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A BILL TO BE ENTITLED
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AN ACT
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relating to the regulation of debt management services providers; |
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providing a penalty. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 394, Finance Code, is amended by adding |
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Subchapter D to read as follows: |
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SUBCHAPTER D. UNIFORM DEBT MANAGEMENT SERVICES ACT |
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Sec. 394.301. SHORT TITLE. This subchapter may be cited as |
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the Uniform Debt Management Services Act. |
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Sec. 394.302. DEFINITIONS. In this subchapter: |
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(1) "Administrator" means the consumer credit |
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commissioner. |
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(2) "Affiliate": |
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(A) with respect to an individual who is a debt |
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management services provider, means: |
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(i) the spouse of the individual provider; |
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(ii) a sibling of the individual provider |
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or the spouse of a sibling; |
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(iii) an individual or the spouse of an |
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individual who is a lineal ancestor or lineal descendant of the |
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individual provider or the individual provider's spouse; |
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(iv) an aunt, uncle, great aunt, great |
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uncle, first cousin, niece, nephew, grandniece, or grandnephew, |
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whether related by the whole or the half blood or adoption, or the |
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spouse of any of them; or |
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(v) any other individual occupying the |
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residence of the individual provider; and |
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(B) with respect to an entity, means: |
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(i) a person that directly or indirectly |
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controls, is controlled by, or is under common control with the |
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entity; |
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(ii) an officer of, or an individual |
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performing similar functions with respect to, the entity; |
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(iii) a director of, or an individual |
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performing similar functions with respect to, the entity; |
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(iv) subject to adjustment of the dollar |
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amount pursuant to Section 394.332(f), a person that receives or |
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received more than $25,000 from the entity in either the current |
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year or the preceding year or a person that owns more than 10 |
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percent of, or an individual who is employed by or is a director of, |
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a person that receives or received more than $25,000 from the entity |
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in either the current year or the preceding year; |
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(v) an officer or director of, or an |
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individual performing similar functions with respect to, a person |
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described in Subparagraph (i); |
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(vi) the spouse of, or an individual |
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occupying the residence of, an individual described in |
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Subparagraphs (i) through (v); or |
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(vii) an individual who has the |
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relationship specified in Paragraph (A)(iv) to an individual |
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provider or the spouse of an individual described in Subparagraphs |
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(i) through (v). |
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(3) "Agreement" means an agreement between a provider |
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and an individual debtor for the performance of debt management |
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services. |
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(4) "Bank" means a financial institution, including a |
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commercial bank, savings bank, savings and loan association, credit |
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union, or trust company, engaged in the business of banking, |
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chartered under federal or state law, and regulated by a federal or |
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state banking regulatory authority. |
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(5) "Business address" means the physical location of |
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a business, including the name and number of a street. |
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(6) "Certified counselor" means an individual |
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certified by a training program or certifying organization, |
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approved by the administrator, that authenticates the competence of |
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individuals providing education and assistance to debtors in |
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connection with debt management services in which an agreement |
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contemplates that creditors will reduce finance charges or fees for |
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late payment, default, or delinquency. |
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(7) "Certified debt specialist" means an individual |
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certified by a training program or certifying organization, |
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approved by the administrator, that authenticates the competence of |
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individuals providing education and assistance to debtors in |
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connection with debt management services in which an agreement |
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contemplates that creditors will settle debts for less than the |
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full principal amount of debt owed. |
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(8) "Concessions" means assent to repayment of a debt |
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on terms more favorable to an individual than the terms of the |
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contract between the individual and a creditor. |
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(9) "Day" means calendar day. |
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(10) "Debt management services" means services as an |
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intermediary between an individual and one or more creditors of the |
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individual for the purpose of obtaining concessions. The term does |
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not include: |
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(A) legal services provided in an |
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attorney-client relationship by an attorney licensed or otherwise |
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authorized to practice law in this state; |
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(B) accounting services provided in an |
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accountant-client relationship by a certified public accountant |
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licensed to provide accounting services in this state; or |
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(C) financial planning services provided in a |
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financial planner-client relationship by a member of a financial |
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planning profession whose members the finance commission, by rule, |
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determines are: |
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(i) licensed by this state; |
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(ii) subject to a disciplinary mechanism; |
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(iii) subject to a code of professional |
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responsibility; and |
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(iv) subject to a continuing education |
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requirement. |
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(11) "Entity" means a person other than an individual. |
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(12) "Good faith" means honesty in fact and the |
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observance of reasonable standards of fair dealing. |
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(13) "Person" means an individual, corporation, |
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business trust, estate, trust, partnership, limited liability |
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company, association, joint venture, or any other legal or |
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commercial entity. The term does not include a public corporation, |
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government, or governmental subdivision, agency, or |
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instrumentality. |
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(14) "Plan" means a program or strategy in which a |
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provider furnishes debt management services to an individual and |
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which includes a schedule of payments to be made by or on behalf of |
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the individual and used to pay debts owed by the individual. |
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(15) "Principal amount of the debt" means the amount |
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of a debt at the time of an agreement. |
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(16) "Provider" means a person that provides, offers |
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to provide, or agrees to provide debt management services directly |
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or through others. |
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(17) "Record" means information that is inscribed on a |
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tangible medium or that is stored in an electronic or other medium |
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and is retrievable in perceivable form. |
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(18) "Settlement fee" means a charge imposed on or |
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paid by an individual in connection with a creditor's assent to |
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accept in full satisfaction of a debt an amount less than the |
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principal amount of the debt. |
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(19) "Sign" means, with present intent to authenticate |
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or adopt a record: |
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(A) to execute or adopt a tangible symbol; or |
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(B) to attach to or logically associate with the |
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record an electronic sound, symbol, or process. |
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(20) "State" means a state of the United States, the |
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District of Columbia, Puerto Rico, the United States Virgin |
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Islands, or any territory or insular possession subject to the |
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jurisdiction of the United States. |
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(21) "Trust account" means an account held by a |
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provider that is: |
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(A) established in an insured bank; |
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(B) separate from other accounts of the provider |
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or its designee; |
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(C) designated as a trust account or other |
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account designated to indicate that the money in the account is not |
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the money of the provider or its designee; and |
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(D) used to hold money of one or more individuals |
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for disbursement to creditors of the individuals. |
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Sec. 394.303. APPLICABILITY. (a) This subchapter does not |
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apply to an agreement with an individual who the provider has no |
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reason to know resides in this state at the time of the agreement. |
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(b) This subchapter does not apply to a provider to the |
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extent that the provider: |
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(1) provides or agrees to provide debt management, |
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educational, or counseling services to an individual who the |
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provider has no reason to know resides in this state at the time the |
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provider agrees to provide the services; or |
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(2) receives no compensation for debt management |
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services from or on behalf of the individuals to whom it provides |
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the services or from their creditors. |
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(c) This subchapter does not apply to the following persons |
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or their employees when the person or the employee is engaged in the |
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regular course of the person's business or profession: |
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(1) a judicial officer, a person acting under an order |
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of a court or an administrative agency, or an assignee for the |
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benefit of creditors; |
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(2) a bank; |
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(3) an affiliate, as defined in Section |
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394.302(2)(B)(i), of a bank if the affiliate is regulated by a |
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federal or state banking regulatory authority; or |
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(4) a title insurer, title insurance agent, escrow |
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company, or other person that provides bill-paying services if the |
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provision of debt management services is incidental to the |
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bill-paying services or a disbursement, closing, or settlement. |
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Sec. 394.304. REGISTRATION REQUIRED. (a) Except as |
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otherwise provided in Subsection (b), a provider may not provide |
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debt management services to an individual who it reasonably should |
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know resides in this state at the time it agrees to provide the |
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services, unless the provider is registered under this subchapter. |
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(b) If a provider is registered under this subchapter, |
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Subsection (a) does not apply to an employee or agent of the |
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provider. |
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(c) The administrator shall maintain and publicize a list of |
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the names of all registered providers. |
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Sec. 394.305. APPLICATION FOR REGISTRATION: FORM, FEE, AND |
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ACCOMPANYING DOCUMENTS. (a) An application for registration as a |
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provider must be in a form prescribed by the administrator. |
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(b) Subject to adjustment of dollar amounts pursuant to |
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Section 394.332(f), an application for an initial registration must |
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be accompanied by: |
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(1) the appropriate fees set by the Finance Commission |
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of Texas in an amount necessary to recover the costs of |
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administering this subchapter; |
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(2) the bond required by Section 394.313; |
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(3) identification of all trust accounts required by |
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Section 394.322 and an irrevocable consent authorizing the |
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administrator to review and examine the trust accounts; |
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(4) evidence of insurance in the amount of $250,000: |
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(A) against the risks of dishonesty, fraud, |
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theft, and other misconduct on the part of the applicant or a |
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director, employee, or agent of the applicant; |
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(B) issued by an insurance company authorized to |
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do business in this state and rated at least A or equivalent by a |
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nationally recognized rating organization approved by the |
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administrator; |
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(C) with a deductible not exceeding $5,000; |
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(D) payable for the benefit of the applicant, |
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this state, and individuals who are residents of this state, as |
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their interests may appear; and |
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(E) not subject to cancellation by the applicant |
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or the insurer until 60 days' notice after written notice has been |
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given to the administrator; and |
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(5) a certificate of authority to do business in this |
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state, if applicable. |
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Sec. 394.306. APPLICATION FOR REGISTRATION: REQUIRED |
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INFORMATION. (a) An application for registration must be signed |
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under oath and include: |
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(1) the applicant's name, principal business address |
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and telephone number, and all other business addresses in this |
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state, electronic mail addresses, and Internet website addresses; |
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(2) all names under which the applicant conducts |
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business; |
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(3) the address of each location in this state at which |
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the applicant will provide debt management services or a statement |
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that the applicant will have no such location; |
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(4) the name and home address of each officer and |
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director of the applicant and each person that owns at least 10 |
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percent of the applicant; |
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(5) identification of every jurisdiction in which, |
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during the five years immediately preceding the application: |
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(A) the applicant or any of its officers or |
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directors has been licensed or registered to provide debt |
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management services; or |
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(B) individuals have resided when they received |
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debt management services from the applicant; |
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(6) a statement describing, to the extent it is known |
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or should be known by the applicant, any material civil or criminal |
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judgment or litigation and any material administrative or |
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enforcement action by a governmental agency in any jurisdiction |
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against the applicant, any of its officers, directors, owners, or |
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agents, or any person who is authorized to have access to the trust |
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account required by Section 394.322; |
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(7) subject to Subsection (b), the applicant's |
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financial statements, reviewed by an independent accountant |
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licensed to practice accounting under Chapter 901, Occupations |
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Code, for each of the two years immediately preceding the |
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application or, if it has not been in operation for the two years |
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preceding the application, for the period of its existence; |
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(8) evidence of accreditation by an independent |
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accrediting organization approved by the administrator; |
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(9) evidence that, within 12 months after initial |
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employment, each of the applicant's counselors becomes certified as |
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a certified counselor or certified debt specialist; |
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(10) a description of the three most commonly used |
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educational programs that the applicant provides or intends to |
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provide to individuals who reside in this state and a copy of any |
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materials used or to be used in those programs; |
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(11) a description of the applicant's financial |
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analysis and initial budget plan, including any form or electronic |
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model, used to evaluate the financial condition of individuals; |
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(12) a copy of each form of agreement that the |
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applicant will use with individuals who reside in this state; |
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(13) the schedule of fees and charges that the |
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applicant will use with individuals who reside in this state; |
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(14) at the applicant's expense, the results of a |
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criminal records check, including fingerprints, conducted within |
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the immediately preceding 12 months, covering every officer of the |
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applicant and every employee or agent of the applicant who is |
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authorized to have access to the trust account required by Section |
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394.322; |
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(15) the names and addresses of all employers of each |
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director during the 10 years immediately preceding the application; |
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(16) a description of any ownership interest of at |
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least 10 percent by a director, owner, or employee of the applicant |
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in: |
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(A) any affiliate of the applicant; or |
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(B) any entity that provides products or services |
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to the applicant or any individual relating to the applicant's debt |
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management services; |
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(17) if the applicant claims nonprofit or tax-exempt |
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status, or if the applicant's business practices involve holding, |
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accessing, or directing the funds of an individual, a statement of |
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the amount of compensation of the applicant's five most highly |
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compensated employees for each of the three years immediately |
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preceding the application or, if it has not been in operation for |
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the three years preceding the application, for the period of its |
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existence; |
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(18) the identity of each director who is an |
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affiliate, as defined in Section 394.302(2)(A) or (B)(i), (ii), |
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(iv), (v), (vi), or (vii), of the applicant; and |
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(19) any other information that the administrator |
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reasonably requires. |
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(b) If the applicant claims nonprofit or tax-exempt status, |
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or if the applicant's business practices involve holding, |
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accessing, or directing the funds of an individual, the applicant's |
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financial statements required by Subsection (a)(7) must be audited |
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by an accountant licensed to practice accounting under Chapter 901, |
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Occupations Code. |
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Sec. 394.307. APPLICATION FOR REGISTRATION: OBLIGATION TO |
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UPDATE INFORMATION. An applicant or registered provider shall |
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notify the administrator within 10 days after a change in the |
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information specified in Section 394.305(b)(4) or Section |
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394.306(a)(1), (3), (6), (12), or (13). |
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Sec. 394.308. APPLICATION FOR REGISTRATION: PUBLIC |
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INFORMATION. Except for the information required by Sections |
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394.306(a)(7), (14), and (17) and the addresses required by Section |
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394.306(a)(4), the administrator shall make the information in an |
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application for registration as a provider available to the public. |
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Sec. 394.309. CERTIFICATE OF REGISTRATION: ISSUANCE OR |
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DENIAL. (a) Except as otherwise provided in Subsections (c) and |
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(d), the administrator shall issue a certificate of registration as |
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a provider to a person that complies with Sections 394.305 and |
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394.306. |
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(b) If an applicant has otherwise complied with Sections |
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394.305 and 394.306, including a timely effort to obtain the |
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information required by Section 394.306(a)(14), but the |
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information has not been received, the administrator may issue a |
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temporary certificate of registration. The temporary certificate |
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shall expire not later than 180 days after issuance. |
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(c) The administrator may deny registration if: |
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(1) the application contains information that is |
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materially erroneous or incomplete; |
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(2) an officer, director, or owner of the applicant |
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has been convicted of a crime, or suffered a civil judgment, |
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involving dishonesty or the violation of state or federal |
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securities laws; |
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(3) the applicant or any of its officers, directors, |
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or owners has defaulted in the payment of money collected for |
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others; or |
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(4) the administrator finds that the financial |
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responsibility, experience, character, or general fitness of the |
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applicant or its owners, directors, employees, or agents does not |
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warrant belief that the business will be operated in compliance |
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with this subchapter. |
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(d) The administrator shall deny registration with respect |
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to an applicant that claims nonprofit or tax-exempt status if the |
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applicant's board of directors is not independent of the |
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applicant's employees and agents. |
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(e) Subject to adjustment of the dollar amount pursuant to |
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Section 394.332(f), a board of directors is not independent for |
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purposes of Subsection (d) if more than one-fourth of its members: |
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(1) are affiliates of the applicant, as defined in |
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Section 394.302(2)(A) or (B)(i), (ii), (iv), (v), (vi), or (vii); |
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or |
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(2) in the 10 years before initially becoming a |
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director of the applicant, were employed by or directors of a person |
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that received from the applicant more than $25,000 in either the |
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current year or the preceding year. |
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Sec. 394.310. CERTIFICATE OF REGISTRATION: TIMING. |
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(a) The administrator shall approve or deny an initial |
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registration as a provider not later than the 60th day after the |
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date on which the completed application, including all required |
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documents and payments, is filed. The administrator shall inform |
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the applicant in writing of the reasons for the denial. |
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(b) If the administrator denies an application for |
|
registration as a provider, the applicant may appeal and request a |
|
hearing pursuant to Chapter 2001, Government Code. The applicant |
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may appeal and request a hearing on the question of the applicant's |
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qualifications for initial registration as a provider if the |
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administrator has notified the applicant in a record that the |
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initial application has been denied. A request for a hearing may |
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not be made after the 30th day after the date the administrator |
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mails a notice to the applicant stating that the application has |
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been denied and stating the reasons for the denial. |
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(c) A registration as a provider is valid for one year. |
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Sec. 394.311. RENEWAL OF REGISTRATION. (a) A provider |
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must obtain a renewal of its registration annually. |
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(b) An application for renewal of registration as a provider |
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must be in a form prescribed by the administrator, signed under |
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oath, and: |
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(1) be filed not less than 30 days or more than 60 days |
|
before the registration expires; |
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(2) be accompanied by the fee established by the |
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Finance Commission of Texas and the bond required by Section |
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394.313; |
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(3) subject to Subsection (b-1), contain the matters |
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required for initial registration as a provider by Sections |
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394.306(8) and (9) and a financial statement for the applicant's |
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fiscal year immediately preceding the application; |
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(4) disclose any changes in the information contained |
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in the applicant's application for registration or its immediately |
|
previous application for renewal, as applicable; |
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(5) supply evidence of insurance in an amount equal to |
|
the larger of $250,000 or the highest daily balance in the trust |
|
account required by Section 394.322 during the six-month period |
|
immediately preceding the application: |
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(A) against risks of dishonesty, fraud, theft, |
|
and other misconduct on the part of the applicant or a director, |
|
employee, or agent of the applicant; |
|
(B) issued by an insurance company authorized to |
|
do business in this state and rated at least A or equivalent by a |
|
nationally recognized rating organization approved by the |
|
administrator; |
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(C) with a deductible not exceeding $5,000; |
|
(D) payable for the benefit of the applicant, |
|
this state, and individuals who are residents of this state, as |
|
their interests may appear; and |
|
(E) not subject to cancellation by the applicant |
|
or the insurer until 60 days after written notice has been given to |
|
the administrator; |
|
(6) disclose the total amount of money received by the |
|
applicant pursuant to plans during the preceding 12 months from or |
|
on behalf of individuals who reside in this state and the total |
|
amount of money distributed to creditors of those individuals |
|
during that period; |
|
(7) disclose, to the best of the applicant's |
|
knowledge, the gross amount of money accumulated during the |
|
preceding 12 months pursuant to plans by or on behalf of individuals |
|
who reside in this state and with whom the applicant has agreements; |
|
and |
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(8) provide any other information that the |
|
administrator reasonably requires to perform the administrator's |
|
duties under this section. |
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(b-1) If the provider claims nonprofit or tax-exempt |
|
status, or if a provider's business practices involve holding, |
|
accessing, or directing the funds of an individual, the provider's |
|
financial statement required by Subsection (b)(3) must be audited |
|
by an accountant licensed to practice accounting under Chapter 901, |
|
Occupations Code. |
|
(c) Except for the information required by Sections |
|
394.306(a)(7), (14), and (17), the information required by Section |
|
394.306(a)(6) with respect to for-profit entities, and the |
|
addresses required by Section 394.306(a)(4), the administrator |
|
shall make the information in an application for renewal of |
|
registration as a provider available to the public. |
|
(d) If a registered provider files a timely and complete |
|
application for renewal of registration, the registration remains |
|
effective until the administrator, in a record, notifies the |
|
applicant of a denial and states the reasons for the denial. |
|
(d-1) If an application is otherwise complete and the |
|
applicant has made a timely effort to obtain the information |
|
required by Section 394.306(a)(14) but the information has not been |
|
received, the administrator may issue a temporary renewal of |
|
registration. The temporary renewal shall expire not later than |
|
180 days after issuance. |
|
(e) If the administrator denies an application for renewal |
|
of registration as a provider, the applicant, within 30 days after |
|
receiving notice of the denial, may appeal and request a hearing |
|
pursuant to Chapter 2001, Government Code. Subject to Section |
|
394.334, while the appeal is pending the applicant shall continue |
|
to provide debt management services to individuals with whom it has |
|
agreements. If the denial is affirmed, subject to the |
|
administrator's order and Section 394.334, the applicant shall |
|
continue to provide debt management services to individuals with |
|
whom it has agreements until, with the approval of the |
|
administrator, it transfers the agreements to another registered |
|
provider or returns to the individuals all unexpended money that is |
|
under the applicant's control. |
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Sec. 394.312. REGISTRATION IN ANOTHER STATE. If a provider |
|
holds a license or certificate of registration in another state |
|
authorizing it to provide debt management services, the provider |
|
may submit a copy of that license or certificate and the application |
|
for it instead of an application in the form prescribed by Sections |
|
394.305 and 394.306 or by Section 394.311. The administrator shall |
|
accept the application and the license or certificate from the |
|
other state as an application for registration as a provider or for |
|
renewal of registration as a provider, as appropriate, in this |
|
state if: |
|
(1) the application in the other state contains |
|
information substantially similar to or more comprehensive than |
|
that required in an application submitted in this state; |
|
(2) the applicant provides the information required by |
|
Sections 394.306(a)(1), (3), (10), (12), and (13); and |
|
(3) the applicant, under oath, certifies that the |
|
information contained in the application is current or, to the |
|
extent it is not current, supplements the application to make the |
|
information current. |
|
Sec. 394.313. BOND REQUIRED. (a) Except as otherwise |
|
provided in Section 394.314, a provider that is required to be |
|
registered under this subchapter shall file a surety bond with the |
|
administrator, which must: |
|
(1) be in effect during the period of registration and |
|
for two years after the provider ceases providing debt management |
|
services to individuals in this state; and |
|
(2) run to this state for the benefit of this state and |
|
of individuals who reside in this state when they agree to receive |
|
debt management services from the provider, as their interests may |
|
appear. |
|
(b) Subject to adjustment of the dollar amount pursuant to |
|
Section 394.332(f), a surety bond filed pursuant to Subsection (a) |
|
must: |
|
(1) be in the amount of $50,000 or other larger or |
|
smaller amount that the administrator determines is warranted by |
|
the financial condition and business experience of the provider, |
|
the history of the provider in performing debt management services, |
|
the risk to individuals, and any other factor the administrator |
|
considers appropriate; |
|
(2) be issued by a bonding, surety, or insurance |
|
company authorized to do business in this state and rated at least A |
|
by a nationally recognized rating organization; and |
|
(3) have payment conditioned on noncompliance of the |
|
provider or its agent with this subchapter. |
|
(c) If the principal amount of a surety bond is reduced by |
|
payment of a claim or a judgment, the provider shall immediately |
|
notify the administrator and, within 30 days after notice by the |
|
administrator, file a new or additional surety bond in an amount set |
|
by the administrator. The amount of the new or additional bond must |
|
be at least the amount of the bond immediately before payment of the |
|
claim or judgment. If for any reason a surety terminates a bond, |
|
the provider shall immediately file a new surety bond in the amount |
|
of $50,000 or other amount determined pursuant to Subsection (b). |
|
(d) The administrator or an individual may obtain |
|
satisfaction out of the surety bond procured pursuant to this |
|
section if: |
|
(1) the administrator assesses expenses under Section |
|
394.332(b)(1), issues a final order under Section 394.333(b)(2), or |
|
recovers a final judgment under Section 394.333(b)(4) or (5) or |
|
394.333(e); or |
|
(2) an individual recovers a final judgment pursuant |
|
to Section 394.335(a), 394.335(b), or 394.335(c)(1), (2), or (4). |
|
(e) If claims against a surety bond exceed or are reasonably |
|
expected to exceed the amount of the bond, the administrator, on the |
|
initiative of the administrator or on petition of the surety, |
|
shall, unless the proceeds are adequate to pay all costs, |
|
judgments, and claims, distribute the proceeds in the following |
|
order: |
|
(1) to satisfaction of a final order or judgment under |
|
Section 394.333(b)(2), (4), or (5) or 394.333(e); |
|
(2) to final judgments recovered by individuals |
|
pursuant to Section 394.335(a), 394.335(b), or 394.335(c)(1), (2), |
|
or (4), pro rata; |
|
(3) to claims of individuals established to the |
|
satisfaction of the administrator, pro rata; and |
|
(4) if a final order or judgment is issued under |
|
Section 394.333(b), to the expenses charged pursuant to Section |
|
394.332(b)(1). |
|
Sec. 394.314. BOND REQUIRED; SUBSTITUTE. (a) Instead of |
|
the bond required by Section 394.313, a provider may deliver to the |
|
administrator a substitute provided by this section. The |
|
substitute must be in the amount required by Section 394.313(b) |
|
and, except as otherwise provided in Subdivision (2)(A), payable or |
|
available to this state and to individuals who reside in this state |
|
when they agree to receive debt management services from the |
|
provider, as their interests may appear, if the provider or its |
|
agent does not comply with this subchapter. On satisfying the |
|
requirements of this subsection, a provider may deliver to the |
|
administrator one of the following substitutes: |
|
(1) a certificate of insurance: |
|
(A) issued by an insurance company authorized to |
|
do business in this state and rated at least A or equivalent by a |
|
nationally recognized rating organization approved by the |
|
administrator; and |
|
(B) with no deductible, or, if the provider |
|
supplies a bond in the amount of $5,000, a deductible not exceeding |
|
$5,000; or |
|
(2) with the approval of the administrator: |
|
(A) an irrevocable letter of credit, issued or |
|
confirmed by a bank approved by the administrator, payable on |
|
presentation of a certificate by the administrator stating that the |
|
provider or its agent has not complied with this subchapter; or |
|
(B) bonds or other obligations of the United |
|
States or guaranteed by the United States or bonds or other |
|
obligations of this state or a political subdivision of this state, |
|
to be deposited and maintained with a bank approved by the |
|
administrator for this purpose. |
|
(b) If a provider furnishes a substitute pursuant to |
|
Subsection (a), Sections 394.313(a), (c), (d), and (e) apply to the |
|
substitute. |
|
Sec. 394.315. REQUIREMENT OF GOOD FAITH. A provider shall |
|
act in good faith in all matters under this subchapter. |
|
Sec. 394.316. CUSTOMER SERVICE. A provider that is |
|
required to be registered under this chapter shall maintain a |
|
toll-free communication system, staffed at a level that reasonably |
|
permits an individual to speak to a certified counselor, certified |
|
debt specialist, or customer service representative, as |
|
appropriate, during ordinary business hours. |
|
Sec. 394.317. PREREQUISITES FOR PROVIDING DEBT MANAGEMENT |
|
SERVICES. (a) Before providing debt management services, a |
|
registered provider shall give the individual an itemized list of |
|
goods and services and the charges for each. The list must be clear |
|
and conspicuous, be in a record the individual may keep whether or |
|
not the individual assents to an agreement, and describe the goods |
|
and services the provider offers: |
|
(1) free of additional charge if the individual enters |
|
into an agreement; |
|
(2) for a charge if the individual does not enter into |
|
an agreement; and |
|
(3) for a charge if the individual enters into an |
|
agreement using the following terminology, as applicable, and |
|
format: |
|
Setup fee ___________________________ (dollar amount of fee) |
|
Monthly service fee ___________ (dollar amount of fee or method of |
|
determining amount) |
|
Settlement fee ________ (dollar amount of fee or method of |
|
determining amount) |
|
Goods and services in addition to those provided in connection with |
|
a plan: |
|
______ (item) _____ (dollar amount or method of determining amount) |
|
_____ (item) ______ (dollar amount or method of determining |
|
amount). |
|
(b) A provider may not furnish debt management services |
|
unless the provider, through the services of a certified counselor |
|
or certified debt specialist: |
|
(1) provides the individual with reasonable education |
|
about the management of personal finance; |
|
(2) has prepared a financial analysis; and |
|
(3) if the individual is to make regular periodic |
|
payments to a creditor or provider: |
|
(A) has prepared a plan for the individual; |
|
(B) has made a determination, based on the |
|
provider's analysis of the information provided by the individual |
|
and otherwise available to it, that the plan is suitable for the |
|
individual and the individual will be able to meet the payment |
|
obligations under the plan; and |
|
(C) believes that each creditor of the individual |
|
listed as a participating creditor in the plan will accept payment |
|
of the individual's debts as provided in the plan. |
|
(c) Before an individual assents to an agreement to engage |
|
in a plan, a provider shall: |
|
(1) provide the individual with a copy of the analysis |
|
and plan required by Subsection (b) in a record that identifies the |
|
provider and that the individual may keep whether or not the |
|
individual assents to the agreement; and |
|
(2) inform the individual of the availability, at the |
|
individual's option, of assistance by a toll-free communication |
|
system or in person to discuss the financial analysis and plan |
|
required by Subsection (b). |
|
(d) Before an individual assents to an agreement, the |
|
provider shall inform the individual, in a separate record that the |
|
individual may keep whether or not the individual assents to the |
|
agreement: |
|
(1) of the name and business address of the provider; |
|
(2) that plans are not suitable for all individuals |
|
and the individual may ask the provider about other ways, including |
|
bankruptcy, to deal with indebtedness; |
|
(3) that establishment of a plan may adversely affect |
|
the individual's credit rating or credit scores; |
|
(4) that nonpayment of debt may lead creditors to |
|
increase finance and other charges or undertake collection |
|
activity, including litigation; |
|
(5) unless it is not true, that the provider may |
|
receive compensation from the creditors of the individual; and |
|
(6) that, unless the individual is insolvent, if a |
|
creditor settles for less than the full amount of the debt, the plan |
|
may result in the creation of taxable income to the individual, even |
|
though the individual does not receive any money. |
|
(e) If a provider may receive payments from an individual's |
|
creditors and the plan contemplates that the individual's creditors |
|
will reduce finance charges or fees for late payment, default, or |
|
delinquency, the provider may comply with Subsection (d) by |
|
providing the following disclosure, surrounded by black lines: |
|
IMPORTANT INFORMATION FOR YOU TO CONSIDER |
|
(1) Debt management plans are not right for all individuals, and |
|
you may ask us to provide information about other ways, including |
|
bankruptcy, to deal with your debts. |
|
(2) Using a debt management plan may make it harder for you to |
|
obtain credit. |
|
(3) We may receive compensation for our services from your |
|
creditors. |
|
_______________________________________ |
|
Name and business address of provider |
|
(f) If a provider will not receive payments from an |
|
individual's creditors and the plan contemplates that the |
|
individual's creditors will reduce finance charges or fees for late |
|
payment, default, or delinquency, a provider may comply with |
|
Subsection (d) by providing the following disclosure, surrounded by |
|
black lines: |
|
IMPORTANT INFORMATION FOR YOU TO CONSIDER |
|
(1) Debt management plans are not right for all individuals, and |
|
you may ask us to provide information about other ways, including |
|
bankruptcy, to deal with your debts. |
|
(2) Using a debt management plan may make it harder for you to |
|
obtain credit. |
|
______________________________________ |
|
Name and business address of provider |
|
(g) If a plan contemplates that creditors will settle debts |
|
for less than the full principal amount of debt owed, a provider may |
|
comply with Subsection (d) by providing the following disclosure, |
|
surrounded by black lines: |
|
IMPORTANT INFORMATION FOR YOU TO CONSIDER |
|
(1) Our program is not right for all individuals, and you may ask |
|
us to provide information about bankruptcy and other ways to deal |
|
with your debts. |
|
(2) Nonpayment of your debts under our program may: |
|
(A) hurt your credit rating or credit scores; |
|
(B) lead your creditors to increase finance and other |
|
charges; and |
|
(C) lead your creditors to undertake activity, including |
|
lawsuits, to collect the debts. |
|
(3) Reduction of debt under our program may result in taxable |
|
income to you, even though you will not actually receive any money. |
|
_________________________________________ |
|
Name and business address of provider |
|
Sec. 394.318. COMMUNICATION BY ELECTRONIC OR OTHER MEANS. |
|
(a) In this section: |
|
(1) "Federal act" means the Electronic Signatures in |
|
Global and National Commerce Act, 15 U.S.C. Section 7001 et seq. |
|
(2) "Consumer" means an individual who seeks or |
|
obtains goods or services that are used primarily for personal, |
|
family, or household purposes. |
|
(b) A provider may satisfy the requirements of Section |
|
394.317, 394.319, or 394.327 by means of the Internet or other |
|
electronic means if the provider obtains a consumer's consent in |
|
the manner provided by Section 101(c)(1) of the federal act. |
|
(c) The disclosures and materials required by Sections |
|
394.317, 394.319, and 394.327 shall be presented in a form that is |
|
capable of being accurately reproduced for later reference. |
|
(d) With respect to disclosure by means of an Internet |
|
website, the disclosure of the information required by Section |
|
394.317(d) must appear on one or more screens that: |
|
(1) contain no other information; and |
|
(2) the individual must see before proceeding to |
|
assent to formation of an agreement. |
|
(e) At the time of providing the materials and agreement |
|
required by Sections 394.317(c) and (d), 394.319, and 394.327, a |
|
provider shall inform the individual that on electronic, |
|
telephonic, or written request, it will send the individual a |
|
written copy of the materials, and shall comply with a request as |
|
provided in Subsection (f). |
|
(f) If a provider is requested, before the expiration of 90 |
|
days after an agreement is completed or terminated, to send a |
|
written copy of the materials required by Sections 394.317(c) and |
|
(d), or by Section 394.319 or 394.327, the provider shall send them |
|
at no charge within three business days after the request is |
|
received, but the provider need not comply with a request more than |
|
once per calendar month or if it reasonably believes the request is |
|
made for purposes of harassment. If a request is made more than 90 |
|
days after an agreement is completed or terminated, the provider |
|
shall send within a reasonable time a written copy of the materials |
|
requested. |
|
(g) A provider that maintains an Internet website shall |
|
disclose on the home page of its website or on a page that is clearly |
|
and conspicuously connected to the home page by a link that clearly |
|
reveals its contents: |
|
(1) its name and all names under which it does |
|
business; |
|
(2) its principal business address, telephone number, |
|
and electronic mail address, if any; and |
|
(3) the names of its principal officers. |
|
(h) Subject to Subsection (i), if a consumer who has |
|
consented to electronic communication in the manner provided by |
|
Section 101 of the federal act withdraws consent as provided in the |
|
federal act, a provider may terminate its agreement with the |
|
consumer. |
|
(i) If a provider wishes to terminate an agreement with a |
|
consumer pursuant to Subsection (h), it shall notify the consumer |
|
that it will terminate the agreement unless the consumer, within 30 |
|
days after receiving the notification, consents to electronic |
|
communication in the manner provided in Section 101(c) of the |
|
federal act. If the consumer consents, the provider may terminate |
|
the agreement only as permitted by Section 394.319(a)(6)(F). |
|
Sec. 394.319. FORM AND CONTENTS OF AGREEMENT. (a) An |
|
agreement must: |
|
(1) be in a record; |
|
(2) be dated and signed by the provider and the |
|
individual; |
|
(3) include the name of the individual and the address |
|
where the individual resides; |
|
(4) include the name, business address, and telephone |
|
number of the provider; |
|
(5) be delivered to the individual immediately on |
|
formation of the agreement; and |
|
(6) disclose: |
|
(A) the services to be provided; |
|
(B) the amount, or method of determining the |
|
amount, of all fees, individually itemized, to be paid by the |
|
individual; |
|
(C) the schedule of payments to be made by or on |
|
behalf of the individual, including the amount of each payment, the |
|
date on which each payment is due, and an estimate of the date of the |
|
final payment; |
|
(D) if a plan provides for regular periodic |
|
payments to creditors: |
|
(i) each creditor of the individual to |
|
which payment will be made, the amount owed to each creditor, and |
|
any concessions the provider reasonably believes each creditor will |
|
offer; |
|
(ii) the schedule of expected payments to |
|
each creditor, including the amount of each payment and the date on |
|
which it will be made; and |
|
(iii) each creditor that the provider |
|
believes will not participate in the plan and to which the provider |
|
will not direct payment; |
|
(E) how the provider will comply with its |
|
obligations under Section 394.327; |
|
(F) that the provider may terminate the agreement |
|
for good cause, on return of unexpended money of the individual; |
|
(G) that the individual may cancel the agreement |
|
as provided in Section 394.320; |
|
(H) that the individual may contact the |
|
administrator with any questions or complaints regarding the |
|
provider; and |
|
(I) the address, telephone number, and Internet |
|
address or website of the administrator. |
|
(b) For purposes of Subsection (a)(5), delivery of an |
|
electronic record occurs when it is made available in a format in |
|
which the individual may retrieve, save, and print, and the |
|
individual is notified that it is available. |
|
(c) If the administrator supplies the provider with any |
|
information required under Subsection (a)(6)(I), the provider may |
|
comply with that requirement only by disclosing the information |
|
supplied by the administrator. |
|
(d) An agreement must provide that: |
|
(1) the individual has a right to terminate the |
|
agreement at any time, without penalty or obligation, by giving the |
|
provider written or electronic notice, in which event: |
|
(A) the provider will refund all unexpended money |
|
that the provider or its agent has received from or on behalf of the |
|
individual for the reduction or satisfaction of the individual's |
|
debt; |
|
(B) with respect to an agreement that |
|
contemplates that creditors will settle debts for less than the |
|
principal amount of debt, the provider will refund 65 percent of any |
|
portion of the setup fee that has not been credited against the |
|
settlement fee; and |
|
(C) all powers of attorney granted by the |
|
individual to the provider are revoked and ineffective; |
|
(2) the individual authorizes any bank in which the |
|
provider or its agent has established a trust account to disclose to |
|
the administrator any financial records relating to the trust |
|
account; and |
|
(3) the provider will notify the individual within |
|
five days after learning of a creditor's decision to reject or |
|
withdraw from a plan and that this notice will include: |
|
(A) the identity of the creditor; and |
|
(B) the right of the individual to modify or |
|
terminate the agreement. |
|
(e) An agreement may confer on a provider a power of |
|
attorney to settle the individual's debt for not more than 50 |
|
percent of the outstanding amount of the debt owed at the time of |
|
settlement. An agreement may not confer a power of attorney to |
|
settle a debt for more than 50 percent of that amount, but may |
|
confer a power of attorney to negotiate with creditors of the |
|
individual on behalf of the individual. An agreement must provide |
|
that the provider will obtain the assent of the individual after a |
|
creditor has assented to a settlement for more than 50 percent of |
|
the outstanding amount of the debt owed at the time of settlement. |
|
(f) An agreement may not: |
|
(1) provide for application of the law of any |
|
jurisdiction other than the United States and this state; |
|
(2) except as permitted by Section 2 of the Federal |
|
Arbitration Act, 9 U.S.C. Section 2, contain a provision that |
|
modifies or limits otherwise available forums or procedural rights, |
|
including the right to trial by jury, that are generally available |
|
to the individual under law other than this subchapter; |
|
(3) contain a provision that restricts the |
|
individual's remedies under this subchapter or law other than this |
|
subchapter; or |
|
(4) contain a provision that: |
|
(A) limits or releases the liability of any |
|
person for not performing the agreement or for violating this |
|
subchapter; or |
|
(B) indemnifies any person for liability arising |
|
under the agreement or this subchapter. |
|
(g) All rights and obligations specified in Subsection (e) |
|
and Section 394.320 exist even if not provided in the agreement. A |
|
provision in an agreement which violates Subsection (d), (e), or |
|
(f) is void. |
|
Sec. 394.320. CANCELLATION OF AGREEMENT; WAIVER. (a) An |
|
individual may cancel an agreement before midnight of the third |
|
business day after the individual assents to it, unless the |
|
agreement does not comply with Section 394.319(b) or Section |
|
394.328, in which event the individual may cancel the agreement |
|
within 30 days after the individual assents to it. To exercise the |
|
right to cancel, the individual must give notice in a record to the |
|
provider. Notice by mail is given when mailed. |
|
(b) An agreement must be accompanied by a form that contains |
|
in bold-faced type, surrounded by bold black lines: |
|
Notice of Right to Cancel |
|
You may cancel this agreement, without any penalty or obligation, |
|
at any time before midnight of the third business day that begins |
|
the day after you agree to it by electronic communication or by |
|
signing it. |
|
To cancel this agreement during this period, send an e-mail to |
|
____________________ [e-mail address of provider] or mail or |
|
deliver a signed, dated copy of this notice, or any other written |
|
notice to ____________________ [name of provider] at |
|
____________________ [address of provider] before midnight on |
|
[date]. |
|
If you cancel this agreement within the three-day period, we will |
|
refund all money you already have paid us. |
|
You also may terminate this agreement at any later time, but we are |
|
not required to refund fees you have paid us. |
|
I cancel this agreement, |
|
__________________________ [Printed name] |
|
__________________________ [Signature] |
|
__________________________ [Date] |
|
(c) If a personal financial emergency necessitates the |
|
disbursement of an individual's money to one or more of the |
|
individual's creditors before the expiration of three days after an |
|
agreement is signed, an individual may waive the right to cancel. |
|
To waive the right, the individual must send or deliver a signed, |
|
dated statement in the individual's own words describing the |
|
circumstances that necessitate a waiver. The waiver must |
|
explicitly waive the right to cancel. A waiver by means of a |
|
standard form record is void. |
|
Sec. 394.321. REQUIRED LANGUAGE. Unless the Finance |
|
Commission of Texas, by rule, provides otherwise, the disclosures |
|
and documents required by this subchapter must be in English. If a |
|
provider communicates with an individual primarily in a language |
|
other than English, the provider must furnish a translation into |
|
the other language of the disclosures and documents required by |
|
this subchapter. |
|
Sec. 394.322. TRUST ACCOUNT. (a) All money paid to a |
|
provider by or on behalf of an individual pursuant to a plan for |
|
distribution to creditors is held in trust. Within two business |
|
days after receipt, the provider shall deposit the money in a trust |
|
account established for the benefit of individuals to whom the |
|
provider is furnishing debt management services. |
|
(b) Money held in trust by a provider is not property of the |
|
provider or its designee. The money is not available to creditors |
|
of the provider or designee, except an individual from whom or on |
|
whose behalf the provider received money, to the extent that the |
|
money has not been disbursed to creditors of the individual. |
|
(c) A provider shall: |
|
(1) maintain separate records of account for each |
|
individual to whom the provider is furnishing debt management |
|
services; |
|
(2) disburse money paid by or on behalf of the |
|
individual to creditors of the individual as disclosed in the |
|
agreement, except that: |
|
(A) the provider may delay payment to the extent |
|
that a payment by the individual is not final; and |
|
(B) if a plan provides for regular periodic |
|
payments to creditors, the disbursement must comply with the due |
|
dates established by each creditor; and |
|
(3) promptly correct any payments that are not made or |
|
that are misdirected as a result of an error by the provider or |
|
other person in control of the trust account and reimburse the |
|
individual for any costs or fees imposed by a creditor as a result |
|
of the failure to pay or misdirection. |
|
(d) A provider may not commingle money in a trust account |
|
established for the benefit of individuals to whom the provider is |
|
furnishing debt management services with money of other persons. |
|
(e) A trust account must at all times have a cash balance |
|
equal to the sum of the balances of each individual's account. |
|
(f) If a provider has established a trust account pursuant |
|
to Subsection (a), the provider shall reconcile the trust account |
|
at least once a month. The reconciliation must compare the cash |
|
balance in the trust account with the sum of the balances in each |
|
individual's account. If the provider or its designee has more than |
|
one trust account, each trust account must be individually |
|
reconciled. |
|
(g) If a provider discovers, or has a reasonable suspicion |
|
of, embezzlement or other unlawful appropriation of money held in |
|
trust, the provider immediately shall notify the administrator by a |
|
method approved by the administrator. Unless the Finance |
|
Commission of Texas by rule provides otherwise, within five days |
|
thereafter, the provider shall give notice to the administrator |
|
describing the remedial action taken or to be taken. |
|
(h) If an individual terminates an agreement or it becomes |
|
reasonably apparent to a provider that a plan has failed, the |
|
provider shall promptly refund to the individual all money paid by |
|
or on behalf of the individual which has not been paid to creditors, |
|
less fees that are payable to the provider under Section 394.323. |
|
(i) Before relocating a trust account from one bank to |
|
another, a provider shall inform the administrator of the name, |
|
business address, and telephone number of the new bank. As soon as |
|
practicable, the provider shall inform the administrator of the |
|
account number of the trust account at the new bank. |
|
Sec. 394.323. FEES AND OTHER CHARGES. (a) A provider may |
|
not impose directly or indirectly a fee or other charge on an |
|
individual or receive money from or on behalf of an individual for |
|
debt management services except as permitted by this section. |
|
(b) A provider may not impose charges or receive payment for |
|
debt management services until the provider and the individual have |
|
signed an agreement that complies with Sections 394.319 and |
|
394.328. |
|
(c) If an individual assents to an agreement, a provider may |
|
not impose a fee or other charge for educational or counseling |
|
services, or the like, except as otherwise provided in this |
|
subsection and Section 394.328(d). The administrator may authorize |
|
a provider to charge a fee based on the nature and extent of the |
|
educational or counseling services furnished by the provider. |
|
(d) Subject to adjustment of dollar amounts pursuant to |
|
Section 394.332(f), fees and other charges must meet the following |
|
requirements: |
|
(1) If an individual assents to a plan that |
|
contemplates that creditors will reduce finance charges or fees for |
|
late payment, default, or delinquency, the provider may charge: |
|
(A) a fee not to exceed $50 for consultation, |
|
obtaining a credit report, setting up an account, and the like; and |
|
(B) a monthly service fee, not to exceed $10 |
|
times the number of accounts remaining in a plan at the time the fee |
|
is assessed, but not more than $50 in any month. |
|
(2) If an individual assents to a plan that |
|
contemplates that creditors will settle debts for less than the |
|
principal amount of the debt, the provider may charge: |
|
(A) subject to Section 394.319(d), a fee for |
|
consultation, obtaining a credit report, setting up an account, and |
|
the like, in an amount not to exceed the lesser of $400 or four |
|
percent of the debt in the plan at the inception of the plan; and |
|
(B) a monthly service fee, not to exceed $10 |
|
times the number of accounts remaining in the plan at the time the |
|
fee is assessed, but not more than $50 in any month. |
|
(3) A provider may not impose or receive fees under |
|
both Subdivisions (1) and (2). |
|
(4) Except as otherwise provided in Section |
|
394.328(d), if an individual does not assent to an agreement, a |
|
provider may receive for educational and counseling services it |
|
provides to the individual a fee not to exceed $100 or, with the |
|
approval of the administrator, a larger amount. The administrator |
|
may approve a fee in an amount greater than $100 if the nature and |
|
extent of the educational and counseling services warrant the |
|
larger fee. |
|
(e) If, before the expiration of 90 days after the |
|
completion or termination of educational or counseling services, an |
|
individual assents to an agreement, the provider shall refund to |
|
the individual any fee paid pursuant to Subsection (d)(4). |
|
(f) Except as otherwise provided in Subsections (c) and (d), |
|
if an agreement contemplates that creditors will settle an |
|
individual's debts for less than the principal amount of the debt, |
|
compensation for services in connection with settling debt may not |
|
exceed one of the following applicable settlement fee limits in |
|
Subdivision (1) or (2), the terms of which shall be clearly |
|
disclosed in the agreement. |
|
(1) With respect to agreements in which a flat |
|
settlement fee is charged based on the overall amount of included |
|
debt, the total aggregate amount of fees charged to any individual |
|
under this chapter, including fees charged under Subsections |
|
(d)(2)(A) and (B), may not exceed 17 percent of the principal amount |
|
of debt included in the agreement at the agreement's inception. The |
|
flat settlement fee authorized under this subchapter shall be |
|
assessed in equal monthly payments over not less than half of the |
|
length of the plan, as estimated at the plan's inception, unless: |
|
(A) voluntarily accelerated by the individual in |
|
a separate record; and |
|
(B) offers of settlement by creditors have been |
|
obtained on at least half of the outstanding debt included in the |
|
agreement. |
|
(2) With respect to agreements in which fees are |
|
calculated as a percentage of the amount saved by an individual, a |
|
settlement fee may not exceed 30 percent of the excess of the |
|
outstanding amount of each debt over the amount actually paid to the |
|
creditor, as calculated at the time of settlement. Settlement fees |
|
authorized under this subsection shall become billable only as |
|
debts are settled, and the total aggregate amount of fees charged to |
|
any individual under this subchapter, including fees charged under |
|
Subsections (d)(2)(A) and (B), may not exceed 20 percent of the |
|
principal amount of debt included in the agreement at the |
|
agreement's inception. |
|
(3) A provider may not impose or receive fees under |
|
both Subdivisions (1) and (2). |
|
(g) Subject to adjustment of the dollar amount pursuant to |
|
Section 394.332(f), if a payment to a provider by an individual |
|
under this subchapter is dishonored, a provider may impose a |
|
reasonable charge on the individual not to exceed the lesser of $25 |
|
or the amount permitted by law other than this subchapter. |
|
Sec. 394.324. VOLUNTARY CONTRIBUTIONS. A provider may not |
|
solicit a voluntary contribution from an individual or an affiliate |
|
of the individual for any service provided to the individual. A |
|
provider may accept voluntary contributions from an individual but, |
|
until 30 days after completion or termination of a plan, the |
|
aggregate amount of money received from or on behalf of the |
|
individual may not exceed the total amount the provider may charge |
|
the individual under Section 394.323. |
|
Sec. 394.325. VOIDABLE AGREEMENTS. (a) If a provider |
|
imposes a fee or other charge or receives money or other payments |
|
not authorized by Section 394.323 or 394.324, the individual may |
|
void the agreement and recover as provided in Section 394.335. |
|
(b) If a provider is not registered as required by this |
|
subchapter when an individual assents to an agreement, the |
|
agreement is voidable by the individual. |
|
(c) If an individual voids an agreement under Subsection |
|
(b), the provider does not have a claim against the individual for |
|
breach of contract or for restitution. |
|
Sec. 394.326. TERMINATION OF AGREEMENTS. (a) If an |
|
individual who has entered into an agreement fails for 60 days to |
|
make payments required by the agreement, a provider may terminate |
|
the agreement. |
|
(b) If a provider or an individual terminates an agreement, |
|
the provider shall immediately return to the individual: |
|
(1) any money of the individual held in trust for the |
|
benefit of the individual; and |
|
(2) 65 percent of any portion of the setup fee received |
|
pursuant to Section 394.323(d)(2) which has not been credited |
|
against settlement fees. |
|
Sec. 394.327. PERIODIC REPORTS AND RETENTION OF RECORDS. |
|
(a) A provider shall provide the accounting required by Subsection |
|
(b): |
|
(1) on cancellation or termination of an agreement; |
|
and |
|
(2) before cancellation or termination of any |
|
agreement: |
|
(A) at least once each month; and |
|
(B) within five business days after a request by |
|
an individual, but the provider does not need to comply with more |
|
than one request in any calendar month. |
|
(b) A provider, in a record, shall provide each individual |
|
for whom it has established a plan an accounting of the following |
|
information: |
|
(1) the amount of money received from the individual |
|
since the last report; |
|
(2) the amounts and dates of disbursement made on the |
|
individual's behalf, or by the individual on the direction of the |
|
provider, since the last report to each creditor listed in the plan; |
|
(3) the amounts deducted from the amount received from |
|
the individual; |
|
(4) the amount held in reserve; and |
|
(5) if, since the last report, a creditor has agreed to |
|
accept as payment in full an amount less than the principal amount |
|
of the debt owed by the individual: |
|
(A) the total amount and terms of the settlement; |
|
(B) the amount of the debt when the individual |
|
assented to the plan; |
|
(C) the amount of the debt when the creditor |
|
agreed to the settlement; and |
|
(D) the calculation of a settlement fee. |
|
(c) A provider shall maintain records for each individual |
|
for whom it provides debt management services for five years after |
|
the final payment made by the individual and produce a copy of the |
|
records to the individual within a reasonable time after a request |
|
for them. The provider may use electronic or other means of storage |
|
for the records. |
|
Sec. 394.328. PROHIBITED ACTS AND PRACTICES. (a) A |
|
provider may not, directly or indirectly: |
|
(1) misappropriate or misapply money held in trust; |
|
(2) settle a debt on behalf of an individual for more |
|
than 50 percent of the outstanding amount of the debt owed a |
|
creditor unless the individual assents to the settlement after the |
|
creditor has assented; |
|
(3) take a power of attorney that authorizes it to |
|
settle a debt, unless the power of attorney expressly limits the |
|
provider's authority to settle debts for not more than 50 percent of |
|
the actual outstanding balance of the debt owed a creditor; |
|
(4) exercise or attempt to exercise a power of |
|
attorney after an individual has terminated an agreement; |
|
(5) initiate a transfer from an individual's account |
|
at a bank or with another person unless the transfer is: |
|
(A) a return of money to the individual; or |
|
(B) before termination of an agreement, properly |
|
authorized by the agreement and this subchapter, and for: |
|
(i) payment to one or more creditors |
|
pursuant to a plan; or |
|
(ii) payment of a fee; |
|
(6) offer a gift or bonus, premium, reward, or other |
|
compensation to an individual for executing an agreement; |
|
(7) offer, pay, or give a gift or bonus, premium, |
|
reward, or other compensation to a person for referring a |
|
prospective customer, if the person making the referral has a |
|
financial interest in the outcome of debt management services |
|
provided to the customer, unless neither the provider nor the |
|
person making the referral communicates to the prospective customer |
|
the identity of the source of the referral; |
|
(8) receive a bonus, commission, or other benefit for |
|
referring an individual to a person; |
|
(9) structure a plan in a manner that would result in a |
|
negative amortization of any of an individual's debts, unless a |
|
creditor that is owed a negatively amortizing debt agrees to refund |
|
or waive the finance charge on payment of the principal amount of |
|
the debt; |
|
(10) compensate its employees on the basis of a |
|
formula that incorporates the number of individuals the employee |
|
induces to enter into agreements; |
|
(11) settle a debt or lead an individual to believe |
|
that a payment to a creditor is in settlement of a debt to the |
|
creditor unless, at the time of settlement, the individual receives |
|
a certification by the creditor that the payment is in full |
|
settlement of the debt or is part of a payment plan, the terms of |
|
which are included in the certification, that on completion will |
|
lead to full settlement of the debt; |
|
(12) make a representation that: |
|
(A) the provider will furnish money to pay bills |
|
or prevent attachments; |
|
(B) payment of a certain amount will permit |
|
satisfaction of a certain amount or range of indebtedness; or |
|
(C) participation in a plan will or may prevent |
|
litigation, garnishment, attachment, repossession, foreclosure, |
|
eviction, or loss of employment; |
|
(13) misrepresent that it is authorized or competent |
|
to furnish legal advice or perform legal services; |
|
(14) represent in its agreements, disclosures |
|
required by this subchapter, advertisements, or Internet website |
|
that it is: |
|
(A) a nonprofit entity unless it is organized and |
|
properly operating as a nonprofit entity under the laws of the state |
|
in which it was formed; or |
|
(B) a tax-exempt entity unless it has received |
|
certification of tax-exempt status from the Internal Revenue |
|
Service and is properly operating as a nonprofit entity under the |
|
laws of the state in which it was formed; |
|
(15) take a confession of judgment or power of |
|
attorney to confess judgment against an individual; or |
|
(16) employ an unfair, unconscionable, or deceptive |
|
act or practice, including the knowing omission of any material |
|
information. |
|
(b) If a provider furnishes debt management services to an |
|
individual, the provider may not, directly or indirectly or through |
|
an affiliate: |
|
(1) purchase a debt or obligation of the individual; |
|
(2) receive from or on behalf of the individual: |
|
(A) a promissory note or other negotiable |
|
instrument other than a check or a demand draft; or |
|
(B) a postdated check or demand draft; |
|
(3) lend money or provide credit to the individual, |
|
except as a deferral of a settlement fee at no additional expense to |
|
the individual; |
|
(4) obtain a mortgage or other security interest from |
|
any person in connection with the services provided to the |
|
individual; |
|
(5) except as permitted by federal law, disclose the |
|
identity or identifying information of the individual or the |
|
identity of the individual's creditors, except to: |
|
(A) the administrator or the attorney general, on |
|
proper demand; |
|
(B) a creditor of the individual, to the extent |
|
necessary to secure the cooperation of the creditor in a plan; or |
|
(C) the extent necessary to administer the plan; |
|
(6) except as otherwise provided in Section |
|
394.323(f), provide the individual less than the full benefit of a |
|
compromise of a debt arranged by the provider; |
|
(7) charge the individual for or provide credit or |
|
other insurance, coupons for goods or services, membership in a |
|
club, access to computers or the Internet, or any other matter not |
|
directly related to debt management services or educational |
|
services concerning personal finance, except to the extent such |
|
services are expressly authorized by the administrator; |
|
(8) furnish legal advice or perform legal services, |
|
unless the person furnishing that advice to or performing those |
|
services for the individual is licensed to practice law; or |
|
(9) receive compensation for referring, directing, or |
|
negotiating a loan or extension of credit on behalf of the |
|
individual. |
|
(c) This subchapter does not authorize any person to engage |
|
in the practice of law. |
|
(d) A provider may not receive a gift or bonus, premium, |
|
reward, or other compensation, directly or indirectly, for |
|
advising, arranging, or assisting an individual in connection with |
|
obtaining an extension of credit or other service from a lender or |
|
service provider, except for educational or counseling services |
|
required in connection with a government program or as expressly |
|
approved by the administrator. |
|
(e) Unless a person supplies goods, services, or facilities |
|
generally and supplies them to the provider at a cost not greater |
|
than the cost the person generally charges to others, a provider may |
|
not purchase goods, services, or facilities from the person if an |
|
employee or a person that the provider should reasonably know is an |
|
affiliate of the provider: |
|
(1) owns more than 10 percent of the person; or |
|
(2) is an employee or affiliate of the person. |
|
Sec. 394.329. NOTICE OF LITIGATION. Not later than 30 days |
|
after a provider has been served with notice of a civil action for |
|
violation of this subchapter by or on behalf of an individual who |
|
resides in this state at either the time of an agreement or the time |
|
the notice is served, the provider shall notify the administrator |
|
in a record that it has been sued. |
|
Sec. 394.330. ADVERTISING. (a) If the agreements of a |
|
provider contemplate that creditors will reduce finance charges or |
|
fees for late payment, default, or delinquency and the provider |
|
advertises debt management services, it shall disclose, in an |
|
easily comprehensible manner, that using a debt management plan may |
|
make it harder for the individual to obtain credit. |
|
(b) If the agreements of a provider contemplate that |
|
creditors will settle for less than the full principal amount of |
|
debt and the provider advertises debt management services, it shall |
|
disclose, in an easily comprehensible manner, the information |
|
specified in Sections 394.317(d)(3) and (4). |
|
Sec. 394.331. LIABILITY FOR CONDUCT OF OTHER PERSONS. If a |
|
provider delegates any of its duties or obligations under an |
|
agreement or this subchapter to a third-party agent, including an |
|
independent contractor, the provider is liable for the person's |
|
conduct which, if done by the provider, would violate the agreement |
|
or this subchapter. |
|
Sec. 394.332. POWERS OF ADMINISTRATOR. (a) The |
|
administrator may receive complaints, act on its own initiative or |
|
in response to complaints, take action to obtain voluntary |
|
compliance with this subchapter, and seek or provide remedies as |
|
provided in this subchapter or Chapter 14. |
|
(b) The administrator or the administrator's representative |
|
may investigate and examine, in this state or elsewhere, by |
|
subpoena or otherwise, the activities, books, accounts, and records |
|
of a person that provides or offers to provide debt management |
|
services, or a person to whom a provider has delegated its |
|
obligations under an agreement or this subchapter, to determine |
|
compliance with this subchapter. Information that identifies |
|
individuals who have agreements with the provider may not be |
|
disclosed to the public. In connection with the investigation, the |
|
administrator may: |
|
(1) charge the person the reasonable expenses |
|
necessarily incurred to conduct the examination; |
|
(2) require or permit a person to file a statement |
|
under oath as to all the facts and circumstances of a matter to be |
|
investigated or examined; and |
|
(3) seek a court order authorizing seizure from a bank |
|
at which the person maintains a trust account required by Section |
|
394.322, any or all money, books, records, accounts, and other |
|
property of the provider that is in the control of the bank and |
|
relates to individuals who reside in this state. |
|
(c) The Finance Commission of Texas may adopt rules to |
|
implement this subchapter in accordance with Chapter 2001, |
|
Government Code. |
|
(d) The administrator may enter into cooperative |
|
arrangements with any other federal or state agency having |
|
authority over providers and may exchange with any of those |
|
agencies information about a provider, including information |
|
obtained during an examination of the provider. |
|
(e) The Finance Commission of Texas by rule shall establish |
|
reasonable fees to be paid by providers for the expense of |
|
administering this subchapter. |
|
(f) The administrator shall compute and publish the dollar |
|
amounts instead of those specified in Sections 394.302, 394.305, |
|
394.309, 394.313, 394.323, 394.333, and 394.335 to reflect |
|
inflation, as measured by the United States Bureau of Labor |
|
Statistics Consumer Price Index for All Urban Consumers or, if that |
|
index is not available, another index adopted by finance commission |
|
rule. The administrator shall adopt a base year and adjust the |
|
dollar amounts, effective on July 1 of each year, if the change in |
|
the index from the base year, as of December 31 of the preceding |
|
year, is at least 10 percent. The dollar amount must be rounded to |
|
the nearest $100, except that the amounts in Section 394.323 must be |
|
rounded to the nearest dollar. |
|
(g) The administrator shall notify registered providers of |
|
any change in dollar amounts made pursuant to Subsection (f) and |
|
make that information available to the public. |
|
(h) Information obtained under an examination is |
|
confidential. |
|
Sec. 394.333. ADMINISTRATIVE REMEDIES. (a) For purposes |
|
of enforcing this subchapter, the administrator: |
|
(1) has the powers granted to the administrator under |
|
Chapter 14; |
|
(2) may exercise those powers in the same manner as |
|
those powers may be exercised under: |
|
(A) Chapters 14 and 392; and |
|
(B) Subtitle B, Title 4; and |
|
(3) has any authority granted to the administrator by |
|
other law. |
|
(b) The administrator may enforce this subchapter and rules |
|
adopted under this subchapter by taking one or more of the following |
|
actions: |
|
(1) ordering a provider or a director, employee, or |
|
other agent of a provider to cease and desist from any violations; |
|
(2) ordering a provider or a person that has caused a |
|
violation to correct the violation, including making restitution of |
|
money or property to a person aggrieved by a violation; |
|
(3) subject to adjustment of the dollar amount |
|
pursuant to Section 394.332(f), imposing against a provider or a |
|
person that has caused a violation a civil penalty in an amount not |
|
to exceed $10,000 for each violation; |
|
(4) prosecuting a civil action to: |
|
(A) enforce an order; or |
|
(B) obtain restitution or an injunction or other |
|
equitable relief, or both; or |
|
(5) intervening in an action brought under Section |
|
394.335. |
|
(c) Subject to adjustment of the dollar amount pursuant to |
|
Section 394.332(f), if a person violates or knowingly authorizes, |
|
directs, or aids in the violation of a final order issued under |
|
Subsection (b)(1) or (2), the administrator may assess an |
|
administrative penalty in an amount not to exceed $20,000 for each |
|
violation. |
|
(d) The administrator may maintain an action to enforce this |
|
subchapter in any county at the administrator's sole discretion. |
|
(e) The administrator may recover the reasonable costs of |
|
enforcing this subchapter under Subsections (b) and (d), including |
|
attorney's fees based on the hours reasonably expended and the |
|
hourly rates for attorneys of comparable experience in the |
|
community. |
|
(f) In determining the amount of an administrative penalty |
|
to impose under Subsection (b) or (c), the administrator shall |
|
consider: |
|
(1) the seriousness of the violation; |
|
(2) the good faith of the violator; |
|
(3) any previous violations by the violator; |
|
(4) the deleterious effect of the violation on the |
|
public; |
|
(5) the net worth of the violator; and |
|
(6) any other factor the administrator considers |
|
relevant to the determination of the penalty. |
|
Sec. 394.334. SUSPENSION, REVOCATION, OR NONRENEWAL OF |
|
REGISTRATION. (a) In this section, "insolvent" means: |
|
(1) having generally ceased to pay debts in the |
|
ordinary course of business other than as a result of a good faith |
|
dispute; |
|
(2) being unable to pay debts as they become due; or |
|
(3) being insolvent within the meaning of federal |
|
bankruptcy law, 11 U.S.C. Section 101 et seq. |
|
(b) The administrator may suspend, revoke, or deny renewal |
|
of a provider's registration if: |
|
(1) a fact or condition exists that, if it had existed |
|
when the registrant applied for registration as a provider, would |
|
have been a reason for denying registration; |
|
(2) the provider has committed a material violation of |
|
this subchapter or a rule or order of the administrator under this |
|
subchapter; |
|
(3) the provider is insolvent; |
|
(4) the provider or an employee or affiliate of the |
|
provider has refused to permit the administrator to make an |
|
examination authorized by this subchapter, failed to comply with |
|
Section 394.332(b)(2) within 15 days after request, or made a |
|
material misrepresentation or omission in complying with Section |
|
394.332(b)(2); or |
|
(5) the provider has not responded within a reasonable |
|
time and in an appropriate manner to communications from the |
|
administrator. |
|
(c) If a provider does not comply with Section 394.322(f) or |
|
if the administrator otherwise finds that the public health or |
|
safety or general welfare requires emergency action, the |
|
administrator may order a summary suspension of the provider's |
|
registration, effective on the date specified in the order. |
|
(d) If the administrator suspends, revokes, or denies the |
|
renewal of the registration of a provider, the administrator may |
|
seek a court order authorizing seizure of any or all of the money in |
|
a trust account required by Section 394.322, books, records, |
|
accounts, and other property of the provider that are located in |
|
this state. |
|
(e) If the administrator suspends or revokes a provider's |
|
registration, the provider may appeal and request a hearing |
|
pursuant to Chapter 2001, Government Code. |
|
Sec. 394.335. PRIVATE ENFORCEMENT. (a) In addition to the |
|
recovery under Subsection (b)(3), if an individual voids an |
|
agreement under Section 394.325(a) or (b), the individual may |
|
recover in a civil action all money paid or deposited by or on |
|
behalf of the individual under the agreement, other than amounts |
|
paid to creditors. |
|
(b) An individual with respect to whom a provider violates |
|
this subchapter or a rule adopted under this subchapter or commits |
|
any unfair or deceptive act may recover in a civil action from the |
|
provider and any third party that caused the violation or committed |
|
the act or practice, not including a provider's officers, |
|
directors, employees, or investors: |
|
(1) actual damages for injury caused by the violation |
|
or conduct; |
|
(2) punitive damages not to exceed three times actual |
|
damages only upon a finding of unconscionable conduct relating to a |
|
violation of this subchapter or a rule adopted under this |
|
subchapter; and |
|
(3) reasonable attorney's fees and costs. |
|
(c) In addition to the remedy available under Subsection |
|
(b), if a provider violates an individual's rights under Section |
|
394.320, the individual may recover in a civil action all money paid |
|
or deposited by or on behalf of the individual under the agreement, |
|
except for amounts paid to creditors. |
|
(d) A provider is not liable under this section for a |
|
violation of this subchapter if the provider proves that the |
|
violation was not intentional and resulted from a good faith error, |
|
notwithstanding the maintenance of reasonable procedures adopted |
|
to avoid the error. An error of legal judgment with respect to a |
|
provider's obligations under this subchapter is not a good faith |
|
error. If, in connection with a violation, the provider has |
|
received more money than authorized by an agreement or this |
|
subchapter, the defense provided by this subsection is not |
|
available unless the provider refunds the excess amount not later |
|
than the seventh calendar day after the date of learning of the |
|
violation. |
|
(e) The administrator shall assist an individual in |
|
enforcing a judgment against the surety bond or other security |
|
provided under Section 394.313 or 394.314. |
|
(f) An administrative penalty or fine under this title or |
|
federal law that is assessed by or agreed to with an administrative |
|
agency or the attorney general shall be considered and applied as a |
|
bar or credit to recovery of further fines, penalties, or enhanced |
|
damages for substantially the same act, practice, or violation in a |
|
suit or other proceeding brought by a private litigant under this |
|
title, the Business & Commerce Code, or other applicable law of this |
|
state. This subsection and Subsection (g) do not apply to a claim |
|
for restitution for unreimbursed actual damages. |
|
(g) A suit or other proceeding by a private litigant does |
|
not affect or restrict any state or federal agency from pursuing a |
|
person for any administrative remedy, including an administrative |
|
penalty. An administrative agency of this state, however, shall |
|
consider as a mitigating factor any relief recovered in a private |
|
suit or proceeding when the agency determines an administrative |
|
remedy. |
|
Sec. 394.336. VIOLATION OF DECEPTIVE TRADE PRACTICES ACT. |
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If an act or practice of a provider violates both this subchapter |
|
and Chapter 17, Business & Commerce Code, an individual may not |
|
recover under both for the same act or practice. |
|
Sec. 394.337. STATUTE OF LIMITATIONS. (a) An action or |
|
proceeding brought pursuant to Section 394.333(a), (b), or (c), |
|
must be commenced within four years after the conduct that is the |
|
basis of the administrator's complaint. |
|
(b) An action brought under Section 394.335 must be |
|
commenced within two years after the latest of: |
|
(1) the individual's last transmission of money to a |
|
provider; |
|
(2) the individual's last transmission of money to a |
|
creditor at the direction of the provider; |
|
(3) the provider's last disbursement to a creditor of |
|
the individual; |
|
(4) the provider's last accounting to the individual |
|
pursuant to Section 394.327; |
|
(5) the date on which the individual discovered or |
|
reasonably should have discovered the facts giving rise to the |
|
individual's claim; or |
|
(6) termination of actions or proceedings by the |
|
administrator with respect to a violation of this subchapter. |
|
(c) The period prescribed in Subsection (b)(5) is tolled |
|
during any period in which the provider or, if different, the |
|
defendant has materially and wilfully misrepresented information |
|
required by this subchapter to be disclosed to the individual, if |
|
the information so misrepresented is material to the establishment |
|
of the liability of the defendant under this subchapter. |
|
Sec. 394.338. UNIFORMITY OF APPLICATION AND CONSTRUCTION. |
|
In applying and construing this subchapter, consideration must be |
|
given to the need to promote uniformity of the law with respect to |
|
the subject matter of this subchapter among states that have |
|
enacted a law substantially similar to this subchapter. |
|
Sec. 394.339. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL |
|
AND NATIONAL COMMERCE ACT. This subchapter modifies, limits, and |
|
supersedes the federal Electronic Signatures in Global and National |
|
Commerce Act (15 U.S.C. Section 7001 et seq.) but does not modify, |
|
limit, or supersede 15 U.S.C. Section 7001(c) or authorize |
|
electronic delivery of any of the notices described in 15 U.S.C. |
|
Section 7003(b). |
|
SECTION 2. Subchapter C, Chapter 394, Finance Code, is |
|
repealed. |
|
SECTION 3. A transaction entered into before the effective |
|
date of this Act and the rights, duties, and interests resulting |
|
from the transaction may be completed, terminated, or enforced as |
|
required or permitted by a law amended, repealed, or modified by |
|
this Act as though the amendment, repeal, or modification had not |
|
occurred. |
|
SECTION 4. This Act takes effect January 1, 2010. |
|
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* * * * * |