Texas 2009 - 81st Regular

Texas House Bill HB3762 Compare Versions

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1	1	81R7812 JE-F
2	2	By: Flynn H.B. No. 3762
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the regulation of prepaid funeral benefits; providing
8	8	penalties.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Chapter 651, Occupations Code, is amended by
11	11	adding Subchapter O to read as follows:
12	12	SUBCHAPTER O. PREPAID FUNERAL BENEFITS
13	13	Sec. 651.701. DEFINITIONS. In this subchapter:
14	14	(1) "Contract beneficiary" means the person whose
15	15	final disposition is the subject of the prepaid funeral benefits
16	16	contract.
17	17	(2) "Crypt," "grave," "lawn crypt," "niche," and
18	18	"plot" have the meanings assigned by Section 711.001, Health and
19	19	Safety Code.
20	20	(3) "Financial institution" has the meaning assigned
21	21	by Section 201.101, Finance Code.
22	22	(4) "Funeral provider" means the funeral home
23	23	designated in a prepaid funeral benefits contract that has agreed
24	24	to provide the specified prepaid funeral benefits.
25	25	(5) "Insurance policy" means a life insurance policy
26	26	or annuity contract.
27	27	(6) "Permit holder" means a person that holds a permit
28	28	to sell prepaid funeral benefits contracts in this state.
29	29	(7) "Prepaid" means payment for funeral merchandise or
30	30	services before the death of the contract beneficiary in which all
31	31	or a portion of the amounts paid are placed in trust or used to pay
32	32	insurance policy premiums.
33	33	(8) "Prepaid funeral benefits" means prepaid funeral
34	34	services or prepaid funeral merchandise, but does not include a
35	35	grave marker, monument, tombstone, crypt, niche, plot, or lawn
36	36	crypt.
37	37	(9) "Prepaid funeral benefits contract" means a
38	38	contract entered into by a person, a funeral provider, and a permit
39	39	holder that sets out the terms for the provision of prepaid funeral
40	40	benefits by the funeral provider.
41	41	(10) "Responsible person" means the person charged
42	42	with the disposition of the remains of the contract beneficiary
43	43	under Section 711.002(a), Health and Safety Code.
44	44	Sec. 651.702. ADMINISTRATION OF SUBCHAPTER. (a) The
45	45	commission shall administer this subchapter.
46	46	(b) The commission may adopt reasonable rules concerning:
47	47	(1) fees to defray the cost of administering this
48	48	subchapter;
49	49	(2) the keeping of records relating to the sale of
50	50	prepaid funeral benefits;
51	51	(3) the filing of contracts and reports;
52	52	(4) changes in the management or control of a permit
53	53	holder; and
54	54	(5) any other matter relating to the enforcement and
55	55	administration of this subchapter.
56	56	Sec. 651.703. ANNUAL REPORT. (a) The commission may
57	57	require a permit holder with outstanding prepaid funeral benefits
58	58	contracts to submit an annual report that specifies:
59	59	(1) the number of prepaid funeral benefits contracts
60	60	in force at the beginning of the calendar year and the sum of the
61	61	total contract price of those contracts;
62	62	(2) the total number of new prepaid funeral benefits
63	63	contracts issued during the calendar year and the sum of the total
64	64	contract price of those contracts;
65	65	(3) the total number of prepaid funeral benefits
66	66	contracts that have been performed during the calendar year and the
67	67	sum of the total contract price of those contracts;
68	68	(4) the total number of prepaid funeral benefits
69	69	contracts that terminated by cancellation during the calendar year
70	70	and the sum of the total contract price of those contracts; and
71	71	(5) the total number of prepaid funeral benefits
72	72	contracts outstanding at year-end, the sum of the total contract
73	73	price of contracts in force, and the total funding available for
74	74	those contracts as either:
75	75	(A) the amount of insurance in force; or
76	76	(B) the amount of trust funds held for those
77	77	contracts.
78	78	(b) The annual report must include a certification by the
79	79	permit holder that states that the insurance premiums received have
80	80	been paid to the appropriate insurance company, or the funds that
81	81	are held in trust have been received and administered, in
82	82	accordance with applicable law.
83	83	Sec. 651.704. RECORDS; EXAMINATION. (a) A permit holder
84	84	that has outstanding prepaid funeral benefits contracts shall
85	85	maintain records as required by the commission. The records are
86	86	subject to examination by the commission or its agent on a schedule
87	87	to be determined by the commission, but in no event more frequently
88	88	than once every three years unless the commission determines
89	89	additional examination necessary for cause.
90	90	(b) As part of the examination, the commission or its agent
91	91	shall be given access to records relating to prepaid funeral
92	92	benefits contracts of each permit holder.
93	93	(c) By rule, the commission may delegate the examination of
94	94	trust-funded permit holders to the Texas Department of Banking and
95	95	the examination of insurance-funded permit holders to the Texas
96	96	Department of Insurance, including the allocation of any
97	97	examination fees under Section 651.705.
98	98	Sec. 651.705. EXAMINATION FEE. (a) For each examination
99	99	conducted under Section 651.704, the commission may impose on the
100	100	permit holder a fee in an amount set by the commission.
101	101	(b) The amount of the fee must be sufficient to cover the
102	102	cost of the examination, including:
103	103	(1) salary and travel expenses for commission
104	104	employees, including travel to and from the place where the records
105	105	are kept; and
106	106	(2) any other expense necessarily incurred in
107	107	conducting the examination.
108	108	Sec. 651.706. CONFIDENTIALITY; DISCLOSURE OF CERTAIN
109	109	INFORMATION. (a) Information relating to the financial condition
110	110	of a permit holder obtained by the commission directly or
111	111	indirectly, through examination or otherwise, other than published
112	112	statements, is confidential.
113	113	(b) The files and records of the commission relating to the
114	114	financial condition of a permit holder are confidential.
115	115	(c) The commission may disclose the information described
116	116	by Subsection (a) or (b) to an agency, commission, or
117	117	instrumentality of this or another state or the United States if the
118	118	commission considers disclosure to be in the best interest of the
119	119	public and necessary or proper to enforce the laws of this or
120	120	another state or the United States.
121	121	Sec. 651.707. PERMIT REQUIREMENT. A person may not sell
122	122	prepaid funeral benefits contracts in this state unless the person
123	123	holds a permit issued under this subchapter.
124	124	Sec. 651.708. PERMIT APPLICATION; FEE. To obtain a permit
125	125	to sell or continue to sell prepaid funeral benefits contracts, a
126	126	person must:
127	127	(1) file an application for a permit with the
128	128	commission on a form prescribed by the commission;
129	129	(2) pay a filing fee in an amount set by the commission
130	130	under Section 651.702; and
131	131	(3) if applicable, pay extraordinary expenses
132	132	required for out-of-state investigation of the person.
133	133	Sec. 651.709. ISSUANCE OF PERMIT. (a) The commission may
134	134	investigate an applicant before issuing an initial permit.
135	135	(b) The commission shall approve the application and issue a
136	136	permit to the applicant if the commission finds that the business
137	137	ability, experience, character, financial condition, and general
138	138	fitness of the applicant warrant the public's confidence. The
139	139	commission shall notify the applicant if the executive director
140	140	finds otherwise.
141	141	(c) The applicant must demonstrate sufficient financial
142	142	responsibility to administer all prepaid funeral benefits
143	143	contracts to performance. Sufficient financial responsibility
144	144	shall be presumed if the permit holder has current net worth of
145	145	$100,000 or provides the commission with a letter of credit or
146	146	performance bond or guarantee from its parent company in the amount
147	147	of $100,000 in a form and from an issuer acceptable to the
148	148	commission.
149	149	(d) The commission shall issue the permit within 60 days of
150	150	receipt of a completed application or shall provide the applicant
151	151	with written notice of the denial of the application, including the
152	152	reasons for denial. The applicant on request is entitled to a
153	153	hearing on the denial of the application, to be held not later than
154	154	the 30th day after the date of the request.
155	155	Sec. 651.710. TERM OF PERMIT. (a) A permit is issued for a
156	156	five-year term.
157	157	(b) The commission by rule may adopt a system under which
158	158	permits expire on various dates during the year.
159	159	Sec. 651.711. FUNDING OF PREPAID FUNERAL BENEFITS
160	160	CONTRACTS. A permit holder may elect to fund prepaid funeral
161	161	benefits contracts with insurance policies under Section 651.729 or
162	162	trust accounts under Section 651.730, or both.
163	163	Sec. 651.712. PROHIBITION ON TRANSFER OF PERMIT. A permit
164	164	is not transferable without the prior approval of the commission.
165	165	Sec. 651.713. TRANSFER OF BUSINESS OWNERSHIP. (a) A
166	166	person may not acquire in any manner an ownership interest in an
167	167	entity that is a permit holder, unless the person has filed with the
168	168	commission under oath:
169	169	(1) a biographical form for each person by whom or on
170	170	whose behalf the acquisition is to be effected;
171	171	(2) a statement disclosing the substance of any
172	172	disciplinary action taken by a financial or insurance regulator of
173	173	this state, another state, or the United States against a person who
174	174	is acquiring an ownership interest in the permit holder;
175	175	(3) a statement certifying that, immediately on the
176	176	acquisition, the permit holder will be able to satisfy the
177	177	requirements for the issuance of the permit; and
178	178	(4) any additional information that the commission by
179	179	rule may prescribe as necessary or appropriate to the protection of
180	180	the consumers of this state or as in the public interest.
181	181	(b) The commission may require a partnership, syndicate, or
182	182	other group that is required to file a statement under Subsection
183	183	(a) to provide the information under that subsection for each
184	184	partner of the partnership, each member of the syndicate, group, or
185	185	limited liability company, and each person who controls the partner
186	186	or member. If the partner, member, or person is a corporation or
187	187	other entity or the person required to file the statement under
188	188	Subsection (a) is a corporation, the commission may require that
189	189	the information required under that subsection be provided
190	190	regarding:
191	191	(1) the corporation or other entity;
192	192	(2) each individual who is an executive officer or
193	193	director of the corporation; and
194	194	(3) each person who is directly or indirectly the
195	195	beneficial owner of more than 10 percent of the outstanding voting
196	196	securities of the corporation.
197	197	(c) The commission may disapprove an acquisition if, after
198	198	notice and opportunity for hearing, the commission determines that:
199	199	(1) immediately on the acquisition, the permit holder
200	200	would not be able to satisfy the requirements for the issuance of
201	201	the permit;
202	202	(2) the competence, trustworthiness, experience, and
203	203	integrity of the persons who would control the operation of the
204	204	permit holder are such that it would not be in the interest of the
205	205	consumers of this state to permit the acquisition; or
206	206	(3) the acquisition would violate this subchapter or
207	207	another law of this state, another state, or the United States.
208	208	(d) Notwithstanding Subsection (c), an acquisition is
209	209	considered approved if the commission has not proposed to deny the
210	210	requested change before the 61st day after the date the commission
211	211	receives all information required by this section.
212	212	(e) The requirements of this section do not apply to an
213	213	acquisition of ownership, directly or indirectly, that is approved
214	214	by the Texas Department of Insurance, the Texas Department of
215	215	Banking, or the insurance or banking regulator of any other state or
216	216	the United States.
217	217	Sec. 651.714. REQUIRED RENEWAL FOR CERTAIN PERMIT HOLDERS.
218	218	A permit holder that has outstanding prepaid funeral benefits
219	219	contracts shall renew its permit.
220	220	Sec. 651.715. RENEWAL FEE. The commission shall set the
221	221	renewal fee under Section 651.702.
222	222	Sec. 651.716. GROUNDS FOR CANCELLATION OR SUSPENSION OF OR
223	223	REFUSAL TO RENEW PERMIT. (a) The commission by order may cancel or
224	224	suspend a permit if the commission finds, by examination or other
225	225	credible evidence, that the permit holder:
226	226	(1) knowingly violated this subchapter or another law
227	227	of this state relating to the sale of prepaid funeral benefits
228	228	contracts, including a final order of the commission or rule of the
229	229	commission;
230	230	(2) misrepresented or concealed a material fact in the
231	231	permit application;
232	232	(3) obtained or attempted to obtain the permit by
233	233	misrepresentation, concealment, or fraud;
234	234	(4) failed to maintain evidence of financial
235	235	responsibility as required by Section 651.709(c); or
236	236	(5) failed to maintain the qualifications necessary to
237	237	obtain a permit.
238	238	(b) The commission by order may refuse to renew a permit if
239	239	the commission finds, by examination or other credible evidence,
240	240	that the permit holder:
241	241	(1) committed one or more of the acts described by
242	242	Subsection (a); and
243	243	(2) did not correct the violation before the 31st day
244	244	after the date of written notice from the commission.
245	245	(c) The commission may place on probation a permit holder
246	246	whose permit is suspended. If a permit suspension is probated, the
247	247	commission may require the permit holder:
248	248	(1) to report regularly to the commission on matters
249	249	that are the basis of the probation; or
250	250	(2) to limit its activities as prescribed by the
251	251	commission.
252	252	Sec. 651.717. ORDER TO CANCEL, SUSPEND, OR REFUSE TO RENEW
253	253	PERMIT. (a) An order issued under Section 651.716 must state:
254	254	(1) with reasonable certainty the grounds for the
255	255	order; and
256	256	(2) the effective date, which may not be before the
257	257	16th day after the date the order is mailed.
258	258	(b) The order shall be served on the person named in the
259	259	order by certified mail, return receipt requested, to the last
260	260	known address of the person.
261	261	(c) The order takes effect as proposed unless the person
262	262	named in the order requests a hearing not later than the 15th day
263	263	after the date the order is mailed.
264	264	Sec. 651.718. FORM OF CONTRACT. (a) The commission must
265	265	approve all prepaid funeral benefits contract forms before their
266	266	use.
267	267	(b) A prepaid funeral benefits contract must:
268	268	(1) be in writing;
269	269	(2) state the name and address of the permit holder
270	270	selling the prepaid funeral benefits contract;
271	271	(3) if the funeral provider is not the permit holder,
272	272	state the name and address of the funeral provider responsible for
273	273	providing the prepaid funeral benefits specified in the prepaid
274	274	funeral benefits contract; and
275	275	(4) state the prepaid funeral benefits to be provided.
276	276	(c) A funeral provider responsible for providing prepaid
277	277	funeral benefits must be a party to the prepaid funeral benefits
278	278	contract.
279	279	(d) A prepaid funeral benefits contract, whether in English
280	280	or Spanish, must be written in plain language designed to be easily
281	281	understood by the average consumer. The contract must be printed in
282	282	an easily readable font and type size. The commission shall adopt
283	283	standards for prepaid funeral benefits contracts that comply with
284	284	this subsection.
285	285	(e) A permit holder may represent that the commission has
286	286	approved a prepaid funeral benefits contract with the following
287	287	language: "The Texas Funeral Service Commission regulates the sale
288	288	of prepaid funeral benefits contracts" and "The form of this
289	289	contract has been approved by the commission."
290	290	(f) The sales price of an item not covered by this
291	291	subchapter may not be increased to allocate a lesser sales price to
292	292	an item covered by this subchapter.
293	293	(g) A purchaser of a prepaid funeral benefits contract may
294	294	agree in writing to pay the permit holder a finance charge in
295	295	accordance with Chapter 345, Finance Code, on any amount due the
296	296	permit holder on the prepaid funeral benefits contract.
297	297	(h) A prepaid funeral benefits contract must clearly
298	298	identify the funeral merchandise and services for which the cost is
299	299	guaranteed and those for which the cost is not guaranteed, the
300	300	circumstances under which the guarantee is limited, and the
301	301	circumstances under which the prepaid funeral benefits contract may
302	302	be modified after the death of the contract beneficiary.
303	303	Sec. 651.719. CANCELLATION OF CONTRACT. (a) A purchaser of
304	304	a prepaid funeral benefits contract may cancel the contract before
305	305	maturity by giving written notice of cancellation to the permit
306	306	holder. The permit holder shall maintain copies of the written
307	307	notice of cancellation for three years from the date of receipt.
308	308	(b) The cancellation of the prepaid funeral benefits
309	309	contract does not cancel the insurance policy funding the prepaid
310	310	funeral benefits contract. The insurance policy may be canceled in
311	311	accordance with the terms of the policy.
312	312	(c) The cancellation of the prepaid funeral benefits
313	313	contract requires the return of trust funds under Section
314	314	651.730(e).
315	315	Sec. 651.720. MODIFICATION AT TIME OF FUNERAL. (a) The
316	316	funeral merchandise and services to be provided by the funeral
317	317	provider under a prepaid funeral benefits contract may be modified
318	318	after the death of the contract beneficiary if the modification
319	319	complies with Subsection (b) or is otherwise agreed to in a writing
320	320	signed by the funeral provider and the responsible person, except
321	321	that:
322	322	(1) if the purchaser of the prepaid funeral benefits
323	323	contract is also the contract beneficiary:
324	324	(A) the contracted funeral merchandise and
325	325	services may not be modified if the contract contains a clause that
326	326	prohibits modification; and
327	327	(B) a modification may not change the type of
328	328	disposition specified by the purchaser in the contract, whether by
329	329	burial, cremation, or another alternative by which the purchaser's
330	330	remains attain their final resting place, as provided by Section
331	331	711.002(g), Health and Safety Code; and
332	332	(2) the value attributed to any funeral merchandise or
333	333	service for which the cost is guaranteed in the prepaid funeral
334	334	benefits contract that is surrendered or exchanged in a
335	335	modification must be computed on a comparable time-price basis with
336	336	the price charged for substituted funeral merchandise or service
337	337	provided as part of the modification.
338	338	(b) Except as limited by Subsection (a)(1), the responsible
339	339	person may make reasonable modifications to the funeral merchandise
340	340	and services provided under a prepaid funeral benefits contract at
341	341	the time the funeral is performed, not to exceed 10 percent of the
342	342	original purchase price of the contract. This subsection does not
343	343	require the permit holder or the funeral provider to:
344	344	(1) refund a portion of the funds attributable to the
345	345	contract if the permit holder or funeral provider grants credit for
346	346	surrender or exchange as provided by Subsection (a)(2);
347	347	(2) provide substituted or additional funeral
348	348	merchandise or services in excess of credits granted under
349	349	Subsection (a)(2) unless the permit holder or funeral provider
350	350	receives additional compensation at current prices; or
351	351	(3) apply a portion of the funds attributable to the
352	352	contract or credits granted under Subsection (a)(2) to another
353	353	contract or funeral.
354	354	(c) The responsible person may not modify a prepaid funeral
355	355	benefits contract that has not been fully paid at the time of death
356	356	of the contract beneficiary except as agreed to in a writing signed
357	357	by the funeral provider and the responsible person.
358	358	Sec. 651.721. WAIVER OF RIGHT OF CANCELLATION. (a) The
359	359	purchaser of a prepaid funeral benefits contract may irrevocably
360	360	waive the purchaser's right to cancel the contract under Section
361	361	651.719. The waiver must be in a separate writing signed by the
362	362	purchaser and the permit holder and may take effect no earlier than
363	363	the 15th day after the date of the purchase of the contract. The
364	364	form of the waiver must comply with the requirements for the form of
365	365	a sales contract under Section 651.718.
366	366	(b) A waiver made under this section does not affect any
367	367	other right of the purchaser.
368	368	Sec. 651.722. PERFORMANCE OF CONTRACT. Delivery of funeral
369	369	merchandise before death is not performance, in whole or in part, of
370	370	a prepaid funeral benefits contract.
371	371	Sec. 651.723. ENFORCEMENT OF CONTRACT. A person that
372	372	violates Section 651.707 may not enforce a prepaid funeral benefits
373	373	contract, but before performance, the purchaser or an heir or legal
374	374	representative of the purchaser is entitled to recover:
375	375	(1) if trust-funded, the amount paid under the
376	376	contract; or
377	377	(2) if insurance-funded, ownership of the insurance
378	378	policy.
379	379	Sec. 651.724. AGENT OF PERMIT HOLDER. (a) A permit holder
380	380	may designate one or more agents to solicit and sell prepaid
381	381	funeral benefits contracts under a written contract specifying the
382	382	duties and obligations of the agents, including the proper receipt
383	383	and deposit of any funds or the transmitting of any insurance policy
384	384	premiums.
385	385	(b) The permit holder is responsible for the action or
386	386	failure to act of any agent appointed under Subsection (a) in the
387	387	course and scope of the agent's duty under the contract with the
388	388	permit holder. The appointment of an agent does not diminish any
389	389	obligation or responsibility of the permit holder imposed by the
390	390	prepaid funeral benefits contract, this subchapter, or other law.
391	391	Sec. 651.725. TRUST-FUNDED PREPAID FUNERAL BENEFITS AGENT.
392	392	(a) A permit holder that elects to fund prepaid funeral benefits
393	393	contracts with trust funds under Chapter 154, Finance Code, may
394	394	sell contracts only through trust-funded prepaid funeral benefits
395	395	agents.
396	396	(b) A permit holder may appoint funeral directors licensed
397	397	by the commission as trust-funded prepaid funeral benefits agents.
398	398	Licensed funeral directors are not subject to the requirements of
399	399	Sections 651.726, 651.727, and 651.728.
400	400	Sec. 651.726. TRAINING AND EXAMINATION. The permit holder
401	401	shall appoint an individual applicant to act as a trust-funded
402	402	prepaid funeral benefits agent on its certification that the
403	403	applicant has:
404	404	(1) completed a course of study and instruction in
405	405	compliance with this subchapter; and
406	406	(2) passed without aid a written examination
407	407	administered by the permit holder.
408	408	Sec. 651.727. COURSE. (a) To be eligible to receive an
409	409	appointment under Section 651.725, an applicant must complete a
410	410	course of study and instruction offered by a permit holder under
411	411	this section.
412	412	(b) The course of study and instruction must:
413	413	(1) be at least five hours in duration; and
414	414	(2) include instruction on:
415	415	(A) funeral merchandise and services, the
416	416	responsibilities of a trustee, and the terms of the prepaid funeral
417	417	benefits contract; and
418	418	(B) the laws relating to funeral prearrangement.
419	419	Sec. 651.728. EXAMINATION. (a) The commission shall
420	420	prescribe a uniform examination for applicants that fairly tests
421	421	knowledge of the information contained in the course under Section
422	422	651.727.
423	423	(b) The commission shall authorize a permit holder to
424	424	administer the examination as provided by this section after
425	425	approval by the commission of a complete outline and explanation of
426	426	the course and the manner of conducting the examination.
427	427	Sec. 651.729. INSURANCE-FUNDED PREPAID FUNERAL BENEFITS
428	428	CONTRACTS. (a) Except as specified in this section, the
429	429	solicitation and sale of insurance policies to fund prepaid funeral
430	430	benefits contracts, the terms of policies, all records relating to
431	431	transactions, and the conduct of agents and insurers shall be
432	432	conducted in accordance with the Insurance Code and regulated
433	433	solely by the Texas Department of Insurance.
434	434	(b) Insurance-funded prepaid funeral benefits contracts may
435	435	be solicited and sold only by a permit holder, or its agent, who is
436	436	properly licensed under Chapter 4054, Insurance Code.
437	437	(c) The application for an insurance policy covering the
438	438	contract beneficiary shall be executed simultaneously with the
439	439	prepaid funeral benefits contract.
440	440	(d) The application must include a disclosure in at least
441	441	10-point bold type, immediately above the signature line of the
442	442	purchaser, that states:
443	443	"If you are applying for a life insurance policy with multiple
444	444	payments, the total amount of premiums you pay over the life of the
445	445	policy may exceed the death benefit."
446	446	(e) The application must include the name and address of the
447	447	insurer in a form required by the Texas Department of Insurance, and
448	448	the policy must include a disclosure of the cash surrender value of
449	449	the policy payable to the policy owner on cancellation of the
450	450	insurance policy.
451	451	(f) The receipt of funds by the agent constitutes receipt of
452	452	premium by the insurer subject to the terms of the policy.
453	453	(g) The insurance policy must be on a form approved for use
454	454	by the Texas Department of Insurance, and the insurance policy must
455	455	provide the policy owner the opportunity to cancel the insurance
456	456	policy and receive a full refund of any premium paid, for any
457	457	reason, for a period of not less than 15 days after the date of
458	458	delivery of the insurance policy. After expiration of that period,
459	459	cancellation of the insurance policy is subject to the terms of the
460	460	policy.
461	461	(h) The insurer issuing the insurance policy must be
462	462	licensed to do business in this state.
463	463	(i) The purchaser of an insurance-funded prepaid funeral
464	464	benefits contract may irrevocably assign the purchaser's ownership
465	465	of or rights to benefits under the insurance policy to the permit
466	466	holder, the funeral provider, or a trustee. An irrevocable
467	467	assignment to a trustee is not valid unless it is made solely to
468	468	facilitate the eligibility of the purchaser under Title XIX of the
469	469	federal Social Security Act (42 U.S.C. Section 1396 et seq.) or
470	470	other public assistance program or the trustee is specifically
471	471	prohibited from exercising any right under the policy except
472	472	administration of the benefits.
473	473	(j) The insurer shall pay the beneficiary or assignee of an
474	474	insurance policy funding a prepaid funeral benefits contract on
475	475	receipt of sufficient documentation, which may include:
476	476	(1) a certification signed by the funeral provider and
477	477	the responsible person that the funeral service has been performed
478	478	in accordance with the prepaid funeral benefits contract and to the
479	479	satisfaction of the responsible person, and a copy of the death
480	480	certificate; or
481	481	(2) other documentation required by the insurer.
482	482	Sec. 651.730. TRUST-FUNDED PREPAID FUNERAL BENEFITS
483	483	CONTRACTS. (a) Except as specified in this section, the terms of
484	484	trusts established for prepaid funeral benefits contracts, all
485	485	records relating to transactions, and the conduct of agents and
486	486	trustees are governed by Chapter 154, Finance Code, and regulated
487	487	by the Texas Department of Banking or other regulators with
488	488	jurisdiction over the trustee.
489	489	(b) Trust-funded prepaid funeral benefits contracts may be
490	490	solicited and sold only by agents appointed by the permit holder on
491	491	forms adopted by the commission by rule.
492	492	(c) The agent shall provide the purchaser a disclosure in a
493	493	form adopted by the commission by rule that includes:
494	494	(1) the amount retained by the permit holder, funeral
495	495	provider, or agent from any funds received from the purchaser
496	496	before deposit;
497	497	(2) the amount retained by the permit holder, funeral
498	498	provider, or agent from any funds received from the purchaser on
499	499	cancellation;
500	500	(3) the name, address, and contact person of the
501	501	financial institution;
502	502	(4) a statement that the funds received will be
503	503	invested in accordance with the Finance Code but that no return on
504	504	funds is guaranteed; and
505	505	(5) a statement that should the contract beneficiary
506	506	die before the prepaid funeral benefits contract is paid in full,
507	507	the purchaser, the purchaser's authorized representative, or the
508	508	responsible person may elect to pay the balance due and receive the
509	509	prepaid funeral benefits under the contract.
510	510	(d) Funds received for prepaid funeral benefits contracts
511	511	shall be administered as prescribed by this section and Chapter
512	512	154, Finance Code, as applicable.
513	513	(e) Not later than the 30th day after the date of the receipt
514	514	of a cancellation request, the permit holder shall withdraw and pay
515	515	to the purchaser funds in the depository being held for the
516	516	purchaser's use and benefit.
517	517	(f) The purchaser or permit holder may not make a partial
518	518	cancellation or withdrawal.
519	519	(g) On cancellation, the purchaser is entitled to receive
520	520	the actual amount paid by the purchaser and half of all earnings
521	521	attributable to those funds, less the amount permitted to be
522	522	retained as provided by Section 154.252, Finance Code, except as
523	523	provided by Subsections (h) and (i).
524	524	(h) A purchaser who cancels a contract on the solicitation
525	525	of the permit holder or the funeral provider is entitled to receive
526	526	the total amount paid to the permit holder or the funeral provider
527	527	by the purchaser and all earnings attributable to those funds. If
528	528	the funds are used to purchase a new prepaid funeral benefits
529	529	contract under a solicitation by the permit holder, the new
530	530	contract must protect the purchaser to an extent equal to or greater
531	531	than that provided by the original contract, as determined by the
532	532	commission. Under the new contract, the cost to the purchaser of
533	533	the same or substantially the same services or merchandise may not
534	534	be greater than that provided by the canceled contract.
535	535	(i) A purchaser who cancels a contract during the first year
536	536	of the contract when payments required under the contract are
537	537	current is entitled to receive, regardless of the amount held in
538	538	trust, the greater of:
539	539	(1) 90 percent of the actual amount paid by the
540	540	purchaser; or
541	541	(2) the amount deposited in trust with respect to the
542	542	purchaser's contract.
543	543	Sec. 651.731. SEIZURE OF PREPAID FUNERAL TRUST FUNDS AND
544	544	RECORDS. (a) After the commission cancels or fails to renew a
545	545	permit under Section 651.716(a) or (b) or on notice to a person
546	546	required to obtain a permit under this subchapter, the executive
547	547	director may issue an order to seize the prepaid funeral trust
548	548	funds, including earnings, where those funds are held and may issue
549	549	an order to seize the records that relate to the sale of prepaid
550	550	funeral benefits if the executive director finds, by examination or
551	551	other credible evidence, that the person:
552	552	(1) failed to deposit or remit funds in accordance
553	553	with Chapter 154, Finance Code;
554	554	(2) misappropriated, converted, or illegally withheld
555	555	or failed or refused to pay on demand funds entrusted to the person
556	556	that belong to the purchaser or contract beneficiary under a
557	557	prepaid funeral benefits contract;
558	558	(3) refused to submit to examination by the
559	559	commission;
560	560	(4) was the subject of an order to cancel, suspend, or
561	561	refuse to renew a permit; or
562	562	(5) does not hold a permit or transferred the
563	563	ownership of its business to another person who does not hold a
564	564	permit and who:
565	565	(A) did not apply for a new permit before the 31st
566	566	day after the date the transfer was completed; or
567	567	(B) was denied a new permit.
568	568	(b) An order shall be served on the person named in the order
569	569	by certified mail, return receipt requested, to the last known
570	570	address of the person.
571	571	(c) An order takes effect immediately if the executive
572	572	director finds that immediate and irreparable harm is threatened to
573	573	a contract beneficiary under a prepaid funeral benefits contract.
574	574	If such a threat does not exist, the order must state the effective
575	575	date, which may not be before the 16th day after the date the order
576	576	is mailed.
577	577	(d) An order takes effect as proposed unless the person
578	578	named in the order requests a hearing not later than the 15th day
579	579	after the date the order is mailed.
580	580	(e) Premiums received on the disposition of a contract
581	581	related to the seizure of prepaid funeral trust funds shall be
582	582	handled as provided by Section 651.732 and Subchapter H, Chapter
583	583	154, Finance Code.
584	584	Sec. 651.732. NOTIFICATION TO PURCHASER. Not later than
585	585	the 30th day after the date prepaid funeral trust funds are seized
586	586	under Section 651.731, the executive director shall notify each
587	587	known person who purchased prepaid funeral benefits under a
588	588	contract from the permit holder whose permit is canceled. The
589	589	notice must:
590	590	(1) include an explanation of the procedures under
591	591	this subchapter for canceling the contract and claiming funds that
592	592	may be due the person if the person elects to cancel;
593	593	(2) inform the person to continue to make payments
594	594	under the contract if the person elects to keep the contract in
595	595	force; and
596	596	(3) inform the person that if the person elects to keep
597	597	the contract in force the executive director will transfer:
598	598	(A) responsibility to perform the contract to a
599	599	responsible successor permit holder selected by the executive
600	600	director; or
601	601	(B) the seized funds to the fund maintained under
602	602	Section 154.351, Finance Code, subject to the claims process
603	603	prescribed by rule under Subchapter H, Chapter 154, Finance Code.
604	604	Sec. 651.733. LIQUIDATION OF BUSINESS AND AFFAIRS OF PERSON
605	605	FOLLOWING SEIZURE OF TRUST FUNDS AND RECORDS. After an order issued
606	606	under Section 651.731(a) becomes final and unappealable, the
607	607	executive director may petition the district court in the county in
608	608	which a person required to hold a permit under this subchapter
609	609	resides to request the issuance of an order to show cause why the
610	610	business and affairs of that person should not be liquidated and a
611	611	receiver appointed by the court for that purpose if the person
612	612	failed or refused to correct the violation before the 31st day after
613	613	the date the person received written notice from the executive
614	614	director.
615	615	Sec. 651.734. PENALTIES FOR VIOLATIONS OF SUBCHAPTER. (a)
616	616	A person commits an offense if the person:
617	617	(1) fails to deposit funds in compliance with this
618	618	subchapter unless the failure to make a deposit is inadvertent and
619	619	is corrected before the 11th day after the date the permit holder
620	620	discovers the failure; or
621	621	(2) withdraws funds in a manner inconsistent with this
622	622	subchapter unless the withdrawal was made in error and the
623	623	withdrawal is reversed before the 11th day after the date the permit
624	624	holder discovers the error.
625	625	(b) An offense under this section is punishable as if it
626	626	were an offense under Section 32.45, Penal Code.
627	627	Sec. 651.735. ADMINISTRATIVE PENALTY. (a) After notice
628	628	and opportunity for hearing, the executive director may impose an
629	629	administrative penalty on a person who:
630	630	(1) violates this subchapter or a final order of the
631	631	commission or rule of the commission and does not correct the
632	632	violation before the 31st day after the date the person receives
633	633	written notice of the violation from the commission; or
634	634	(2) engages in a pattern of violations, as determined
635	635	by the executive director.
636	636	(b) The amount of the penalty for each violation may not
637	637	exceed $1,000 for each day the violation occurs.
638	638	(c) In determining the amount of the penalty, the executive
639	639	director shall consider the seriousness of the violation, the
640	640	person's history of violations, and the person's good faith in
641	641	attempting to comply with this subchapter.
642	642	(d) The imposition of a penalty under this section is:
643	643	(1) subject to the procedures of Subchapter L; and
644	644	(2) subject to judicial review as a contested case
645	645	under Chapter 2001, Government Code.
646	646	Sec. 651.736. RESTITUTION. The commission may issue an
647	647	order to a person requiring restitution if, after notice and
648	648	opportunity for hearing, the commission finds that the person:
649	649	(1) failed to deposit funds in accordance with
650	650	Subchapter F, Chapter 154, Finance Code; or
651	651	(2) misappropriated, converted, or illegally withheld
652	652	or failed or refused to pay on demand funds entrusted to the person
653	653	that belong to the contract beneficiary under a prepaid funeral
654	654	benefits contract.
655	655	Sec. 651.737. DELIVERY AT NEED. (a) A funeral provider
656	656	responsible for the delivery of prepaid funeral benefits shall
657	657	provide the responsible person, at the time of delivery of prepaid
658	658	funeral benefits, with a written reconciliation on a form adopted
659	659	by the commission by rule.
660	660	(b) The reconciliation must provide complete, item-by-item
661	661	details of the provider's resolution of the funeral costs with the
662	662	responsible person, including prices and any guarantees, guarantee
663	663	limitations, nonguaranteed items, and balance due.
664	664	(c) The funeral provider shall maintain a fully executed
665	665	copy of each reconciliation until the next examination by the
666	666	commission under Section 651.704.
667	667	SECTION 2. Section 154.002(10), Finance Code, is amended to
668	668	read as follows:
669	669	(10) "Seller" means a person holding a permit to sell
670	670	[selling, accepting money or premiums for, or soliciting contracts
671	671	for] prepaid funeral benefits [or] contracts under Subchapter O,
672	672	Chapter 651, Occupations Code, and electing [or insurance policies]
673	673	to fund those contracts through a trust [prepaid funeral benefits
674	674	in this state].
675	675	SECTION 3. The following laws are repealed:
676	676	(1) Section 154.002(7), Finance Code;
677	677	(2) Subchapters B, C, D, and I, Chapter 154, Finance
678	678	Code;
679	679	(3) Section 154.201, Finance Code;
680	680	(4) Section 154.202, Finance Code;
681	681	(5) Section 154.203, Finance Code;
682	682	(6) Section 154.205, Finance Code;
683	683	(7) Section 154.206, Finance Code;
684	684	(8) Section 154.207, Finance Code; and
685	685	(9) Sections 651.159 and 651.160, Occupations Code.
686	686	SECTION 4. A person holding a permit issued by the Texas
687	687	Department of Banking to sell prepaid funeral benefits on the
688	688	effective date of this Act shall be issued a permit by the Texas
689	689	Funeral Service Commission without application, effective
690	690	September 1, 2009. All provisions of this Act apply to the permit
691	691	holder on and after the effective date of this Act, except that the
692	692	permit holder has until the third anniversary of the effective date
693	693	of this Act to meet the financial responsibility requirements of
694	694	Section 651.709(c), Occupations Code, as added by this Act.
695	695	SECTION 5. This Act takes effect September 1, 2009.