SRC-EPT, TBR S.B. 314 77(R)BILL ANALYSIS Senate Research CenterS.B. 314 By: Sibley Business & Commerce 6/12/2001 Enrolled DIGEST AND PURPOSE Periodically, state agencies undergo a review by the Sunset Advisory Commission. S.B. 314 continues the Texas Department of Banking for 12 years and makes statutory changes recommended by the Sunset Advisory Commission following its review of that department. RULEMAKING AUTHORITY Rulemaking authority is expressly granted to the Finance Commission of Texas is SECTIONS 6, 13, and 14 (Sections 154.151, and 712.008, 712.009 Finance Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 12.107, Finance Code, as follows: (a) Defines "Texas trade association." (b) Prohibits a person from being a Texas Department of Banking (department) employee if the person or the person's spouse is an officer, employee, or paid consultant of a Texas trade association in an industry regulated by the department. (c) Prohibits a person from acting as the general counsel to the department if the person is required to register as a lobbyist under Chapter 305, Government Code, because of the person's activities for compensation on behalf of a profession related to the operation of the department. Deletes language regarding officer or employee. SECTION 2. Amends Section 12.108, Finance Code, as follows: (b) Requires the department to maintain a file on each written complaint filed with the department. Requires the file to include certain information. (c) Requires the department to provide to the person filing the complaint and to each person who is a subject of the complaint a written summary of the department's policies and procedures relating to complaint investigation and resolution. SECTION 3. Amends Section 12.109, Finance Code, to provide that the office of banking commissioner is subject to Chapter 325 (Texas Sunset Act), Government Code. Provides that unless continued in existence as provided by that chapter, the office is abolished September 1, 2013, rather than 2001. SECTION 4. Chapter 12B, Finance Code, by adding Sections 12.111-12.113 as follows: Sec. 12.111. STANDARDS OF CONDUCT. Requires the banking commissioner or the banking commissioner's designee to provide to agency employees, as often as necessary, information regarding the requirements for office or employment under this chapter, including information regarding a person's responsibilities under applicable laws relating to standards of conduct for state officers or employees. Sec. 12.112. EQUAL EMPLOYMENT OPPORTUNITY POLICY. (a) Requires the banking commissioner or the banking commissioner's designee to prepare and maintain a written policy statement that implements a program of equal employment opportunity to ensure that all personnel decisions are made without regard to race, color, disability, sex, religion, age, or national origin. (b) Requires the policy statement to include certain information. (c) Requires the policy statement to be updated annually, be reviewed by the state Commission on Human Rights for compliance with Subsection (b)(1) and be filed with the governor's office. Sec. 12.113. EMPLOYEE INCENTIVE PROGRAM. Requires the banking commissioner or the banking commissioner's designee to provide to agency employees information and training on the benefits and methods of participation in the State Employee Incentive Program. SECTION 5. Amends Section 154.109, Finance Code, by adding Subsection (d) to authorize the commissioner to place on probation a permit holder whose permit is suspended. Authorizes the commissioner, if a permit suspension is probated, to require the permit holder to report regularly to the department on matters that are the basis of the probation, or to limit its activities as prescribed by the commissioner. SECTION 6. Amends Section 154.151, Finance Code, by adding Subsections (d) and (e) as follows: (d) Requires that a sales contract for prepaid funeral benefits, whether in English or Spanish, be written in plain language designed to be easily understood by the average consumer. Requires the contract to be printed in an easily readable font and type size. Requires the department to provide model contracts complying with this subsection and to enforce this subsection. (e) Requires the Finance Commission of Texas by rule to establish a standard disclosure that be included in each contract to inform purchasers of the goods and services that will be provided or excluded under the contract and the circumstances under which the contract may be modified after death of the beneficiary. SECTION 7. Amends Section 154.155(d), Finance Code, to provide that the purchaser is entitled to receive the actual amount paid by the purchaser and half of all earnings attributable to that money, less the amount permitted to be retained as provided by Section 154.252, except as provided by Subsection (e) and by Section 154.205 and 154.254. SECTION 8. Amends Chapter 154D, Finance Code, by adding Section 154.1551 as follows: Section 154.1551. MODIFICATION AT TIME OF FUNERAL. (a) Authorizes the funeral merchandise and services to be provided by the seller under a fully paid prepaid funeral benefits contact to be modified after the death of the beneficiary if the modification complies with Subsection (b) or is otherwise agreed to in a writing signed by the seller and the person charged with the disposition of the beneficiary's remains by Section 711.002(a), Health and Safety Code with certain exceptions. (b) Authorizes the person charged with the disposition of the beneficiary's remains by Section 711.002(a), Health and Safety Code, to make reasonable modifications to the funeral merchandise and services provided under a prepaid funeral contract at the time the funeral is performed, not to exceed 10 percent of the original purchase price of the contract. Provides that this section does not require the seller to take certain actions. (c) Prohibits the person charged with the disposition of the beneficiary's remains by Section 711.002(a), Health and Safety Code from modifying a prepaid funeral benefits contract that has not been fully paid at the time of death of the beneficiary except as agreed to in a writing signed by the seller and the person. SECTION 9. Amends Section 154.156, Finance Code, to Require the waiver be in a separate writing signed by the purchaser and the seller not earlier than the 15th day after the date of the purchase of the contract. Requires the form of the waiver to comply with the requirements for the form of a sales contract under Section 154.151. Provides that a waiver made under this section does not affect a modification to the contract as provided by Section 154.1551. SECTION 10. Amends Section 154.252, Finance Code, to authorize the seller of a trust-funded prepaid funeral benefits contract to retain for the seller's use and benefit an amount not to exceed one-half of all money collected or paid until the seller has received an amount equal to the lesser of the amount spent by the seller on selling expenses, service costs, and general overhead, as determined and documented according to rules adopted by the Finance Commission of Texas, or 10 percent of the total amount the purchaser agreed to pay under the contract. SECTION 11. Amends Section 154.406, Finance Code, as follows: (a) Authorizes the commissioner, after notice and opportunity for hearing, the to impose an administrative penalty on a person who violates this chapter or a final order of the commissioner or rule of the Finance Commission of Texas(rather than commissioner or department) and does not correct the violation before the 31st day after the date the person receives written notice of the violation from the department, or engages in a pattern of violations, as determined by the commissioner. (c) Requires the commissioner, in determining the amount of the penalty, to consider the seriousness of the violation, the person's history of violations, and the person's good faith in attempting to comply with this chapter. (d) Provides that the imposition of a penalty under this section is subject to judicial review as a contested case under Chapter 2001 (Administrative Procedure), Government Code. SECTION 12. Amends Section 154I, Finance Code, by adding Section 154.4061 as follows: Section 154.4061. PATTERN OF WILFUL DISREGARD. (a) Requires the trier of fact, if after a hearing conducted as provided by Chapter 2001, Government Code, the trier of fact finds that a violation of the chapter or a rule of the Finance Commission of Texas establishes a pattern of wilful disregard for the requirements of this chapter or rules of the finance commission, the trier of fact to recommend to the commissioner that the maximum administrative penalty permitted under Section 154.406 be imposed on the person committing the violation or that the commissioner cancel or not renew the person's permit under this chapter. (b) Provides that for the purposes of this section, violations corrected as provided by Section 154.406 may be included in determining whether a pattern of wilful disregard for the requirements of this chapter or rules of the finance commission exists. SECTION 13. Amends Chapter 712A, Health and Safety Code, by adding Section 712.008 as follows: Sec. 712.008. RULES. Authorizes the Finance Commission of Texas to adopt rules to enforce and administer this chapter, including rules establishing fees to defray the costs of enforcing and administering this chapter. SECTION 14. Amends Chapter 712A, Health and Safety Code by adding Section 712.009 as follows: Section 712.009. LIMITATIONS ON BURIALS; DAMAGES. (a) Requires the Finance Commission of Texas to adopt rules to administer and enforce this section. (b) Prohibits an individual, corporation, partnership, firm, trust, or association that operates or owns a perpetual care cemetery from interring the remains of an individual who may have caused the death of another person if certain conditions exist. (c) Provides that an individual, corporation, partnership, firm, trust, or association that violates Subsection (b) is liable to the person having the right to control the disposition of the victim's remains under Section 711.002(a) for certain damages. (d) Prohibits damages under Subsection (c) from being assessed if the individual, corporation, partnership, firm, trust, or association that operates the cemetery proves by a preponderance of the evidence that certain conditions exist. (e) Prohibits an individual, corporation, partnership, firm, trust, or association operating or owning a perpetual care cemetery and barred from interring remains of an individual under this section from being held liable for damages by a person having the right to control the disposition of the individual's remains under Section 711.002(a), including damages for failure to provide for interment under a contract executed before the delivery of the written notice under Subsection (b)(2). (f) Provides that a notice under Subsection (b)(2) expires seven years after the date the notice is delivered. Authorizes a new notice to be delivered on the expiration of each previous notice. SECTION 15. Amends Section 712.042, to require a corporation, that on filing a statement of funds under Section 712.041, to pay the commissioner a reasonable and necessary fee set by rule adopted by the Finance Commissioner of Texas under Section 712.008 to defray the cost of administering this chapter. Deletes language regarding the banking department. SECTION 16. Amends Section 712.044, Health and Safety Code, as follows: Sec. 712.044. New Heading: EXAMINATION OF RECORDS; EXAMINATION FEES AND EXPENSES. (a) Authorizes the commissioner to examine the books and records of a corporation relating to its fund and the operation of the cemetery annually or more often as necessary to protect the interest of plot owners. Deletes language regarding the last examination of the corporation's books. (b) Requires a corporation that is examined under this section to make the specified books and records available for examination by the banking department upon reasonable notice to the corporation is required to pay to the commissioner for the examination a reasonable and necessary fee set by rules adopted by the Finance Commission of Texas under Section 712.008 to defray the cost of administering this chapter. SECTION 17. Amends Sections 712.0441(a)-(c), Health and Safety Code, as follows: (a) Authorizes the commissioner, after notice and opportunity for hearing, to impose an administrative penalty on a person who violates this chapter or a final order of the commissioner or rule of the Finance Commission of Texas and does not correct the violation before the 31st day after the date the person receives written notice of the violation from the banking department, or engages in a pattern of violations, as determined by the commissioner, including violations corrected as provided by this section. (b) Prohibits the amount of the penalty for each violation from exceeding $1,000 for each day the violation occurs. (c) Requires the commissioner, in determining the amount of the penalty, to consider the seriousness of the violation, the person's history of violations, including violations corrected as provided by this section, and the person's good faith in attempting to comply with this chapter. Provides that the imposition of a penalty under this section is subject to judicial review as a contested case under Chapter 2001, Government Code. Authorizes the commissioner to collect the penalty in the same manner that a money judgment is enforced in district court. Deletes language regarding civil penalties. SECTION 18. Amends Chapter 712C, Health and Safety Code, by adding Section 712.0442 as follows: Section 712.0442. PATTERN OF WILFUL DISREGARD. (a) Requires the trier of fact, if after a hearing conducted as provided by Chapter 2001, Government Code, the trier of fact finds that a violation of the chapter or a rule of the Finance Commission of Texas establishes a pattern of wilful disregard for the requirements of this chapter or rules of the finance commission, the trier of fact to recommend to the commissioner that the maximum administrative penalty permitted under Section 712.0441 be imposed on the person committing the violation or that the commissioner cancel or not renew the person's permit under chapter 154, Finance Code, if the person holds such a permit. (b) Provides that for the purposes of this section, violations corrected as provided by Section 712.0441 may be included in determining whether a pattern of wilful disregard for the requirements of this chapter or rules of the finance commission exists. SECTION 19. Amends Article 21.07-1, Insurance Code, by adding Section 5B as follows: Section 5B. INSURANCE FUNDED PREPAID FUNERAL CONTRACT SALES. Provides that notwithstanding any other provision of this code, a funeral home employee or other person who has a funeral prearrangement life insurance agent license or a license to sell life insurance not exceeding $15,000 and who writes only life insurance policies and fixes annuity contracts to secure the delivery of funeral services and merchandise under prepaid funeral contracts regulated by the Texas Department of Banking under Chapter 154, Finance Code, is not required to comply with any continuing education requirements in order to maintain such a license, except that the appointing insurance company must educate its appointed agents about any new products sold by the licensed agent to fund prepaid funeral contracts. Authorizes such a a licensee to be appointed by more than one insurance company. SECTION 20. Amends Chapter 4A, business and Commerce Code by adding Section 4.112 as follows: Section 4.112. PAYMENT OF CHECK AT PAR. (a) Requires a payor bank except as provided by Chapter 3 or this chapter, to pay a check drawn on it against an account with a sufficient balance at par without regard to whether the payee holds an account at the bank. (b) Provides that this section does not prohibit a bank from requiring commercially reasonable verification of the payee's identity before settlement of the check. (c) Requires the banking commissioner, in addition to any remedy provide by law, in coordination with the Finance Commission of Texas, to ensure that payor banks comply with the requirements of the section. SECTION 21. (a) Provides that the changes in law made by this Act to Subsection (d), Section 154.155, Finance Code, do not apply to cancellation of a contract that was executed and binding on all parties before September 1, 2001. Provides that such a cancellation is governed by the law in effect when the contract was executed, and the former law is continued in effect for that purpose. (b) Provides that the changes in law made by this Act to Section 154.252, Finance Code, do not apply to a contract that was executed and binding on all parties before September 1, 2002. Provides that such a contract is governed by the law in effect when the contract was executed, and the former law is continues in effect for that purpose. SECTION 22. Effective date: September 1, 2001.