78R6237 DWS-F

By:  Van de Putte                                                 S.B. No. 1211



A BILL TO BE ENTITLED

AN ACT

relating to collateral protection insurance.                                  
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Section 307.051(e), Finance Code, is amended to 
read as follows: 
	(e)  A premium for collateral protection insurance for 
collateral that is real property may be based on the amount of 
unpaid indebtedness, the cash value or replacement value of the 
property, or the amount of insurance previously maintained by the 
debtor, and may include an additional premium for any liability 
coverage provided to the debtor.  A premium for collateral 
protection insurance for other types of collateral may not be based 
on an amount that exceeds the actual amount of unpaid indebtedness 
of the debtor as of the effective date of the policy.  This 
condition applies without regard to whether the coverage under the 
policy limits the insurer's liability to:
		(1)  the amount of unpaid debt;                                               
		(2)  the cash value of the collateral;  or                                    
		(3)  the cost of repair of the collateral.                                    
	SECTION 2.  Section 307.052(a), Finance Code, is amended to 
read as follows: 
	(a)  A creditor who requires collateral protection insurance 
that is paid for directly or indirectly by a debtor may place 
collateral protection insurance if:
		(1)  the debtor has entered into a credit transaction 
with the creditor for which a credit agreement exists;
		(2)  the credit agreement requires the debtor to 
maintain insurance on the collateral; and
		(3)  a notice has been included in the credit agreement 
or a separate document provided to the debtor at the time the credit 
agreement is executed that states that:
			(A)  the debtor is required to:                                              
				(i)  keep the collateral insured against 
damage in the amount the creditor specifies [equal to the debtor's 
indebtedness to the creditor];
				(ii)  purchase the insurance from an insurer 
that is authorized to do business in this state or an eligible 
surplus lines insurer;  and
				(iii)  name the creditor as the person to be 
paid under the policy in the event of a loss;
			(B)  the debtor must, if required by the creditor, 
deliver to the creditor a copy of the policy and proof of the 
payment of premiums;  and
			(C)  if the debtor fails to meet any requirement 
listed in Paragraph (A) or (B), the creditor may obtain collateral 
protection insurance on behalf of the debtor at the debtor's 
expense.
	SECTION 3.  The change in law made by this Act applies only 
to a credit agreement entered into on or after the effective date of 
this Act.  A credit agreement entered into before the effective date 
of this Act is governed by the law in effect when the credit 
agreement was entered into, and the former law is continued in 
effect for that purpose.
	SECTION 4.  This Act takes effect immediately if it receives 
a vote of two-thirds of all the members elected to each house, as 
provided by Section 39, Article III, Texas Constitution.  If this 
Act does not receive the vote necessary for immediate effect, this 
Act takes effect September 1, 2003.