By: Carona S.B. No. 1076
A BILL TO BE ENTITLED
AN ACT
1-1 relating to certain types of noncredit insurance and other products
1-2 offered in connection with a consumer loan.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 ARTICLE 1. AMENDMENTS TO TITLE 79, REVISED STATUTES
1-5 SECTION 1.01. Subchapter I, Chapter 3A, Title 79, Revised
1-6 Statutes (Article 5069-3A.701 et seq., Vernon's Texas Civil
1-7 Statutes), is amended by adding Article 3A.717 to read as follows:
1-8 Art. 3A.717. NONCREDIT INSURANCE AND OTHER PRODUCTS.
1-9 (a) In connection with or subsequent to a loan made under
1-10 Subchapter E or G, an authorized lender may offer, subject to all
1-11 applicable insurance laws of this state, including agent licensing
1-12 requirements and policy form requirements, one or more of the
1-13 following types of noncredit insurance and other products:
1-14 (1) life insurance;
1-15 (2) disability insurance;
1-16 (3) accident insurance;
1-17 (4) loss of income insurance;
1-18 (5) mechanical breakdown insurance;
1-19 (6) home security plans and club memberships;
1-20 (7) automobile security plans and automobile club
1-21 memberships; and
1-22 (8) extended service contracts.
1-23 (b) The cost of noncredit insurance or another product under
1-24 Subsection (a) may be collected from the borrower only if:
2-1 (1) the purchase of the noncredit insurance or product
2-2 is not a condition for approval of the loan and this fact is
2-3 clearly disclosed in writing to the borrower;
2-4 (2) the borrower provides written acknowledgment of
2-5 the borrower's intent to purchase the noncredit insurance or
2-6 product;
2-7 (3) the borrower has 30 days to cancel the transaction
2-8 and receive a full refund of the purchase price; and
2-9 (4) any benefit payable as a result of the ownership
2-10 of the noncredit insurance or product will be paid directly to the
2-11 borrower or the borrower's designated representative.
2-12 (c) An authorized lender may not charge or collect an amount
2-13 for a type of noncredit insurance or other product that is not
2-14 specified in Subsection (a) unless the commissioner authorizes the
2-15 charge or collection.
2-16 (d) The cost of noncredit insurance and other products
2-17 purchased under this chapter, and any gain or advantage received by
2-18 an authorized lender or an employee, officer, director, general or
2-19 other agent, affiliate, or associate of the lender as a result of a
2-20 charge for noncredit insurance or other products authorized under
2-21 this chapter, is not considered a further or other charge or amount
2-22 received in connection with a loan made under this chapter.
2-23 (e) The commissioner shall adopt a rule providing for
2-24 Spanish language disclosure of the information required in
2-25 Subsection (b).
2-26 SECTION 1.02. Article 3A.710, Title 79, Revised Statutes
3-1 (Article 5069-3A.710, Vernon's Texas Civil Statutes), is amended to
3-2 read as follows:
3-3 Art. 3A.710. PAYMENT FOR INSURANCE AND OTHER PRODUCTS FROM
3-4 LOAN PROCEEDS. A lender, including an officer, agent, or employee
3-5 of the lender, who offers [accepts] insurance or other products as
3-6 permitted by [under] this subchapter [as protection for a loan]:
3-7 (1) may deduct the premium [or identifiable charge]
3-8 for the insurance and the charges for the other products from the
3-9 proceeds of the loan; and
3-10 (2) shall pay the deducted amounts to the insurance
3-11 company writing the insurance or to the vendor of the other
3-12 products.
3-13 SECTION 1.03. Subsection (b), Article 3A.852, Title 79,
3-14 Revised Statutes (Article 5069-3A.852, Vernon's Texas Civil
3-15 Statutes), is amended to read as follows:
3-16 (b) On a loan subject to Subchapter E or a secondary
3-17 mortgage loan subject to Subchapter G a lender may assess and
3-18 collect from the borrower:
3-19 (1) an amount incurred by the lender for:
3-20 (A) [(1)] court costs;
3-21 (B) [(2)] attorney's fees assessed by a court;
3-22 (C) [(3)] a fee authorized by law for filing,
3-23 recording, or releasing in a public office a security for a loan;
3-24 (D) [(4)] a reasonable amount spent for
3-25 repossessing, storing, preparing for sale, or selling any security;
3-26 or
4-1 (E) [(5)] a fee for recording a lien on or
4-2 transferring a certificate of title to a motor vehicle offered as
4-3 security for a loan made under this chapter; and [or]
4-4 (2) the [(6) a] premium [or an identifiable charge]
4-5 received in connection with the sale of insurance or the charge for
4-6 any other product authorized under this chapter.
4-7 ARTICLE 2. AMENDMENTS TO FINANCE CODE
4-8 SECTION 2.01. Subchapter I, Chapter 342, Finance Code, is
4-9 amended by adding Section 342.4021 to read as follows:
4-10 Sec. 342.4021. NONCREDIT INSURANCE AND OTHER PRODUCTS.
4-11 (a) In connection with or subsequent to a loan made under
4-12 Subchapter E or G, an authorized lender may offer, subject to all
4-13 applicable insurance laws of this state, including agent licensing
4-14 requirements and policy form requirements, one or more of the
4-15 following types of noncredit insurance and other products:
4-16 (1) life insurance;
4-17 (2) disability insurance;
4-18 (3) accident insurance;
4-19 (4) loss of income insurance;
4-20 (5) mechanical breakdown insurance;
4-21 (6) home security plans and club memberships;
4-22 (7) automobile security plans and automobile club
4-23 memberships; and
4-24 (8) extended service contracts.
4-25 (b) The cost of noncredit insurance or another product under
4-26 Subsection (a) may be collected from the borrower only if:
5-1 (1) the purchase of the noncredit insurance or product
5-2 is not a condition for approval of the loan and this fact is
5-3 clearly disclosed in writing to the borrower;
5-4 (2) the borrower provides written acknowledgment of
5-5 the borrower's intent to purchase the noncredit insurance or
5-6 product;
5-7 (3) the borrower has 30 days to cancel the transaction
5-8 and receive a full refund of the purchase price; and
5-9 (4) any benefit payable as a result of the ownership
5-10 of the noncredit insurance or product will be paid directly to the
5-11 borrower or the borrower's designated representative.
5-12 (c) An authorized lender may not charge or collect an amount
5-13 for a type of noncredit insurance or other product that is not
5-14 specified in Subsection (a) unless the commissioner authorizes the
5-15 charge or collection.
5-16 (d) The cost of noncredit insurance and other products
5-17 purchased under this chapter, and any gain or advantage received by
5-18 an authorized lender or an employee, officer, director, general or
5-19 other agent, affiliate, or associate of the lender as a result of a
5-20 charge for noncredit insurance or other products authorized under
5-21 this chapter, is not considered a further or other charge or amount
5-22 received in connection with a loan made under this chapter.
5-23 (e) The commissioner shall adopt a rule providing for
5-24 Spanish language disclosure of the information required in
5-25 Subsection (b).
5-26 SECTION 2.02. Section 342.410, Finance Code, is amended to
6-1 read as follows:
6-2 Sec. 342.410. PAYMENT FOR INSURANCE AND OTHER PRODUCTS FROM
6-3 LOAN PROCEEDS. A lender, including an officer, agent, or employee
6-4 of the lender, who offers [accepts] insurance or other products as
6-5 permitted by [under] this subchapter [as protection for a loan]:
6-6 (1) may deduct the premium [or identifiable charge]
6-7 for the insurance and the charges for the other products from the
6-8 proceeds of the loan; and
6-9 (2) shall pay the deducted amounts to the insurance
6-10 company writing the insurance or to the vendor of the other
6-11 products.
6-12 SECTION 2.03. Subsection (b), Section 342.502, Finance Code,
6-13 is amended to read as follows:
6-14 (b) On a loan subject to Subchapter E or a secondary
6-15 mortgage loan subject to Subchapter G a lender may assess and
6-16 collect from the borrower:
6-17 (1) an amount incurred by the lender for:
6-18 (A) court costs;
6-19 (B) attorney's fees assessed by a court;
6-20 (C) a fee authorized by law for filing,
6-21 recording, or releasing in a public office a security for a loan;
6-22 (D) a reasonable amount spent for repossessing,
6-23 storing, preparing for sale, or selling any security; or
6-24 (E) a fee for recording a lien on or
6-25 transferring a certificate of title to a motor vehicle offered as
6-26 security for a loan made under this chapter; and [or]
7-1 (2) the [(F) a] premium [or an identifiable] charge
7-2 received in connection with the sale of insurance or the charge for
7-3 any other product authorized under this chapter; and
7-4 (3) [(2)] an administrative fee, subject to Subsection
7-5 (c), in an amount not to exceed:
7-6 (A) $25 for a loan of more than $1,000; or
7-7 (B) $10 for a loan of $1,000 or less.
7-8 ARTICLE 3. EFFECTIVE DATE; APPLICATION; EMERGENCY
7-9 SECTION 3.01. (a) Except as provided by Subsections (b) and
7-10 (c) of this section, this Act takes effect September 1, 1999.
7-11 (b) Article 1 of this Act takes effect only if the Act of
7-12 the 76th Legislature, Regular Session, 1999, relating to
7-13 nonsubstantive additions to and corrections in enacted codes does
7-14 not take effect.
7-15 (c) Article 2 of this Act takes effect only if the Act of
7-16 the 76th Legislature, Regular Session, 1999, relating to
7-17 nonsubstantive additions to and corrections in enacted codes takes
7-18 effect.
7-19 SECTION 3.02. The change in law made by this Act applies
7-20 only to a loan contract made on or after the effective date of this
7-21 Act. A loan contract made before the effective date of this Act is
7-22 governed by the law in effect when the loan contract was made, and
7-23 the former law is continued in effect for that purpose.
7-24 SECTION 3.03. The importance of this legislation and the
7-25 crowded condition of the calendars in both houses create an
7-26 emergency and an imperative public necessity that the
8-1 constitutional rule requiring bills to be read on three several
8-2 days in each house be suspended, and this rule is hereby suspended.
8-3 COMMITTEE AMENDMENT NO. 1
8-4 Amend S.B. 1076 as follows:
8-5 (1) Art. 3A.717(a), Page 1, line 9, strike "In connection"
8-6 and insert "Contemporaneously".
8-7 (2) Art. 3A.717(a), Page 1, line 12, strike "requirements
8-8 and policy form requirements," and insert "requirements, policy
8-9 form requirements, and refunding methods,"
8-10 (3) Art. 3A.717(a)(2), Page 1, line 15, after the word
8-11 "disability" insert "income".
8-12 (4) Art. 3A.717, page 1, line 23, insert a new subsection
8-13 (b) as follows: "(b) The borrower must have the option of
8-14 purchasing any of the products separately." Renumber existing (b)
8-15 through (e), accordingly.
8-16 (5) Art. 3A.717(b)(3), Page 2, line 8, after "price;" strike
8-17 "and".
8-18 (6) Art. 3A.717(b), Page 2, line 9, insert new subsections
8-19 (4) and (5) as follows:
8-20 "(4) The borrower is provided a separate notice
8-21 stating that:
8-22 (A) the product is not credit insurance;
8-23 (B) the purchase of the product was not a
8-24 condition for loan approval;
8-25 (C) the borrower has 30 days from the time they
8-26 receive the notice to cancel the purchase and receive a full refund
9-1 of the purchase price;
9-2 (D) if the borrower elected to finance the
9-3 purchase of the product they are paying a finance charge for the
9-4 cost of the product;
9-5 (5) The notice required in (4) shall include a
9-6 separate section that may be detached and returned to the vendor
9-7 permitting the customer to cancel the purchase of the product and
9-8 receive a full cash refund. This section shall also contain the
9-9 mailing address of the vendor; and"
9-10 Renumber section accordingly.
9-11 (7) Article 3A.852(b)(2), Page 4, line 5, strike "of
9-12 insurance or" and insert "of credit insurance, the premium received
9-13 for noncredit insurance, and".
9-14 (8) Sec. 342.4021(a), Page 4, line 11, strike "In
9-15 connection" and insert "Contemporaneously".
9-16 (9) Sec. 342.4021(a), Page 4, line 14, strike "requirements
9-17 and policy form requirements," and insert "requirements, policy
9-18 form requirements, and refunding methods,"
9-19 (10) Sec. 342.4021(a)(2), Page 4, line 17, after the word
9-20 "disability" insert "income".
9-21 (11) Sec. 342.4021(a)(8), Page 4, line 24, insert new
9-22 subsection (b) as follows: "(b) The borrower must have the option
9-23 of purchasing any of the products separately."
9-24 Renumber existing (b) through (e), accordingly.
9-25 (12) Sec. 342.4021(b)(3), Page 5, line 8, after "price;"
9-26 strike "and".
10-1 (13) Sec. 342.4021(b)(4), Page 5, line 9, insert new
10-2 subsection (4) as follows:
10-3 "(4) the borrower is provided a separate notice
10-4 stating that:
10-5 (A) the product is not credit insurance;
10-6 (B) the purchase of the product was not a
10-7 condition for loan approval;
10-8 (C) the borrower has 30 days from the time they
10-9 receive the notice to cancel the purchase and receive a full refund
10-10 of the purchase price;
10-11 (D) if the borrower elected to finance the
10-12 purchase of the product they are paying a finance charge for the
10-13 cost of the product; and"
10-14 (5) The notice required in (4) shall include a
10-15 separate section that may be detached and returned to the vendor
10-16 permitting the customer to cancel the purchase of the product and
10-17 receive a full cash refund. This section shall also contain the
10-18 mailing address of the vendor; and"
10-19 Renumber section accordingly.
10-20 (14) Sec. 342.502(b)(2), Page 7, line 2, "of insurance or"
10-21 and insert "of credit insurance, the premium received for noncredit
10-22 insurance, and".
10-23 Thompson