affect the interests of the purchasers
4-21 of prepaid funeral benefits contracts. The Commissioner shall
4-22 approve or disapprove the transaction within 30 days after the date
4-23 of the receipt of written notification by the permit holder.
4-24 Failure to act within that period constitutes approval of the
4-25 transaction. Unless the permit holder requests a hearing within 10
5-1 days after the date of the order of disapproval, the order shall
5-2 become effective as proposed. If the permit holder requests a
5-3 hearing within the 10-day period, it shall be conducted in
5-4 accordance with the procedures for a contested case hearing under
5-5 the Administrative Procedure and Texas Register Act (Article
5-6 6252-13a, Vernon's Texas Civil Statutes) and its subsequent
5-7 amendments. <Any individual, firm, partnership, corporation, or
5-8 association (hereinafter called "organization" or "seller")
5-9 desiring to sell prearranged or prepaid funeral services or funeral
5-10 merchandise (including caskets, grave vaults, and all other
5-11 articles of merchandise incidental to a funeral service, but
5-12 excluding grave lots, grave spaces, grave markers, monuments,
5-13 tombstones, crypts, niches, and mausoleums), or accepting funds for
5-14 such services or merchandise, in this state, under any contract,
5-15 expressed or implied, providing for prepaid burial or funeral
5-16 benefits or merchandise (hereinafter called "prepaid funeral
5-17 benefits"), or who shall solicit the designations by an individual
5-18 of the items of funeral merchandise or services which he desires to
5-19 be provided out of any fund, investment, security, or contract to
5-20 be created or purchased by such individual at the suggestion or
5-21 solicitation of the organization shall obtain a permit from the
5-22 State Banking Department (hereinafter called Department) of this
5-23 state authorizing the transaction of this type of business, before
5-24 conducting such business. Seller shall not be entitled to enforce
5-25 a contract made in violation of this Act, but the purchaser or his
6-1 heirs, or legal representative, shall be entitled to recover all
6-2 amounts paid to the seller under any contract made in violation
6-3 thereof, and all amounts paid whether or not paid seller, to any
6-4 fund or for any investment, security, or contract where the seller
6-5 has violated the provisions of this Act. Delivery of funeral
6-6 merchandise prior to death shall not constitute performance or
6-7 fulfillment, either wholly or in part, of any prepaid funeral
6-8 benefits contract entered into after the effective date of this
6-9 amendatory Act.>
6-10 <Provided, however, that grave lots, grave spaces, grave
6-11 markers, monuments, tombstones, crypts, niches, and mausoleums
6-12 shall not be excluded from the provisions of this Section when
6-13 these items and articles are sold in contemplation of trade or
6-14 barter for services and articles designated as included by the
6-15 provisions of this Section.>
6-16 Sec. 1A <1a>. INSURANCE FUNDED PREPAID FUNERAL BENEFITS.
6-17 (a) No seller <organization> covered by this Act shall solicit by
6-18 any means whatsoever the designation by an individual of prepaid
6-19 funeral benefits <funeral services or merchandise which he desires>
6-20 to be provided to be paid out of any fund, investment, security, or
6-21 contract, including insurance policies, to be created or purchased
6-22 by or for such an individual at the suggestion or solicitation of
6-23 the seller <organization>, unless such a fund is to be created by a
6-24 life insurance policy or an annuity contract approved by the Board
6-25 of Insurance and issued by <with> an insurance company licensed by
7-1 the Board of Insurance or except as provided for trust-funded
7-2 prepaid funeral benefits by Section 5 of this Act <in Texas>, or
7-3 unless such fund, investment, security, or contract shall have been
7-4 approved by the Department as safeguarding the right and interests
7-5 of the individual, his heirs and assigns, to substantially the same
7-6 or greater degree as is provided with respect to funds regulated by
7-7 Section 5 hereof. An insurance-funded prepaid funeral benefits
7-8 contract must be executed in conjunction with the application for
7-9 the issuance of the insurance policy.
7-10 (b) The <Provided, however, that the> Department may require
7-11 evidence of payment of premiums on any life insurance policy, or an
7-12 annuity contract used to create a fund to guarantee prepaid funeral
7-13 benefits. Any seller failing to provide such evidence to the
7-14 Department after being so requested by written notice shall be
7-15 subject to cancellation of its permit under the provisions of
7-16 Section 4 of this Act. A seller shall remit all premiums collected
7-17 for insurance policies or annuity contracts funding prepaid funeral
7-18 benefits to the insurance company within 30 days after the date of
7-19 collection.
7-20 (c) On the death of a beneficiary named in an
7-21 insurance-funded prepaid funeral benefits contract, the seller or
7-22 funeral provider, after completion of the funeral service and
7-23 presentation to the insurance company of proper affidavits signed
7-24 and sworn to by an officer or designated agent of the seller on
7-25 forms prescribed by the Department, together with a certified copy
8-1 of the death certificate, may withdraw the benefits payable under
8-2 that policy. The seller shall maintain copies of those affidavits
8-3 and death certificate for examination by the Department.
8-4 (d) A conversion from trust-funded prepaid funeral benefits
8-5 to insurance-funded prepaid funeral benefits must be approved by
8-6 the Department as safeguarding the rights and interests of the
8-7 individual who purchases the prepaid funeral benefits contract.
8-8 Each contract holder shall be notified in writing of the terms of
8-9 the proposed conversion and of the holder's right to decline the
8-10 conversion. Applications for approval of conversions from
8-11 trust-funded prepaid funeral benefits to insurance-funded prepaid
8-12 funeral benefits must be filed with the Department on forms
8-13 prescribed by the Department and accompanied by conversion
8-14 application fees established by the Department under Section 2 of
8-15 this Act.
8-16 (e) The cancellation of an insurance-funded prepaid funeral
8-17 benefits contract shall be handled as provided by Section 5(b) of
8-18 this Act.
8-19 Sec. 2. ADMINISTRATION OF ACT; CONTRACTS. This law shall be
8-20 administered by the <State Banking> Department. The Department is
8-21 authorized to prescribe reasonable rules and regulations concerning
8-22 <application> fees to defray the cost of administering this Act,
8-23 but may not maintain unnecessary fund balances, and fee amounts
8-24 shall be set in accordance with this requirement, the keeping and
8-25 inspection of records relating to the sale of prepaid funeral
9-1 benefits, the filing of contracts and reports, changes in
9-2 management or control of an organization, and all other matters
9-3 incidental to the enforcement and orderly administration of this
9-4 law; and the Department shall <may> approve forms for sales
9-5 contracts for prepaid funeral benefits before their use. All such
9-6 contracts must be in writing and no contract form shall be used
9-7 without prior approval of the Department. All such contracts shall
9-8 state the name of the funeral home or other person <organization>
9-9 primarily responsible for providing the prepaid funeral benefits
9-10 <funeral services or merchandise> specified in such contracts. In
9-11 the event the seller is not the funeral home designated to provide
9-12 the specified prepaid funeral benefits <funeral services or
9-13 merchandise>, such contract shall not be valid unless the funeral
9-14 home so designated is a party to the contract and therein agrees
9-15 and obligates itself to provide such specified prepaid funeral
9-16 benefits <funeral services or merchandise>. It is further
9-17 provided, that all <prearranged or> prepaid funeral benefits
9-18 contracts shall set forth the particulars of the funeral
9-19 merchandise, including a description and specifications of the
9-20 material used in the caskets or grave vaults to be furnished, and
9-21 such contracts shall set forth the particulars of the prepaid
9-22 funeral benefits <professional services to be performed and the
9-23 funeral home facilities and automotive equipment> to be provided.
9-24 Sec. 3. PERMIT. Each person <organization> desiring to sell
9-25 or to continue to sell prepaid funeral benefits shall file an
10-1 application for a one-year permit with the Department on a form
10-2 prescribed by the Department. The applicant <and> shall pay a
10-3 filing fee in an amount set by the Department under Section 2 of
10-4 this Act and extraordinary expenses required for out of state
10-5 investigation of the applicant, if applicable <of $250>. The
10-6 Commissioner may conduct an investigation of the applicant for the
10-7 initial permit, and if the Commissioner finds that the business
10-8 ability, experience, character, financial condition, and general
10-9 fitness of the applicant warrants the confidence of the public, the
10-10 Commissioner shall approve <grant> the application and issue a
10-11 permit to the applicant. If the Commissioner finds otherwise, the
10-12 Commissioner shall notify the applicant, who is entitled to a
10-13 hearing on the application, on request, within 60 days after the
10-14 date of the request, to be conducted in accordance with the
10-15 procedures for a contested case hearing under the Administrative
10-16 Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas
10-17 Civil Statutes) and its subsequent amendments. The Department by
10-18 rule may adopt a system under which permits expire on various dates
10-19 during the year. The Commissioner may refuse to renew a permit if
10-20 the applicant has committed one or more of the acts described by
10-21 Section 4(a) of this Act and has not corrected the violation within
10-22 30 days after the date of written notice from the Commissioner.
10-23 The fee for renewal shall be set by the Department under Section 2
10-24 of this Act <is $60>.
10-25 Sec. 4. ENFORCEMENT. (a) The Commissioner may issue an
11-1 order to cancel, suspend, or refuse to renew a permit issued to a
11-2 person under this Act to sell prepaid funeral benefits if the
11-3 Commissioner finds, by examination or other credible evidence, that
11-4 the person:
11-5 (1) has violated this Act or another law of this
11-6 state, including a final order or rule of the Commissioner or the
11-7 Department, relating to the sale of prepaid funeral benefits;
11-8 (2) has misrepresented or concealed a material fact in
11-9 the application for the permit; or
11-10 (3) has obtained, or attempted to obtain, the permit
11-11 by misrepresentation, concealment, or fraud.
11-12 (b) In addition to other penalties that may be imposed under
11-13 this Act, the Commissioner may bring a civil action in a district
11-14 court in Travis County to enjoin a violation or threatened
11-15 violation of this Act or a final order or rule of the Commissioner
11-16 or the Department.
11-17 (c) The Commissioner may issue an order to cease and desist
11-18 if the Commissioner finds, by examination or other credible
11-19 evidence, that a person has violated this Act or another law of
11-20 this state, including a final order or rule of the Commissioner or
11-21 the Department, relating to the sale of prepaid funeral benefits.
11-22 (d) An order proposed under Subsection (a) or (c) of this
11-23 section shall be served on the person named and shall state the
11-24 grounds for the proposed order with reasonable certainty and the
11-25 proposed effective date, which may not be before the 16th day after
12-1 the date of its mailing by certified mail, return receipt
12-2 requested, to the person's last known address. Unless the person
12-3 named in the order requests a hearing within 15 days after that
12-4 mailing, the order becomes effective as proposed. If the person
12-5 named requests a hearing, it shall be conducted in accordance with
12-6 the procedures for a contested case hearing under the
12-7 Administrative Procedure and Texas Register Act (Article 6252-13a,
12-8 Vernon's Texas Civil Statutes) and its subsequent amendments.
12-9 (e) Following cancellation of or failure to renew a permit
12-10 under Subsection (a) of this section or on notice to a person
12-11 required to obtain a permit under this Act, the Commissioner may
12-12 issue an order to seize all prepaid funeral funds, including
12-13 earnings, wherever those funds are held and may issue an order to
12-14 seize any or all records that relate to the sale of prepaid funeral
12-15 benefits, if the Commissioner finds, by examination or other
12-16 credible evidence, that the person:
12-17 (1) has failed to deposit or remit funds in accordance
12-18 with Section 1A or 5 of this Act;
12-19 (2) has misappropriated, converted, or illegally
12-20 withheld or failed or refused to pay on proper demand any money
12-21 entrusted to the person belonging to the beneficiary under a
12-22 prepaid funeral benefits contract;
12-23 (3) has refused to submit to examination by the
12-24 Department;
12-25 (4) has been the subject of an order to cancel,
13-1 suspend, or refuse to renew a permit; or
13-2 (5) does not hold a valid permit or has transferred
13-3 the ownership of its business to an acquiror that does not hold a
13-4 valid permit and that:
13-5 (A) has not applied for a new permit within 30
13-6 days after the date of the consummation of the transfer; or
13-7 (B) has been denied a new permit.
13-8 (f) An order under Subsection (e) is effective instanter if
13-9 the Commissioner finds that immediate and irreparable harm is
13-10 threatened to a beneficiary under a prepaid funeral benefits
13-11 contract. If such a threat does not exist, the order shall state
13-12 the proposed effective date, which may not be before the 16th day
13-13 after the date of mailing by certified mail, return receipt
13-14 requested, to the person's last known address. Unless the person
13-15 named in the order requests a hearing within 15 days after that
13-16 mailing, the order becomes effective as proposed. If the person
13-17 named requests a hearing, it shall be conducted in accordance with
13-18 the Administrative Procedure and Texas Register Act (Article
13-19 6252-13a, Vernon's Texas Civil Statutes) and its subsequent
13-20 amendments.
13-21 (g) Within 30 days after the date of a seizure of funds, the
13-22 Commissioner may notify all known parties who purchased prepaid
13-23 funeral benefits contract obligations from the person whose permit
13-24 was cancelled. The notice shall include an explanation of the
13-25 procedures under this Act for cancelling the contracts and claiming
14-1 funds that may be due to the parties if they elect to cancel. The
14-2 notice shall instruct those parties how to continue making payments
14-3 due under the contracts if they elect to keep the contracts in
14-4 force. The notice shall instruct those parties that if they elect
14-5 to keep the contracts in force the Commissioner will transfer
14-6 responsibility to perform the contracts to a responsible successor
14-7 permit holder selected by the Commissioner or transfer the seized
14-8 funds to the guaranty fund, subject to the claims process
14-9 prescribed by rule under Section 8A of this Act. A successor
14-10 permit holder to whom a contract is transferred by the Commissioner
14-11 assumes responsibility to perform the contract and is entitled to
14-12 retain all funds that would have been due the person whose permit
14-13 was cancelled, including any funds seized by the Commissioner. The
14-14 Department shall adopt rules governing selection of a successor
14-15 permit holder. Any premium received through the selection process
14-16 that exceeds the claims against the prior permit holder shall be
14-17 paid into the guaranty fund.
14-18 (h) The Commissioner may issue an order to a person
14-19 requiring restitution if, after notice and opportunity for hearing
14-20 held in accordance with the procedures for a contested case hearing
14-21 under the Administrative Procedure and Texas Register Act (Article
14-22 6252-13a, Vernon's Texas Civil Statutes) and its subsequent
14-23 amendments, the Commissioner finds that the person:
14-24 (1) has failed to deposit funds in accordance with
14-25 Section 5 of this Act; or
15-1 (2) has misappropriated, converted, or illegally
15-2 withheld or failed or refused to pay on proper demand any money
15-3 entrusted to the person belonging to the beneficiary under any
15-4 prepaid funeral benefits contract.
15-5 (i) In addition to any other penalties that may be imposed
15-6 under this Act, a person who violates this Act or a final order or
15-7 rule of the Commissioner or Department is subject to a civil
15-8 penalty unless within 30 days after the date of receiving written
15-9 notice from the Department of the violation, the person corrects
15-10 the violation by performing the required duty or act. A civil
15-11 penalty may not exceed $1,000 per violation for each day that the
15-12 violation persists.
15-13 (j) A civil penalty may be imposed by the Commissioner after
15-14 notice and opportunity for hearing in accordance with the
15-15 procedures for a contested case hearing under the Administrative
15-16 Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas
15-17 Civil Statutes) and its subsequent amendments. In determining the
15-18 amount of the penalty, the Commissioner shall consider the
15-19 seriousness of the violation and the good faith of the person
15-20 charged in attempting to comply with this Act. The amount of the
15-21 penalty may be collected by the Commissioner in the same manner
15-22 that money judgements are enforced in the district courts of this
15-23 state.
15-24 (k) After an order issued by the Commissioner to seize funds
15-25 or records under Subsection (e) of this section has become final
16-1 and not subject to appeal, the Commissioner may petition the
16-2 district court in the county of residence of a person required to
16-3 hold a permit under this Act, requesting the issuance of an order
16-4 to show cause why the business and affairs of that person should
16-5 not be liquidated and a receiver appointed by the court to
16-6 accomplish that purpose if the person has committed one or more of
16-7 the following acts and has failed or refused to correct the
16-8 violations within 30 days after the date on which the person
16-9 received written notice from the Commissioner:
16-10 (1) failed to deposit funds in accordance with Section
16-11 5 of this Act;
16-12 (2) misappropriated, converted, or illegally withheld
16-13 or failed or refused to pay over upon proper demand any money
16-14 entrusted to that person belonging to the beneficiary under any
16-15 prepaid funeral benefits contract; or
16-16 (3) allowed the person's permit to lapse or has had
16-17 the permit revoked under this Act and has not made adequate
16-18 provision for the administration of all funds deposited with the
16-19 person for prepaid funeral benefits contracts in accordance with
16-20 the terms of the contracts and applicable law, including
16-21 regulations <The Department may cancel a permit or refuse to renew
16-22 a permit for failure to comply with any provision of this Act or
16-23 any valid rule or regulation which the Department has prescribed,
16-24 after reasonable notice to the permittee and after a hearing if the
16-25 permittee requests a hearing.>
17-1 <No organization shall be entitled to a new permit for a
17-2 period of one year after cancellation or refusal by the Department
17-3 to renew its permit, but shall thereafter be entitled to a new
17-4 permit upon satisfactory proof of compliance with this law>.
17-5 Sec. 4A. TRANSFER OF BUSINESS OWNERSHIP. (a) A permit
17-6 issued under this Act is not transferable.
17-7 (b) If a permit holder transfers the ownership of its
17-8 business, the permit holder shall notify the Department and the
17-9 depository of the funds held under Section 5 of this Act by
17-10 registered mail within seven days after the date the transfer is
17-11 consummated. If the transfer is to a person who is not a permit
17-12 holder, the person shall file, within 30 days after the date of the
17-13 consummation of the transfer, an application for a permit with the
17-14 Department in accordance with Section 3 of this Act. If the
17-15 application is not filed within that period, or if the person does
17-16 not meet the requirements for issuance of a permit under this Act,
17-17 the Commissioner shall follow the procedures set forth in Section 4
17-18 of this Act for denying the permit application and for seizing the
17-19 funds or records.
17-20 (c) Any person aggrieved by the final action of the
17-21 Department may appeal therefrom to a District Court in Travis
17-22 County, Texas.
17-23 Sec. 5. TRUST FUNDED PREPAID FUNERAL BENEFITS. (a) All
17-24 sums heretofore or hereafter paid or collected on contracts for
17-25 prepaid funeral benefits entered into prior to the effective date
18-1 of this Act shall be handled in accordance with the manner in which
18-2 they have heretofore been handled. All sums paid or collected on
18-3 such contracts entered into after the effective date of this Act
18-4 (with the exception of those paid where a contract of insurance
18-5 previously is created or approved by the Department) shall be
18-6 handled in the following manner:
18-7 (1) The seller of a trust-funded prepaid funeral
18-8 benefits contract <funeral home (or other entity collecting said
18-9 funds)> may retain as its own money, for the purpose of covering
18-10 its selling expenses, servicing costs, and general overhead, an
18-11 amount not to exceed one-half of all funds so collected or paid
18-12 until it has received for its use and benefit an amount not to
18-13 exceed ten percent of the total amount agreed to be paid by the
18-14 purchaser of said prepaid funeral benefits as such total amount is
18-15 reflected in the contract. <No charges or assessments, except
18-16 premiums collected on an insurance policy guaranteeing the payments
18-17 on a prepaid funeral contract or the unpaid balance thereof, shall
18-18 be collected from the purchaser other than those included in the
18-19 total amount of said contract.>
18-20 (2) All amounts paid or collected, with the exception
18-21 of those permitted to be retained as set forth above, shall, within
18-22 30 <thirty> days after such collection, be (a) deposited in a
18-23 savings and loan association in this state in an interest-bearing
18-24 account insured by the federal government, or (b) deposited in a
18-25 state or national bank in this state in an interest-bearing account
19-1 insured by the federal government, or (c) placed with the trust
19-2 department in a state or national bank in this state, or in a trust
19-3 company authorized to do business in this state, to be invested by
19-4 such trust department or company in accordance with the terms and
19-5 provisions of this Act <the Texas Trust Code (Subtitle B, Title 9,
19-6 Property Code)>. Such deposits or trust accounts shall be carried
19-7 in the name of the funeral provider <home> or other entity to whom
19-8 the purchaser makes payment, but accounting records shall be
19-9 maintained by the seller showing the amount deposited or invested
19-10 with respect to any particular purchaser's contract.
19-11 (3) On the death of a beneficiary named in a prepaid
19-12 funeral benefits contract, the seller, after completion of the
19-13 funeral service and presentation to the depository of proper
19-14 affidavits signed and sworn to by an officer or authorized agent of
19-15 the seller on forms prescribed by the Department and a certified
19-16 copy of the death certificate, may withdraw the amount equal to the
19-17 original contract amount paid in by the purchaser less amounts
19-18 retained under Subsection (a)(1) of this section, plus all earnings
19-19 attributable to that contract. The seller shall maintain the
19-20 copies of the affidavits and death certificate for examination by
19-21 the Department. <The date of death of the purchaser of such
19-22 contract (or other individual who may be designated in the contract
19-23 as the person for whose funeral such funds may be used) shall be
19-24 the maturity date of the contract, and as soon as conveniently
19-25 practicable after such maturity date and upon presentation of a
20-1 certified copy of the death certificate of such person together
20-2 with proper affidavits as may be required by the Department, such
20-3 funds shall be released in fulfillment of the contract, and the
20-4 funeral home (or other entity to the contract which has collected
20-5 the funds) shall, if the amount so withdrawn does not equal one
20-6 hundred percent of the total amount paid by the purchaser, make up
20-7 the difference so that the amount available for funeral benefits
20-8 shall equal one hundred percent of the total amount paid by the
20-9 purchaser. Any amounts accumulated at maturity on any particular
20-10 contract in excess of one hundred percent of the amount deposited
20-11 or placed by the seller shall be available to the funeral home (or
20-12 other entity collecting said funds) in making up the difference on
20-13 any particular contract which at maturity did not have funds
20-14 available equal to one hundred percent of the amount paid by the
20-15 purchaser.>
20-16 (4)(A) The seller may withdraw <at any time> funds out
20-17 of earnings <accrued interest or income> on the accounts for the
20-18 purpose of paying reasonable and necessary trustee's fees or
20-19 depository fees. With prior approval of the Department, the seller
20-20 may withdraw funds out of earnings on the accounts <charges made by
20-21 a savings and loan association, or bank, or trust department of a
20-22 bank, or trust company, and trustee's fees made by a savings and
20-23 loan association, or bank, or trust department of a bank, or trust
20-24 company, with respect to such accounts,> for the purpose of paying
20-25 any taxes<, with prior approval of the Department,> caused or
21-1 created by reason of the existence of such deposit accounts or
21-2 trust accounts or for the purpose of paying an assessment under
21-3 Section 8A of this Act<, or for the purpose of paying any
21-4 assessment under this Act or ordered by the Department for funding
21-5 a fund to guarantee performance of prepaid funeral contracts>.
21-6 (B) The seller may also withdraw funds from the
21-7 earnings <accrued interest or income> on the <deposit> accounts for
21-8 the purpose of paying the examination fee for one examination by
21-9 the Department each calendar year, or for the preparation of
21-10 financial statements required by the Department, including
21-11 financial statements required in lieu of an examination by the
21-12 Department.
21-13 (C) Upon the maturity date of a trust-funded
21-14 contract as above provided and only after the funeral provider
21-15 <home> has fully performed its obligations under said contract with
21-16 the purchaser, or at the time of cancellation prior to maturity as
21-17 provided in Subsection (b)<(5)> herein, the seller may
21-18 <additionally> withdraw from said <deposit> account all earnings
21-19 attributable to <(whether a trust or other funded account) any
21-20 enhanced value, accrued interest, or accrued income on> said
21-21 contract. Such withdrawal shall be the proportionate part of the
21-22 earnings <total enhanced value, accrued interest or accrued
21-23 income,> that the amount deposited under said contract bears to the
21-24 total amount deposited from all unmatured contracts, less any
21-25 withdrawals of excess earnings made in accordance with this
22-1 section, or, if the Commissioner has affirmatively determined that
22-2 the records of the permit holder are adequate to allow this method
22-3 to be exercised in an accurate manner, the withdrawals may be equal
22-4 to the actual earnings on individual matured contracts, minus any
22-5 properly allocated expenses permitted by this section, less any
22-6 withdrawals of excess earnings made in accordance with this section
22-7 <subsection>.
22-8 (D) On approval by the Commissioner, a
22-9 <application, the Commissioner may, after notice and hearing
22-10 conducted pursuant to the Administrative Procedure and Texas
22-11 Register Act (Article 6252-13a, Vernon's Texas Civil Statutes),
22-12 authorize the> seller of prepaid funeral benefits may <preneed
22-13 services to> withdraw excess earnings from the seller's trust
22-14 accounts <deposits>. For the purposes of this section, "excess
22-15 earnings" means funds in the trust accounts, including all realized
22-16 and unrealized gains and losses, <deposit> that exceed 110 <107>
22-17 percent of all sums paid by purchasers on the contracts. <of the
22-18 seller's obligations on each contract for which deposits have been
22-19 made after the date the contracts are entered into. The
22-20 Commissioner may grant the authorization if in the Commissioner's
22-21 opinion, the evidence shows that the seller's ability to deliver
22-22 the contracted services and merchandise is not diminished by the
22-23 withdrawal. The Commissioner by rule may set out factors that may
22-24 be considered in evaluating each application. The Commissioner's
22-25 decision on whether to grant the withdrawal is not limited to those
23-1 factors. A withdrawal of excess earnings made after an initial
23-2 withdrawal as provided by this subsection may not be approved for
23-3 more than 93 percent of the funds remaining in the accounts after
23-4 the withdrawal that are in excess of the 107 percent to be
23-5 maintained in satisfaction of the seller's contractual
23-6 obligations.>
23-7 (i) A seller must apply to the
23-8 Commissioner for approval to withdraw excess earnings from the
23-9 seller's trust accounts under this subsection. An application must
23-10 be in writing and must include a sworn statement by an agent of the
23-11 seller designated under Section 6 of this Act that:
23-12 (I) specifies the amount eligible
23-13 for withdrawal based on the market value of the trust assets as of
23-14 a date not more than 45 days prior to the date of the application;
23-15 and
23-16 (II) affirms that the requested
23-17 withdrawal constitutes excess earnings.
23-18 (ii) An application by a seller to
23-19 withdraw excess earnings from the seller's trust accounts must be
23-20 accompanied by:
23-21 (I) a statement from the trustee of
23-22 the trust accounts verifying the market and book values of the
23-23 assets in the accounts as of a date not more than 45 days prior to
23-24 the date of the application;
23-25 (II) the seller's most recent
24-1 audited or unaudited financial statements dated not more than 18
24-2 months prior to the date the application is filed with the
24-3 Commissioner. In the event of the filing of a consolidated
24-4 application on behalf of affiliated sellers, audited financial
24-5 statements of the parent company may be submitted in lieu of those
24-6 of the sellers. Such audited statements shall be accompanied by an
24-7 unqualified opinion by a certified public accountant. In the event
24-8 the seller provides unaudited financial statements or audited
24-9 financial statements with a qualified opinion pursuant to this
24-10 subsection, the Commissioner may approve the application if the
24-11 application is accompanied by a surety bond from a company
24-12 acceptable to the Commissioner, in favor of the Commissioner, in an
24-13 amount equal to the amount of the requested withdrawal. Such bond
24-14 shall be reduced on an annual basis by an amount equal to 10
24-15 percent per year;
24-16 (III) the seller's quarterly audited
24-17 or unaudited profit and loss statements covering the two years
24-18 immediately preceding the year covered by the financial statements
24-19 required in Subsection (a)(4)(D)(ii)(II) of this section. If the
24-20 seller has not been in operation for three (3) years, the profit
24-21 and loss statements shall cover the period of time that the seller
24-22 has been operating;
24-23 (IV) financial records or reports
24-24 reflecting the total amount of the seller's contracts and the total
24-25 amount of payments made by purchasers with respect to the seller's
25-1 contracts; and
25-2 (V) In the event an application is
25-3 submitted by a seller that is not the funeral home designated in
25-4 the contracts that is obligated to provide the specified prepaid
25-5 funeral benefits, in addition to all information required under
25-6 Subsections (a)(4)(D)(ii)(I) through (IV) of this section, such
25-7 application shall be accompanied by:
25-8 (-a-) copies of agreements
25-9 with all funeral homes that will deliver the funeral services and
25-10 merchandise, including amounts agreed to be paid to such funeral
25-11 homes by the seller; and
25-12 (-b-) an affidavit from each
25-13 funeral home stating that the withdrawal of excess earnings in the
25-14 amount requested will not affect its contractual obligation to
25-15 deliver the contracted funeral services and merchandise.
25-16 (iii) The Commissioner shall approve a
25-17 completed application to withdraw excess earnings unless the
25-18 Commissioner determines that the seller's ability to deliver the
25-19 contracted services and merchandise would be materially jeopardized
25-20 by the withdrawal due to:
25-21 (I) the seller's failure, after
25-22 written notice from the Commissioner, to substantially comply with
25-23 any law or rule applicable to the sale of prepaid funeral benefits
25-24 in this state;
25-25 (II) the seller's willful commission
26-1 of any felony or fraudulent act in the conduct of the seller's
26-2 prepaid funeral business that threatens the seller's solvency;
26-3 (III) the seller's refusal to submit
26-4 to an examination of the seller's trust accounts under Section 8 of
26-5 this Act;
26-6 (IV) the cancellation or involuntary
26-7 non-renewal of the seller's permit to sell prepaid funeral
26-8 benefits;
26-9 (V) the seller's knowing withdrawal
26-10 from the trust accounts of amounts that are not authorized under
26-11 this Act or the seller's refusal to correct the unauthorized
26-12 withdrawal after the receipt of written notice from the
26-13 Commissioner;
26-14 (VI) the seller's failure to deposit
26-15 or remit funds in accordance with this section or the seller's
26-16 refusal to make the required deposit or remittance after the
26-17 receipt of written notice from the Commissioner;
26-18 (VII) the amount of the requested
26-19 withdrawal exceeding the net worth of the seller, or if the seller
26-20 is an affiliate of a consolidated entity, the net worth of the
26-21 parent corporation. In the event the requested withdrawal exceeds
26-22 the net worth of the seller or, if applicable, the parent
26-23 corporation, the Commissioner may approve the withdrawal if the
26-24 seller provides a surety bond from a company acceptable to the
26-25 Commissioner, in favor of the Commissioner, in the amount of the
27-1 withdrawal in excess of the net worth of the seller or its parent.
27-2 Such bond shall be reduced on an annual basis by an amount equal to
27-3 20 percent per year;
27-4 (VIII) the seller (or the parent, if
27-5 a consolidated application is filed) having experienced a net loss
27-6 from operations in any of the last three years. In the event of
27-7 such a loss, the Commissioner may approve the withdrawal if the
27-8 seller provides a surety bond from a company acceptable to the
27-9 Commissioner, in favor of the Commissioner, in an amount equal to
27-10 the requested withdrawal. Such bond shall be reduced on an annual
27-11 basis by an amount equal to 10 percent per year;
27-12 (IX) the contingent liabilities
27-13 other than commitments disclosed on the face of seller's (or
27-14 parent's if a consolidated application is filed) audited
27-15 consolidated or unconsolidated balance sheet exceeding seller's (or
27-16 parent's if a consolidated application is filed) net worth as of
27-17 the date of the financial statement. In such event, the
27-18 Commissioner may approve the withdrawal if the seller provides a
27-19 surety bond from a company acceptable to the Commissioner, in favor
27-20 of the Commissioner, in an amount equal to the requested
27-21 withdrawal. Such bond shall be reduced on an annual basis by an
27-22 amount equal to 10 percent per year; or
27-23 (X) the withdrawal causing the
27-24 investments in the trust accounts to be in violation of Section
27-25 5A(d) of this Act.
28-1 (iv) In connection with the Commissioner's
28-2 review of a seller's application to withdraw excess earnings from
28-3 the trust accounts under this subsection, the Commissioner may
28-4 conduct an examination or audit of the seller's prepaid funeral
28-5 benefits records under Section 8 of this Act.
28-6 (v) The Commissioner shall issue a written
28-7 notice within 10 days of receipt of an application informing the
28-8 seller either that the application is complete and accepted for
28-9 filing, or that the application is deficient and that specific
28-10 additional information is required within 30 days. If the
28-11 requested information is not received within 30 days, the
28-12 application is deemed denied unless good cause exists for failure
28-13 to provide the information timely. The Commissioner shall approve
28-14 or deny an application under this subsection within 90 days of the
28-15 date of filing of a completed application. If a completed
28-16 application to withdraw excess earnings under this subsection is
28-17 not denied by the Commissioner within 90 days after it is accepted
28-18 by the Commissioner as complete, the application shall be deemed
28-19 approved by the Commissioner and the requested withdrawal shall be
28-20 deemed authorized without further action by the Commissioner. The
28-21 Commissioner may extend this time period for an additional 90 days
28-22 for good cause and upon notice to the seller. If the Commissioner
28-23 denies the application for withdrawal, the seller will be entitled
28-24 to a hearing conducted pursuant to the Administrative Procedure and
28-25 Texas Register Act (Article 6252-13a, Vernon's Texas Civil
29-1 Statutes). Judicial review of a final decision by the Commissioner
29-2 shall be by trial de novo in a district court of Travis County.
29-3 (vi) Within 60 days following the approval
29-4 of an application under this subsection, the seller shall provide
29-5 the Commissioner with a verified statement indicating that the
29-6 withdrawn funds were used in the ordinary course of the seller's
29-7 business.
29-8 (vii) In the event a material error in an
29-9 application is discovered or the seller fails or refuses to comply
29-10 with or fulfill any undertaking assumed by the seller in connection
29-11 with the withdrawal of excess earnings from the seller's trust
29-12 accounts, the seller, after notice from the Commissioner and a
29-13 hearing, must return the disputed funds to the trust accounts or
29-14 the seller's permit will be subject to cancellation.
29-15 (viii) To the extent that additional
29-16 federal income taxes or other taxes are due as a result of a
29-17 withdrawal of excess earnings from a seller's trust accounts, such
29-18 taxes shall be paid by the seller and shall not be withdrawn from
29-19 the trust accounts.
29-20 (ix) Applications for withdrawal of excess
29-21 earnings under this subsection shall be filed with the Department
29-22 on forms acceptable to the Commissioner. Each application shall be
29-23 accompanied by a nonrefundable fee of $1,000 per permit, or a fee
29-24 not to exceed $5,000 for consolidated applications, made payable to
29-25 the Department, in order to cover the costs of processing the
30-1 application.
30-2 (x) This Subsection (D) shall be repealed
30-3 on December 31, 1993. Such repeal shall not affect those
30-4 applications to withdraw excess earnings filed prior to December
30-5 31, 1993, or that may be supplemented after December 31, 1993, all
30-6 of which applications shall be handled in accordance with the
30-7 provisions of this Subsection (D).
30-8 (b)(1)<(5)> In the event a purchaser under a trust-funded
30-9 contract should desire to cancel the contract prior to maturity,
30-10 such cancellation may be accomplished by the purchaser <seller>
30-11 giving to the seller written <fifteen days> notice of cancellation
30-12 on forms prescribed by the Department <in writing to the
30-13 Department, signed by the purchaser>, and thereafter, the <upon
30-14 written authorization from the Department, such> seller within 30
30-15 days after the date of the cancellation notice shall <may> withdraw
30-16 and pay to the purchaser the funds in such depository being held
30-17 for the purchaser's use and benefit; provided, however, such
30-18 purchaser shall be entitled to receive only the actual amounts paid
30-19 in by him less the amounts permitted to be retained as provided in
30-20 Subsection (a)(1) hereof. The seller shall maintain copies of the
30-21 cancellation forms for examination by the Department. Purchaser or
30-22 seller may make no partial cancellations or withdrawals.
30-23 (2) A purchaser of a trust-funded contract who elects
30-24 to cancel the contract during the first year of the contract when
30-25 payments required under the contract are current is entitled to
31-1 receive 90 percent of the actual amounts paid in by the purchaser
31-2 or the amounts deposited in trust with respect to the purchaser's
31-3 contract, whichever is greater, regardless of the amount held in
31-4 trust. A purchaser of an insurance-funded contract who elects to
31-5 cancel the contract during the first year of the contract when
31-6 payments required under the contract are current is entitled to
31-7 receive the cash surrender value of the policy.
31-8 (3) If the purchaser cancels the contract on the
31-9 solicitation of the seller, the purchaser is entitled to withdraw
31-10 all funds paid to the seller and all earnings <enhanced value>
31-11 attributable to the funds. If the funds are used to purchase a new
31-12 prepaid <preneed> funeral contract pursuant to a solicitation by
31-13 the seller, the new contract must, as determined by the Department,
31-14 protect the purchaser to an extent equal to or greater than that
31-15 provided by the original contract, and the purchaser's cost of the
31-16 same or substantially the same services and merchandise may not be
31-17 increased above that contained in the canceled contract.
31-18 (4) The purchaser of a prepaid funeral benefits
31-19 contract may irrevocably waive and renounce the purchaser's right
31-20 to cancel the contract under Subsection (b) of this section. The
31-21 waiver and renunciation may be included as a provision of the
31-22 contract or be made in a separate writing signed by the purchaser
31-23 and the seller. The waiver and renunciation of a purchaser's right
31-24 to cancel the purchaser's prepaid funeral benefits contract do not
31-25 affect:
32-1 (A) a right the purchaser has under the contract
32-2 to change the beneficiary of the contract;
32-3 (B) the purchaser's right to cancel the contract
32-4 under Section 4(g) of this Act upon any seizure of the seller's
32-5 prepaid funeral funds by the Commissioner; or
32-6 (C) any abandonment of the funds paid by the
32-7 purchaser under the contract in accordance with Section 5B of this
32-8 Act.
32-9 (c) Notwithstanding any other provision of law, the
32-10 purchaser of an insurance-funded prepaid funeral benefits contract
32-11 may irrevocably assign the purchaser's ownership of and rights to
32-12 benefits under the insurance policy or annuity contract to the
32-13 seller, the funeral provider, the trustee or other person.
32-14 (d) A seller may enter into a written agreement with a
32-15 purchaser of a prepaid funeral benefits contract providing for the
32-16 payment of a finance charge in accordance with Chapter 6, Title 79,
32-17 Revised Statutes (Article 5069-6.01 et seq., Vernon's Texas Civil
32-18 Statutes), on any amount due and owing to the seller on the prepaid
32-19 funeral benefits contract.
32-20 Sec. 5A. INVESTMENT OF TRUST FUNDS. (a) A permit holder or
32-21 trustee, if the permit holder elects to deposit prepaid funeral
32-22 funds with a bank trust department or a trust company shall:
32-23 (1) adopt a written investment plan consistent with
32-24 this section that specifies the quality, maturity, and
32-25 diversification of investments; and
33-1 (2) at least annually, review the adequacy and the
33-2 implementation of the investment plan.
33-3 (b) A permit holder and the trustee, if any, shall maintain
33-4 the investment plan in their principal offices. The permit holder
33-5 shall provide the investment plan to the Department with the filing
33-6 of the permit holder's annual report. The permit holder or
33-7 trustee, if any, shall maintain investment records covering each
33-8 transaction.
33-9 (c) A trustee, in acquiring, investing, reinvesting,
33-10 exchanging, retaining, selling, supervising, and managing property
33-11 held in a prepaid funeral benefits trust shall exercise the
33-12 judgment and care under the circumstances then prevailing that
33-13 persons of ordinary prudence, discretion, and intelligence exercise
33-14 in the management of their own affairs, not in regard to
33-15 speculation but in regard to the permanent disposition of their
33-16 funds, considering the probable income from as well as the probable
33-17 increase in value and the safety of their capital, taking into
33-18 consideration the investment of all the assets of the trust over
33-19 which the trustee has management and control, rather than a
33-20 consideration as to the prudence of a single investment of the
33-21 trust.
33-22 (d) Within the limitations of the standard set out in
33-23 Subsection (c) of this section, investments of a prepaid funeral
33-24 benefits trust are limited to the following:
33-25 (1) demand deposits, savings accounts, certificates of
34-1 deposit, and all other accounts that are issued by banks and
34-2 savings and loan associations organized under the laws of the
34-3 United States or a state, provided that the amounts deposited in
34-4 such an account shall at all times be maintained so as to be fully
34-5 covered by federal deposit insurance;
34-6 (2) bonds, evidences of indebtedness, or obligations
34-7 of the United States, or guaranteed as to principal and interest by
34-8 the full faith and credit of the United States;
34-9 (3) bonds, evidences of indebtedness, or obligations
34-10 of agencies and instrumentalities of the government of the United
34-11 States;
34-12 (4) bonds of any state or local government that have
34-13 been given federal income tax exempt status by the United States
34-14 government and that are rated:
34-15 (A) "Aa" or better by Moody's bond rating
34-16 service; or
34-17 (B) "AA" or better by Standard and Poor's bond
34-18 rating service;
34-19 (5) bonds, evidences of indebtedness, or obligations
34-20 of corporations organized under the laws of the United States or a
34-21 state, provided that the bonds, evidences of indebtedness, or
34-22 obligations are rated:
34-23 (A) "A" or better by Moody's bond rating
34-24 service; or
34-25 (B) "A" or better by Standard and Poor's bond
35-1 rating service;
35-2 (6) notes, evidences of indebtedness, or participation
35-3 in notes or evidences of indebtedness, secured by a valid first
35-4 lien on real property located in the United States, the amount of
35-5 which obligations may not exceed 90 percent of the value of the
35-6 respective parcels of real property securing them;
35-7 (7) common stock of a corporation organized under the
35-8 laws of the United States or a state, provided that the corporation
35-9 has at least $1 million of net worth or will have at least $1
35-10 million of net worth after completion of a securities offering to
35-11 which the trust is subscribing;
35-12 (8) preferred stock of a corporation organized under
35-13 the laws of the United States or a state, provided that the stock
35-14 is rated;
35-15 (A) "BAA" or better by Moody's bond rating
35-16 service; or
35-17 (B) "BBB" or better by Standard and Poor's bond
35-18 rating service;
35-19 (9) real estate, oil and gas interests, limited
35-20 partnerships, and any other investments not covered by this
35-21 section;
35-22 (10) mutual funds, collective investment funds, or
35-23 similar participative investment funds, the assets of which are
35-24 invested solely in investments permitted under this section and
35-25 that, if aggregated with other investments, meet the percentage
36-1 limitations specified by this section; and
36-2 (11) any other investment approved in writing by the
36-3 Department.
36-4 (e) At no time may more than 70 percent of the prepaid
36-5 funeral benefits trust funds related to a single permit holder be
36-6 invested in:
36-7 (1) bonds, evidences of indebtedness, obligations,
36-8 notes, and participation described by Subsection (d)(5) or (6) of
36-9 this section; or
36-10 (2) common or preferred stock described by Subsection
36-11 (d)(7) or (8) of this section.
36-12 (f) At no time may more than 10 percent of the prepaid
36-13 funeral benefits trust funds related to a single permit holder be
36-14 invested in real estate, oil and gas interests, limited
36-15 partnerships, and other investments described by Subsection (d)(9)
36-16 of this section.
36-17 (g) At no time may more than 20 percent of the prepaid
36-18 funeral benefits trust funds related to a single permit holder be
36-19 invested in a single issue of any investment, with the exception of
36-20 insured deposits and government securities.
36-21 (h) This section applies to investments that are made on or
36-22 after the effective date of this Act. Before September 1, 1996, a
36-23 permit holder or trustee shall dispose of all investments made
36-24 before the effective date of this Act that are not in compliance
36-25 with this section in respect to the type of investment or the
37-1 percentage of trust funds that may be invested in certain types of
37-2 investments. The Commissioner may grant an extension of time for a
37-3 period of one year or more for disposing of a nonconforming
37-4 investment if, in the Commissioner's opinion, the permit holder or
37-5 trustee has made a good faith effort to dispose of the
37-6 nonconforming investment or the disposal of the nonconforming
37-7 investment would be materially detrimental to the best interests of
37-8 the purchasers of prepaid funeral benefit contracts.
37-9 Sec. 5B. ABANDONED CONTRACTS. (a) Funds paid by a
37-10 purchaser of a prepaid funeral benefits contract are personal
37-11 property subject to presumption of abandonment and delivery to the
37-12 state treasurer <escheat> under Title 6, Property Code. In the
37-13 event of a conflict between the provisions of that title and this
37-14 section, this section controls.
37-15 (b) Funds paid by a purchaser of a prepaid funeral benefits
37-16 contract and held in the name of the seller at a depository
37-17 <institution> under Section 5 of this Act are presumed abandoned if
37-18 <a claim of ownership to the funds or the contract is not asserted
37-19 and>:
37-20 (1) all amounts due to the seller from the purchaser
37-21 under the terms of the contract have been collected and <the
37-22 conditions under both Paragraphs (A) and (B) of this subsection
37-23 have occurred>:
37-24 (A) at least three consecutive years have
37-25 elapsed since the existence and location of the purchaser or the
38-1 beneficiary of the contract was known to the seller;
38-2 (B) at least three consecutive years have
38-3 elapsed since, according to the knowledge and records of the
38-4 seller, a claim to or act of ownership of the funds or the contract
38-5 has been asserted or exercised;
38-6 (C) at least 60 years have elapsed since the
38-7 date of execution by the purchaser of the contract; and
38-8 (D) <(B)> at least 90 years have elapsed since
38-9 the date of birth of the beneficiary of <individual designated in>
38-10 the contract <as the person for whose funeral the funds may be
38-11 used>; or
38-12 (2) all amounts due to the seller from the purchaser
38-13 under the terms of the contract have not been paid to the seller
38-14 and<,> at least three consecutive years have elapsed since:
38-15 (A) the most recent date on which the purchaser
38-16 made a payment to the seller under the contract;
38-17 (B) the existence and location of the purchaser
38-18 or the beneficiary of the contract was known to the seller; and
38-19 (C) according to the knowledge and records of
38-20 the seller, a claim to or act of ownership of the funds or the
38-21 contract has been asserted or exercised<, and under the terms of
38-22 the contract the seller is not obligated to refund the amount
38-23 received>.
38-24 (c) For purposes of Title 6, Property Code, the seller of
38-25 the prepaid funeral benefits contract for which funds are presumed
39-1 abandoned under Subsection (b) of this section is the holder of the
39-2 funds, and the purchaser or the beneficiary of the contract is the
39-3 owner of the <principal> funds <paid on the contract>.
39-4 (d) Any amount retained by the seller as its own money for
39-5 the purpose of covering its selling expenses, servicing costs, and
39-6 general overhead, as provided by Section 5(a)(1) of this Act, and
39-7 any earnings attributable to the funds paid by a purchaser of a
39-8 prepaid funeral benefits contract, are not subject to the
39-9 presumption of abandonment as provided by Subsection (b) of this
39-10 section.
39-11 (e)(1) Each seller that on June 30 holds funds that are
39-12 presumed abandoned under Subsection (b) of this section shall
39-13 furnish the Commissioner with an acknowledged written notice of the
39-14 abandoned funds not later than the following October 1. The
39-15 seller's notice shall, for each abandoned contract, include the
39-16 name and address, if known, of each person who appears to be the
39-17 purchaser or the beneficiary of the contract; the identification
39-18 number, if any, of the contract; the total amount paid on the
39-19 contract; the amount paid on the contract and held at the
39-20 depository; and the earnings of the contract. The notice shall
39-21 also contain a statement by the seller recognizing the seller's
39-22 obligation and intent to deliver the abandoned funds to the state
39-23 treasurer in accordance with this section.
39-24 (2) The Commissioner shall, within 15 days after the
39-25 date of the receipt of the seller's notice, authorize in writing
40-1 the seller to withdraw the funds specified in the seller's notice
40-2 that are presumed abandoned under Subsection (b) of this section,
40-3 and subject to Subdivision (3) of this subsection, to withdraw and
40-4 retain the funds specified in the seller's notice that represent
40-5 the earnings attributable to the abandoned funds. The seller shall
40-6 deliver to the state treasurer not later than the following
40-7 November 1 the abandoned funds and the report required to be filed
40-8 under Chapter 74, Property Code.
40-9 (3) The Commissioner may refuse to authorize the
40-10 withdrawal of the funds representing the earnings attributable to
40-11 the abandoned funds only if:
40-12 (A) the seller's permit to sell prepaid funeral
40-13 benefits has been cancelled or not renewed by the Department;
40-14 (B) the seller is the subject of a pending
40-15 proceeding brought by the Department under Section 13,
40-16 Administrative Procedure and Texas Register Act (Article 6252-13a,
40-17 Vernon's Texas Civil Statutes), and its subsequent amendments, to
40-18 cancel the seller's permit to sell prepaid funeral benefits; or
40-19 (C) the Department has determined from an
40-20 examination of the seller's records that the seller has made
40-21 withdrawals from accounts maintained by the seller that were not
40-22 authorized under this Act, and has previously given written notice
40-23 to the seller of that determination.
40-24 (4) If the Commissioner does not authorize the seller
40-25 to withdraw the funds representing the earnings attributable to the
41-1 abandoned funds because of the existence of a condition described
41-2 by Subdivision (3) of this subsection, the Commissioner shall, not
41-3 later than the 15th day after the date of the receipt of the
41-4 seller's notice to the Commissioner under Subdivision (1) of this
41-5 subsection, give written notice to the seller that states the
41-6 condition that exists. If the Commissioner notifies the seller
41-7 that the Commissioner does not authorize the seller's withdrawal of
41-8 earnings on the basis of Subdivision (3)(B) of this subsection and
41-9 if the Department or a court of competent jurisdiction subsequently
41-10 determines that the seller's permit should not be cancelled, the
41-11 seller is entitled to withdraw and retain all of the earnings
41-12 attributable to the abandoned funds. If the Commissioner notifies
41-13 the seller that the Commissioner does not authorize the seller's
41-14 withdrawal of earnings on the basis of Subdivision (3)(C) of this
41-15 subsection, the seller, upon depositing in the accounts the amount
41-16 of the unauthorized withdrawals, is entitled to withdraw and retain
41-17 all of the earnings attributable to the abandoned funds.
41-18 (f) <(d)> A seller <of a prepaid funeral services contract>
41-19 who <in good faith> reports and delivers funds to the state
41-20 treasurer under this section <Chapter 74, Property Code,> is
41-21 relieved of all obligations and liabilities under the prepaid
41-22 funeral benefits <services> contract. The prepaid funeral benefits
41-23 contract is considered to be cancelled by the purchaser of the
41-24 contract and all obligations and liabilities of and claims against
41-25 the seller and any funeral home obligated to provide prepaid
42-1 funeral benefits under the contract are discharged and released.
42-2 (g) A seller who delivers funds to the state treasurer under
42-3 this section shall be indemnified under Section 74.304, Property
42-4 Code, for any claim that may be made with respect to the property
42-5 <if all amounts due to the seller under the terms of a contract
42-6 abandoned under this section have been paid, the seller shall
42-7 report and deliver to the state treasurer the principal amount paid
42-8 by the purchaser of such contract>.
42-9 (h) <(e)> The state treasurer is not liable to the purchaser
42-10 or beneficiary of a prepaid funeral benefits <services> contract
42-11 presumed abandoned under this section except to the extent of funds
42-12 attributable to the contract that are delivered to the state
42-13 treasurer. The state treasurer is not obligated to perform the
42-14 seller's duties under an abandoned prepaid funeral benefits
42-15 <services> contract. A purchaser's or beneficiary's sole recourse
42-16 after a seller has reported and delivered funds to the state
42-17 treasurer is to file a claim with the state treasurer as provided
42-18 by Chapter 74, Property Code.
42-19 Sec. 6. AGENT; DEPOSIT OF FUNDS. (a) Each seller
42-20 <organization> subject to this Act shall designate an agent or
42-21 agents, either by names of the individuals or by titles of their
42-22 offices or positions, who shall be considered as fiduciaries under
42-23 Section 32.45, Penal Code, and who are responsible for deposit of
42-24 funds collected under contracts for prepaid funeral benefits. The
42-25 seller <organization> shall notify the Department of such
43-1 designation within 10 days after it becomes subject to this Act,
43-2 and shall also notify the Department of any change in such
43-3 designation within 10 days before such change occurs.
43-4 (b) If the seller or any other person acting on behalf of
43-5 the seller collects any money under such a contract and fails to
43-6 deliver it, within 30 days after collection, to a designated agent,
43-7 or if any designated agent fails to deposit the money within 30
43-8 days after he receives it, he commits an offense under Section
43-9 32.45, Penal Code.
43-10 (c) It is an exception to the application of Subsection (b)
43-11 of this section that the failure to make a deposit is inadvertent
43-12 and is corrected within 10 days after the date on which the
43-13 discovery of the failure is made by the seller.
43-14 Sec. 7. ANNUAL REPORT. The Department may require an annual
43-15 report from any permit holder in such form as the Department may
43-16 require. Any seller who <organization which> has discontinued the
43-17 sale of prepaid funeral benefits but <which> still has outstanding
43-18 contracts shall <not> be required to obtain a renewal of its
43-19 permit, and <but> the Department shall <may> require annual reports
43-20 of said seller <organization> until all such contracts have been
43-21 fully discharged. If any officer of a seller <any organization>
43-22 fails or refuses to file an annual report or to cause it to be
43-23 filed within 30 days after he has been notified of the requirement
43-24 by the Department, he shall be guilty of a misdemeanor and a
43-25 violation of this Act and shall be punished by those means
44-1 prescribed in Section 9 of this Act.
44-2 Sec. 8. RECORDS; EXAMINATION. (a) Each seller who
44-3 <organization which> has outstanding contracts for prepaid funeral
44-4 benefits shall maintain within this state such records as the
44-5 Department may require to enable it to determine whether the seller
44-6 <organization> is complying with the provisions of this Act. Such
44-7 records shall be subject to annual examination by the Department or
44-8 its agent and to such additional examinations as it deems
44-9 necessary. The seller <organization> shall pay for the cost of
44-10 examination, including the salary and travel <traveling> expenses
44-11 for Department employees, including travel <paid to the person
44-12 making the examination during the time spent in making the
44-13 examination and in traveling> to and <returning> from the point
44-14 where the records are kept, and all other expenses necessarily
44-15 incurred in the examination. The <Banking> Commissioner or the
44-16 Commissioner's <his> agent shall assess and collect a fee in
44-17 connection with each examination, based on the seller's
44-18 <organization's> total outstanding contracts, covering the cost of
44-19 such examination, the equitable or proportionate cost of
44-20 maintenance and operation of the <Banking> Department, and the
44-21 enforcement of the provisions of this Act<; but the cost to the
44-22 organization shall not be more than a total cost of $3,000 for each
44-23 examination>. The Department shall set the amount of those fees
44-24 under Section 2 of this Act.
44-25 (b) <Following cancellation of a permit, the Commissioner
45-1 may seize all records of the prior permit holder and may seize all
45-2 prepaid funeral funds, including earnings, of the prior permit
45-3 holder, place them under the sole control of the Commissioner with
45-4 a state bank, the state treasury, a state-chartered trust company,
45-5 or an insurance company licensed and domiciled in this state and
45-6 approved by the Commissioner, and cause the funds to be maintained
45-7 under that arrangement for the benefit of the purchasers. The
45-8 Commissioner shall notify each purchaser of the Commissioner's
45-9 action and direct the purchaser to forward payments on contracts
45-10 directly to the depository designated by the Commissioner. The
45-11 Department may adopt reasonable rules for the enforcement and
45-12 orderly administration of this subsection.>
45-13 <(c) Those organizations with less than 50 contracts
45-14 outstanding shall be assessed an examination fee of $50 plus
45-15 one-fourth of one percent of the dollar amount of the
45-16 organization's outstanding contract funds on deposit, in trust, or
45-17 vested in any other program subject to this Act. Those
45-18 organizations with 50 or more contracts outstanding shall be
45-19 assessed an examination fee of $100 plus one-fourth of one percent
45-20 of the dollar amount of the organization's outstanding contract
45-21 funds on deposit, in trust, or vested in any other program subject
45-22 to this Act.>
45-23 <(d)> As part of the examination, the Department is entitled
45-24 to access to the records relating to prepaid funeral benefits of
45-25 any entity holding deposits or premiums for annuity contracts or
46-1 policies of insurance under the account and to other records
46-2 necessary to protect the interests of the beneficiaries. The
46-3 Department may conduct an examination or audit of records
46-4 pertaining to prepaid funeral benefits at any place and in any
46-5 manner the Department considers necessary to protect the interests
46-6 of the purchasers or beneficiaries.
46-7 (c) All information obtained, either directly or indirectly,
46-8 by the Department relative to the financial condition of any seller
46-9 whether obtained through examination or otherwise, except published
46-10 statements, and all files and records of the Department relative
46-11 thereto shall be confidential, provided that the Commissioner may,
46-12 if deemed necessary or proper to the enforcement of the laws of
46-13 this State, another state, or the United States, and in the best
46-14 interest of the public, divulge such information to any other
46-15 department of this State, another state, or the National
46-16 Government, or any agency or instrumentality thereof.
46-17 Sec. 8A. GUARANTY FUND; ASSESSMENT. (a) The Department by
46-18 rule shall create and maintain a fund to guarantee performance by
46-19 sellers of prepaid funeral benefits contracts of their obligations
46-20 to purchasers under the provisions of this Act governing prepaid
46-21 funeral trusts. The Department shall assess and collect from
46-22 sellers an assessment of not more than $1 for each of the unmatured
46-23 prepaid funeral benefits contracts sold during each calendar year
46-24 beginning with 1993 <existing on January 1, 1988. The Department
46-25 shall also assess and collect an assessment of not more than $1 for
47-1 each prepaid funeral contract sold during 1988 by a permittee first
47-2 receiving a permit in 1988>. The Department shall place the
47-3 assessments in the fund. The Department shall stop assessing the
47-4 amounts required by this subsection when the amount in the fund
47-5 first reaches $1 million.
47-6 (b) The fund may be deposited with the state treasurer, a
47-7 state or national bank in this state, or a savings and loan
47-8 association in this state, or placed with the trust department in a
47-9 state or national bank in this state or in a trust company
47-10 authorized to do business in this state. If the fund is deposited
47-11 with the state treasurer, the <The> state treasurer shall manage
47-12 the fund as trustee of funds outside the treasury. The Department
47-13 may use any earnings from the fund for the expenses of operating
47-14 and maintaining the fund. <An actuarial study shall be made before
47-15 April 1, 1988, to determine the total amount needed to maintain a
47-16 sound and responsible fund. The Department may make any additional
47-17 assessments on unmatured contracts to maintain the funds at the
47-18 amount found to be actuarially sound.>
47-19 (c) The operation and maintenance of the fund shall be
47-20 supervised by an advisory council composed of the Commissioner and
47-21 Attorney General or their representatives, <and> one representative
47-22 of the funeral industry appointed by the Finance Commission of
47-23 Texas, and one consumer representative appointed by the Finance
47-24 Commission of Texas <Banking Commissioner>. The funeral industry
47-25 representative and the consumer representative serve <serves a>
48-1 two-year terms <term> and may not serve more than two terms <one
48-2 term>. The Commissioner shall cast the deciding vote if there is a
48-3 tie vote by members of the advisory council.
48-4 (d) The advisory council may make assessments against all
48-5 permit holders, based upon their proportionate share of the
48-6 purchasers' deposits on all outstanding prepaid funeral benefits
48-7 contracts, in order to pay claims against the fund when the balance
48-8 of the fund is not sufficient to pay those claims. Assessed funds
48-9 shall be placed in the fund established under Subsection (a) of
48-10 this section and administered by the Department and the advisory
48-11 council in accordance with rules adopted by the Department. The
48-12 assessments under this subsection are in addition to those provided
48-13 for by Subsection (a) of this section.
48-14 (e) Notwithstanding any other law, the Department may assert
48-15 a claim against a seller or <trust> depository that commits a
48-16 violation of this Act that could result in a claim against the
48-17 fund.
48-18 Sec. 9. OFFENSES. (a) A permit holder may not represent
48-19 that a prepaid <preneed> funeral vendor is approved or otherwise
48-20 chosen by the Department except with the following language: "The
48-21 Texas Banking Department regulates the sale of prearranged funeral
48-22 contracts" and "The form of this contract has been approved by the
48-23 Department."
48-24 (b) Except as provided by Subsection (c) of this section,
48-25 any officer, director, agent, or employee of any seller
49-1 <organization> subject to the terms of this Act who makes or
49-2 attempts to make any contract in violation of this Act, or who
49-3 refuses to allow an inspection of the seller's <organization's>
49-4 records relating to the sale of prepaid funeral benefits, or who
49-5 violates any other provision of this Act, or who is guilty of
49-6 fraud, deception, misrepresentation or any other dishonest practice
49-7 in sale of any contract subject to this Act, shall be punished by a
49-8 fine of not less than $100 and not more than $500, or by
49-9 imprisonment in the county jail for not less than one month and not
49-10 more than six months, or by both such fine and imprisonment. Each
49-11 violation of any provision of this Act shall be deemed a separate
49-12 offense and prosecuted individually.
49-13 (c) Any failure to deposit funds in compliance with this
49-14 Act, or any withdrawal of funds in a manner inconsistent with the
49-15 provisions of this Act, is an offense under Section 32.45, Penal
49-16 Code.
49-17 (d) A depository or holder of funds designated under Section
49-18 5 of this Act shall be held to the standard of duty of a fiduciary
49-19 in holding, investing, and disbursing the funds.
49-20 (e) The Department may bring each such violation of this Act
49-21 to the attention of the Attorney General of this state and it shall
49-22 be the duty of the Attorney General to institute suit in the name
49-23 of the State of Texas against such violator in any county in this
49-24 state where such violation might occur.
49-25 (f) In addition to the penalties prescribed above, the
50-1 Attorney General shall have the power and authority to institute
50-2 quo warranto proceedings in a District Court of Travis County,
50-3 Texas to forfeit the charter and right to do business of a
50-4 corporation whose officer, director, agent or employee refuses or
50-5 fails to correct a violation of this Act after such violation has
50-6 been called to the attention of said officer, director, agent or
50-7 employee by the Department or the Attorney General. A period of 30
50-8 days shall be considered sufficient time to correct such violation
50-9 after notice from the Department or Attorney General.
50-10 Sec. 10. COLLECTION AND DISPOSITION OF MONEY. (a) Except
50-11 as provided by this section, all <All> fees, penalties, and
50-12 revenues collected by the Department <department> shall be paid to
50-13 the State Treasury, placed in the prepaid funeral account fund, and
50-14 shall be expended as authorized by legislative appropriation.
50-15 (b) The Department shall pay funds received under an order
50-16 of restitution to the injured party as ordered.
50-17 (c) Seized funds and premiums received on the disposition of
50-18 related contracts shall be handled as provided by Section 4(g) of
50-19 this Act.
50-20 Sec. 10A <10a>. APPLICABILITY TO INSURANCE CODE. Nothing in
50-21 this Act shall alter or affect any provisions of the Insurance Code
50-22 of the State of Texas; provided however, that purchasers of
50-23 contracts for prepaid funeral benefits from the same seller of such
50-24 contracts shall constitute a lawful group for the issuance of a
50-25 group contract of decreasing term life insurance by a life
51-1 insurance company authorized to do a life insurance business in the
51-2 State of Texas. The amount of insurance relative to any particular
51-3 purchaser shall at all times approximate the future unpaid balance
51-4 of such contract for prepaid funeral benefits. The seller of
51-5 prepaid funeral benefits <benefit> contracts shall have an
51-6 insurable interest in the life of any purchaser of such contract to
51-7 the extent of any unpaid balance thereof, and the proceeds of any
51-8 life insurance policy received by a seller of a prepaid funeral
51-9 benefits <benefit> contract on the life of a purchaser of such
51-10 contract shall be applied to the reduction or elimination of any
51-11 unpaid balance thereof. This section shall not be construed as
51-12 having any effect on the funding of prepaid funeral benefits by
51-13 other contracts of insurance as provided for in Section 1A <1a> of
51-14 this Act.
51-15 SECTION 2. Subsections (b) and (e), Article 6.01, Title 79,
51-16 Revised Statutes (Article 5069-6.01, Vernon's Texas Civil
51-17 Statutes), are amended to read as follows:
51-18 (b) "Services" means work, labor, or services of any kind
51-19 when purchased primarily for personal, family or household use and
51-20 not for commercial or business use, and includes a maintenance or
51-21 service contract or agreement or warranty, but does not include (i)
51-22 the services, other than prepaid funeral benefits regulated by
51-23 Article 548b, Vernon's Texas Civil Statutes, of a professional
51-24 person licensed by the State except when those services are
51-25 rendered in connection with the purchase of goods; or (ii) services
52-1 for which the cost is by law fixed or approved by, or filed with or
52-2 subject to approval or disapproval by the United States or the
52-3 State of Texas, or any agency, instrumentality or subdivision
52-4 thereof; or (iii) educational services provided by an accredited
52-5 college or university or a primary or secondary school providing
52-6 education required by the State of Texas or services of a
52-7 kindergarten or nursery school; or (iv) any services which are
52-8 authorized to be and are included in a contract subject to Chapter
52-9 7 of this Subtitle; or (v) any medical or legal services.
52-10 (e) "Retail installment transaction" means any transaction
52-11 in which a retail buyer purchases goods or services from a retail
52-12 seller pursuant to a retail installment contract or retail charge
52-13 agreement, as defined in this Article, which provides for a time
52-14 price differential, as defined in this Article, and under which the
52-15 buyer agrees to pay the unpaid balance in one or more installments,
52-16 together with a time price differential. The term includes
52-17 transactions made pursuant to a retail credit card arrangement as
52-18 defined in this Article. The term also includes the sale of
52-19 prepaid funeral benefits regulated by Article 548b, Vernon's Texas
52-20 Civil Statutes.
52-21 SECTION 3. Chapter 6, Title 79, Revised Statutes (Article
52-22 5069-6.01 et seq., Vernon's Texas Civil Statutes), is amended by
52-23 adding Article 6.12 to read as follows:
52-24 Art. 6.12. RATES FOR PREPAID FUNERAL BENEFITS REGULATED BY
52-25 ARTICLE 548b, VERNON'S TEXAS CIVIL STATUTES. Prepaid funeral
53-1 benefits regulated by Article 548b, Vernon's Texas Civil Statutes,
53-2 may be financed only at rates authorized by Article 1.04 of this
53-3 title.
53-4 SECTION 4. (a) A fund, investment, security, or contract
53-5 included in a plan approved before the effective date of this Act
53-6 by the Banking Department of Texas under Section 1a, Chapter 512,
53-7 Acts of the 54th Legislature, 1955 (Article 548b, Vernon's Texas
53-8 Civil Statutes), may continue in effect. Any funds paid pursuant
53-9 to such a plan under a contract entered into before, on, or after
53-10 the effective date of this Act shall continue to be handled in
53-11 accordance with that approved plan, except that those funds may be
53-12 invested in accordance with Section 5A, Chapter 512, Acts of the
53-13 54th Legislature, Regular Session, 1955 (Article 548b, Vernon's
53-14 Texas Civil Statutes), as amended by this Act.
53-15 (b) Sections 1(h) and (i), Chapter 512, Acts of the 54th
53-16 Legislature, Regular Session, 1955 (Article 548b, Vernon's Texas
53-17 Civil Statutes), as added by this Act, do not apply to a plan
53-18 approved before the effective date of this Act, by the Banking
53-19 Department of Texas under Section 1a, Chapter 512, Acts of the 54th
53-20 Legislature, Regular Session, 1955 (Article 548b, Vernon's Texas
53-21 Civil Statutes).
53-22 SECTION 5. This Act takes effect September 1, 1993.
53-23 SECTION 6. The importance of this legislation and the
53-24 crowded condition of the calendars in both houses create an
53-25 emergency and an imperative public necessity that the
54-1 constitutional rule requiring bills to be read on three several
54-2 days in each house be suspended, and this rule is hereby suspended.