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.
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