Bill Text: TX SB1169 | 2011-2012 | 82nd Legislature | Enrolled
Bill Title: Relating to the regulation of providers, administrators, and sellers of service contracts and identity recovery service contracts; providing penalties.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Passed) 2011-06-17 - Effective on 9/1/11 [SB1169 Detail]
Download: Texas-2011-SB1169-Enrolled.html
S.B. No. 1169 |
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relating to the regulation of providers, administrators, and | ||
sellers of service contracts and identity recovery service | ||
contracts; providing penalties. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
ARTICLE 1. SERVICE CONTRACTS | ||
SECTION 1.01. Section 1304.002, Occupations Code, is | ||
amended by adding Subdivision (8-a) to read as follows: | ||
(8-a) "Seller" means a person, other than the provider | ||
or administrator of a service contract, who markets, sells, offers | ||
to sell, negotiates, or issues a service contract to a consumer on | ||
behalf of a provider, but who is not contractually obligated to a | ||
service contract holder under the terms of a service contract. | ||
SECTION 1.02. Chapter 1304, Occupations Code, is amended by | ||
adding Subchapter B to read as follows: | ||
SUBCHAPTER B. POWERS AND DUTIES OF DEPARTMENT | ||
AND COMMISSION | ||
Sec. 1304.052. RULES. The commission shall adopt rules | ||
necessary to implement and administer this chapter. | ||
SECTION 1.03. Section 1304.007, Occupations Code, is | ||
transferred to Subchapter B, Chapter 1304, Occupations Code, as | ||
added by this Act, redesignated as Section 1304.051, Occupations | ||
Code, and amended to read as follows: | ||
Sec. 1304.051 [ |
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EXECUTIVE DIRECTOR. (a) The executive director may investigate a | ||
provider, administrator, seller, or other person as necessary to | ||
enforce this chapter and protect service contract holders in this | ||
state. | ||
(b) On request of the executive director, a provider shall | ||
make the records required by Section 1304.155 available to the | ||
executive director as necessary to enable the executive director to | ||
reasonably determine compliance with this chapter. | ||
SECTION 1.04. Section 1304.101, Occupations Code, is | ||
amended to read as follows: | ||
Sec. 1304.101. REGISTRATION REQUIRED; EXEMPTION FROM OTHER | ||
LICENSING REQUIREMENTS. (a) A person may not operate as a | ||
provider or administrator of service contracts sold or issued in | ||
this state unless the person is registered with the department. | ||
(b) Except for the registration requirement of this chapter | ||
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administrator, or other person who markets, sells, issues, or | ||
offers to sell service contracts is exempt from any licensing | ||
requirement of this state that relates to an activity regulated | ||
under this chapter. | ||
(c) A provider or administrator may not contract with or use | ||
the services of a person to perform an activity that requires | ||
registration with the department as a provider or administrator | ||
unless that person is appropriately registered. | ||
SECTION 1.05. Subsection (c), Section 1304.102, | ||
Occupations Code, is amended to read as follows: | ||
(c) The department may refuse to issue or renew a | ||
registration, suspend or revoke a registration, or take any other | ||
disciplinary action under Subchapter E if the applicant or a | ||
controlling person of the applicant: | ||
(1) has violated this chapter or a rule adopted or | ||
order issued by the commission or executive director under this | ||
chapter; | ||
(2) has made a material misrepresentation or false | ||
statement in an application or in any document accompanying an | ||
application; | ||
(3) has had a license issued under Title 13, Insurance | ||
Code, revoked as provided by that code; or | ||
(4) has had a license or registration as a provider, | ||
administrator, or seller revoked in this state or another state. | ||
SECTION 1.06. Subsection (a), Section 1304.1025, | ||
Occupations Code, is amended to read as follows: | ||
(a) In addition to the requirements of Section 1304.102, an | ||
applicant for issuance or renewal of a provider registration must | ||
file with the application: | ||
(1) the reimbursement insurance policy, if the | ||
provider is using a reimbursement insurance policy to meet the | ||
financial security requirements of Section 1304.151; [ |
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(2) the financial security deposit and the | ||
documentation required by the department demonstrating adequate | ||
funding of the reserve account, if the provider is using a funded | ||
reserve account and financial security deposit to meet the | ||
financial security requirements of Section 1304.151; | ||
(3) the proof necessary to demonstrate the applicant | ||
or its parent company maintains at least $100 million net worth, if | ||
the applicant is using net worth to meet the financial security | ||
requirements of Section 1304.151; and | ||
(4) information about each controlling person of the | ||
applicant [ |
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executive director[ |
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SECTION 1.07. Subsections (a) and (b), Section 1304.103, | ||
Occupations Code, are amended to read as follows: | ||
(a) The executive director shall develop a tiered schedule | ||
of registration and renewal fees under which a provider's fee is | ||
based on the number of service contracts the provider sold or issued | ||
in this state during the preceding 12-month period. | ||
(b) The commission shall set [ |
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the costs of administering this chapter, including registration and | ||
renewal fees for administrators. | ||
SECTION 1.08. Section 1304.104, Occupations Code, is | ||
amended to read as follows: | ||
Sec. 1304.104. INFORMATION CONCERNING NUMBER OF SERVICE | ||
CONTRACTS SOLD OR ISSUED. Information concerning the number of | ||
service contracts sold or issued by a provider that is submitted | ||
under Section 1304.103[ |
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Government Code, applies[ |
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SECTION 1.09. The heading to Subchapter D, Chapter 1304, | ||
Occupations Code, is amended to read as follows: | ||
SUBCHAPTER D. PRACTICE BY SERVICE CONTRACT PROVIDERS, | ||
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SECTION 1.10. The heading to Section 1304.151, Occupations | ||
Code, is amended to read as follows: | ||
Sec. 1304.151. FINANCIAL SECURITY REQUIREMENTS; | ||
DISTRIBUTION OF FUNDS HELD IN TRUST. | ||
SECTION 1.11. Section 1304.151, Occupations Code, is | ||
amended by amending Subsections (a) and (b) and adding Subsection | ||
(f) to read as follows: | ||
(a) To ensure the faithful performance of a provider's | ||
obligations to its service contract holders, each provider must: | ||
(1) insure the provider's service contracts under a | ||
reimbursement insurance policy issued by an insurer authorized to | ||
transact insurance in this state or by a surplus lines insurer | ||
eligible to place coverage in this state under Chapter 981, | ||
Insurance Code; | ||
(2) maintain a funded reserve account covering the | ||
provider's obligations under its service contracts that are issued | ||
and outstanding in this state and place in trust with the executive | ||
director a financial security deposit consisting of: | ||
(A) [ |
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(B) [ |
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qualified financial institution; or | ||
(C) a certificate of deposit issued by a | ||
qualified financial institution [ |
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(3) maintain, or have a parent company that maintains, | ||
a net worth or stockholders' equity of at least $100 million. | ||
(b) If the provider ensures its obligations under | ||
Subsection (a)(2), the amount maintained in the reserve account may | ||
not be less than an amount equal to 40 percent of the gross | ||
consideration the provider received from consumers from the sale of | ||
all service contracts issued and outstanding in this state, minus | ||
any claims paid. The executive director may review and examine the | ||
reserve account. The amount of the security deposit may not be less | ||
than $250,000. The provider must submit to the executive director | ||
on request a copy of the provider's financial statements that must | ||
be prepared in accordance with generally accepted accounting | ||
principles, be without qualification as to the going concern status | ||
of the provider, and be audited by an independent certified public | ||
accountant. The commission by rule may require the provider to | ||
submit additional financial reports [ |
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(f) In the event of a provider's bankruptcy or a similar | ||
event affecting the ability of the provider to faithfully perform | ||
its obligations to its service contract holders, the executive | ||
director may distribute any funds held in trust as financial | ||
security for the provider under this section to eligible service | ||
contract holders as payment for claims. The executive director | ||
must distribute the funds in an equitable and cost-effective manner | ||
as determined by the executive director. | ||
SECTION 1.12. Subchapter D, Chapter 1304, Occupations Code, | ||
is amended by adding Sections 1304.1521 and 1304.1531 to read as | ||
follows: | ||
Sec. 1304.1521. FINANCIAL SECURITY TRANSITION. (a) In | ||
this section, "provider that maintained a funded reserve account" | ||
means a provider that, in order to ensure the faithful performance | ||
of the provider's obligations to service contract holders, | ||
maintained a funded reserve account covering the provider's | ||
obligations under service contracts that were issued and | ||
outstanding in this state and placed in trust with the executive | ||
director a financial security deposit consisting of: | ||
(1) a surety bond issued by an authorized surety; | ||
(2) securities of the type eligible for deposit by an | ||
authorized insurer in this state; | ||
(3) a statutory deposit of cash or cash equivalents; | ||
(4) a letter of credit issued by a qualified financial | ||
institution; or | ||
(5) another form of security prescribed by commission | ||
rules. | ||
(b) This section applies only to a provider that maintained | ||
a funded reserve account on August 31, 2011. | ||
(c) Not later than September 1, 2012, a provider that | ||
maintained a funded reserve account shall submit to the executive | ||
director documentation that the provider is in compliance with the | ||
financial security requirements provided by Section 1304.151 for | ||
service contracts sold or issued in this state on or after September | ||
1, 2012. A provider that maintained a funded reserve account may | ||
not sell or issue a service contract on or after September 1, 2012, | ||
unless the provider is in compliance with this subsection. | ||
(d) A provider that maintained a funded reserve account | ||
shall: | ||
(1) continue to maintain the funded reserve account | ||
and security deposit at appropriate levels for service contracts | ||
that were sold or issued in this state before September 1, 2012, | ||
until the contracts are no longer in effect; or | ||
(2) provide financial security for service contracts | ||
sold or issued before September 1, 2012, by complying with the | ||
financial security requirements of Section 1304.151. | ||
(e) If a provider provides financial security for service | ||
contracts sold or issued before September 1, 2012, by complying | ||
with the financial security requirements of Section 1304.151, the | ||
provider shall give to the executive director satisfactory | ||
documentation that the reimbursement insurance policy, funded | ||
reserve account and security deposit, or net worth covers all | ||
outstanding service contracts issued before September 1, 2012. | ||
(f) A service contract that is sold or issued before | ||
September 1, 2012, and is covered under a funded reserve account and | ||
security deposit may not be extended or renewed at the end of the | ||
service contract term unless the provider provides financial | ||
security for those service contracts by complying with the | ||
financial security requirements of Section 1304.151 before the | ||
extension or renewal. | ||
Sec. 1304.1531. SERVICE CONTRACT SELLERS; | ||
RESPONSIBILITIES. (a) A provider may employ or contract with a | ||
seller to be responsible for: | ||
(1) all or any part of the sale or marketing of service | ||
contracts for the provider; and | ||
(2) compliance with this chapter in connection with | ||
the sale or marketing of service contracts. | ||
(b) The hiring of or contracting with a seller under this | ||
section does not affect a provider's responsibility to comply with | ||
this chapter. | ||
(c) Unless registered as a provider or administrator, a | ||
seller is prohibited from engaging in activities that would require | ||
registration as a provider or administrator. | ||
(d) A seller shall process a service contract application | ||
and a payment from a consumer in accordance with this chapter and | ||
with any sales agreement or contract between the provider and the | ||
seller. | ||
SECTION 1.13. Subsections (a), (b), and (d), Section | ||
1304.156, Occupations Code, are amended to read as follows: | ||
(a) A service contract marketed, sold, offered for sale, | ||
issued, made, proposed to be made, or administered in this state | ||
must: | ||
(1) be written, printed, or typed in clear, | ||
understandable language that is easy to read; | ||
(2) state the name and address of the provider; | ||
(3) state the purchase price of the contract and the | ||
terms under which the contract is sold; | ||
(4) state the terms and restrictions governing | ||
cancellation of the contract by the provider or the service | ||
contract holder before the expiration date of the contract; | ||
(5) identify: | ||
(A) any administrator and any registration | ||
number issued to the administrator under this chapter; | ||
(B) the [ |
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(C) the service contract holder, if the service | ||
contract holder provides the holder's name; | ||
(6) state the amount of any deductible; | ||
(7) specify the products and services to be provided | ||
under the contract and any limitation, exception, or exclusion; | ||
(8) specify any restriction governing the | ||
transferability of the contract; | ||
(9) state the duties of the service contract holder, | ||
including any duty to protect against any further damage and any | ||
requirement to follow the instructions in the owner's manual; and | ||
(10) state whether the contract provides for or | ||
excludes consequential damages or preexisting conditions, if | ||
applicable. | ||
(b) The identity and, if applicable, registration number | ||
issued under this chapter of a person described by Subsection | ||
(a)(5) is not required to be preprinted on the service contract and | ||
may be added to the contract at the time of sale. | ||
(d) A service contract insured under a reimbursement | ||
insurance policy under Section 1304.152 [ |
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(1) state the name and address of the insurer; | ||
(2) state that the service contract holder may apply | ||
for reimbursement directly to the insurer if: | ||
(A) a covered service is not provided to the | ||
service contract holder by the provider before the 61st [ |
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(B) a refund or credit is not paid before the 46th | ||
day after the date on which the contract is canceled [ |
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(3) contain a statement substantially similar to the | ||
following: "Obligations of the provider under this service | ||
contract are insured under a service contract reimbursement | ||
insurance policy." | ||
SECTION 1.14. Subchapter D, Chapter 1304, Occupations Code, | ||
is amended by adding Section 1304.1581 to read as follows: | ||
Sec. 1304.1581. CANCELLATION BY SERVICE CONTRACT HOLDER; | ||
REFUND. (a) A service contract must allow the service contract | ||
holder to cancel the service contract at any time. | ||
(b) If a service contract holder cancels a service contract | ||
before the 31st day after the date of purchase, the provider: | ||
(1) shall refund to the service contract holder or | ||
credit to the account of the service contract holder the full | ||
purchase price of the contract, decreased by the amount of any | ||
claims paid under the contract; and | ||
(2) may not impose a cancellation fee. | ||
(c) If a service contract holder cancels a service contract | ||
on or after the 31st day after the date of purchase, the provider: | ||
(1) shall refund to the service contract holder or | ||
credit to the account of the service contract holder the prorated | ||
purchase price of the contract reflecting the remaining term of the | ||
contract, based on mileage, time, or another reasonably applicable | ||
measure of the remaining term that must be disclosed in the | ||
contract, decreased by the amount of any claims paid under the | ||
contract; and | ||
(2) may impose a reasonable cancellation fee not to | ||
exceed $50. | ||
(d) A provider may allow a service contract holder to cancel | ||
a service contract on other terms included in the contract, | ||
provided the terms do not conflict with this section. | ||
(e) A provider who does not pay the refund or credit the | ||
service contract holder's account before the 46th day after the | ||
date notice of cancellation is received by the provider is liable to | ||
the service contract holder for a penalty for each month an amount | ||
remains outstanding equal to 10 percent of the amount outstanding. | ||
The penalty is in addition to the full or prorated purchase price of | ||
the contract that is owed to the service contract holder under this | ||
section or the terms of the contract. | ||
(f) The right to cancel a service contract is not | ||
transferable to a subsequent holder of the contract. | ||
SECTION 1.15. The heading to Section 1304.159, Occupations | ||
Code, is amended to read as follows: | ||
Sec. 1304.159. CANCELLATION BY PROVIDER; REFUND [ |
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SECTION 1.16. Section 1304.159, Occupations Code, is | ||
amended by amending Subsection (b) and adding Subsection (c) to | ||
read as follows: | ||
(b) The provider is not required to provide prior notice of | ||
cancellation if the service contract is canceled because of: | ||
(1) nonpayment of the consideration for the contract; | ||
(2) fraud or a material misrepresentation by the | ||
service contract holder to the provider or the provider's | ||
administrator; or | ||
(3) a substantial breach of a duty by the service | ||
contract holder relating to the covered product or its use. | ||
(c) A service contract holder whose contract is canceled by | ||
the provider in accordance with this section is entitled to a | ||
prorated refund of the purchase price of the contract reflecting | ||
the remaining term of the contract, based on mileage, time, or | ||
another reasonably applicable measure of the remaining term that | ||
must be disclosed in the contract, decreased by the amount of any | ||
claims paid under the contract. A provider who cancels a contract | ||
under this section may not impose a cancellation fee. | ||
SECTION 1.17. Section 1304.161, Occupations Code, is | ||
amended to read as follows: | ||
Sec. 1304.161. [ |
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(a) A provider, administrator, seller, or other [ |
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provider's service contracts or literature or in any written | ||
communication: | ||
(1) make, permit, or cause to be made any false, | ||
deceptive, or misleading statement; or | ||
(2) deliberately omit a material statement if the | ||
omission would be considered misleading. | ||
(b) A person, including a bank, a savings and loan | ||
association, a lending institution, or the manufacturer or seller | ||
of a product, may not require the purchase of a service contract as | ||
a condition of a loan or the sale of property. | ||
(c) A provider, administrator, seller, or other | ||
representative of the provider may not make a telemarketing call to | ||
a consumer as provided by Sections 304.002 and 304.003, Business & | ||
Commerce Code, unless the provider, administrator, seller, or | ||
representative has an established business relationship, as | ||
defined by Section 304.002, Business & Commerce Code, with the | ||
consumer. | ||
SECTION 1.18. Section 1304.201, Occupations Code, is | ||
amended to read as follows: | ||
Sec. 1304.201. DISCIPLINARY ACTION. [ |
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that a ground for disciplinary action exists under this chapter, | ||
the commission or executive director may impose an administrative | ||
sanction or[ |
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penalty or any other remedy as provided by this chapter and | ||
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SECTION 1.19. Subchapter E, Chapter 1304, Occupations Code, | ||
is amended by adding Section 1304.205 to read as follows: | ||
Sec. 1304.205. REMEDY FOR SERVICE CONTRACT HOLDERS. | ||
(a) If the commission by order, including an agreed order, | ||
determines that a person has operated as a provider or | ||
administrator in this state without holding the appropriate | ||
registration under this chapter, the person shall offer to a | ||
service contract holder who holds a service contract sold or issued | ||
by the person during the period that the person was not registered | ||
under this chapter the right to: | ||
(1) cancel the contract and obtain a refund of the full | ||
purchase price of the contract; or | ||
(2) retain the contract. | ||
(b) If a seller fails to process a service contract | ||
application or a payment from a consumer in accordance with this | ||
chapter and any sales agreement or contract between the provider | ||
and the seller, the commission or executive director may, by | ||
commission order, including an agreed order, require the seller to | ||
refund the full purchase price of the contract to the consumer. | ||
(c) The remedies described in this section are in addition | ||
to any administrative penalty, administrative sanction, civil | ||
penalty, or other disciplinary or enforcement action sought under | ||
this chapter or Chapter 51. | ||
SECTION 1.20. (a) On the effective date of this Act, the | ||
following provisions of the Occupations Code are repealed: | ||
(1) Section 1304.006; and | ||
(2) Subsection (d), Section 1304.102. | ||
(b) On January 1, 2012, the following provisions of the | ||
Occupations Code are repealed: | ||
(1) Section 1304.157; and | ||
(2) Section 1304.158. | ||
SECTION 1.21. (a) Not later than April 1, 2012, the Texas | ||
Commission of Licensing and Regulation shall adopt rules necessary | ||
to implement Chapter 1304, Occupations Code, as amended by this | ||
Act. | ||
(b) Sections 1304.102 and 1304.1025, Occupations Code, as | ||
amended by this Act, apply only to an application for a registration | ||
or renewal of a registration filed with the Texas Department of | ||
Licensing and Regulation on or after the effective date of this Act. | ||
An application filed before that date is governed by the law in | ||
effect on the date the application was filed, and the former law is | ||
continued in effect for that purpose. | ||
(c) Sections 1304.156 and 1304.159, Occupations Code, as | ||
amended by this Act, and Section 1304.1581, Occupations Code, as | ||
added by this Act, apply only to a service contract sold or issued | ||
on or after January 1, 2012. A service contract sold or issued | ||
before that date is governed by the law in effect on the date the | ||
contract was sold or issued, and the former law is continued in | ||
effect for that purpose. | ||
(d) Notwithstanding Subsection (c) of this section, a | ||
service contract sold or issued before January 1, 2012, may not be | ||
extended or renewed at the end of the service contract term unless | ||
the contract complies with Sections 1304.156 and 1304.159, | ||
Occupations Code, as amended by this Act, and Section 1304.1581, | ||
Occupations Code, as added by this Act. | ||
(e) Section 1304.201, Occupations Code, as amended by this | ||
Act, applies only to a disciplinary action initiated by the Texas | ||
Department of Licensing and Regulation on or after the effective | ||
date of this Act. An action initiated before the effective date of | ||
this Act is governed by the law in effect on the date the action was | ||
initiated, and the former law is continued in effect for that | ||
purpose. | ||
(f) Section 1304.205, Occupations Code, as added by this | ||
Act, applies only to an act or omission of a person operating as a | ||
provider, administrator, or seller of a service contract that | ||
occurs on or after the effective date of this Act. An act or | ||
omission that occurs before that date is governed by the law in | ||
effect on the date the act or omission occurred, and the former law | ||
is continued in effect for that purpose. | ||
ARTICLE 2. IDENTITY RECOVERY SERVICE CONTRACTS | ||
SECTION 2.01. Section 1306.002, Occupations Code, is | ||
amended by adding Subdivision (11) to read as follows: | ||
(11) "Seller" means a person, other than the provider | ||
or administrator of an identity recovery service contract, who | ||
markets, sells, offers to sell, negotiates, or issues an identity | ||
recovery service contract to a consumer on behalf of a provider, but | ||
who is not contractually obligated to a service contract holder | ||
under the terms of an identity recovery service contract. | ||
SECTION 2.02. Chapter 1306, Occupations Code, is amended by | ||
adding Subchapter A-1 to read as follows: | ||
SUBCHAPTER A-1. POWERS AND DUTIES OF DEPARTMENT | ||
AND COMMISSION | ||
Sec. 1306.022. RULES. The commission shall adopt rules | ||
necessary to implement and administer this chapter. | ||
SECTION 2.03. Section 1306.008, Occupations Code, is | ||
transferred to Subchapter A-1, Chapter 1306, Occupations Code, as | ||
added by this Act, redesignated as Section 1306.021, Occupations | ||
Code, and amended to read as follows: | ||
Sec. 1306.021 [ |
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EXECUTIVE DIRECTOR. (a) The executive director may investigate a | ||
provider, administrator, seller, or other person as necessary to | ||
enforce this chapter and protect identity recovery service contract | ||
holders in this state. | ||
(b) On request of the executive director, a provider shall | ||
make the records required by Section 1306.105 available to the | ||
executive director as necessary to enable the executive director to | ||
reasonably determine compliance with this chapter. | ||
SECTION 2.04. Section 1306.051, Occupations Code, is | ||
amended by amending Subsections (a) and (b) and adding Subsection | ||
(d) to read as follows: | ||
(a) A person may not operate as a provider or administrator | ||
of identity recovery service contracts sold or issued in this state | ||
unless the person is registered with the department. | ||
(b) Except for the registration requirement of this chapter | ||
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seller, administrator, or other person who markets, sells, issues, | ||
or offers to sell identity recovery service contracts is exempt | ||
from any licensing requirement of this state that relates to an | ||
activity regulated under this chapter. | ||
(d) A provider or administrator may not contract with or use | ||
the services of a person to perform an activity that requires | ||
registration with the department as a provider or administrator | ||
unless that person is appropriately registered. | ||
SECTION 2.05. Subsection (c), Section 1306.052, | ||
Occupations Code, is amended to read as follows: | ||
(c) The department may refuse to issue or renew a | ||
registration, suspend or revoke a registration, or take any other | ||
disciplinary action under Subchapter D if the applicant or a | ||
controlling person of the applicant: | ||
(1) has violated this chapter or a rule adopted or | ||
order issued by the commission or executive director under this | ||
chapter; | ||
(2) has made a material misrepresentation or false | ||
statement in an application or in any document accompanying an | ||
application; | ||
(3) has had a license issued under Title 13, Insurance | ||
Code, revoked as provided by that code; or | ||
(4) has had a license or registration as a provider, | ||
administrator, or seller revoked in this state or another state. | ||
SECTION 2.06. Subsection (a), Section 1306.053, | ||
Occupations Code, is amended to read as follows: | ||
(a) In addition to the requirements of Section 1306.052, an | ||
applicant for issuance or renewal of a provider registration must | ||
file with the application: | ||
(1) the reimbursement insurance policy required by | ||
Section 1306.102, if the provider is using a reimbursement | ||
insurance policy to meet the financial security requirements of | ||
Section 1306.101; [ |
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(2) the financial security deposit and the | ||
documentation required by the department demonstrating adequate | ||
funding of the reserve account, if the provider is using a funded | ||
reserve account and financial security deposit to meet the | ||
financial security requirements of Section 1306.101; | ||
(3) the proof necessary to demonstrate the applicant | ||
or its parent company maintains at least $100 million net worth, if | ||
the applicant is using net worth to meet the financial security | ||
requirements of Section 1306.101; and | ||
(4) information about each controlling person of the | ||
applicant [ |
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executive director[ |
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SECTION 2.07. Subsections (b) and (d), Section 1306.054, | ||
Occupations Code, are amended to read as follows: | ||
(b) To register or renew a registration, a provider or | ||
administrator must pay the appropriate fee. The commission shall | ||
set by rule the [ |
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required to cover the costs of administering this chapter. | ||
(d) The information concerning the number of identity | ||
recovery service contracts sold or issued by a provider that is | ||
submitted under Subsection (c)[ |
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Government Code, applies[ |
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SECTION 2.08. The heading to Subchapter C, Chapter 1306, | ||
Occupations Code, is amended to read as follows: | ||
SUBCHAPTER C. PRACTICE BY IDENTITY RECOVERY SERVICE CONTRACT | ||
PROVIDERS, [ |
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SECTION 2.09. The heading to Section 1306.101, Occupations | ||
Code, is amended to read as follows: | ||
Sec. 1306.101. FINANCIAL SECURITY REQUIREMENTS; | ||
DISTRIBUTION OF FUNDS HELD IN TRUST. | ||
SECTION 2.10. Section 1306.101, Occupations Code, is | ||
amended by amending Subsections (a) and (b) and adding Subsection | ||
(f) to read as follows: | ||
(a) To ensure the faithful performance of a provider's | ||
obligations to its identity recovery service contract holders, each | ||
provider must: | ||
(1) insure the provider's identity recovery service | ||
contracts under a reimbursement insurance policy issued by an | ||
insurer authorized to transact insurance in this state or by a | ||
surplus lines insurer eligible to place coverage in this state | ||
under Chapter 981, Insurance Code; | ||
(2) maintain a funded reserve account covering the | ||
provider's obligations under its identity recovery service | ||
contracts that are issued and outstanding in this state and place in | ||
trust with the executive director a financial security deposit | ||
consisting of: | ||
(A) [ |
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(B) [ |
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qualified financial institution; or | ||
(C) a certificate of deposit issued by a | ||
qualified financial institution [ |
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(3) maintain, or have a parent company that maintains, | ||
a net worth or stockholders' equity of at least $100 million. | ||
(b) If the provider ensures its obligations under | ||
Subsection (a)(2), the amount maintained in the reserve account may | ||
not be less than an amount equal to 40 percent of the gross | ||
consideration the provider received from consumers from the sale of | ||
all identity recovery service contracts issued and outstanding in | ||
this state, minus any claims paid. The executive director may | ||
review and examine the reserve account. The amount of the security | ||
deposit may not be less than $250,000. The provider must submit to | ||
the executive director on request a copy of the provider's | ||
financial statements that must be prepared in accordance with | ||
generally accepted accounting principles, be without qualification | ||
as to the going concern status of the provider, and be audited by an | ||
independent certified public accountant. The commission by rule | ||
may require the provider to submit additional financial reports | ||
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(f) In the event of a provider's bankruptcy or a similar | ||
event affecting the ability of the provider to faithfully perform | ||
its obligations to its identity recovery service contract holders, | ||
the executive director may distribute any funds held in trust as | ||
financial security for the provider under this section to eligible | ||
identity recovery service contract holders as payment for claims. | ||
The executive director must distribute the funds in an equitable | ||
and cost-effective manner as determined by the executive director. | ||
SECTION 2.11. Subchapter C, Chapter 1306, Occupations Code, | ||
is amended by adding Sections 1306.1021 and 1306.1031 to read as | ||
follows: | ||
Sec. 1306.1021. FINANCIAL SECURITY TRANSITION. (a) In | ||
this section, "provider that maintained a funded reserve account" | ||
means a provider that, in order to ensure the faithful performance | ||
of the provider's obligations to identity recovery service contract | ||
holders, maintained a funded reserve account covering the | ||
provider's obligations under identity recovery service contracts | ||
that were issued and outstanding in this state and placed in trust | ||
with the executive director a financial security deposit consisting | ||
of: | ||
(1) a surety bond issued by an authorized surety; | ||
(2) securities of the type eligible for deposit by an | ||
authorized insurer in this state; | ||
(3) a statutory deposit of cash or cash equivalents; | ||
(4) a letter of credit issued by a qualified financial | ||
institution; or | ||
(5) another form of security prescribed by commission | ||
rules. | ||
(b) This section applies only to a provider that maintained | ||
a funded reserve account on August 31, 2011. | ||
(c) Not later than September 1, 2012, a provider that | ||
maintained a funded reserve account shall submit to the executive | ||
director documentation that the provider is in compliance with the | ||
financial security requirements provided by Section 1306.101 for | ||
identity recovery service contracts sold or issued in this state on | ||
or after September 1, 2012. A provider that maintained a funded | ||
reserve account may not sell or issue an identity recovery service | ||
contract on or after September 1, 2012, unless the provider is in | ||
compliance with this subsection. | ||
(d) A provider that maintained a funded reserve account | ||
shall: | ||
(1) continue to maintain the funded reserve account | ||
and security deposit at appropriate levels for identity recovery | ||
service contracts that were sold or issued in this state before | ||
September 1, 2012, until the contracts are no longer in effect; or | ||
(2) provide financial security for identity recovery | ||
service contracts sold or issued before September 1, 2012, by | ||
complying with the financial security requirements of Section | ||
1306.101. | ||
(e) If a provider provides financial security for identity | ||
recovery service contracts sold or issued before September 1, 2012, | ||
by complying with the financial security requirements of Section | ||
1306.101, the provider shall give to the executive director | ||
satisfactory documentation that the reimbursement insurance | ||
policy, funded reserve account and security deposit, or net worth | ||
covers all outstanding identity recovery service contracts issued | ||
before September 1, 2012. | ||
(f) An identity recovery service contract that is sold or | ||
issued before September 1, 2012, and is covered under a funded | ||
reserve account and security deposit may not be extended or renewed | ||
at the end of the identity recovery service contract term unless the | ||
provider provides financial security for those service contracts by | ||
complying with the financial security requirements of Section | ||
1306.101 before the extension or renewal. | ||
Sec. 1306.1031. IDENTITY RECOVERY SERVICE CONTRACT | ||
SELLERS; RESPONSIBILITIES. (a) A provider may employ or contract | ||
with a seller to be responsible for: | ||
(1) all or any part of the sale or marketing of | ||
identity recovery service contracts for the provider; and | ||
(2) compliance with this chapter in connection with | ||
the sale or marketing of identity recovery service contracts. | ||
(b) The hiring of or contracting with a seller under this | ||
section does not affect a provider's responsibility to comply with | ||
this chapter. | ||
(c) Unless registered as a provider or administrator, a | ||
seller is prohibited from engaging in activities that would require | ||
registration as a provider or administrator. | ||
(d) A seller shall process an identity recovery service | ||
contract application and a payment from a consumer in accordance | ||
with this chapter and with any sales agreement or contract between | ||
the provider and the seller. | ||
SECTION 2.12. Subsections (a), (b), and (d), Section | ||
1306.106, Occupations Code, are amended to read as follows: | ||
(a) An identity recovery service contract marketed, sold, | ||
offered for sale, issued, made, proposed to be made, or | ||
administered in this state must: | ||
(1) be written, printed, or typed in clear, | ||
understandable language that is easy to read; | ||
(2) state the name and address of the provider; | ||
(3) state the purchase price of the contract and the | ||
terms under which the contract is sold; | ||
(4) state the terms and restrictions governing | ||
cancellation of the contract by the provider or the identity | ||
recovery service contract holder before the expiration date of the | ||
contract; | ||
(5) identify: | ||
(A) any administrator and any registration | ||
number issued to the administrator under this chapter; | ||
(B) the [ |
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(C) the identity recovery service contract | ||
holder, if the identity recovery service contract holder provides | ||
the holder's name; | ||
(6) state the amount of any deductible; | ||
(7) specify the services to be provided under the | ||
contract and any limitation, exception, or exclusion; | ||
(8) specify any restriction governing the | ||
transferability of the contract; and | ||
(9) state the duties of the identity recovery service | ||
contract holder, including any duty to protect against any further | ||
damage and any requirement to follow the instructions in the | ||
identity recovery service contract. | ||
(b) The identity and, if applicable, registration number | ||
issued under this chapter of a person described by Subsection | ||
(a)(5) is not required to be preprinted on the identity recovery | ||
service contract and may be added to the contract at the time of | ||
sale. | ||
(d) An identity recovery service contract insured under a | ||
reimbursement insurance policy under Section 1306.102 must: | ||
(1) state the name and address of the insurer; | ||
(2) state that the identity recovery service contract | ||
holder may apply for reimbursement directly to the insurer if: | ||
(A) a covered service is not provided to the | ||
identity recovery service contract holder by the provider before | ||
the 61st day after the date of proof of loss; or | ||
(B) a refund or credit is not paid before the 46th | ||
day after the date on which the contract is canceled [ |
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(3) contain a statement substantially similar to the | ||
following: "Obligations of the provider under this identity | ||
recovery service contract are insured under an identity recovery | ||
service contract reimbursement insurance policy." | ||
SECTION 2.13. Subchapter C, Chapter 1306, Occupations Code, | ||
is amended by adding Section 1306.1081 to read as follows: | ||
Sec. 1306.1081. CANCELLATION BY IDENTITY RECOVERY SERVICE | ||
CONTRACT HOLDER; REFUND. (a) An identity recovery service | ||
contract must allow the identity recovery service contract holder | ||
to cancel the identity recovery service contract at any time. | ||
(b) If an identity recovery service contract holder cancels | ||
an identity recovery service contract before the 31st day after the | ||
date of purchase, the provider: | ||
(1) shall refund to the identity recovery service | ||
contract holder or credit to the account of the identity recovery | ||
service contract holder the full purchase price of the contract, | ||
decreased by the amount of any claims paid under the contract; and | ||
(2) may not impose a cancellation fee. | ||
(c) If an identity recovery service contract holder cancels | ||
an identity recovery service contract on or after the 31st day after | ||
the date of purchase, the provider: | ||
(1) shall refund to the identity recovery service | ||
contract holder or credit to the account of the identity recovery | ||
service contract holder the prorated purchase price of the contract | ||
reflecting the remaining term of the contract, based on mileage, | ||
time, or another reasonably applicable measure of the remaining | ||
term that must be disclosed in the contract, decreased by the amount | ||
of any claims paid under the contract; and | ||
(2) may impose a reasonable cancellation fee not to | ||
exceed $50. | ||
(d) A provider may allow an identity recovery service | ||
contract holder to cancel an identity recovery service contract on | ||
other terms included in the contract, provided the terms do not | ||
conflict with this section. | ||
(e) A provider who does not pay the refund or credit the | ||
identity recovery service contract holder's account before the 46th | ||
day after the date notice of cancellation is received by the | ||
provider is liable to the identity recovery service contract holder | ||
for a penalty for each month an amount remains outstanding equal to | ||
10 percent of the amount outstanding. The penalty is in addition to | ||
the full or prorated purchase price of the contract that is owed to | ||
the identity recovery service contract holder under this section or | ||
the terms of the contract. | ||
(f) The right to cancel an identity recovery service | ||
contract is not transferable to a subsequent holder of the | ||
contract. | ||
SECTION 2.14. The heading to Section 1306.109, Occupations | ||
Code, is amended to read as follows: | ||
Sec. 1306.109. CANCELLATION BY A PROVIDER; REFUND | ||
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SECTION 2.15. Section 1306.109, Occupations Code, is | ||
amended by amending Subsection (b) and adding Subsection (c) to | ||
read as follows: | ||
(b) The provider is not required to provide prior notice of | ||
cancellation if the identity recovery service contract is canceled | ||
because of: | ||
(1) nonpayment of the consideration for the contract; | ||
(2) fraud or a material misrepresentation by the | ||
identity recovery service contract holder to the provider or the | ||
provider's administrator; or | ||
(3) a substantial breach of a duty by the identity | ||
recovery service contract holder. | ||
(c) An identity recovery service contract holder whose | ||
contract is canceled by the provider in accordance with this | ||
section is entitled to a prorated refund of the purchase price of | ||
the contract reflecting the remaining term of the contract, based | ||
on mileage, time, or another reasonably applicable measure of the | ||
remaining term that must be disclosed in the contract, decreased by | ||
the amount of any claims paid under the contract. A provider who | ||
cancels a contract under this section may not impose a cancellation | ||
fee. | ||
SECTION 2.16. Section 1306.111, Occupations Code, is | ||
amended to read as follows: | ||
Sec. 1306.111. [ |
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(a) A provider, administrator, seller, or other [ |
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provider's identity recovery service contracts or literature or in | ||
any written communication: | ||
(1) make, permit, or cause to be made any false, | ||
deceptive, or misleading statement; or | ||
(2) deliberately omit a material statement if the | ||
omission would be considered misleading. | ||
(b) A person regulated by Chapter 2301 may not require the | ||
purchase of an identity recovery service contract as a condition of | ||
a loan or the sale of a vehicle. | ||
(c) A provider, administrator, seller, or other | ||
representative of the provider may not make a telemarketing call to | ||
a consumer as provided by Sections 304.002 and 304.003, Business & | ||
Commerce Code, unless the provider, administrator, seller, or | ||
representative has an established business relationship, as | ||
defined by Section 304.002, Business & Commerce Code, with the | ||
consumer. | ||
SECTION 2.17. Section 1306.151, Occupations Code, is | ||
amended to read as follows: | ||
Sec. 1306.151. DISCIPLINARY ACTION. On a finding that a | ||
ground for disciplinary action exists under this chapter, the | ||
commission or executive director may impose an administrative | ||
sanction or[ |
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penalty or any other remedy as provided by this chapter and | ||
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SECTION 2.18. Subchapter D, Chapter 1306, Occupations Code, | ||
is amended by adding Section 1306.155 to read as follows: | ||
Sec. 1306.155. REMEDY FOR IDENTITY RECOVERY SERVICE | ||
CONTRACT HOLDERS. (a) If the commission by order, including an | ||
agreed order, determines that a person has operated as a provider or | ||
administrator in this state without holding the appropriate | ||
registration under this chapter, the person shall offer to an | ||
identity recovery service contract holder who holds an identity | ||
recovery service contract sold or issued by the person during the | ||
period that the person was not registered under this chapter the | ||
right to: | ||
(1) cancel the contract and obtain a refund of the full | ||
purchase price of the contract; or | ||
(2) retain the contract. | ||
(b) If a seller fails to process an identity recovery | ||
service contract application or a payment from a consumer in | ||
accordance with this chapter and any sales agreement or contract | ||
between the provider and the seller, the commission or executive | ||
director may, by commission order, including an agreed order, | ||
require the seller to refund the full purchase price of the contract | ||
to the consumer. | ||
(c) The remedies described in this section are in addition | ||
to any administrative penalty, administrative sanction, civil | ||
penalty, or other disciplinary or enforcement action sought under | ||
this chapter or Chapter 51. | ||
SECTION 2.19. (a) On the effective date of this Act, the | ||
following provisions of the Occupations Code are repealed: | ||
(1) Section 1306.007; and | ||
(2) Subsection (d), Section 1306.052. | ||
(b) On January 1, 2012, the following provisions of the | ||
Occupations Code are repealed: | ||
(1) Section 1306.107; and | ||
(2) Section 1306.108. | ||
SECTION 2.20. (a) Not later than April 1, 2012, the Texas | ||
Commission of Licensing and Regulation shall adopt rules necessary | ||
to implement Chapter 1306, Occupations Code, as amended by this | ||
Act. | ||
(b) Sections 1306.052 and 1306.053, Occupations Code, as | ||
amended by this Act, apply only to an application for a registration | ||
or renewal of a registration filed with the Texas Department of | ||
Licensing and Regulation on or after the effective date of this Act. | ||
An application filed before that date is governed by the law in | ||
effect on the date the application was filed, and the former law is | ||
continued in effect for that purpose. | ||
(c) Sections 1306.106 and 1306.109, Occupations Code, as | ||
amended by this Act, and Section 1306.1081, Occupations Code, as | ||
added by this Act, apply only to an identity recovery service | ||
contract sold or issued on or after January 1, 2012. An identity | ||
recovery service contract sold or issued before that date is | ||
governed by the law in effect on the date the contract was sold or | ||
issued, and the former law is continued in effect for that purpose. | ||
(d) Notwithstanding Subsection (c) of this section, an | ||
identity recovery service contract sold or issued before January 1, | ||
2012, may not be extended or renewed at the end of the contract term | ||
unless the contract complies with Sections 1306.106 and 1306.109, | ||
Occupations Code, as amended by this Act, and Section 1306.1081, | ||
Occupations Code, as added by this Act. | ||
(e) Section 1306.151, Occupations Code, as amended by this | ||
Act, applies only to a disciplinary action initiated by the Texas | ||
Department of Licensing and Regulation on or after the effective | ||
date of this Act. An action initiated before the effective date of | ||
this Act is governed by the law in effect on the date the action was | ||
initiated, and the former law is continued in effect for that | ||
purpose. | ||
(f) Section 1306.155, Occupations Code, as added by this | ||
Act, applies only to an act or omission of a person operating as a | ||
provider, administrator, or seller of an identity recovery service | ||
contract that occurs on or after the effective date of this Act. An | ||
act or omission that occurs before that date is governed by the law | ||
in effect on the date the act or omission occurred, and the former | ||
law is continued in effect for that purpose. | ||
ARTICLE 3. EFFECTIVE DATE | ||
SECTION 3.01. This Act takes effect September 1, 2011. | ||
______________________________ | ______________________________ | |
President of the Senate | Speaker of the House | |
I hereby certify that S.B. No. 1169 passed the Senate on | ||
April 21, 2011, by the following vote: Yeas 31, Nays 0; and that | ||
the Senate concurred in House amendment on May 25, 2011, by the | ||
following vote: Yeas 31, Nays 0. | ||
______________________________ | ||
Secretary of the Senate | ||
I hereby certify that S.B. No. 1169 passed the House, with | ||
amendment, on May 23, 2011, by the following vote: Yeas 142, | ||
Nays 0, one present not voting. | ||
______________________________ | ||
Chief Clerk of the House | ||
Approved: | ||
______________________________ | ||
Date | ||
______________________________ | ||
Governor |