By Carona S.B. No. 1076
76R6738 DWS-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to certain types of noncredit insurance and other products
1-3 offered in connection with a consumer loan.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 ARTICLE 1. AMENDMENTS TO TITLE 79, REVISED STATUTES
1-6 SECTION 1.01. Subchapter I, Chapter 3A, Title 79, Revised
1-7 Statutes (Article 5069-3A.701 et seq., Vernon's Texas Civil
1-8 Statutes), is amended by adding Article 3A.717 to read as follows:
1-9 Art. 3A.717. NONCREDIT INSURANCE AND OTHER PRODUCTS. (a)
1-10 In connection with or subsequent to a loan made under Subchapter E
1-11 or G, an authorized lender may offer, subject to the applicable
1-12 provisions of the insurance laws of this state, the following types
1-13 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) home security plans and club memberships;
1-19 (6) automobile security plans and club memberships;
1-20 (7) mechanical breakdown insurance;
1-21 (8) extended service contracts; and
1-22 (9) any other product the commissioner approves for
1-23 sale.
1-24 (b) The cost of noncredit insurance or another product under
2-1 Subsection (a) may be collected from the borrower only if:
2-2 (1) the purchase of the noncredit insurance or product
2-3 is not a condition for approval of the loan and this fact is
2-4 clearly disclosed in writing to the borrower;
2-5 (2) the borrower provides written acknowledgment of
2-6 the borrower's intent to purchase the noncredit insurance or
2-7 product;
2-8 (3) the borrower has 30 days to cancel the transaction
2-9 and receive a full refund of the purchase price; and
2-10 (4) any benefit payable as a result of the ownership
2-11 of the noncredit insurance or product will be paid directly to the
2-12 borrower or the borrower's designated representative.
2-13 SECTION 1.02. Article 3A.710, Title 79, Revised Statutes
2-14 (Article 5069-3A.710, Vernon's Texas Civil Statutes), is amended to
2-15 read as follows:
2-16 Art. 3A.710. PAYMENT FOR INSURANCE OR OTHER PRODUCT FROM
2-17 LOAN PROCEEDS. A lender, including an officer, agent, or employee
2-18 of the lender, who offers [accepts] insurance or another product as
2-19 permitted by [under] this subchapter [as protection for a loan]:
2-20 (1) may deduct the premium [or identifiable charge]
2-21 for the insurance or charge for the other product from the proceeds
2-22 of the loan; and
2-23 (2) shall pay the deducted amounts to the insurance
2-24 company writing the insurance or to the vendor of the other
2-25 product.
2-26 SECTION 1.03. Article 3A.852(b), Title 79, Revised Statutes
2-27 (Article 5069-3A.852, Vernon's Texas Civil Statutes), is amended to
3-1 read as follows:
3-2 (b) On a loan subject to Subchapter E or a secondary
3-3 mortgage loan subject to Subchapter G a lender may assess and
3-4 collect from the borrower an amount incurred by the lender for:
3-5 (1) court costs;
3-6 (2) attorney's fees assessed by a court;
3-7 (3) a fee authorized by law for filing, recording, or
3-8 releasing in a public office a security for a loan;
3-9 (4) a reasonable amount spent for repossessing,
3-10 storing, preparing for sale, or selling any security;
3-11 (5) a fee for recording a lien on or transferring a
3-12 certificate of title to a motor vehicle offered as security for a
3-13 loan made under this chapter; or
3-14 (6) the [a] premium [or an identifiable charge]
3-15 received in connection with the sale of insurance or the charge for
3-16 any other product authorized under this chapter.
3-17 ARTICLE 2. AMENDMENTS TO FINANCE CODE
3-18 SECTION 2.01. Subchapter I, Chapter 342, Finance Code, is
3-19 amended by adding Section 342.4021 to read as follows:
3-20 Sec. 342.4021. NONCREDIT INSURANCE AND OTHER PRODUCTS. (a)
3-21 In connection with or subsequent to a loan made under Subchapter E
3-22 or G, an authorized lender may offer, subject to the applicable
3-23 provisions of the insurance laws of this state, the following types
3-24 of noncredit insurance and other products:
3-25 (1) life insurance;
3-26 (2) disability insurance;
3-27 (3) accident insurance;
4-1 (4) loss of income insurance;
4-2 (5) home security plans and club memberships;
4-3 (6) automobile security plans and club memberships;
4-4 (7) mechanical breakdown insurance;
4-5 (8) extended service contracts; and
4-6 (9) any other product the commissioner approves for
4-7 sale.
4-8 (b) The cost of noncredit insurance or another product under
4-9 Subsection (a) may be collected from the borrower only if:
4-10 (1) the purchase of the noncredit insurance or product
4-11 is not a condition for approval of the loan and this fact is
4-12 clearly disclosed in writing to the borrower;
4-13 (2) the borrower provides written acknowledgment of
4-14 the borrower's intent to purchase the noncredit insurance or
4-15 product;
4-16 (3) the borrower has 30 days to cancel the transaction
4-17 and receive a full refund of the purchase price; and
4-18 (4) any benefit payable as a result of the ownership
4-19 of the noncredit insurance or product will be paid directly to the
4-20 borrower or the borrower's designated representative.
4-21 SECTION 2.02. Section 342.410, Finance Code, is amended to
4-22 read as follows:
4-23 Sec. 342.410. PAYMENT FOR INSURANCE OR OTHER PRODUCT FROM
4-24 LOAN PROCEEDS. A lender, including an officer, agent, or employee
4-25 of the lender, who offers [accepts] insurance or another product as
4-26 permitted by [under] this subchapter [as protection for a loan]:
4-27 (1) may deduct the premium [or identifiable charge]
5-1 for the insurance or charge for the other product from the proceeds
5-2 of the loan; and
5-3 (2) shall pay the deducted amounts to the insurance
5-4 company writing the insurance or to the vendor of the other
5-5 product.
5-6 SECTION 2.03. Section 342.502(b), Finance Code, is amended
5-7 to read as follows:
5-8 (b) On a loan subject to Subchapter E or a secondary
5-9 mortgage loan subject to Subchapter G a lender may assess and
5-10 collect from the borrower:
5-11 (1) an amount incurred by the lender for:
5-12 (A) court costs;
5-13 (B) attorney's fees assessed by a court;
5-14 (C) a fee authorized by law for filing,
5-15 recording, or releasing in a public office a security for a loan;
5-16 (D) a reasonable amount spent for repossessing,
5-17 storing, preparing for sale, or selling any security;
5-18 (E) a fee for recording a lien on or
5-19 transferring a certificate of title to a motor vehicle offered as
5-20 security for a loan made under this chapter; or
5-21 (F) the [a] premium [or an identifiable] charge
5-22 received in connection with the sale of insurance or the charge for
5-23 any other product authorized under this chapter; and
5-24 (2) an administrative fee, subject to Subsection (c),
5-25 in an amount not to exceed:
5-26 (A) $25 for a loan of more than $1,000; or
5-27 (B) $10 for a loan of $1,000 or less.
6-1 ARTICLE 3. EFFECTIVE DATE; APPLICATION; EMERGENCY
6-2 SECTION 3.01. (a) Except as provided by Subsections (b) and
6-3 (c) of this Section, this Act takes effect September 1, 1999.
6-4 (b) Article 1 of this Act takes effect only if the Act of
6-5 the 76th Legislature, Regular Session, 1999, relating to
6-6 nonsubstantive additions to and corrections in enacted codes does
6-7 not take effect.
6-8 (c) Article 2 of this Act takes effect only if the Act of
6-9 the 76th Legislature, Regular Session, 1999, relating to
6-10 nonsubstantive additions to and corrections in enacted codes takes
6-11 effect.
6-12 SECTION 3.02. The change in law made by this Act applies
6-13 only to a loan contract made on or after the effective date of this
6-14 Act. A loan contract made before the effective date of this Act is
6-15 governed by the law in effect when the loan contract was made, and
6-16 the former law is continued in effect for that purpose.
6-17 SECTION 3.03. The importance of this legislation and the
6-18 crowded condition of the calendars in both houses create an
6-19 emergency and an imperative public necessity that the
6-20 constitutional rule requiring bills to be read on three several
6-21 days in each house be suspended, and this rule is hereby suspended.