Part 1.
FINANCE COMMISSION OF TEXAS
Chapter 1.
CONSUMER CREDIT REGULATION
Subchapter Q. CHAPTER 342, PLAIN LANGUAGE CONTRACT PROVISIONS
7 TAC §§1.1211, 1.1212, 1.1214 - 1.1217
The Finance Commission of Texas (the commission) proposes
new 7 TAC §§1.1211, 1.1212, 1.1214 - 1.1217, concerning a plain
language model contract for Subchapter E contracts. New 7 TAC §§1.1211,
1.1212, 1.1214 - 1.1217 includes proposed clauses, disclosures, layout, and
font type for Subchapter E plain language contracts.
The purpose of the rules is stated in the purpose clause, §1.1211,
and is to implement the provisions of Texas Finance Code §341.502, which
requires contracts for consumer loans under Chapter 342, whether in English
or in Spanish, to be written in plain language. The proposed rule provides
model contract provisions for use by licensees of the Office of Consumer Credit
Commissioner. Use of the model contract is optional; however, should a licensee
choose not to use the model contract, contracts must be submitted to the agency
in accordance with the provisions of 7 TAC §1.841.
Section 1.1212 explains the relationship of federal law to the state requirements.
The section describes how conflicts or inconsistencies shall be resolved.
Section 1.1213 is reserved for Subchapter E definitions and if necessary
will be proposed in the future.
Section 1.1214 details the required format, typeface, and font for model
plain language Subchapter E contracts. The requirements are necessary to ensure
that the contract will be easy for consumers to read and understand.
Section 1.1215 identifies the types of provisions that may be included
in a Subchapter E contract.
Section 1.1216 contains the model clauses. These clauses are the agency's
interpretation of a plain language version of typical contract provisions.
Section 1.1217 outlines permissible changes that can be made to a contract
and still comply with the model provision. This section provides licensees
with flexibility in using a model contract.
Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that
for the first five-year period the rules are in effect there will be no fiscal
implications for state or local government as a result of administering the
rules.
Commissioner Pettijohn also has determined that for each year of the first
five years the rules are in effect the public benefit anticipated as a result
of the new rules will be enhanced compliance with the credit laws, simpler
credit contracts, and increased uniformity and consistency in credit contracts.
Additional economic costs will be incurred by a person required to comply
with this proposal. Because a licensee fully complies with the proposal by
using the model forms, the additional costs imposed by the proposal are limited
to costs associated with copying a contract and costs attributable to loss
of obsolete forms inventory. Additional copy costs are estimated to be approximately
$0.30 - $0.40 per contract. There will be no adverse effect on small businesses
as compared to the effect on large businesses. Some licensees who use or lease
specialized computer software programs for their loan business may experience
some additional cost. These costs are impossible to predict. The agency has
attempted to lessen these costs by providing the software programmers with
the text of the contracts. Whether programmers will use the adopted form or
submit non-standard contracts for review is not predictable. Whether the programmers
will charge an additional fee for a contract they do not have to draft is
also not predictable.
Comments on the proposed new rules may be submitted in writing to Leslie
L. Pettijohn, Consumer Credit Commissioner, Office of Consumer Credit Commissioner,
2601 North Lamar Boulevard, Austin, Texas 78705-4207.
The new sections are proposed under the Texas Finance Code §11.304,
which authorizes the Finance Commission to adopt rules to enforce Title 4
of the Texas Finance Code. Additionally, Texas Finance Code §341.502
grants the Finance Commission the authority to adopt rules to govern the form
of Subchapter E contracts and to adopt model plain language contracts.
These rules affect Texas Finance Code Chapter 342, Subchapter E.
§1.1211.Purpose.
(a)
The purpose of these rules is to provide a model plain
language contract in English for Texas Finance Code, Chapter 342, Subchapter
E transactions. The establishment of model provisions for these transactions
will encourage use of simplified wording that will ultimately benefit consumers
by making these contracts easier to understand. The use of the "plain language"
model contract by a licensee is not mandatory. The licensee, however, may
not use a contract other than a model contract unless the licensee has submitted
the contract to the commissioner in compliance with §1.841 of this title.
The commissioner shall issue an order disapproving the contract if the commissioner
determines the contract does not comply with this section or rules adopted
under this section. A licensee may not claim the commissioner's failure to
disapprove a contract constitutes an approval.
(b)
These provisions are intended to constitute a complete
plain language Subchapter E contract; however, a licensee is not limited to
the contract provisions addressed by these rules.
§1.1212.Relationship with Federal Law.
In the event of an inconsistency or conflict between the disclosure
or notice requirements in these provisions and any current or future federal
law, regulation, or interpretation, the requirements of the federal law, regulation,
or interpretation will control to the extent of the inconsistency. The remainder
of the contract will remain in full force and effect. Use of the Federal Reserve
Board's promulgated model forms complies with the Truth-in-Lending requirements
of this chapter.
§1.1214.Format, Typeface, and Font.
(a)
Plain language contracts must be printed in an easily readable
font and type size pursuant to Texas Finance Code §341.502(a). If other
state or federal law requires a different type size for a specific disclosure
or contractual provision, the type size specified by the other law should
be used.
(b)
The text of the document must be set in a readable typeface.
Typefaces considered to be readable include: Times, Scala, Caslon, Century
Schoolbook, Helvetica, Arial, and Garamond.
(c)
Titles, headings, subheadings, captions, and illustrative
or explanatory tables or sidebars may be used to distinguish between different
levels of information or provide emphasis.
(d)
Typeface size is referred to in points (pt). Because different
typefaces in the same point size are not of equal size, type face is not strictly
defined but is expressed as a minimum size in the Times typeface for visual
comparative purposes. Use of a larger typeface is encouraged. The typeface
for the federal disclosure box or other disclosures required under federal
law must be legible, but no minimum typeface is required. Generally, the typeface
for the remainder of the contract must be at least as large as 8 pt in the
Times typeface.
§1.1215.Contract Provisions.
A Chapter 342, Subchapter E contract may include, but is not limited
to, the following contract provisions to the extent not prohibited by law
or regulation. If the licensee desires to exercise its rights under one of
the following provisions, it must include the provision in the contract. A
licensee who does not desire to apply a provision is not required to include
it in the contract. For example, if a licensee does not take a security interest
in the borrower's personal property, the provisions addressing security interests
are not required. A licensee may also exclude non-relevant portions of a model
clause. For example, a licensee who does not routinely finance certain insurance
coverages may omit those non-applicable portions of the model clause.
(1)
Identification of the parties, including the name and address
of each party;
(2)
A Truth-in-Lending Act (TILA) disclosure box;
(3)
An Itemization of Amount Financed box;
(4)
A definition section specifying the pronouns that designate
the borrower and the lender;
(5)
A promise to pay;
(6)
A late charge provision;
(7)
A provision for after maturity interest;
(8)
A provision specifying that prepayment is permitted;
(9)
A provision specifying the finance charge earnings and
refund method;
(10)
A provision authorizing deferments;
(11)
A provision contracting for a fee for a dishonored check;
(12)
A provision specifying the conditions causing default;
(13)
A provision relating to property insurance;
(14)
A provision relating to credit insurance;
(15)
A provision regarding the mailing of notices to the borrower;
(16)
Statement of truthful information;
(17)
A waiver of notice of intent to accelerate and waiver
of notice of acceleration;
(18)
A provision expressing no waiver of licensee's rights;
(19)
A collection expense clause;
(20)
A clause providing for joint liability;
(21)
A usury savings clause;
(22)
A provision stating that if any part of the contract is
declared invalid, the rest of the contract remains valid; and,
(23)
Complaints and inquiries notice.
§1.1216.Model Clauses.
(a)
Generally. These model clauses are the plain language rendition
of contract clauses that have typically been stated in technical legal terms.
(1)
The model clauses refer to the Borrower as "I" or "me."
The Lender is referred to as "you" or "your."
(2)
Nothing in this regulation prohibits a contract from including
provisions that provide more favorable results for the borrower than those
that would result from the use of a model clause.
(b)
Itemization of the Amount Financed box. Two model clauses
for the itemization of amount financed are presented in this subsection. One
is for use when the licensee finances an administrative fee. The other is
for use when the administrative fee is paid in cash by the borrower. A licensee
may delete portions applicable to any insurance premiums that are not financed
and may also delete other inapplicable portions. The model clause itemizing
the amount financed reads:
(1)
For use when the administrative fee is financed:
Figure: 7 TAC §1.1216(b)(1)
(2)
For use when the administrative fee is paid in cash:
Figure: 7 TAC §1.1216(b)(2)
(c)
Promise to Pay. The model clause for the borrower's promise
to pay reads:
(1)
For contracts using the Scheduled Installment Earnings
Method: "I promise to pay the Total of Payments to the order of you, the Lender.
I will make the payments at your address above. I will make the payments on
the dates and in the amounts shown in the Payment Schedule."
(2)
For contracts using the True Daily Earnings Method: "I
promise to pay the cash advance plus the accrued interest to the order of
you, the Lender. I will make the payments at your address above. I will make
the payments on the dates and in the amounts shown in the Payment Schedule."
(d)
Late Charge. The late charge model clause reads: "If I
don't pay all of a payment within 10 days after it is due, you can charge
me a late charge. The late charge will be 5% of the scheduled payment."
(e)
After Maturity Interest. The after maturity interest model
clause reads: "If I don't pay all I owe when the final payment becomes due,
I will pay interest on the amount that is still unpaid. That interest will
be the higher rate of 18% per year or the maximum rate allowed by law. That
interest will begin the day after the final payment becomes due."
(f)
Prepayment Clause. The model prepayment clause reads:
(1)
For contracts using the Scheduled Installment Earnings
Method: "I can make a whole payment early. Unless you agree otherwise in writing,
I may not skip payments. If I make a payment early, my next payment will still
be due as scheduled."
(2)
For contracts using the True Daily Earnings Method: "I
can make any payment early. Unless you agree otherwise in writing, I may not
skip payments. If I make a payment early, my next payment will still be due
as scheduled."
(g)
Finance Charge Earnings and Refund Method. The model finance
charge earnings and refund method reads:
(1)
For contracts using the Scheduled Installment Earnings
Method, Texas Finance Code §342.201(a):
Figure: 7 TAC §1.1216(g)(1)
(2)
For contracts using the Scheduled Installment Earnings
Method, Texas Finance Code §342.201(d): "The annual rate of interest
is ___%. This interest rate may not be the same as the Annual Percentage Rate.
You figure the Finance Charge by applying the scheduled installment earnings
method as defined by the Texas Finance Code to the unpaid cash advance. The
unpaid cash advance does not include the administrative fee, late charges,
and returned check charges. If I prepay my loan in full before the final payment
is due, I may save a portion of the Finance Charge. I will not get a refund
if the refund would be less than $1.00. You base the Finance Charge and Total
of Payments as if I will make each payment on the day it is due. My final
payment may be larger or smaller than my regular payment."
(3)
For contracts using the Scheduled Installment Earnings
Method, Texas Finance Code §342.201(e):
Figure: 7 TAC §1.1216(g)(3)
(4)
For contracts using the True Daily Earnings Method, Texas
Finance Code §342.201(d): "The annual rate of interest is _____%. This
interest rate may not be the same as the Annual Percentage Rate. You figure
the Finance Charge by applying the true daily earnings method as defined by
the Texas Finance Code to the unpaid portion of the cash advance. You base
the Finance Charge and Total of Payments as if I will make each payment on
the day it is due. You will apply payments on the date they are received.
This may result in a different Finance Charge or Total of Payments. My final
payment may be larger or smaller than my regular payment."
(5)
For contracts using the True Daily Earnings Method, Texas
Finance Code §342.201(e):
Figure: 7 TAC §1.1216(g)(5)
(h)
Deferment Clause. The deferment model clause reads:
(1)
"If I ask for more time to make any payment and you agree,
I will pay more interest to extend the payment. The extra interest will be
figured under the Finance Commission rules."
(2)
Optional language for unilateral deferment(s): "You may
extend one or more of my payments without my permission. You have to wait
six months to do it again."
(i)
Fee for Dishonored Check Clause. The fee for dishonored
check model clause reads: "I agree to pay you a fee of up to $25 for a returned
check. You can add the fee to the amount I owe or collect it separately."
(j)
Default Clause. The model default clause reads: "I will
be in default if: I do not timely make a payment; I break any promise I made
in this agreement; I allow a judgment to be entered against me or the collateral;
I sell, lease, or dispose of the collateral; I use the collateral for an illegal
purpose; or you believe in good faith that I am not going to keep any of my
promises. If there is more than one Borrower, each Borrower agrees to keep
all of the promises in the loan documents."
(k)
Property Insurance Disclosure Box. The model provision
for the disclosure of property insurance reads:
Figure: 7 TAC §1.1216(k)
(l)
Credit Insurance Disclosure Box. The model provision for
the disclosure of credit insurance reads:
Figure: 7 TAC §1.1216(l)
(m)
Mailing of Notice to Borrower. The model agreement regarding
notice to the borrower reads: "You can mail any notice to me at my last address
in your records. Your duty to give me notice will be satisfied when you mail
it."
(n)
Statement of Truthful Information. The following clause
is sufficient as the borrower's agreement that the information provided to
the licensee is true: "I promise that all information I gave you is true."
(o)
Waiver of Notice of Intent to Accelerate and Waiver of
Notice of Acceleration Clause. The waiver of notice of intent to accelerate
and waiver of notice of acceleration clause reads: "If I am in default, you
may require me to repay the entire unpaid principal balance, and any accrued
interest at once. You don't have to give me notice that you are demanding
or intend to demand immediate payment of all that I owe."
(p)
No Waiver of Lender's Rights. The model agreement regarding
the lender's rights reads: "If you don't enforce your rights every time, you
can still enforce them later."
(q)
Collection Expense Clause. The model provision relating
to the collection of expenses if default occurs reads: "If this debt is referred
to an attorney for collection, I will pay any attorney fees set by the court
plus court costs."
(r)
Joint Liability Clause. The model joint liability clause
reads: "I understand that you may seek payment from only me without first
looking to any other Borrower."
(s)
Usury Savings Clause. The model usury savings clause reads:
"I don't have to pay interest or other amounts that are more than the law
allows."
(t)
Savings Clause. The model savings clause reads: "If any
part of this contract is declared invalid, the rest of the contract remains
valid."
(u)
Final Agreement and Modifications in Writing. The model
agreement requiring any change to be in writing reads: "This written loan
agreement is the final agreement between you and me and may not be changed
by prior, current, or future agreements or statements between you and me.
There are no oral agreements between us relating to this loan agreement. Any
change to this agreement has to be in writing. Both you and I have to sign
it."
(v)
Security Agreement Clause. The model clause for the security
agreement reads: "If I am giving collateral for this loan, I will see the
separate security agreement for more information and agreements."
(w)
Application of Law. The model agreement regarding the law
to be applied to the contract reads: "Federal law and Texas law apply to this
contract."
(x)
Complaints and Inquiries Notice. "This lender is licensed
and examined by the State of Texas--Office of Consumer Credit Commissioner.
Call the Consumer Credit Hotline or write for credit information or assistance
with credit problems. Office of Consumer Credit Commissioner, 2601 North Lamar,
Austin, Texas 78705-4207, (512) 936-7600, (800) 538-1579."
(y)
Clause Describing Collateral. In the TILA disclosure box,
the model clause describing the collateral reads: "You will have a security
interest in the following described collateral ________________."
(z)
Clause Relating to Prepayment. In the TILA disclosure box,
the model clause for prepayment reads:
(1)
For contracts using the Scheduled Installment Earnings
Method: "Prepayment: If I pay off early, I may be entitled to a refund of
part of the Finance Charge."
(2)
For contracts using the True Daily Earnings Method: "Prepayment:
If I pay off early, I will not be entitled to a refund of part of the Finance
Charge."
(aa)
Security Agreement. If the loan is secured, a separate
security agreement should be used.
(1)
The model clause stating the secured nature of the agreement
reads: "To secure this loan, I give you a security interest in the collateral.
The collateral includes the property listed below, improvements and attachments
to the property, insurance refunds, and proceeds."
(2)
Prohibition on Transfer and Collateral Free of Encumbrance.
The model agreement keeping the collateral free from encumbrance and against
transferring it reads: "I own the collateral. I won't sell or transfer it
without your written permission. I won't allow anyone else to have an interest
in the collateral except you."
(3)
Location and Restrictions on Movement or Transfer of Collateral.
The model agreement regarding the location of the collateral reads: "I will
keep the collateral at my address shown above. I will promptly tell you in
writing if I change my address. I won't permanently remove the collateral
from Texas unless you give me written permission."
(4)
Upkeep and Use of Collateral. The model agreement regarding
the upkeep and use of the collateral reads: "I will timely pay all taxes and
license fees on the collateral. I will keep it in good repair. I won't use
the collateral illegally."
(5)
Modifications in Writing. The model agreement regarding
changes made to the security agreement reads: "Any change to this security
agreement has to be in writing. Both you and I have to sign it."
(6)
Any Default is a Default of the Security Agreement. The
model agreement in the security agreement regarding defaults reads: "Any default
under my agreements with you will be a default of this security agreement."
(7)
Default Clause. The model clause setting out the security
agreement in case of default reads: "If there is a default, you can take the
collateral. You will only do this lawfully and without a breach of the peace.
If you take my collateral, you will tell me how much I have to pay to get
it back. If I don't pay you to get the collateral back, you can sell it or
take other action allowed by law. You will send me notice at least 10 days
before you sell it. My right to get the collateral back ends when you sell
it. You can use the money you get from selling it to pay amounts the law allows
and to reduce the amount I owe. If any money is left, you will pay it to me.
If the money from the sale is not enough to pay all I owe, I must pay the
rest of what I owe you plus interest."
§1.1217.Permissible Changes.
(a)
A licensed lender may consider making the following types
of changes to the model clauses:
(1)
The addition of information related to information set
forth in the model clauses that is not otherwise prohibited by law.
(2)
Substituting another term for "Lender", "Borrower" that
has the same meaning, or use of pronouns such as "you," "we," and "us."
(3)
The model clauses may be presented in any order, and may
be combined or further segregated at the licensee's option.
(4)
Inserting descriptive headings or number provisions.
(5)
Changing the case of a word if otherwise permitted by the
Texas Finance Code.
(6)
Other changes which do not affect the substance of the
disclosures.
(7)
A sample model contract using the scheduled installment
earnings method is presented in the following example.
Figure: 7 TAC §1.1217(a)(7)
(8)
A sample model contract using the true daily earnings method
is presented in the following example.
Figure: 7 TAC §1.1217(a)(8)
(9)
A sample model security agreement is presented in the following
example.
Figure: 7 TAC §1.1217(a)(9)
(b)
An authorized licensee has considerable flexibility to
arrange the format of the model form if the revised format does not significantly
adversely affect the substance, clarity, or meaningful sequence of the disclosures.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on May 2, 2002.
TRD-200202732
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Earliest possible date of adoption: June 16, 2002
For further information, please call: (512) 936-7640
Subchapter B. GENERAL
7 TAC §3.37
The Texas Finance Commission (the commission) proposes to
amend §3.37, concerning the calculation of annual assessments for banks.
Section 3.37 provides a table with steps for determining annual assessments
for banks. The proposed amendment reduces assessments for banks with over
$1 billion in assets by adjusting the applicable multiplication factor in
the assessable asset group of over $1 billion and by adding two new assessment
categories: (1) for banks with assets between $5 billion and $10 billion;
and (2) banks with over $10 billion in assets. The addition of these new categories
makes assessments more equitable for larger banks by recognizing the increased
efficiencies of supervision of larger institutions.
The specific amendments to the table include changes to the "Assessable
Asset Group" of over $1,000,000 (in thousands). In that column, $5,000,000
(in thousands) is added in Step 1 under the heading "but not greater than
(in thousands) . . . ." In Step 3, the multiplication factor is reduced from
0.060 to 0.055. The amendments also add two new columns under the "Assessable
Asset Group" for the two new assessment categories. The first new column is
for the assessment category between $5,000,000 (in thousands) and $10,000,000
(in thousands) at a multiplication factor of 0.050. The second is for assessable
assets over $10,000,000 (in thousands) at a multiplication factor of 0.040.
Gayle Griffin, Deputy Commissioner, Texas Department of Banking, has determined
that, for each year of the first five years that the section is in effect,
there will be an approximate 1.3% decrease in assessments collected by the
department. This decrease will affect the amounts of revenue collected from
regulated entities, but not department appropriations. The proposed change
in the collection structure will result in more equitable cost allocations
to the industry. There will be no fiscal implication for local government
as a result of enforcing or administering the section as amended.
Mr. Griffin also has determined that, for each of the first five years
the section as amended is in effect, the public benefit anticipated as a result
of the adoption is increased competition in the banking industry, which will
result from attracting banks with high levels of assessable assets based on
the more equitable assessment calculation. No economic cost will be incurred
by a person required to comply with this section, and there will be no deleterious
effect on small businesses.
Comments on the proposed amendment may be submitted to Robin Robinson,
Assistant General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard,
Austin, Texas 78705-4294, or by e-mail to robin.robinson@banking.state.tx.us.
The amendment is proposed under Finance Code, §11.301 and §31.003,
which authorize the commission to adopt rules to recover the cost of maintaining
and operating the Department of Banking by imposing and collecting ratable
and equitable fees, and under Finance Code §31.106, which requires each
state bank to pay the equitable or proportionate cost of maintenance and operation
of the department and the cost of enforcement of applicable Finance Code provisions.
Finance Code, §11.301 and §31.003 are affected by the proposed
amendment.
§3.37.Calculation of Annual Assessment for Banks.
The annual assessment for a state bank is calculated as described in §3.36
of this title (relating to Annual Assessments and Specialty Examination Fees),
based on the values in the following table:
Figure: 7 TAC §3.37
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on May 1, 2002.
TRD-200202711
Everette D. Jobe
Certifying Official
Finance Commission of Texas
Proposed date of adoption: June 21, 2002
For further information, please call: (512) 475-1300
Chapter 17.
TRUST COMPANY REGULATION
Subchapter A. GENERAL
7 TAC §17.1
(Editor's note: The text of the following section proposed for
repeal will not be published. The section may be examined in the offices of
the Texas Department of Banking or in the Texas Register office, Room 245,
James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Finance Commission of Texas (the commission),
on behalf of the Texas Department of Banking, proposes the repeal of §17.1,
concerning Ratable Increases in Required Capital. The commission has reviewed §17.1
in connection with its rule review of Chapter 17 and has concluded that the
reason for the initial adoption of §17.1 no longer exists and that the
rule should be repealed.
Prior to 1997, state law required a Texas trust company to possess minimum
restricted capital of $500,000. In 1997, the legislature enacted Texas Civil
Statutes, Article 342a-3.007, now codified at Finance Code, §182.008,
which increased the minimum restricted capital requirement to not less than
$1 million. The commission adopted §17.1 for the specific purpose of
providing a timetable for a trust company to achieve the new required level
of restricted capital by September 1, 2000. All Texas trust companies have
achieved and now maintain at least the minimum required level of restricted
capital. The repeal of §17.1 is necessary because the reason for the
rule no longer exists.
Everette D. Jobe, General Counsel, Texas Department of Banking, has determined
that, for each year of the first five years that the repeal is in effect,
there will be no fiscal implications for state or local government as a result
of enforcing or administering the repeal.
Mr. Jobe has also determined that, for each of the first five years the
repeal as proposed will be in effect, the public benefit anticipated as a
result of the repeal is the removal of obsolete regulations. There is no anticipated
cost to persons who are required to comply with the repeal as proposed. There
will be no adverse economic effect on small businesses.
Comments concerning the proposed repeal should be submitted within 30 days
of publication to Sarah Shirley, Assistant General Counsel, Texas Department
of Banking, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294,
or e-mail to sarah.shirley@banking.state.tx.us.
The repeal is proposed under Government Code, §2001.039,
which requires a state agency to review each of its rules every four years
and readopt, readopt with amendments, or repeal a rule based upon the agency's
rule review and its determination as to whether the reasons for initially
adopting the rule continue to exist.
No statute, article or code is affected by the proposed repeal.
§17.1.Ratable Increases in Required Capital.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on May 1, 2002.
TRD-200202714
Everette D. Jobe
Certifying Official
Texas Department of Banking
Proposed date of adoption: June 21, 2002
For further information, please call: (512) 475-1300
The Finance Commission of Texas (the commission), on behalf of the
Texas Department of Banking (department), proposes amendments to §17.2,
concerning trust company advertising; §17.3, concerning sale or lease
agreements with an officer, director, principal shareholder or affiliate; §17.4,
concerning bonding requirements; and §17.23, concerning call reports.
The department has completed the rule review of Chapter 17 required by
Government Code, §2001.039. As a result of the review, the department
has determined that the statutory references in these rules need to be amended.
The rules cite statutes that were repealed in connection with the codification
of Texas Revised Statutes, Article 342a-1.001, et seq. into the Finance Code
in 1999. The purpose of these amendments is to conform the statutory references
in the rules to the sections in which the referenced authority now appears
in Finance Code, Title 3, Subtitle F.
Everette Jobe, General Counsel, Texas Department of Banking, has determined
that, for each year of the first five years that the proposed amendments are
in effect, there will be no fiscal implications for state or local governments
as a result of enforcing or administering the amendments.
Mr. Jobe has also determined that, for each of the first five years the
amendments as proposed will be in effect, the public benefit anticipated as
a result of the amendments will be the replacement of obsolete statutory references
with correct citations. There is no anticipated cost to persons who are required
to comply with the amendments as proposed. There will be no adverse economic
effect on small businesses.
Comments concerning the proposed amendments should be submitted within
30 days of publication to Sarah Shirley, Assistant General Counsel, Texas
Department of Banking, 2601 North Lamar Boulevard, Suite 300, Austin, Texas
78705-4924, or e-mail to sarah.shirley@banking.state.tx.us.
Subchapter A. GENERAL
7 TAC §§17.2 - 17.4
The amendments are proposed under the authority of Government
Code, §2001.039, which requires a state agency to review each of its
rules every four years and readopt, readopt with amendments, or repeal a rule
based upon its rule review, and Finance Code, §181.003, which authorizes
the commission to adopt rules as necessary for the implementation and administration
of Finance Code, §§181.001, et seq.
No statute, article or code is affected by the proposed amendments.
§17.2.Advertising.
(a) - (b)
(No change.)
(c)
A trust company that violates this section is subject to
an enforcement action initiated by the banking commissioner under
Finance
Code, §§185.001, et seq.
[
§17.3.Sale or Lease Agreements With an Officer, Director, Principal Shareholder, or Affiliate.
(a) - (b)
(No change.)
(c)
Board action. All transactions subject to
Finance
Code, §183.109(a)
, [
(d) - (f)
(No change.)
§17.4.Bonding Requirements.
(a)
Compliance required. Pursuant to
Finance Code, §183.112,
[
(b)
(No change.)
(c)
Holding company's comprehensive insurance coverage. In
lieu of obtaining individual or blanket bond coverage, a trust company which
is owned and controlled by a holding company, may utilize a holding company's
comprehensive insurance coverage to satisfy the requirements of
Finance
Code, §183.112,
[
(d)
Records. A trust company shall retain all original bonds
to demonstrate compliance with
Finance Code, §183.112,
[
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on May 1, 2002.
TRD-200202715
Everette D. Jobe
Certifying Official
Texas Department of Banking
Proposed date of adoption: June 21, 2002
For further information, please call: (512) 475-1300
7 TAC §17.23
The amendments are proposed under the authority of Government
Code, §2001.039, which requires a state agency to review each of its
rules every four years and readopt, readopt with amendments, or repeal a rule
based upon its rule review, and Finance Code, §181.003, which authorizes
the commission to adopt rules as necessary for the implementation and administration
of Finance Code, §§181.001, et seq.
No statute, article or code is affected by the proposed amendments.
§17.23.Call Reports.
(a)
Call report. As used in this section, the term "call report"
means a statement of condition and income and results of operations of a trust
company as mandated by the banking commissioner pursuant to
Finance Code, §181.107
[
(b) - (e)
(No change.)
(f)
Confidentiality. Pursuant to
Finance Code, §181.107(b)
and (c) and §181.301,
[
(g)
Reports containing significant errors and penalties for
failure to file or for filing a report with false or misleading information.
A trust company that transacts business with the public which fails to make,
file, or submit a call report or a special call report or fails to timely
file a call report or special call report as required by this section is subject
to a penalty not exceeding $500 a day to be collected by the attorney general
on behalf of the banking commissioner. Failure of a trust company that does
not transact business with the public to make, file, or submit a call report
or a special call report or fails to timely file a call report or special
call report as required by this section is grounds for revocation of its exempt
status. Any trust company which makes, files, submits or publishes a call
report or special call report which contains a significant error, shall file
a corrected call report within 20 days from the date of request. For purposes
of this subsection, a significant error refers to any difference in the report
of condition and/or supporting schedules equating to 5.0% or more of total
assets, provided the amount is greater than $50,000, or any difference in
the report of income and/or supporting schedules equating to 5.0% or more
of total operating income, provided the amount is greater than $5,000. Any
trust company which makes, files, submits or publishes a false or misleading
call report or special call report is subject to an enforcement action pursuant
to
Finance Code, §§185.001, et seq.
[
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed
with the Office of the Secretary of State on May 1, 2002.
TRD-200202716
Everette D. Jobe
Certifying Official
Texas Department of Banking
Proposed date of adoption: June 21, 2002
For further information, please call: (512) 475-1300
The Finance Commission of Texas (the commission), on behalf of the
Texas Department of Banking (department), proposes amendments to §19.1,
concerning grandfathered loans; §19.21, concerning grandfathered investments; §19.22,
concerning investments in mutual funds; and §19.51, concerning other
real estate owned.
The department has completed the rule review of Chapter 19 required by
Government Code, §2001.039. As a result of the review, the department
has determined that the statutory references in these rules need to be amended.
The rules cite statutes that were repealed in connection with the codification
of Texas Revised Statutes, Article 342a-1.001, et seq. into the Finance Code
in 1999. The purpose of these amendments is to conform the statutory references
in the rules to the sections in which the referenced authority now appears
in Finance Code, Title 3, Subtitle F.
Everette Jobe, General Counsel, Texas Department of Banking, has determined
that, for each year of the first five years that the proposed amendments are
in effect, there will be no fiscal implications for state or local governments
as a result of enforcing or administering the amendments.
Mr. Jobe has also determined that, for each of the first five years the
amendments as proposed will be in effect, the public benefit anticipated as
a result of the amendments will be the replacement of obsolete statutory references
with correct citations. There is no anticipated cost to persons who are required
to comply with the amendments as proposed. There will be no adverse economic
effect on small businesses.
Comments concerning the proposed amendments should be submitted within
30 days of publication to Sarah Shirley, Assistant General Counsel, Texas
Department of Banking, 2601 North Lamar Boulevard, Suite 300, Austin, Texas
78705-4924, or e-mail to sarah.shirley@banking.state.tx.us.
Subchapter A. LOANS
7 TAC §19.1
The amendments are proposed under the authority of Government
Code, §2001.039, which requires a state agency to review each of its
rules every four years and readopt, readopt with amendments, or repeal a rule
based upon its rule review, and Finance Code, §181.003, which authorizes
the commission to adopt rules as necessary for the implementation and administration
of Finance Code, §§181.001, et seq.
No statute, article or code is affected by the proposed amendments.
§19.1.Grandfathered Loans.
(a)
Finance Code, §184.201
[
(b)
Except as provided in subsections (c)-(e) of this section,
a trust company may not renew, extend the maturity of, or restructure a nonconforming
loan or extension of credit described in subsection (a) of this section unless
the renewed, extended, or restructured loan complies with
Finance Code, §184.201
[
(c) - (f)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on May 1, 2002.
TRD-200202717
Everette D. Jobe
Certifying Official
Texas Department of Banking
Proposed date of adoption: June 21, 2002
For further information, please call: (512) 475-1300
7 TAC §19.21, §19.22
The amendments are proposed under the authority of Government
Code, §2001.039, which requires a state agency to review each of its
rules every four years and readopt, readopt with amendments, or repeal a rule
based upon its rule review, and Finance Code, §181.003, which authorizes
the commission to adopt rules as necessary for the implementation and administration
of Finance Code, §§181.001, et seq.
No statute, article or code is affected by the proposed amendments.
§19.21.Grandfathered Investments.
(a)
An investment in securities made prior to September 1,
1997, that was within a trust company's investment limit when made but exceeds
the new limitations of
Finance Code, §184.101(c) or (e)
[
(b)
Without the prior written approval of the banking commissioner
pursuant to
Finance Code, §184.101(c)
[
§19.22.Investments in Mutual Funds.
(a)
Subject to
Finance Code, §184.101(f)
[
(b)
Notwithstanding the limits stated in
Finance Code, §184.101(c)
[
(1) - (2)
(No change.)
(c)
Notwithstanding the limits stated in
Finance Code, §184.101(c)
[
(1)
the mutual fund's stated investment objective is to invest
solely in securities that the trust company could invest in directly for its
own account without limit under
Finance Code, §184.101(d)
[
(2)
the mutual fund's portfolio in fact consists wholly of
investments in which the trust company could invest directly without limitation
under
Finance Code, §184.101(d)
[
(d) - (e)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed
with the Office of the Secretary of State on May 1, 2002.
TRD-200202718
Everette D. Jobe
Certifying Official
Texas Department of Banking
Proposed date of adoption: June 21, 2002
For further information, please call: (512) 475-1300
7 TAC §19.51
The amendments are proposed under the authority of Government
Code, §2001.039, which requires a state agency to review each of its
rules every four years and readopt, readopt with amendments, or repeal a rule
based upon its rule review, and Finance Code, §181.003, which authorizes
the commission to adopt rules as necessary for the implementation and administration
of Finance Code, §§181.001, et seq.
No statute, article or code is affected by the proposed amendments.
§19.51.Other Real Estate Owned.
(a)
Definitions. Words and terms used in this subchapter that
are defined in
Finance Code, §§181.001, et seq.
[
(1) - (2)
(No change.)
(3)
Trust company facility -- Real property, including improvements,
owned or leased, to the extent the lease or the leasehold improvements are
capitalized, by a trust company if the real estate is held for the purposes
set forth in
Finance Code, §184.001
[
(4) - (9)
(No change.)
(10)
Other Real Estate Owned (OREO) -- Real estate, including
improvements, mineral interests, surface, and subsurface rights, owned in
whole or in part or leased by a trust company, no matter how acquired, which
is not a trust company facility as defined by paragraph (3) of this subsection
or leasehold property as permitted under
Finance Code, §184.203
[
(11) - (13)
(No change.)
(b)
Prohibition on real estate ownership. A trust company may
not acquire or hold real estate except as specifically provided under
Finance Code, §§184.001 - 184.003 and 184.203
[
(c)
(No change.)
(d)
Acquisition of OREO with secondary capital. A trust company
may hold OREO purchased with the secondary capital of the trust company, subject
to the exercise of prudent judgment using the factors set forth in
Finance
Code, §184.101(f)
[
(e) - (f)
(No change.)
(g)
Holding period.
(1)
A trust company must dispose of OREO acquired with the
restricted capital of the trust company, except for real estate which became
OREO pursuant to
Finance Code, §184.002(b)
[
(2) - (3)
(No change.)
(h)
(No change.)
(i)
Disposition of OREO. A trust company may dispose of OREO
by:
(1) - (3)
(No change.)
(4)
transferring the OREO for market value to an affiliate,
subject to
Finance Code, §183.109
[
(5) - (6)
(No change.)
(j)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed
with the Office of the Secretary of State on May 1, 2002.
TRD-200202719
Everette D. Jobe
Certifying Official
Texas Department of Banking
Proposed date of adoption: June 21, 2002
For further information, please call: (512) 475-1300
Subchapter B. REGULATION OF LICENSES
7 TAC §§25.19 - 25.23
The Finance Commission of Texas (the commission) proposes
amendments to §25.19, concerning notice of seizure and the bid process; §25.20,
concerning guaranty fund claims filing procedures and eligibility for payment
standards; §25.21, concerning introduction to the joint memorandum of
understanding between the Department of Banking (department), the Texas Funeral
Service Commission, and the Texas Department of Insurance; §25.22, concerning
the joint memorandum of understanding; and §25.23, concerning application
fees.
Section 25.19 provides procedures for the department in connection with
cancellation of a prepaid funeral permit and seizure of prepaid funeral funds.
The section requires the department to maintain a bid list of permit holders
who wish to assume a canceled permit holder's obligations under prepaid funeral
contracts and the right to receive the balance of the prepaid funeral funds
paid or to be paid under the contracts. Subsection (c) of this section requires
the department to notify persons on the bid list within 60 days after it cancels
a permit. One of the two proposed changes to this provision clarifies that
it means on or before the 60th day after the date of final cancellation. The
clarification is necessary to ensure that bids are not solicited prior to
a determination on an order of cancellation through the hearing process, if
a hearing is requested by a permit holder. The other proposed change to subsection
(c) of this section adds all funeral providers in the vicinity of a canceled
permit holder to the list of persons the department must notify after a permit
cancellation. The proposed increase to the number of persons notified will
enable the department to more quickly place preneed contracts of a canceled
permit holder with another permit holder and thereby ensure consumers are
protected. The addition to the bid list of funeral providers in the vicinity
of the canceled permit holder will also increase the likelihood that preneed
contracts will be placed with a provider that is conveniently located to consumers.
Section 25.20 provides procedures for making a claim against the Guaranty
Fund. The section requires a claimant to file a certified copy of the death
certificate for a person designated to receive funeral benefits under a preneed
contract. One of the proposed changes to the provision clarifies that the
department will accept a copy of the certified copy of the death certificate,
which will save consumers the cost of purchasing a new certified copy. The
remaining proposed changes include nonsubstantive clerical or clarifying changes
and the deletion of an obsolete provision.
Section 25.21 provides an introduction to the memorandum of understanding
between the department, the Texas Funeral Service Commission, and the Texas
Department of Insurance, set out in §25.22. The only proposed amendment
to §25.21 is to update a citation. The amendments to §25.22 are
proposed to make the rule consistent with the rules of the Texas Funeral Service
Commission, which has recently adopted these changes in the memorandum of
understanding. The changes are nonsubstantive clerical changes or updates
to citations, except for the change to §25.22(g)(2). The proposed amendment
to this provision increases the minimum recommended penalty that may be assessed
by the Texas Funeral Services Commission for a violation of Finance Code,
Chapter 154, from $500 to $1,000.
Section 25.23 governs application fees. The proposed amendments increase
the new permit application fee and the re-application fee of a previous permit
holder from $500 to $2,500. The proposed amendments also increase fees associated
with conversion of a trust-funded prepaid funeral benefits operation to an
insurance-funded prepaid funeral benefits operation. Applications for conversions
that result in the issuance of an annuity product identical in form to one
that was previously approved by the department will increase from $500 to
$1,000. The total fee the department can charge for processing an incomplete
conversion application will increase from $1,000 to $2,000. The higher fees
reflect the actual cost to the department related to these applications.
Stephanie Newberg, Deputy Commissioner, Texas Department of Banking, has
determined that, for each year of the first five years that the proposed section
is in effect, there will be no fiscal implication for state or local government
as a result of enforcing or administering the section as adopted.
Ms. Newberg also has determined that, for each of the first five years
the sections as proposed are in effect, a public benefit will be clear guidance
for prepaid funeral contract permit holders in the seizure and bid process
and in filing claims against the guaranty fund. The public benefit will also
be a more efficient seizure and bid process, which ultimately provides more
protection and stability to consumers whose contracts must be placed after
a permit is cancelled. Finally, the public benefit associated with the proposed
amendments to increase fee applications will be a more equitable fee structure
among permit holders. The current fees associated with these applications
do not cover department processing costs. The proposed amendments will prevent
imposition of these unfunded costs on other permit holders.
There will be no economic costs incurred by a person required to comply
with the proposed amendments to §§25.19-25.22. There will be an
economic cost incurred by a person required to comply with the proposed amendments
to §25.23 on application fees. The cost will increase $2,000 for a new
prepaid funeral contract permit application or a re-application by a previous
permit holder. The department receives approximately nine new permit applications
per year. The cost for a conversion to an insurance-funded prepaid funeral
operation that results in the continued purchase of annuities will increase
by $500. The cost for a person who submits an incomplete conversion application
is an increase in processing fees of up to an additional $1,000. The department
receives approximately three conversion applications per year. There will
be no deleterious effect on small businesses.
Comments concerning the proposed section should be submitted within 30
days of publication to Robin Robinson, Assistant General Counsel, Texas Department
of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294, or by email
to robin.robinson@banking.state.tx.us.
The amendments are proposed under Finance Code, §154.051,
which authorizes the commission to adopt rules necessary to enforce and administer
Finance Code, Chapter 154.
Finance Code, Chapter 154, is affected by the proposed amendments.
§25.19.Notice of Seizure; the Bid Process.
(a) - (b)
(No change.)
(c)
Solicitation of bids.
On or before the 60th day after
the date of final cancellation of
[
[
(d)
[
(e)
[
(1)
Time of selection. After the deadline has expired for submitting
sealed bids, the commissioner may select a successor to the cancelled permit
holder.
(2)
Criteria for permit holders. If the bidder is a permit
holder, the commissioner shall consider:
(A)
whether the bidder has demonstrated an ability to properly
manage, maintain, and account for its own prepaid funeral funds;
(B)
whether the bidder has properly remedied violations of
law cited by the department in its examination reports;
(C)
whether the bidder has a history of repeated or continuous
violations;
(D)
whether the bidder has the ability to fulfill the terms
of the prepaid funeral contract;
(E)
whether the bidder poses any other significant regulatory
concern; and
(F)
the amount of money in the cancelled permit holder's prepaid
funeral funds, the value of receivables that are due under the contracts of
the cancelled permit holder to a successor permit holder, the amount of money
offered for the prepaid funeral business, the current or potential claim against
the guaranty fund, and any other relevant information.
(3)
Criteria for non-permit holder funeral providers. If the
bidder is a non-permit holder funeral provider, the commissioner shall consider,
to the extent applicable, all of the factors listed in paragraph (2) of this
subsection and the following:
(A)
the bidder's general reputation in the community where
it is located;
(B)
whether the bidder's business ability, experience, character,
and general fitness warrant the confidence of the public;
(C)
any state or federal regulatory or law enforcement, administrative,
or other action taken against the bidder; and
(D)
the bidder's willingness to obtain a permit from the commissioner
to sell prepaid funeral benefits in the State of Texas and to abide by the
statutes and rules governing such permits.
(4)
Rejection of bids. The commissioner may reject all bid
proposals received pursuant to this section. If all bids are rejected, a new
bid proposal may be solicited or, alternatively, the balance of prepaid funeral
funds paid or to be paid under the contracts of the cancelled permit holder
shall be received into the guaranty fund for management by the Guaranty Fund
Advisory Council, and the department shall manage the prepaid funeral contracts;
provided, however, that the commissioner may thereafter solicit additional
bid proposals under subsection (e) of this section.
(f)
[
§25.20.Guaranty Fund Claims Filing Procedures and Eligibility for Payment Standards.
(a)
Who may make a claim. Unless expressly precluded from making
a claim against the guaranty fund in subsection (b) of this section, the following
parties or their heirs, successors, and assignees may make a claim against
the guaranty fund:
(1)
purchasers of prepaid funeral benefits from permit holders;
or
[
(2)
(No change.)
(b) - (c)
(No change.)
(d)
Claims approval process and right to reconsideration.
(1)
Delegation of authority to commissioner. The Guaranty Fund
Advisory Council may delegate to the commissioner the authority to settle
and determine [
(2) - (3)
(No change.)
(e)
Claimant's filings. A claimant shall file with the department
a completed claim form prescribed by the department together with the following
documents and information:
(1)
(No change.)
(2)
evidence of the
amount paid on
[
(3)
[
[
(4)
[
(5)
[
(f)
(No change.)
§25.21.Introduction to Joint Memorandum of Understanding.
(a)
Occupations Code, §651.159
[
(1) - (7)
(No change.)
(b) - (c)
(No change.)
§25.22.Joint Memorandum of Understanding.
(a)
Pursuant to
Occupations Code, §651.159
[
(b)
Responsibilities of each agency in regulating prepaid funeral
services and transactions.
(1)
The Texas Funeral Service Commission is responsible for
the following:
(A)
licensing funeral directors
,
[
(B)
taking action against any licensee violating Finance Code,
Chapter 154, under
Occupations Code, §651.460(b)(3)
[
(C)
taking action against any funeral director in charge and/or
funeral establishment for violations of Finance Code, Chapter 154, by persons
directly or indirectly connected to the funeral establishment, under
Occupations Code, §651.460(b)(3)
[
(2)
The
Texas Department of
Banking [
(A) - (F)
(No change.)
(3)
The Texas Department of Insurance is responsible for the
following:
(A)
(No change.)
(B)
regulating individuals/entities that perform the acts of
an insurance agent(s) as defined in the Insurance Code,
Article
[
(C) - (E)
(No change.)
(c)
(No change.)
(d)
Procedures to be used by each agency in investigating a
complaint.
(1)
All agencies.
(A)
Each agency will develop an internal complaint procedures
manual for violations relating to prepaid funeral services and/or transactions.
The manual should at a minimum provide for:
(i)
cross-checking the other two agencies'
list
[
(ii) - (v)
(No change.)
(B) - (G)
(No change.)
(2)
The Texas Funeral Service Commission.
(A)
The TFSC, in accordance with
Occupations Code, Chapter
651
[
(B)
(No change.)
(3)
Texas Department of
Banking [
(A) - (C)
(No change.)
(D)
In the event that a licensee under the TFSC's jurisdiction
is found[
(4)
(No change.)
(e)
(No change.)
(f)
Information the agencies will provide consumers and when
that information is to be provided.
(1) - (2)
(No change.)
(3)
TFSC, DOB, and TDI, as state agencies, are subject to the
Public Information
[
(g)
Administrative penalties each agency imposes for violations.
(1)
All agencies.
(A)
(No change.)
(B)
DOB, TDI, and TFSC will refer
deceptive trade practices
[
(2)
Texas Funeral Service Commission. The TFSC may impose an
administrative penalty, issue a reprimand, or revoke, suspend, or place on
probation any licensee who violates Finance Code, Chapter 154. The recommended
range of administrative penalty for a violation [
(3)
Texas Department of
Banking [
(A) - (B)
(No change.)
(4)
(No change.)
(h)
(No change.)
§25.23.Application Fees.
(a)
(No change.)
(b)
Application fees. The application fees set forth in this
subsection have been set in accordance with the Finance Code, Chapter 154,
for the purpose of defraying the cost of administering the Finance Code, Chapter
154. Except as otherwise provided in this subsection, all fees are due at
the time the application is filed and are nonrefundable. An application submitted
without the appropriate filing fee will be deemed incomplete and will not
be considered.
(1)
New permit application fee. An applicant for a new prepaid
funeral benefits permit, other than an applicant seeking a permit for the
sole purpose of administering previously sold and outstanding contracts, shall
pay a
$2,500
[
(2)
(No change.)
(3)
Conversion application fee. An applicant for the conversion
of a trust-funded prepaid funeral benefits operation to an insurance-funded
prepaid funeral benefits operation shall pay a $1,000 fee per application[
(c)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on May 1, 2002.
TRD-200202720
Everette D. Jobe
Certifying Official
Texas Department of Banking
Proposed date of adoption: June 21, 2002
For further information, please call: (512) 475-1300
Chapter 82.
ADMINISTRATION
Chapter 3.
STATE BANK REGULATION
Part 2.
TEXAS DEPARTMENT OF BANKING
Chapter 17.
TRUST COMPANY REGULATION
Texas Civil Statutes, Articles
342a-6.001 et seq.
]
Texas Civil Statutes, Article 342a-4.107(a)
] must receive the prior approval of at least a majority of a quorum
composed entirely of disinterested directors of the board or the transaction
at issue must be submitted for prior approval of the banking commissioner.
For purposes of this section, a quorum shall consist of a majority of the
number of directors elected at the last meeting of shareholders. Even if the
transaction is subject to the prior approval of the banking commissioner because
a quorum composed entirely of disinterested directors cannot be obtained,
as a matter of good corporate policy, a trust company proposing to enter into
a transaction subject to
Finance Code, §183.109,
[
Texas
Civil Statutes, Article 342a-4.107
] should obtain the affirmative vote
of a majority of the disinterested directors of the board.
Texas Civil Statutes, Article 342a-4.110
] a trust company
is required to maintain a bond for protection and indemnity of clients, in
reasonable amounts against dishonesty, fraud, defalcation, forgery, theft,
and other insurable losses with a corporate insurance or surety company. Unless
the banking commissioner waives the bonding requirement for a particular individual,
a bond is required for each director, manager, managing participant, officer,
and employee without regard to whether the person receives salary or other
compensation. In addition to complying with
Finance Code, §183.112,
[
Texas Civil Statutes, Article 342a-4.110
] a trust company
shall comply with this section.
Texas Civil Statutes, Article 342a-4.110
] and this section. Utilization by a trust company of its holding company's
comprehensive insurance coverage must be lawfully permitted under terms of
the comprehensive insurance policy and the insurance laws of this state. Evidence
of bond coverage for a trust company's directors, officers, and employees
must be provided to the banking commissioner.
Texas Civil Statutes, Article 342a-4.110
] and this section, which documents
must be available at all times to the department for examination and review.
Subchapter B. EXAMINATION AND CALL REPORTS
Texas Civil Statutes, Article 342a-2.003
].
Texas Civil Statutes, Article 342a-2.101
] call reports filed under subsection (b) of this section are public
information to the extent that such reports are considered public records,
and may be published or otherwise disclosed to the public. Special call reports
filed pursuant to subsection (c) of this section and non-public portions of
call reports filed pursuant to subsection (b) of this section are confidential,
subject only to such disclosure as may be permitted by
Finance Code, §§181.301,
et seq.
[
Texas Civil Statutes, Articles 342a-2.101 et seq.
]
or by §3.111 of this title (relating to Confidential Information).
Texas Civil
Statutes, Articles 342a-6.001 et seq.
]
Chapter 19.
TRUST COMPANY LOANS AND INVESTMENTS
Texas Civil
Statutes, Article 342a-5.201
], and this subchapter apply to loans or
extensions of credit made on or after September 1, 1997. A loan or extension
of credit existing prior to September 1, 1997, that was within a trust company's
lending limit when made but is currently in excess of the limitations of
Finance Code, §184.201
[
Texas Civil Statutes, Article 342a-5.201
], is not a violation of
Finance Code, §184.201
[
Texas Civil Statutes, Article 342a-5.201
], or this subchapter, but is
considered a nonconforming loan.
Texas Civil Statutes, Article 342a-5.201
].
Subchapter B. INVESTMENTS
Texas Civil Statutes, Article 342a-5.101(c) or (e)
], effective September
1, 1997, is not a violation of
Finance Code, §184.101
[
Texas Civil Statutes, Article 342a-5.101
], but is considered a nonconforming
investment.
Texas Civil Statutes,
Article 342a-5.101(c)
], a trust company may not make an investment on
or after September 1, 1997, that is not in compliance with law, or that would
increase an existing investment described in subsection (a) of this section
and cause it to become further out of compliance with law.
Texas Civil Statutes, Article 342a-5.101(f)
], and this section, a trust
company may invest for its own account in a mutual fund as defined in
Finance Code, §181.002(a)(31)
[
Texas Civil Statutes, Article
342a-1.002(a)(31)
], unless the mutual fund portfolio contains an investment
that the trust company could not make directly.
Texas Civil Statutes, Article 342a-5.101(c)
], a trust company
may invest in a mutual fund not more than an amount equal to 15% of the trust
company's restricted capital unless a larger investment is permitted under
subsection (c) of this section. Pursuant to
Finance Code, §184.101(c)
[
Texas Civil Statutes, Article 342a-5.101(c)
], the banking
commissioner may authorize investments in excess of this limitation on written
application if the banking commissioner concludes that:
Texas Civil Statutes, Article 342a-5.101(c)
], and subsection
(b) of this section, a trust company may invest in a mutual fund without limit
if:
Texas Civil Statutes, Article 342a-5.101(d)
]; and
Texas Civil Statutes,
Article 342a-5.101(d)
].
Subchapter C. REAL ESTATE
Texas Civil Statutes, Articles 342a-1.001 et seq
], have the same meanings
as defined therein. The following words and terms when used in this subchapter
shall have the following meanings unless the context clearly indicates the
contrary.
Texas Civil Statutes,
Article 342a-5.001(a)(1)-(4)
], and is not disqualified under
Finance
Code, §184.002(b)
[
Texas Civil Statutes, Article 342a-5.001(c)
]. The term also includes capitalized leasehold improvements if held
for the same purposes.
Texas Civil Statutes, Article 342a-5.202
].
Texas
Civil Statutes, Articles 342a-5.001, 342a-5.104, and 342a-5.202
], and
this section.
Texas Civil Statutes, Article 342a-5.101(f)
].
Texas Civil
Statutes, Article 342a-5.001(c)
], no later than five years after it
was acquired or ceases to be used as a trust company facility, unless an extension
of time for disposing of the real estate is granted in writing by the banking
commissioner pursuant to
Finance Code, §184.003(d)
[
Texas Civil Statutes, Article 342a-5.104(d)
]. A trust company must dispose
of real estate which becomes OREO pursuant to
Finance Code, §184.002(b)
[
Texas Civil Statutes, Article 342a-5.001(c)
], within two
years of the date it ceases to be a trust company facility, unless a delay
in the improvement and occupation of the property is approved in writing by
the banking commissioner pursuant to
Finance Code, §184.002(b)
[
Texas Civil Statutes, Article 342a-5.001(c)
].
Texas Civil Statutes,
Article 342a-4.107
], and applicable federal law, including 12 United
States Code, §§371c, 371c-1, and 1828(j);
Chapter 25.
PREPAID FUNERAL CONTRACTS
Within 60 days after cancelling
] a permit to sell prepaid funeral benefits, the department shall notify
those on the bid list
and all funeral providers in the vicinity of the
canceled permit holder
of the cancellation. The notice shall include
the name and address of the cancelled permit holder, the number and aggregate
dollar amount of unperformed prepaid funeral contracts, the balance of unearned
prepaid funeral funds, and the date by which sealed bid proposals must be
submitted to the department to be considered for the bid award. The notice
shall also include instructions as to how eligible potential bidders may inspect
the cancelled permit holder's prepaid funeral contract records. The seized
contracts will be bid on as a bloc rather than on an individual contract basis,
and the commissioner shall have the discretion to combine or group contracts
seized for bidding and sale purposes.
(d)
Notice to non-permit holder funeral providers.
If no permit holder or only one permit holder submits a sealed bid to assume
the prepaid funeral obligations, or if no permit holder bidding on the prepaid
funeral obligations submits a bid acceptable to the commissioner, the department
may invite bids from non-permit holder funeral providers located in the same
vicinity as the cancelled permit holder.
] The notice [
shall include
the same information contained in the notice to those on the eligible bid
list and, in addition,
] shall inform
any
[
the
]
non-permit holder that it must apply for and obtain a permit from the commissioner
to sell prepaid funeral benefits in the State of Texas in the event that it
receives the bid award. [
The commissioner may solicit bids from non-permit
holder funeral providers at the same time as bids are solicited from permit
holders under subsection (c) of this section.
]
(e)
] Solicitation of bids on certain
contracts. The commissioner may also from time to time solicit bids on seized
prepaid funeral contracts which were not placed with successor permittees
as a result of the original or any subsequent bid solicitations.
(f)
] Selection criteria.
(g)
] Selection of successor. The
commissioner alone shall be responsible for the selection of a successor permit
holder under this section. The commissioner shall make no contract regarding
the selection of a successor permit holder that obligates the guaranty fund
in any way until a vote of the members of the Guaranty Fund Advisory Council
approving such obligation has been given in a properly posted open meeting.
and
]
all
] claims against the guaranty fund up to such
amount and with such restrictions as the council may from time to time determine.
These limits and restrictions shall be reflected in the minutes of the meetings
of the council.
status
of
] the account[
, including whether the account is paid in full,
the amount owed thereon, and whether payments are current or delinquent
];
a statement containing the name of the seller and
the date of purchase;
]
(4)
]
a
copy of a
certified copy of the
death certificate
for
[
of
] the person designated by
the purchaser to receive the funeral benefits under the contract, if applicable;
(5)
] a notarized statement setting
forth any special circumstances that may bear on the claim; and
(6) any
] other information that
may be pertinent to the claim that is requested by the department.
Texas
Civil Statutes, Article 4582(b), §4(1),
]
mandates
[
mandate
] the
Texas Department of
Banking [
Department
of Texas
], the Texas Funeral Service Commission, and the Texas Department
of Insurance to adopt by rule a joint memorandum of understanding relating
to prepaid funeral services and transactions that:
Texas Civil Statutes, Article 4582b, §4(1)
], the Texas Funeral
Service Commission (herein referred to as the "TFSC"), the Texas Department
of Insurance (herein referred to as the "TDI"), and the
Texas Department
of
Banking [
Department of Texas
] (herein referred to as
the "DOB") hereby adopt the following joint memorandum of understanding (JMOU)
relating to prepaid funeral services and transactions. The TFSC, TDI, and
DOB intend this memorandum of understanding to serve as a vehicle to assist
the three agencies in their regulatory activities, and to make it as easy
as possible for a consumer with a complaint to have the complaint acted upon
by all three agencies, where appropriate. In order to accomplish this end,
where not statutorily prohibited, the three agencies will share information
between the agencies which may not be available to the public generally under
the
Public Information
[
Open Records
] Act, Government
Code, Chapter 552. Such information will be transmitted between agencies with
the notation on the information that it is considered confidential, is being
furnished to the other agencies in furtherance of their joint responsibilities
as state agencies in enforcing their respective statutes, and that it may
not be disseminated to others
except as required
.
and
]
embalmers,
provisional
[
apprentice
] funeral directors
,
[
and
]
provisional
[
apprentice
] embalmers
[
(Texas Civil Statutes, Article 4582b, §3)
], and funeral establishments
[
(Texas Civil Statutes, Article 4582b, §4(A))
]. The TFSC
may refuse to license a person or establishment which violates Finance Code,
Chapter 154, under
Occupations Code, §651.460(b)(3)
[
Texas Civil Statutes, Article 4582b, §3(H)(10)
];
Texas Civil Statutes, Article 4582b, §3(H)(10)
];
Texas Civil Statutes, Article
4582b, §4(D)(l)(f) and §4(E)
].
Department
of Texas
] is responsible for administering Finance Code, Chapter 154,
including, but not limited to, the following:
Articles
] 21.02 and
Insurance Code, Chapter 101
[
1.14-1
];
lists
] of licensees against the investigating agency's list;
Texas Civil Statutes, Article 4582b, §4D(2)(b)
],
will investigate violations of prepaid funeral services only if the investigation
does not interfere with or duplicate an investigation conducted by the DOB.
Department
of Texas
].
, after hearing,
] to have violated one or more provisions
of Finance Code, Chapter 154, the DOB will inform the TFSC of the violation(s)
in writing and provide documentation supporting the occurrence of the violation(s).
Open Records
] Act, Texas Government Code,
Chapter 552. Upon written request, the three agencies will provide consumers
with public information which is not exempt from disclosure under that Act.
As noted in the preamble to this JMOU, the agencies may, where not statutorily
prohibited, exchange information necessary to fulfill their statutory responsibilities
among each other, without making such information public information under
the
Public Information
[
Open Records
] Act.
Deceptive Trade Practices Act
] and other such violations
to the Federal Trade Commission and/or the attorney general whenever appropriate.
of Finance Code, Chapter
154,
] is
$1,000
[
$500
] to $5,000[
. Also,
a funeral establishment may be assessed an administrative penalty of $250
to $5,000
] for each violation of Finance Code, Chapter 154, by a person
directly or indirectly connected to the funeral establishment, under 22 TAC
§201.11(2)(D)(vi)
[
§201.11(a)(6) and (25)
]
(relating to
[
concerning
] Disciplinary Guidelines
)
.
Department
of Texas
]. The DOB may impose the following administrative penalties:
$500
] fee. An applicant that administers
previously sold and outstanding contracts and wishes to again sell prepaid
funeral benefits shall pay the greater of a
$2,500
[
$500
]
fee or the fee calculated pursuant to paragraph (2) of this subsection. In
addition to the application fee, an applicant shall pay any extraordinary
costs incurred by the department pursuant to any out of state investigation
of the applicant as required by the Finance Code, §154.102(3). Extraordinary
costs shall be paid by the applicant within 20 days after written request
by the department.
, provided that, if the conversion will result in the issuance of an annuity
product identical in form to one that has been approved by the department
after December 1, 1993, in response to a substantially similar application,
the applicant shall submit a $500 fee per application
]. In the event
additional processing time is required because the application is incomplete,
the applicant shall pay the addition processing costs incurred in excess of
the filing fee originally submitted, at the rate of $500 per eight-hour employee
day, provided that the total fee cannot exceed
$2,000
[
$1,000
]. Until any such additional fee has been paid by the applicant, the
application will be deemed incomplete and will not be considered.
Part 5.
OFFICE OF CONSUMER CREDIT COMMISSIONER