H.B. No. 1380
AN ACT
relating to certain products offered in connection with a consumer
loan.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter I, Chapter 342, Finance Code, is
amended by adding Section 342.4021 to read as follows:
Sec. 342.4021. PRODUCTS OFFERED IN CONNECTION WITH LOAN.
(a) Contemporaneously with or subsequent to a loan made under
Subchapter E, an authorized lender may offer, subject to all
applicable insurance laws of this state, including agent licensing
requirements, policy form requirements, and refunding methods, one
or more of the following types of noncredit insurance and other
products:
(1) life insurance;
(2) disability income insurance;
(3) accident insurance;
(4) loss of income insurance;
(5) mechanical breakdown insurance;
(6) home security plans and club memberships;
(7) automobile security plans and automobile club
memberships; and
(8) service contracts.
(b) The lender:
(1) shall provide the borrower with the option of
purchasing any of the products under Subsection (a) separately; and
(2) may not require the purchase of any of the products
under Subsection (a) as a condition for approval of the loan.
(c) The cost of noncredit insurance or another product under
Subsection (a) may be collected from the borrower only if:
(1) the purchase of the noncredit insurance or product
is not a condition for approval of the loan;
(2) the borrower provides written acknowledgment of
the borrower's intent to purchase the noncredit insurance or
product;
(3) the borrower is entitled to cancel the transaction
and receive a full refund of the purchase price:
(A) before the 31st day after the date of the
notice under Subdivision (4), for a transaction other than a
service contract; or
(B) as provided by Chapter 1304, Occupations
Code, for a service contract;
(4) the borrower is provided a separate notice stating
that:
(A) the product is not credit insurance;
(B) the purchase of the product is not a
condition for loan approval;
(C) the borrower is entitled to cancel the
purchase and receive a full refund of the purchase price:
(i) before the 31st day after the date of
the notice under Subdivision (4), for a transaction other than a
service contract; or
(ii) as provided by Chapter 1304,
Occupations Code, for a service contract; and
(D) if the borrower chooses to finance the
purchase of the product, the borrower will pay a finance charge on
the cost of the product;
(5) the notice required by Subdivision (4) includes a
separate section that states the mailing address of the insurance
company or vendor of the product and that may be detached and
returned to the insurance company or vendor permitting the customer
to cancel the purchase and receive a full cash refund; and
(6) any benefit payable as a result of the ownership of
the noncredit insurance or product will be paid directly to the
borrower or the borrower's designated representative.
(d) An authorized lender may include in the loan contract
the cost for noncredit insurance or another product under
Subsection (a).
(e) An authorized lender may not charge or collect an amount
for a type of noncredit insurance or other product that is not
specified in Subsection (a).
(f) The cost of noncredit insurance and other products
purchased under this chapter, and any gain or advantage received by
an authorized lender or an employee, officer, director, general or
other agent, affiliate, or associate of the lender as a result of a
charge for noncredit insurance or other products authorized under
this chapter, is not considered a further or other charge or amount
received in connection with a loan made under this chapter.
(g) The commissioner shall:
(1) adopt a rule providing for Spanish language
disclosure of the information required in Subsection (c); and
(2) establish a form for the disclosure conforming to
the plain language and readability requirements applicable to a
loan contract under Section 341.502.
SECTION 2. Section 342.410, Finance Code, is amended to
read as follows:
Sec. 342.410. PAYMENT FOR INSURANCE OR OTHER PRODUCT FROM
LOAN PROCEEDS. A lender, including an officer, agent, or employee
of the lender, who offers credit [accepts] insurance, noncredit
insurance, or another product as permitted by [under] this
subchapter [as protection for a loan]:
(1) may deduct the premium or identifiable charge for
the credit insurance, the premium for the noncredit insurance, and
the charge for the other product from the proceeds of the loan; and
(2) shall pay the deducted amounts to the insurance
company writing the insurance or the vendor of the other product.
SECTION 3. Section 342.502(b), Finance Code, is amended to
read as follows:
(b) On a loan subject to Subchapter E or a secondary
mortgage loan subject to Subchapter G a lender may assess and
collect from the borrower an amount incurred by the lender for:
(1) court costs;
(2) attorney's fees assessed by a court, in addition to
those provided by Section 342.307;
(3) a fee authorized by law for filing, recording, or
releasing in a public office a security for a loan;
(4) a reasonable amount spent for repossessing,
storing, preparing for sale, or selling any security;
(5) a fee for recording a lien on or transferring a
certificate of title to a motor vehicle offered as security for a
loan made under this chapter; or
(6) the [a] premium or an identifiable charge received
in connection with the sale of credit insurance, the premium
received in connection with the sale of noncredit insurance, and
the charge for any other product authorized under this chapter.
SECTION 4. The change in law made by this Act applies only
to a loan contract made on or after the effective date of this Act.
A loan contract made before the effective date of this Act is
governed by the law in effect when the loan contract was made, and
the former law is continued in effect for that purpose.
SECTION 5. This Act takes effect September 1, 2003.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 1380 was passed by the House on May
10, 2003, by a non-record vote.
______________________________
Chief Clerk of the House
I certify that H.B. No. 1380 was passed by the Senate on May
28, 2003, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor