1-1 By: Carona S.B. No. 1076
1-2 (In the Senate - Filed March 9, 1999; March 11, 1999, read
1-3 first time and referred to Committee on Economic Development;
1-4 April 9, 1999, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 4, Nays 0; April 9, 1999,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1076 By: Carona
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to certain types of noncredit insurance and other products
1-11 offered in connection with a consumer loan.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 ARTICLE 1. AMENDMENTS TO TITLE 79, REVISED STATUTES
1-14 SECTION 1.01. Subchapter I, Chapter 3A, Title 79, Revised
1-15 Statutes (Article 5069-3A.701 et seq., Vernon's Texas Civil
1-16 Statutes), is amended by adding Article 3A.717 to read as follows:
1-17 Art. 3A.717. NONCREDIT INSURANCE AND OTHER PRODUCTS.
1-18 (a) In connection with or subsequent to a loan made under
1-19 Subchapter E or G, an authorized lender may offer, if agent
1-20 licensing requirements and policy forms comply with the applicable
1-21 provisions of the Insurance Code and other insurance laws of this
1-22 state, one or more of the following types of noncredit insurance
1-23 and other products:
1-24 (1) life insurance;
1-25 (2) disability insurance;
1-26 (3) accident insurance;
1-27 (4) loss of income insurance;
1-28 (5) mechanical breakdown insurance;
1-29 (6) home security plans and club memberships;
1-30 (7) automobile security plans and automobile club
1-31 memberships; and
1-32 (8) extended service contracts.
1-33 (b) The cost of noncredit insurance or another product under
1-34 Subsection (a) may be collected from the borrower only if:
1-35 (1) the purchase of the noncredit insurance or product
1-36 is not a condition for approval of the loan and this fact is
1-37 clearly disclosed in writing to the borrower;
1-38 (2) the borrower provides written acknowledgment of
1-39 the borrower's intent to purchase the noncredit insurance or
1-40 product;
1-41 (3) the borrower has 30 days to cancel the transaction
1-42 and receive a full refund of the purchase price; and
1-43 (4) any benefit payable as a result of the ownership
1-44 of the noncredit insurance or product will be paid directly to the
1-45 borrower or the borrower's designated representative.
1-46 (c) An authorized lender may not charge or collect an amount
1-47 for a type of noncredit insurance or other product that is not
1-48 specified in Subsection (a) unless the commissioner authorizes the
1-49 charge or collection.
1-50 (d) The cost of noncredit insurance and other products
1-51 purchased under this chapter, and any gain or advantage received by
1-52 an authorized lender or an employee, officer, director, general or
1-53 other agent, affiliate, or associate of the lender as a result of a
1-54 charge for noncredit insurance or other products authorized under
1-55 this chapter, is not considered a further or other charge or amount
1-56 received in connection with a loan made under this chapter.
1-57 SECTION 1.02. Article 3A.710, Title 79, Revised Statutes
1-58 (Article 5069-3A.710, Vernon's Texas Civil Statutes), is amended to
1-59 read as follows:
1-60 Art. 3A.710. PAYMENT FOR INSURANCE AND OTHER PRODUCTS FROM
1-61 LOAN PROCEEDS. A lender, including an officer, agent, or employee
1-62 of the lender, who offers [accepts] insurance or other products as
1-63 permitted by [under] this subchapter [as protection for a loan]:
1-64 (1) may deduct the premium [or identifiable charge]
2-1 for the insurance and the charges for the other products from the
2-2 proceeds of the loan; and
2-3 (2) shall pay the deducted amounts to the insurance
2-4 company writing the insurance or to the vendor of the other
2-5 products.
2-6 SECTION 1.03. Subsection (b), Article 3A.852, Title 79,
2-7 Revised Statutes (Article 5069-3A.852, Vernon's Texas Civil
2-8 Statutes), is amended to read as follows:
2-9 (b) On a loan subject to Subchapter E or a secondary
2-10 mortgage loan subject to Subchapter G a lender may assess and
2-11 collect from the borrower:
2-12 (1) an amount incurred by the lender for:
2-13 (A) [(1)] court costs;
2-14 (B) [(2)] attorney's fees assessed by a court;
2-15 (C) [(3)] a fee authorized by law for filing,
2-16 recording, or releasing in a public office a security for a loan;
2-17 (D) [(4)] a reasonable amount spent for
2-18 repossessing, storing, preparing for sale, or selling any security;
2-19 or
2-20 (E) [(5)] a fee for recording a lien on or
2-21 transferring a certificate of title to a motor vehicle offered as
2-22 security for a loan made under this chapter; and [or]
2-23 (2) the [(6) a] premium [or an identifiable charge]
2-24 received in connection with the sale of insurance or the charge for
2-25 any other product authorized under this chapter.
2-26 ARTICLE 2. AMENDMENTS TO FINANCE CODE
2-27 SECTION 2.01. Subchapter I, Chapter 342, Finance Code, is
2-28 amended by adding Section 342.4021 to read as follows:
2-29 Sec. 342.4021. NONCREDIT INSURANCE AND OTHER PRODUCTS.
2-30 (a) In connection with or subsequent to a loan made under
2-31 Subchapter E or G, an authorized lender may offer, if agent
2-32 licensing requirements and policy forms comply with the applicable
2-33 provisions of the Insurance Code and other insurance laws of this
2-34 state, one or more of the following types of noncredit insurance
2-35 and other products:
2-36 (1) life insurance;
2-37 (2) disability insurance;
2-38 (3) accident insurance;
2-39 (4) loss of income insurance;
2-40 (5) mechanical breakdown insurance;
2-41 (6) home security plans and club memberships;
2-42 (7) automobile security plans and automobile club
2-43 memberships; and
2-44 (8) extended service contracts.
2-45 (b) The cost of noncredit insurance or another product under
2-46 Subsection (a) may be collected from the borrower only if:
2-47 (1) the purchase of the noncredit insurance or product
2-48 is not a condition for approval of the loan and this fact is
2-49 clearly disclosed in writing to the borrower;
2-50 (2) the borrower provides written acknowledgment of
2-51 the borrower's intent to purchase the noncredit insurance or
2-52 product;
2-53 (3) the borrower has 30 days to cancel the transaction
2-54 and receive a full refund of the purchase price; and
2-55 (4) any benefit payable as a result of the ownership
2-56 of the noncredit insurance or product will be paid directly to the
2-57 borrower or the borrower's designated representative.
2-58 (c) An authorized lender may not charge or collect an amount
2-59 for a type of noncredit insurance or other product that is not
2-60 specified in Subsection (a) unless the commissioner authorizes the
2-61 charge or collection.
2-62 (d) The cost of noncredit insurance and other products
2-63 purchased under this chapter, and any gain or advantage received by
2-64 an authorized lender or an employee, officer, director, general or
2-65 other agent, affiliate, or associate of the lender as a result of a
2-66 charge for noncredit insurance or other products authorized under
2-67 this chapter, is not considered a further or other charge or amount
2-68 received in connection with a loan made under this chapter.
2-69 SECTION 2.02. Section 342.410, Finance Code, is amended to
3-1 read as follows:
3-2 Sec. 342.410. PAYMENT FOR INSURANCE AND OTHER PRODUCTS FROM
3-3 LOAN PROCEEDS. A lender, including an officer, agent, or employee
3-4 of the lender, who offers [accepts] insurance or other products as
3-5 permitted by [under] this subchapter [as protection for a loan]:
3-6 (1) may deduct the premium [or identifiable charge]
3-7 for the insurance and the charges for the other products from the
3-8 proceeds of the loan; and
3-9 (2) shall pay the deducted amounts to the insurance
3-10 company writing the insurance or to the vendor of the other
3-11 products.
3-12 SECTION 2.03. Subsection (b), Section 342.502, Finance Code,
3-13 is amended to read as follows:
3-14 (b) On a loan subject to Subchapter E or a secondary
3-15 mortgage loan subject to Subchapter G a lender may assess and
3-16 collect from the borrower:
3-17 (1) an amount incurred by the lender for:
3-18 (A) court costs;
3-19 (B) attorney's fees assessed by a court;
3-20 (C) a fee authorized by law for filing,
3-21 recording, or releasing in a public office a security for a loan;
3-22 (D) a reasonable amount spent for repossessing,
3-23 storing, preparing for sale, or selling any security; or
3-24 (E) a fee for recording a lien on or
3-25 transferring a certificate of title to a motor vehicle offered as
3-26 security for a loan made under this chapter; and [or]
3-27 (2) the [(F) a] premium [or an identifiable] charge
3-28 received in connection with the sale of insurance or the charge for
3-29 any other product authorized under this chapter; and
3-30 (3) [(2)] an administrative fee, subject to Subsection
3-31 (c), in an amount not to exceed:
3-32 (A) $25 for a loan of more than $1,000; or
3-33 (B) $10 for a loan of $1,000 or less.
3-34 ARTICLE 3. EFFECTIVE DATE; APPLICATION; EMERGENCY
3-35 SECTION 3.01. (a) Except as provided by Subsections (b) and
3-36 (c) of this section, this Act takes effect September 1, 1999.
3-37 (b) Article 1 of this Act takes effect only if the Act of
3-38 the 76th Legislature, Regular Session, 1999, relating to
3-39 nonsubstantive additions to and corrections in enacted codes does
3-40 not take effect.
3-41 (c) Article 2 of this Act takes effect only if the Act of
3-42 the 76th Legislature, Regular Session, 1999, relating to
3-43 nonsubstantive additions to and corrections in enacted codes takes
3-44 effect.
3-45 SECTION 3.02. The change in law made by this Act applies
3-46 only to a loan contract made on or after the effective date of this
3-47 Act. A loan contract made before the effective date of this Act is
3-48 governed by the law in effect when the loan contract was made, and
3-49 the former law is continued in effect for that purpose.
3-50 SECTION 3.03. The importance of this legislation and the
3-51 crowded condition of the calendars in both houses create an
3-52 emergency and an imperative public necessity that the
3-53 constitutional rule requiring bills to be read on three several
3-54 days in each house be suspended, and this rule is hereby suspended.
3-55 * * * * *