1-1 By: Harris S.B. No. 1568 1-2 (In the Senate - Filed March 9, 2001; March 14, 2001, read 1-3 first time and referred to Committee on Business and Commerce; 1-4 April 26, 2001, reported favorably by the following vote: Yeas 4, 1-5 Nays 0; April 26, 2001, sent to printer.) 1-6 A BILL TO BE ENTITLED 1-7 AN ACT 1-8 relating to the licensing of national and state banks to underwrite 1-9 certain credit insurance products as principal. 1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-11 SECTION 1. Subchapter F, Chapter 21, Insurance Code, is 1-12 amended by adding Article 21.82 to read as follows: 1-13 Art. 21.82. CERTIFICATES OF AUTHORITY FOR NATIONAL AND STATE 1-14 BANKS 1-15 Sec. 1. DEFINITIONS. In this article: 1-16 (1) "Bank" means a national banking association 1-17 organized and existing under the National Bank Acts (12 U.S.C. 1-18 Section 21 et seq.), a state bank organized and existing under 1-19 Subtitle A, Title 3, Finance Code, or a state savings bank 1-20 organized and existing under Subtitle C, Title 3, Finance Code. 1-21 (2) "Authorized product" means either a debt 1-22 cancellation agreement or debt suspension agreement as defined 1-23 herein but does not include any other insurance products that a 1-24 bank may underwrite as principal as authorized by Section 302, 1-25 Financial Services Modernization Act of 1999 (Pub. L. No. 106-102). 1-26 (3) "Debt cancellation agreement" means a contract 1-27 between a bank and its borrower wherein the bank for a separately 1-28 stated consideration agrees to waive all or part of the debt on the 1-29 happening of a fortuitous event, such as death, disability, or the 1-30 destruction of the bank's collateral. 1-31 (4) "Debt suspension agreement" means a contract 1-32 between a bank and its borrower wherein the bank for a separately 1-33 stated consideration agrees to suspend scheduled installment 1-34 payments for an agreed period of time upon the happening of a 1-35 fortuitous event, such as involuntary unemployment or accident or 1-36 on occurrence of a fortuitous condition such as sickness. 1-37 Sec. 2. CERTIFICATE OF AUTHORITY TO UNDERWRITE DEBT 1-38 CANCELLATION AND DEBT SUSPENSION AGREEMENT. (a) A bank, without 1-39 first obtaining a certificate of authority from the commissioner as 1-40 provided in Subsection (b) of this section, may not sell either as 1-41 principal or agent a debt cancellation agreement or a debt 1-42 suspension agreement nor contract for, charge, or receive any 1-43 amount in connection with the offering or sale of such agreements. 1-44 (b) A bank is entitled to receive a certificate of authority 1-45 on notification to the commissioner of its intention to operate 1-46 under this subchapter. On receipt of notice, the commissioner 1-47 shall immediately issue a certificate of authority. 1-48 (c) The holder of a certificate of authority is subject to 1-49 disciplinary action as provided by Chapter 81 of this code for 1-50 violations exclusively relating to conduct in the underwriting, 1-51 pricing, marketing, and claims handling of authorized products. 1-52 (d) The holder of a certificate of authority is not subject 1-53 to any visitorial power granted to the department by this code, 1-54 save and except that a holder is required to submit information and 1-55 other data that relate exclusively to the setting of rates, payment 1-56 of claims, and marketing of authorized products. 1-57 Sec. 3. DEBT CANCELLATION AND DEBT SUSPENSION AGREEMENTS TO 1-58 BE REGULATED AS INSURANCE. (a) Debt cancellation and debt 1-59 suspension agreements shall be regulated with respect to rates, 1-60 forms, and claims according to their functional insurance 1-61 equivalent. By way of example only and without limitation, debt 1-62 cancellation agreements that provide for the cancellation of 1-63 indebtedness on death shall be regulated as credit life insurance. 1-64 (b) The commissioner, by rule, shall classify debt 2-1 cancellation and debt suspension agreements according to their 2-2 functional insurance equivalent and identify those articles or 2-3 sections of this code which shall apply; provided, however, that 2-4 this rulemaking authority is restricted exclusively to 2-5 underwriting, pricing, marketing, and claims handling and in no 2-6 event shall a certificate holder be subject to any provision of 2-7 this code relating to financial solvency or reserves related to the 2-8 underwriting of these authorized products. 2-9 SECTION 2. This Act takes effect September 1, 2001. 2-10 * * * * *