1-1     By:  Solis (Senate Sponsor - Truan)                   H.B. No. 1985
 1-2           (In the Senate - Received from the House April 30, 2001;
 1-3     May 1, 2001, read first time and referred to Committee on
 1-4     Education; May 10, 2001, reported favorably by the following vote:
 1-5     Yeas 7, Nays 0; May 10, 2001, sent to printer.)
 1-6                            A BILL TO BE ENTITLED
 1-7                                   AN ACT
 1-8     relating to the regulation of proprietary schools.
 1-9           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10           SECTION 1. Sections 132.001(2), (5), and (11), Education
1-11     Code, are amended to read as follows:
1-12                 (2)  "Owner" of a proprietary school means:
1-13                       (A)  in the case of a school owned by an
1-14     individual, that individual;
1-15                       (B)  in the case of a school owned by a
1-16     partnership, all full, silent, and limited partners;
1-17                       (C)  in the case of a school owned by a
1-18     corporation, the corporation, its directors, officers, and each
1-19     shareholder owning shares of issued and outstanding stock
1-20     aggregating at least 10 percent of the total of the issued and
1-21     outstanding shares;
1-22                       (D)  in the case of a school in which the
1-23     ownership interest is held in trust, the beneficiary of that trust;
1-24     or
1-25                       (E)  in the case of a school owned by another
1-26     legal entity, a person who owns at least 10 percent ownership
1-27     interest in the entity.
1-28                 (5)  "Agency administrator" means the agency
1-29     administrator of the Texas Workforce [Employment] Commission or a
1-30     person, knowledgeable in the administration of regulating
1-31     proprietary schools, designated by the agency administrator to
1-32     administer this chapter.
1-33                 (11)  "Commission" means the Texas Workforce
1-34     [Employment] Commission.
1-35           SECTION 2. The heading to Section 132.021, Education Code, is
1-36     amended to read as follows:
1-37           Sec. 132.021.  TEXAS WORKFORCE [EMPLOYMENT] COMMISSION.
1-38           SECTION 3. Section 132.056(d), Education Code, is amended to
1-39     read as follows:
1-40           (d)  At least 30 days prior to expiration of a certificate of
1-41     approval, the proprietary school shall forward to the commission an
1-42     application for renewal.  The commission shall reexamine [the
1-43     school at] the premises of the school as frequently as the
1-44     commission considers necessary and [either] renew, revoke, or deny
1-45     renewal of [cancel] the school's certificate of approval.  If a
1-46     school fails to file a complete application for renewal at least 30
1-47     days before the expiration date of the certificate of approval, the
1-48     school, as a condition of renewal, must pay, in addition to the
1-49     annual renewal fee, a late renewal fee in an amount established by
1-50     commission rule of at least $100.
1-51           SECTION 4. Section 132.060(a), Education Code, is amended to
1-52     read as follows:
1-53           (a)  Before a certificate of approval is issued under this
1-54     chapter, a bond shall be provided by the proprietary school for the
1-55     period during which the certificate of approval is issued, and the
1-56     obligation of the bond shall be that neither this chapter nor any
1-57     rule adopted pursuant thereto shall be violated by the school or
1-58     any of its officers, agents, or employees.  The bond shall be in
1-59     the penal sum of $5,000 or a multiple of $5,000 that is not greater
1-60     than $35,000 for a certificate of approval issued for a period that
1-61     begins in the fiscal year ending August 31, 2002, and $50,000 for a
1-62     certificate of approval issued for a period that begins on or after
1-63     September 1, 2002 [$25,000].  The commission shall determine the
1-64     amount based on the evidence the school submits of its projected
 2-1     maximum total unearned tuition during the period of the certificate
 2-2     of approval.  The bond shall be a corporate surety bond issued by a
 2-3     company authorized to do business in this state, conditioned that
 2-4     the parties thereto shall pay all damages or expenses that the
 2-5     state or any governmental subdivision thereof or any student or
 2-6     potential student may sustain resulting from a violation.  The bond
 2-7     shall be to the state to be used only for payment of a tuition
 2-8     refund due to a student or potential student.  The bond shall be
 2-9     filed with the commission and shall be in such form as shall be
2-10     approved by the commission.
2-11           SECTION 5. Section 132.061(b), Education Code, is amended to
2-12     read as follows:
2-13           (b)  Except as provided by Subsection (g), as a condition for
2-14     granting certification each proprietary school must maintain a
2-15     policy for the refund of the unused portion of tuition, fees, and
2-16     other charges in the event the student, after expiration of the
2-17     72-hour cancellation privilege, fails to enter the course,
2-18     withdraws, or is discontinued therefrom at any time prior to
2-19     completion, and such policy must provide:
2-20                 (1)  refunds for resident courses will be based on the
2-21     period of enrollment computed on the basis of course time expressed
2-22     in clock hours;
2-23                 (2)  the effective date of the termination for refund
2-24     purposes in residence schools will be the earliest of the
2-25     following:
2-26                       (A)  the last date of attendance, if the student
2-27     is terminated by the school;
2-28                       (B)  the date of receipt of written notice from
2-29     the student; or
2-30                       (C)  10 school days following the last date of
2-31     attendance;
2-32                 (3)  if tuition and fees are collected in advance of
2-33     entrance, and if, after expiration of the 72-hour cancellation
2-34     privilege, the student does not enter the residence school, not
2-35     more than $100 shall be retained by the school;
2-36                 (4)  for the student who enters a residence course of
2-37     not more than 12 months in length, terminates, or withdraws, the
2-38     school may retain $100 of tuition and fees and the minimum refund
2-39     of the remaining tuition and fees will be:
2-40                       (A)  during the first week or one-tenth of the
2-41     course, whichever is less, 90 percent of the remaining tuition and
2-42     fees;
2-43                       (B)  after the first week or one-tenth of the
2-44     course, whichever is less, but within the first three weeks or
2-45     one-fifth of the course, whichever is less, 80 percent of the
2-46     remaining tuition and fees;
2-47                       (C)  after the first three weeks or one-fifth of
2-48     the course, whichever is less, but within the first quarter of the
2-49     course, 75 percent of the remaining tuition and fees;
2-50                       (D)  during the second quarter of the course, 50
2-51     percent of the remaining tuition and fees;
2-52                       (E)  during the third quarter of the course, 10
2-53     percent of the remaining tuition and fees; or
2-54                       (F)  during the last quarter of the course, the
2-55     student may be considered obligated for the full tuition and fees;
2-56                 (5)  for residence courses more than 12 months in
2-57     length, the refund shall be applied to each 12-month period paid,
2-58     or part thereof separately, and the student is entitled to a refund
2-59     as provided by Subdivision (4);
2-60                 (6)  refunds of items of extra expense to the student,
2-61     such as instructional supplies, books, student activities,
2-62     laboratory fees, service charges, rentals, deposits, and all other
2-63     such ancillary miscellaneous charges, where these items are
2-64     separately stated and shown in the data furnished the student
2-65     before enrollment, will be made in a reasonable manner acceptable
2-66     to the commission;
2-67                 (7)  refunds based on enrollment in residence schools
2-68     will be totally consummated within 60 days after the effective date
2-69     of termination;
 3-1                 (8)  refunds for correspondence courses will be
 3-2     computed on the basis of the number of lessons in the course;
 3-3                 (9)  the effective date of the termination for refund
 3-4     purposes in correspondence courses will be the earliest of the
 3-5     following:
 3-6                       (A)  the date of notification to the student if
 3-7     the student is terminated;
 3-8                       (B)  the date of receipt of written notice from
 3-9     the student; or
3-10                       (C)  the end of the third calendar month
3-11     following the month in which the student's last lesson assignment
3-12     was received unless notification has been received from the student
3-13     that the student [he] wishes to remain enrolled;
3-14                 (10)  if tuition and fees are collected before any
3-15     lessons have been completed, and if, after expiration of the
3-16     72-hour cancellation privilege, the student fails to begin the
3-17     course, not more than $50 shall be retained by the school;
3-18                 (11)  in cases of termination or withdrawal after the
3-19     student has begun the correspondence course, the school may retain
3-20     $50 of tuition and fees, and the minimum refund policy must provide
3-21     that the student will be refunded the pro rata portion of the
3-22     remaining tuition, fees, and other charges that the number of
3-23     lessons completed and serviced by the school bears to the total
3-24     number of lessons in the course; and
3-25                 (12)  refunds based on enrollment in correspondence
3-26     schools will be totally consummated within 60 days after the
3-27     effective date of termination.
3-28           SECTION 6. The heading to Section 132.064, Education Code, is
3-29     amended to read as follows:
3-30           Sec. 132.064.  NONQUALIFICATION AS SMALL PROPRIETARY SCHOOL.
3-31           SECTION 7. Section 132.151, Education Code, is amended to
3-32     read as follows:
3-33           Sec. 132.151.  PROHIBITIONS. A person may not:
3-34                 (1)  operate a proprietary school without a certificate
3-35     of approval issued by the commission;
3-36                 (2)  solicit prospective students for or on behalf of a
3-37     proprietary school without being registered as a representative of
3-38     the proprietary school [bonded] as required by this chapter;
3-39                 (3)  accept contracts or enrollment applications from a
3-40     representative who is not bonded as required by this chapter;
3-41                 (4)  utilize advertising designed to mislead or deceive
3-42     prospective students;
3-43                 (5)  fail to notify the commission of the
3-44     discontinuance of the operation of any proprietary school within 72
3-45     hours of cessation of classes and make available accurate records
3-46     as required by this chapter;
3-47                 (6)  fail to secure and file within 30 days an
3-48     increased bond as required by this chapter;
3-49                 (7)  negotiate any promissory instrument received as
3-50     payment of tuition or other charge prior to completion of 75
3-51     percent of the course, provided that prior to such time, the
3-52     instrument may be transferred by assignment to a purchaser who
3-53     shall be subject to all the defenses available against the
3-54     proprietary school named as payee; or
3-55                 (8)  violate any provision of this chapter.
3-56           SECTION 8. Section 132.201, Education Code, is amended by
3-57     amending Subsection (e) and adding Subsection (i) to read as
3-58     follows:
3-59           (e)  The fee for an investigation at a proprietary school to
3-60     resolve a complaint filed against the school is $600 [$400].  The
3-61     fee may be charged only if:
3-62                 (1)  the complaint could not have been resolved by
3-63     telephone or written correspondence only;
3-64                 (2)  a representative of the commission visits the
3-65     school as a part of the complaint resolution process; and
3-66                 (3)  the school is found to be at fault.
3-67           (i)  The commission may charge each proprietary school a fee
3-68     for the cost of a service that collects, analyzes, and reports
3-69     student-level data in order to assess the outcome of students who
 4-1     attend proprietary schools.  The total amount of the fees charged
 4-2     under this subsection must not exceed the cost of the service to
 4-3     the commission.
 4-4           SECTION 9. Section 132.242(e), Education Code, is amended to
 4-5     read as follows:
 4-6           (e)  If the amount of the closed proprietary school's bond
 4-7     under Section 132.060 is less than the amount required for student
 4-8     refunds under Subsections (c) and (d), the refunds shall be paid
 4-9     from the proprietary school tuition protection fund in an amount
4-10     not to exceed $50,000 [$25,000].
4-11           SECTION 10. (a)  This Act takes effect September 1, 2001.
4-12           (b)  The change in law made by this Act to Section
4-13     132.061(b), Education Code, applies only to a course of instruction
4-14     or study beginning on or after the effective date of this Act.  A
4-15     course of instruction or study beginning before the effective date
4-16     of this Act is governed by the law in effect when the course began,
4-17     and the former law is continued in effect for that purpose.
4-18           (c)  The change in law made by this Act to Section
4-19     132.201(e), Education Code, applies only to a fee for an
4-20     investigation conducted pursuant to a complaint filed on or after
4-21     the effective date of this Act.  A fee for an investigation
4-22     conducted pursuant to a complaint filed before the effective date
4-23     of this Act is governed by the law in effect at the time the
4-24     complaint is filed, and the former law is continued in effect for
4-25     that purpose.
4-26           (d)  The change in law made by this Act to Section
4-27     132.242(e), Education Code, applies only to a refund that becomes
4-28     due on or after the effective date of this Act.  A refund that
4-29     becomes due before the effective date of this Act is governed by
4-30     the law in effect on the date the refund becomes due, and the
4-31     former law is continued in effect for that purpose.
4-32                                  * * * * *