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