By: Harris S.B. No. 1568
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the licensing of national and state banks to underwrite
1-3 certain credit insurance products as principal:
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter F, Chapter 21, Texas Insurance Code is
1-6 amended by adding article 21.82 to read as follows:
1-7 Art. 21.82 CERTIFICATES OF AUTHORITY FOR NATIONAL AND STATE
1-8 BANKS
1-9 Sec. 1. DEFINITIONS. In this article:
1-10 (1) "Bank" means a national banking association
1-11 organized and existing under the National Bank Acts (12 U.S.C.
1-12 Section 21 et seg.), a state bank organized and existing under the
1-13 Texas Banking Act (Article 342- 1.001 et seg., Vernon's Texas Civil
1-14 Statutes), a state savings bank organized and existing under the
1-15 Texas Savings Bank Act (Article 489e, Vernon's Texas Civil
1-16 Statutes).
1-17 (2) "Authorized Product" means either a debt
1-18 cancellation agreement or debt suspension agreement as defined
1-19 herein but does not include any other insurance products that a
1-20 bank may underwrite as principal as authorized by Section 302 of
1-21 the Financial Services Modernization Act of 1999 (Pub.L. 106-102).
1-22 (3) "Debt Cancellation Agreement" means a contract
1-23 between a bank and its borrower wherein the bank for a separately
2-1 stated consideration agrees to waive all or part of the debt upon
2-2 the happening of a fortuitous event, such as death, disability or
2-3 the destruction of the bank's collateral.
2-4 (4) "Debt Suspension Agreement" means a contract
2-5 between a bank and its borrower wherein the bank for a separately
2-6 stated consideration agrees to suspend scheduled installment
2-7 payments for an agreed period of time upon the happening of a
2-8 fortuitous event, such as involuntary unemployment or accident or
2-9 upon occurrence of a fortuitous condition such as sickness.
2-10 Sec. 2. CERTIFICATE OF AUTHORITY TO UNDERWRITE DEBT
2-11 CANCELLATION AND DEBT SUSPENSION AGREEMENT. (a) A bank, without
2-12 first obtaining a Certificate of Authority from the Commissioner as
2-13 provided in sub section (b), may not sell either as principal or
2-14 agent a debt cancellation agreement or a debt suspension agreement
2-15 nor contract for, charge, or receive any amount in connection with
2-16 the offering or sale of such agreements.
2-17 (b) A bank is entitled to receive a certificate of authority
2-18 on notification to the Commissioner of its intention to operate
2-19 under this subchapter. Upon receipt of notice, the Commissioner
2-20 shall immediately issue a certificate of authority.
2-21 (c) The holder of a Certificate of Authority is subject to
2-22 disciplinary action as provided by Chapter 81, Texas Insurance Code
2-23 for violations exclusively relating to conduct in the underwriting,
2-24 pricing, marketing and claims handling of authorized products.
2-25 (d) The holder of a Certificate of Authority is not subject
2-26 to any visitorial power granted to the Department by the Texas
3-1 Insurance Code, save and except, that a holder is required to
3-2 submit information and other data that relate exclusively to the
3-3 setting of rates, payment of claims and marketing of authorized
3-4 products.
3-5 Sec. 3 Debt Cancellation and Debt Suspension Agreements to
3-6 Be Regulated as Insurance (a) Debt Cancellation and Debt
3-7 Suspension Agreements shall be regulated with respect to rates,
3-8 forms, and claims according to their functional insurance
3-9 equivalent. By way of example only and without limitation, debt
3-10 cancellation agreements that provide for the cancellation of
3-11 indebtedness upon death shall be regulated as credit life
3-12 insurance.
3-13 (b) The Commissioner, by rule, shall classify debt
3-14 cancellation and debt suspension agreements according to their
3-15 functional insurance equivalent and identify those articles or
3-16 sections of the Texas Insurance Code which shall apply. Provided
3-17 however, this rule making authority is restricted exclusively to
3-18 underwriting, pricing, marketing and claims handling and in no
3-19 event shall a certificate holder be subject to any provision of the
3-20 Texas Insurance Code relating to financial solvency or reserves
3-21 related to the underwriting of these authorized products.
3-22 SECTION 2. This Act takes effect September 1, 2001.