By: Madla S.B. No. 1188
73R3725 LJD-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of prepaid funeral services or funeral
1-3 merchandise and perpetual care cemeteries.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 5, Chapter 512, Acts of the 54th
1-6 Legislature, 1955 (Article 548b, Vernon's Texas Civil Statutes), is
1-7 amended to read as follows:
1-8 Sec. 5. Handling of Funds Paid or Collected Under Contract.
1-9 All sums heretofore or hereafter paid or collected on contracts for
1-10 prepaid funeral benefits entered into prior to the effective date
1-11 of this Act shall be handled in accordance with the manner in which
1-12 they have heretofore been handled. All sums paid or collected on
1-13 such contracts entered into after the effective date of this Act
1-14 (with the exception of those paid where a contract of insurance
1-15 previously is created or approved by the Department) shall be
1-16 handled in the following manner:
1-17 (1) The funeral home (or other entity collecting said
1-18 funds) may retain as its own money, for the purpose of covering its
1-19 selling expenses, servicing costs, and general overhead, an amount
1-20 not to exceed one-half of all funds so collected or paid until it
1-21 has received for its use and benefit an amount not to exceed ten
1-22 percent of the total amount agreed to be paid by the purchaser of
1-23 said prepaid funeral benefits as such total amount is reflected in
1-24 the contract. No charges or assessments, except premiums collected
2-1 on an insurance policy guaranteeing the payments on a prepaid
2-2 funeral contract or the unpaid balance thereof, shall be collected
2-3 from the purchaser other than those included in the total amount of
2-4 said contract.
2-5 (2) All amounts paid or collected, with the exception
2-6 of those permitted to be retained as set forth above, shall, within
2-7 thirty days after such collection, be (a) deposited in a savings
2-8 and loan association in this state in an interest-bearing account
2-9 insured by the federal government, or (b) deposited in a state or
2-10 national bank in this state in an interest-bearing account insured
2-11 by the federal government, or (c) placed with the trust department
2-12 in a state or national bank in this state, or in a trust company
2-13 authorized to do business in this state, to be invested by such
2-14 trust department or company in accordance with the terms and
2-15 provisions of the Texas Trust Code (Subtitle B, Title 9, Property
2-16 Code). Such deposits or trust accounts shall be carried in the
2-17 name of the funeral home or other entity to whom the purchaser
2-18 makes payment, but accounting records shall be maintained showing
2-19 the amount deposited or invested with respect to any particular
2-20 purchaser's contract.
2-21 (3) The date of death of the purchaser of such
2-22 contract (or other individual who may be designated in the contract
2-23 as the person for whose funeral such funds may be used) shall be
2-24 the maturity date of the contract, and as soon as conveniently
2-25 practicable after such maturity date and upon presentation of a
2-26 certified copy of the death certificate of such person together
2-27 with proper affidavits as may be required by the Department, such
3-1 funds shall be released in fulfillment of the contract, and the
3-2 funeral home (or other entity to the contract which has collected
3-3 the funds) shall, if the amount so withdrawn does not equal one
3-4 hundred percent of the total amount paid by the purchaser, make up
3-5 the difference so that the amount available for funeral benefits
3-6 shall equal one hundred percent of the total amount paid by the
3-7 purchaser. Any amounts accumulated at maturity on any particular
3-8 contract in excess of one hundred percent of the amount deposited
3-9 or placed by the seller shall be available to the funeral home (or
3-10 other entity collecting said funds) in making up the difference on
3-11 any particular contract which at maturity did not have funds
3-12 available equal to one hundred percent of the amount paid by the
3-13 purchaser.
3-14 (4) The seller may withdraw at any time funds out of
3-15 accrued interest or income on the accounts for the purpose of
3-16 paying reasonable and necessary charges made by a savings and loan
3-17 association, or bank, or trust department of a bank, or trust
3-18 company, and trustee's fees made by a savings and loan association,
3-19 or bank, or trust department of a bank, or trust company, with
3-20 respect to such accounts, for the purpose of paying any taxes, with
3-21 prior approval of the Department, caused or created by reason of
3-22 the existence of such deposit accounts or trust accounts, or for
3-23 the purpose of paying any assessment under this Act or ordered by
3-24 the Department for funding a fund to guarantee performance of
3-25 prepaid funeral contracts.
3-26 The seller may also withdraw funds from the accrued interest
3-27 or income on the deposit accounts for the purpose of paying the
4-1 examination fee for one examination by the Department each calendar
4-2 year, or for the preparation of financial statements required by
4-3 the Department in lieu of an examination by the Department.
4-4 Upon the maturity date of a contract as above provided and
4-5 only after the funeral home has fully performed its obligations
4-6 under said contract with the purchaser, or at the time of
4-7 cancellation prior to maturity as provided in Subsection (5)
4-8 herein, the seller may additionally withdraw from said deposit
4-9 account (whether a trust or other funded account) any enhanced
4-10 value, accrued interest, or accrued income on said contract. Such
4-11 withdrawal shall be the proportionate part of the total enhanced
4-12 value, accrued interest or accrued income, that the amount
4-13 deposited under said contract bears to the total amount deposited
4-14 from all unmatured contracts or, if the Commissioner has
4-15 affirmatively determined that the records of the permit holder are
4-16 adequate to allow this method to be exercised in an accurate
4-17 manner, the withdrawals may be equal to the actual earnings on
4-18 individual matured contracts, minus any properly allocated expenses
4-19 permitted by this subsection. <On application, the Commissioner
4-20 may, after notice and hearing conducted pursuant to the
4-21 Administrative Procedure and Texas Register Act (Article 6252-13a,
4-22 Vernon's Texas Civil Statutes), authorize the seller of preneed
4-23 services to withdraw excess earnings from the trust deposits. For
4-24 the purposes of this section, "excess earnings" means funds in the
4-25 trust deposit that exceed 107 percent of the seller's obligations
4-26 on each contract for which deposits have been made after the date
4-27 the contracts are entered into. The Commissioner may grant the
5-1 authorization if, in the Commissioner's opinion, the evidence shows
5-2 that the seller's ability to deliver the contracted services and
5-3 merchandise is not diminished by the withdrawal. The Commissioner
5-4 by rule may set out factors that may be considered in evaluating
5-5 each application. The Commissioner's decision on whether to grant
5-6 the withdrawal is not limited to those factors. A withdrawal of
5-7 excess earnings made after an initial withdrawal as provided by
5-8 this subsection may not be approved for more than 93 percent of the
5-9 funds remaining in the accounts after the withdrawal that are in
5-10 excess of the 107 percent to be maintained in satisfaction of the
5-11 seller's contractual obligations.>
5-12 (5) In the event a purchaser under a contract should
5-13 desire to cancel the contract prior to maturity, such cancellation
5-14 may be accomplished by the seller giving fifteen days notice in
5-15 writing to the Department, signed by the purchaser, and thereafter,
5-16 upon written authorization from the Department, such seller may
5-17 withdraw the funds in such depository being held for the
5-18 purchaser's use and benefit; provided, however, such purchaser
5-19 shall be entitled to receive only the actual amounts paid in by him
5-20 less the amounts permitted to be retained as provided in Subsection
5-21 (1) hereof. Purchaser or seller may make no partial cancellations
5-22 or withdrawals.
5-23 If the purchaser cancels the contract on the solicitation of
5-24 the seller, the purchaser is entitled to withdraw all funds paid to
5-25 the seller and all enhanced value attributable to the funds. If
5-26 the funds are used to purchase a new preneed funeral contract
5-27 pursuant to a solicitation by the seller, the new contract must, as
6-1 determined by the Department, protect the purchaser to an extent
6-2 equal to or greater than that provided by the original contract,
6-3 and the purchaser's cost of the same or substantially the same
6-4 services and merchandise may not be increased above that contained
6-5 in the canceled contract.
6-6 SECTION 2. Chapter 512, Acts of the 54th Legislature, 1955
6-7 (Article 548b, Vernon's Texas Civil Statutes), is amended by adding
6-8 Section 9A to read as follows:
6-9 Sec. 9A. ADMINISTRATIVE PENALTY. (a) The Department may
6-10 assess an administrative penalty against a person who violates this
6-11 Act or a rule adopted under this Act.
6-12 (b) The amount of the penalty may not exceed $25,000 for
6-13 each day of violation and for each act of violation.
6-14 (c) In determining the amount of the penalty, the Department
6-15 shall consider:
6-16 (1) the history of previous violations;
6-17 (2) the amount necessary to deter future violations;
6-18 (3) efforts to correct the violation;
6-19 (4) enforcement costs relating to the violation,
6-20 including investigation costs, witness fees, and deposition
6-21 expenses; and
6-22 (5) any other matters that justice may require.
6-23 (d) If after an examination of the facts the Department
6-24 concludes that the person did commit a violation, the Department
6-25 may issue a preliminary report stating the facts on which it based
6-26 its conclusion, recommending that an administrative penalty under
6-27 this section be imposed, and recommending the amount of the
7-1 proposed penalty.
7-2 (e) The Department shall give written notice of the report
7-3 to the person charged with committing the violation. The notice
7-4 must include a brief summary of the facts, a statement of the
7-5 amount of the recommended penalty, and a statement of the person's
7-6 right to an informal review of the occurrence of the violation, the
7-7 amount of the penalty, or both.
7-8 (f) Not later than the 10th day after the date on which the
7-9 person charged with committing the violation receives the notice,
7-10 the person may either give the Department written consent to the
7-11 report, including the recommended penalty, or make a written
7-12 request for an informal review by the Department.
7-13 (g) If the person charged with committing the violation
7-14 consents to the penalty recommended by the Department or fails to
7-15 timely request an informal review, the Department shall assess the
7-16 penalty. The Department shall give the person written notice of
7-17 its action. The person shall pay the penalty not later than the
7-18 30th day after the date on which the person receives the notice.
7-19 (h) If the person charged with committing a violation
7-20 requests an informal review as provided by Subsection (f) of this
7-21 section, the Department shall conduct the review. The Department
7-22 shall give the person written notice of the results of the review.
7-23 (i) Not later than the 10th day after the date on which the
7-24 person charged with committing the violation receives the notice
7-25 prescribed by Subsection (h) of this section, the person may make
7-26 to the Department a written request for a hearing. The hearing
7-27 must be conducted in accordance with the Administrative Procedure
8-1 and Texas Register Act (Article 6252-13a, Vernon's Texas Civil
8-2 Statutes).
8-3 (j) If, after informal review, a person who has been ordered
8-4 to pay a penalty fails to request a formal hearing in a timely
8-5 manner, the Department shall assess the penalty. The Department
8-6 shall give the person written notice of its action. The person
8-7 shall pay the penalty not later than the 30th day after the date on
8-8 which the person receives the notice.
8-9 (k) Except as provided by Subsection (l) of this section,
8-10 not later than the 30th day after the date on which the Department
8-11 issues a final decision after a hearing under Subsection (i) of
8-12 this section, a person who has been ordered to pay a penalty under
8-13 this section shall pay the penalty in full.
8-14 (l) If the person seeks judicial review of either the fact
8-15 of the occurrence of a violation or the amount of the penalty, or
8-16 of both, the person shall send the amount of the penalty to the
8-17 Department for placement in an escrow account or post with the
8-18 Department a supersedeas bond in a form approved by the Department
8-19 for the amount of the penalty. The bond must be effective until
8-20 all judicial review of the order or decision is final.
8-21 (m) Failure to forward the money to or to post the bond with
8-22 the Department within the period provided by Subsection (k) or (l)
8-23 of this section results in a waiver of all legal rights to judicial
8-24 review. If the person charged fails to forward the money or post
8-25 the bond within the period provided by Subsection (g), (j), (k), or
8-26 (l) of this section, the Department may forward the matter to the
8-27 attorney general for enforcement of the penalty and interest as
9-1 provided by law for legal judgments. An action to enforce a
9-2 penalty order under this section must be initiated in a court of
9-3 competent jurisdiction in Travis County or in the county in which
9-4 the violation occurred.
9-5 (n) Judicial review of a Department order or review under
9-6 this section assessing a penalty is under the substantial evidence
9-7 rule. A suit may be initiated by filing a petition with a district
9-8 court in Travis County, as provided by Section 19, Administrative
9-9 Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas
9-10 Civil Statutes).
9-11 (o) If a penalty is reduced or not assessed, the Department
9-12 shall remit to the person the appropriate amount plus accrued
9-13 interest if the penalty has been paid or shall execute a release of
9-14 the bond if a supersedeas bond has been posted. The accrued
9-15 interest on amounts remitted by the Department under this
9-16 subsection shall be paid at a rate equal to the rate provided by
9-17 law for legal judgments and shall be paid for the period beginning
9-18 on the date the penalty is paid to the Department under this
9-19 section and ending on the date the penalty is remitted.
9-20 (p) In addition to the administrative penalty, the court may
9-21 authorize the Department to recover from a person who pays an
9-22 administrative penalty under this section reasonable expenses
9-23 incurred in obtaining the penalty, including investigation costs,
9-24 witness fees, and deposition expenses.
9-25 (q) A penalty collected under this section shall be
9-26 deposited to the credit of the general revenue fund.
9-27 SECTION 3. Section 712.028, Health and Safety Code, is
10-1 amended to read as follows:
10-2 Sec. 712.028. Amount of Fund Deposits from Sales; RULEMAKING
10-3 AUTHORITY. (a) The commissioner by rule shall set the amount a
10-4 perpetual care cemetery shall deposit in the fund for each <A
10-5 perpetual care cemetery shall deposit in the fund an amount that is
10-6 at least>:
10-7 (1) <$1.50 a> square foot of ground area disposed of
10-8 or sold as perpetual care property;
10-9 (2) <$90 for each> crypt interment right for mausoleum
10-10 interment or lawn crypt interment disposed of or sold as perpetual
10-11 care property, including a <or $50 for each> crypt interment right
10-12 if that crypt is accessible only through another crypt; and
10-13 (3) <$30 for each> niche interment right for
10-14 columbarium interment disposed of or sold.
10-15 (b) The amounts set under Subsection (a) must be sufficient
10-16 to assure that as the deposits accrue the maintenance costs of the
10-17 cemetery are covered.
10-18 (c) <(b)> A cemetery may not operate as a perpetual care
10-19 cemetery, including a permanent maintenance or free care cemetery,
10-20 unless the cemetery complies with this section and Section 712.029.
10-21 SECTION 4. This Act takes effect September 1, 1993.
10-22 SECTION 5. (a) The change in law made by Section 1 of this
10-23 Act, amending Section 5, Chapter 512, Acts of the 54th Legislature,
10-24 1955 (Article 548b, Vernon's Texas Civil Statutes), does not apply
10-25 to a withdrawal of excess earnings by a seller of preneed funeral
10-26 services that was approved by the Banking Commissioner of Texas
10-27 before the effective date of this Act. Withdrawals approved before
11-1 the effective date of this Act are governed by the law in effect at
11-2 the time of approval, and the prior law is continued in effect for
11-3 this purpose.
11-4 (b) The administrative penalties provided by Section 9A,
11-5 Chapter 512, Acts of the 54th Legislature, 1955 (Article 548b,
11-6 Vernon's Texas Civil Statutes), as added by Section 2 of this Act,
11-7 apply only to violations committed on or after the effective date
11-8 of this Act. For purposes of this subsection, a violation is
11-9 committed on or after the effective date of this Act if each
11-10 element of the violation occurs on or after that date.
11-11 (c) The change in law made by Section 3 of this Act,
11-12 amending Section 712.028, Health and Safety Code, applies only to
11-13 deposits to trust funds by perpetual care cemeteries made on or
11-14 after the effective date of this Act. Deposits made before the
11-15 effective date of this Act are governed by the law in effect at the
11-16 time of deposit, and the prior law is continued in effect for this
11-17 purpose.
11-18 SECTION 6. The importance of this legislation and the
11-19 crowded condition of the calendars in both houses create an
11-20 emergency and an imperative public necessity that the
11-21 constitutional rule requiring bills to be read on three several
11-22 days in each house be suspended, and this rule is hereby suspended.