16 TAC §§57.1, 57.10, 57.21 - 57.23, 57.25, 57.70 - 57.72, 57.80, 57.90
The Texas Department of Licensing and Regulation ("Department")
proposes new rules at 16 Texas Administrative Code ("TAC"), Chapter 57, §§57.1,
57.10, 57.21, 57.22, 57.23, 57.25, 57.70, 57.71, 57.72, 57.80 and 57.90 concerning
regulation of certain for-profit legal service contract programs and registration
of administrators, companies and sales representatives.
The proposed new rules define and set out registration and fee requirements,
describe the responsibilities imposed upon all registrants, and specify available
administrative penalties and sanctions.
The rules are necessary to implement Chapter 953, Texas Occupations Code,
which became effective September 1, 2003, after the passage of Senate Bill
597 during the 78th regular session of the Texas Legislature.
William H. Kuntz, Jr., Executive Director, has determined that for the
first five-year period the proposed new rules are in effect there will be
no significant cost to state or local government as a result of enforcing
or administering the new rules.
Mr. Kuntz also has determined that for each year of the first five-year
period the new rules are in effect, the public benefits will be the protection
of the public who enter into legal service contracts under Chapter 953, Texas
Occupations Code, including the possible investigation of companies, administrators,
and sales representatives, and providing an avenue of regulation and relief
for individuals involved with certain prepaid legal services.
There will be a minimal effect on large, small, or micro-businesses as
well as minimal economic costs to persons who are required to comply with
the proposed new rules due to the fee structure established for registering
sales representatives, administrators, and companies as mandated by statute.
Comments on the proposal may be submitted to William H. Kuntz, Jr., Executive
Director, Texas Department of Licensing and Regulation, P.O. Box 12157, Austin,
Texas 78711, or facsimile 512/475-2872, or electronically: whkuntz@license.state.tx.us.
The deadline for comments is 30 days after publication in the
Texas Register
.
The Texas Commission of Licensing and Regulation ("Commission") may consider
the temporary adoption of these rules on an emergency basis at their next
meeting scheduled on February 25, 2004, which would allow the Commission to
comply with the timetable prescribed by Senate Bill 597 and set out in Chapter
953, Texas Occupations Code.
The new rules are proposed under Chapters 51 and 953, Texas Occupations
Code, which authorize the Commission to adopt rules as necessary to implement
Chapter 953 and any other law establishing a program regulated by the Department.
The statutory provisions affected by the proposal are those set forth in
the Chapters 51 and 953, Texas Occupations Code. No other statutes, articles,
or codes are affected by the proposal.
§57.1.Authority.
These rules are promulgated under the authority of Title 5, Texas Occupations
Code, Chapter 953, and Title 2, Texas Occupations Code, Chapter 51.
§57.10.Definitions.
The following words and terms, when used in this chapter, have the
following meanings.
(1)
Group legal service contract--A legal service contract
that is entered into on behalf of a group by a group representative and provides
legal services for members of the group that choose to purchase the service.
(2)
Administrator--The person appointed by a company to be
responsible for:
(A)
all or any part of the administration of legal service
contracts or group legal service contracts;
(B)
the sale of legal service contracts or group legal service
contracts; or
(C)
compliance with Title 5, Texas Occupations Code, Chapter
953 and this chapter.
(3)
Company--A person who:
(A)
is contractually obligated to a legal service contract
holder under the terms of a legal service contract;
(B)
enters into a contract with a contracting attorney to provide
or obtain covered legal services for a legal service contract holder; and
(C)
operates as a for-profit legal service contract company.
(4)
Sales Representative--A person who sells or solicits:
(A)
legal service contracts; or
(B)
group legal service contracts to a person on behalf of
a legal service contract company.
§57.21.Registration Requirements--Company.
(a)
No person may operate as a company without first registering
with the department.
(b)
Registration is valid for one year from the date issued
and must be renewed annually.
(c)
Original and renewal applications must be accompanied by:
(1)
an audit report and audited financial statements for the
company’s most recent fiscal year;
(2)
a certified statement, made by an actuary, describing the
company’s reserves, if any;
(3)
the required fees; and
(4)
proof of one of the following forms of financial security:
(A)
a surety bond issued by an authorized surety;
(B)
securities of the type eligible for deposit by an authorized
insurer in Texas;
(C)
a deposit of cash or cash equivalents as provided in Title
5, Texas Occupations Code, Chapter 953, Section 953.101;
(D)
an irrevocable letter of credit issued by a qualified financial
institution; or
(E)
another form of security acceptable to the Executive Director.
(d)
Falsification of information on an application is cause
for denial of the application and revocation of the registration.
§57.22.Registration Requirements--Sales Representative.
(a)
No person may sell or solicit legal service contracts to
a person on behalf of a company without first registering with the department.
(b)
Registration is valid for one year from the date issued
and must be renewed annually.
(c)
The required fee must accompany both original and renewal
applications.
(d)
Falsification of information on an application is cause
for denial of the application or revocation of the registration.
§57.23.Registration Requirements--Administrator.
(a)
No person may act as an administrator on behalf of a company
without first registering with the department.
(b)
Registration is valid for one year from the date issued
and must be renewed annually.
(c)
The required fee must accompany both original and renewal
applications.
(d)
Falsification of information on an application is cause
for denial of the application or revocation of the registration.
§57.25.Registration Requirements--Renewal.
(a)
A complete application for registration renewal must be
submitted on an approved Department form with all required fees.
(b)
Non-receipt of a registration renewal notice from the Department
does not exempt a person from any requirements of this chapter.
(c)
A person shall not perform work requiring registration
under Title 5, Texas Occupations Code, Chapter 953 with an expired registration.
§57.70.Responsibilities of Registrants--General.
A registrant shall notify the Department in writing within thirty (30)
days of any change in the information set forth in the registrant’s
most recent original and renewal application.
§57.71.Responsibilities of Registrants--Company.
(a)
A company must provide a receipt for or other written evidence
of the purchase of a legal service contract to a contract holder within 45
days.
(b)
A company must provide a copy of the legal service contract
to the contract holder within 45 days.
(c)
A company must provide a copy of the terms of a group legal
service contract including the obligations and benefits of each party as specified
in Texas Occupations Code, Chapter 953, §953.156 within 45 days.
(d)
A company must provide a receipt for or other written evidence
of the purchase of a group legal service contract to a contract holder within
45 days.
(e)
A company must include a statement substantially similar
to, "Legal service contract companies and their sales representatives are
regulated by the Texas Department of Licensing and Regulation. You may contact
the Department at P.O. Box 12157, Austin, TX 78711, 512-463-6599, 800-803-9202,
or at ." in each legal service contract sold or offered for sale in Texas.
§57.72.Responsibilities of Registrant--Sales Representative.
A sales representative may only sell legal service contracts regulated
under Title 5, Texas Occupations Code, Chapter 953 and this Chapter on behalf
of a registered company.
§57.80.Fees.
(a)
All fees are non-refundable.
(b)
The original and renewal registration fee for a company
shall be:
(1)
$500 for a company that sells 0 to 1,000 legal service
contracts during the twelve (12) months preceding the date of the application;
(2)
$750 for a company that sells 1,001 to 2,500 legal service
contracts during the twelve (12) months preceding the date of the application;
and
(3)
$1,000 for company that sells 2,501 or more legal service
contracts during the twelve (12) months preceding the date of the application.
(c)
For purposes of subsection (b) if a company that sold no
legal service contracts in this state in the preceding year previously sold
prepaid legal service contracts under article 5.13-1, Texas Insurance Code,
the company’s registration fee shall be based on the number of prepaid
legal service contracts sold under the Texas Insurance Code in the preceding
year.
(d)
Companies must also pay an annual premium tax replacement
fee. The premium tax replacement fee is equal to the difference between an
amount equal to 1.7% of the amount a company collects for legal service contracts
sold by the company in Texas in the current year and the amount the company
paid to the state in franchise taxes in the same year.
(e)
The original and renewal registration fee for a sales representative
is $50.
(f)
The original and renewal registration fee for an administrator
is $50.
(g)
A $25 fee shall be charged for duplicate or amended registration
certificates.
(h)
Late renewal fees for registrations issued under this chapter
are provided for in Title 16, section 60.83 of the Commission rules.
§57.90.Administrative Penalties and Sanctions.
If a person violates any provision of Title 5, Texas Occupations Code,
Chapter 953, any provision of Title 16, Texas Administrative Code, Chapter
57, or any provision of an order of the Executive Director or Commission,
proceedings may be instituted to impose administrative penalties, administrative
sanctions, or both administrative penalties and sanctions in accordance with
the provisions of Title 5, Texas Occupations Code, Chapter 953; Title 2, Texas
Occupations Code, Chapter 51; and Title 16, Texas Administrative Code, Chapter
60 (relating to the Texas Commission of Licensing and Regulation.)
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 January 15, 2004.
TRD-200400287
William H. Kuntz, Jr.
Executive Director
Texas Department of Licensing and Regulation
Earliest possible date of adoption: February 29, 2004
For further information, please call: (512) 463-7348