Texas 2009 - 81st Regular

Texas Senate Bill SB778 Compare Versions

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1	1	S.B. No. 778
2	2
3	3
4	4	AN ACT
5	5	relating to the licensing and regulation of identity recovery
6	6	service contract providers and the inclusion of identity recovery
7	7	service agreements in certain service contracts, retail
8	8	installment contracts, and vehicle protection products; providing
9	9	penalties.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Subsection (b), Section 348.208, Finance Code,
12	12	is amended to read as follows:
13	13	(b) A retail installment contract may include as a separate
14	14	charge an amount for:
15	15	(1) motor vehicle property damage or bodily injury
16	16	liability insurance;
17	17	(2) mechanical breakdown insurance;
18	18	(3) participation in a motor vehicle theft protection
19	19	plan;
20	20	(4) insurance to reimburse the retail buyer for the
21	21	amount computed by subtracting the proceeds of the buyer's basic
22	22	collision policy on the motor vehicle from the amount owed on the
23	23	vehicle if the vehicle has been rendered a total loss; [or]
24	24	(5) a warranty or service contract relating to the
25	25	motor vehicle; or
26	26	(6) an identity recovery service contract defined by
27	27	Section 1306.003, Occupations Code.
28	28	SECTION 2. Subsection (b), Section 1304.003, Occupations
29	29	Code, is amended to read as follows:
30	30	(b) A service contract may also provide for:
31	31	(1) incidental payment or indemnity under limited
32	32	circumstances, including towing, rental, and emergency road
33	33	service; [or]
34	34	(2) the repair or replacement of a product for damage
35	35	resulting from a power surge or for accidental damage incurred in
36	36	handling the product; or
37	37	(3) identity recovery, as defined by Section 1306.002,
38	38	if the service contract is financed under Chapter 348, Finance
39	39	Code.
40	40	SECTION 3. Title 8, Occupations Code, is amended by adding
41	41	Chapter 1306 to read as follows:
42	42	CHAPTER 1306. IDENTITY RECOVERY SERVICE CONTRACT PROVIDERS AND
43	43	ADMINISTRATORS
44	44	SUBCHAPTER A. GENERAL PROVISIONS
45	45	Sec. 1306.001. SHORT TITLE. This chapter may be cited as
46	46	the Identity Recovery Service Contract Regulatory Act.
47	47	Sec. 1306.002. DEFINITIONS. In this chapter:
48	48	(1) "Administrator" means a person, other than the
49	49	provider of the identity recovery service contract or an employee
50	50	of the provider, who is responsible for the third-party
51	51	administration of an identity recovery service contract.
52	52	(2) "Commission" means the Texas Commission of
53	53	Licensing and Regulation.
54	54	(3) "Consumer" means an individual who, for a purpose
55	55	other than resale, buys a motor vehicle that is:
56	56	(A) distributed in commerce; and
57	57	(B) normally used for personal, family, or
58	58	household purposes and not for business or research purposes.
59	59	(4) "Department" means the Texas Department of
60	60	Licensing and Regulation.
61	61	(5) "Executive director" means the executive director
62	62	of the department.
63	63	(6) "Identity recovery" means a process, through a
64	64	limited power of attorney and the assistance of an identity
65	65	recovery expert, that returns the identity of an identity theft
66	66	victim to pre-identity theft event status.
67	67	(7) "Identity recovery service contract holder" means
68	68	a person who purchases or otherwise holds an identity recovery
69	69	service contract.
70	70	(8) "Person" means an individual or an association,
71	71	company, corporation, partnership, or other group.
72	72	(9) "Provider" means a person who is contractually
73	73	obligated to an identity recovery service contract holder under the
74	74	terms of an identity recovery service contract.
75	75	(10) "Reimbursement insurance policy" means a policy
76	76	of insurance issued to a provider to:
77	77	(A) reimburse the provider under an identity
78	78	recovery service contract the provider issued or sold; or
79	79	(B) pay on behalf of the provider all covered
80	80	contractual obligations that are incurred by the provider under an
81	81	identity recovery service contract the provider issued or sold and
82	82	that the provider does not perform.
83	83	Sec. 1306.003. IDENTITY RECOVERY SERVICE CONTRACT. In this
84	84	chapter, "identity recovery service contract" means an agreement:
85	85	(1) to provide identity recovery;
86	86	(2) that is entered into for a separately stated
87	87	consideration and for a specified term; and
88	88	(3) that is financed through a retail installment
89	89	contract under Chapter 348, Finance Code.
90	90	Sec. 1306.004. CONTROLLING PERSON. (a) In this chapter,
91	91	"controlling person" means an individual who:
92	92	(1) possesses direct or indirect control of at least
93	93	25 percent of the voting securities of a corporation;
94	94	(2) possesses the authority to set policy and direct
95	95	the management of a business entity;
96	96	(3) is the president, the secretary, or a director of a
97	97	corporation; or
98	98	(4) is a general partner of a partnership.
99	99	(b) An individual who is a controlling person of a
100	100	corporation or other business entity that is the general partner of
101	101	a limited partnership is a controlling person of the limited
102	102	partnership.
103	103	Sec. 1306.005. EXEMPTIONS. This chapter does not apply to:
104	104	(1) an identity recovery service contract sold or
105	105	offered for sale to a person who is not a consumer; or
106	106	(2) an identity recovery service contract sold by a
107	107	motor vehicle dealer on a motor vehicle sold by that dealer, if the
108	108	dealer:
109	109	(A) is the provider;
110	110	(B) is licensed as a motor vehicle dealer under
111	111	Chapter 2301; and
112	112	(C) covers its obligations under the identity
113	113	recovery service contract with a reimbursement insurance policy.
114	114	Sec. 1306.006. EXEMPTIONS FROM CERTAIN OTHER LAWS.
115	115	Marketing, selling, offering for sale, issuing, making, proposing
116	116	to make, and administering an identity recovery service contract
117	117	are exempt from the Insurance Code and other laws of this state
118	118	regulating the business of insurance.
119	119	Sec. 1306.007. PURCHASE REQUIREMENT PROHIBITED. A person
120	120	regulated by Chapter 2301 may not require the purchase of an
121	121	identity recovery service contract as a condition of a loan or the
122	122	sale of a vehicle.
123	123	Sec. 1306.008. GENERAL INVESTIGATIVE POWER OF EXECUTIVE
124	124	DIRECTOR. (a) The executive director may investigate a provider,
125	125	administrator, or other person as necessary to enforce this chapter
126	126	and protect identity recovery service contract holders in this
127	127	state.
128	128	(b) On request of the executive director, a provider shall
129	129	make the records required by Section 1306.105 available to the
130	130	executive director as necessary to enable the executive director to
131	131	reasonably determine compliance with this chapter.
132	132	[Sections 1306.009-1306.050 reserved for expansion]
133	133	SUBCHAPTER B. REGISTRATION REQUIREMENTS
134	134	Sec. 1306.051. REGISTRATION REQUIRED; EXEMPTION FROM OTHER
135	135	LICENSING REQUIREMENTS. (a) A person may not operate as a
136	136	provider or administrator of identity recovery service contracts
137	137	sold in this state unless the person is registered with the
138	138	department.
139	139	(b) Except for the registration requirement of this
140	140	subchapter, a provider, identity recovery service contract seller,
141	141	administrator, or other person who markets, sells, or offers to
142	142	sell identity recovery service contracts is exempt from any
143	143	licensing requirement of this state that relates to an activity
144	144	regulated under this chapter.
145	145	(c) If a person registered under Chapter 1304 registers
146	146	under Chapter 1306, the financial security used to comply with
147	147	Section 1304.151 fulfills the requirements of Section 1306.101.
148	148	Sec. 1306.052. APPLICATION FOR REGISTRATION OR RENEWAL;
149	149	GENERAL REQUIREMENTS. (a) An applicant for registration or
150	150	registration renewal must submit an application to the executive
151	151	director.
152	152	(b) The application must:
153	153	(1) be in the form prescribed by the executive
154	154	director; and
155	155	(2) include evidence satisfactory to the executive
156	156	director of compliance with the applicable financial security
157	157	requirements prescribed by Section 1306.101, if the application is
158	158	for a provider registration or renewal.
159	159	(c) The department may refuse to issue or renew a
160	160	registration if the applicant or a controlling person of the
161	161	applicant has violated this chapter or a rule adopted or order
162	162	issued by the commission or executive director.
163	163	(d) A person who makes a false statement in an application
164	164	or in any document provided with an application is subject to
165	165	disciplinary action under Subchapter D, including denial of the
166	166	application or suspension or revocation of a registration.
167	167	Sec. 1306.053. ADDITIONAL REGISTRATION AND RENEWAL
168	168	REQUIREMENTS FOR PROVIDERS. (a) In addition to the requirements
169	169	of Section 1306.052, an applicant for issuance or renewal of a
170	170	provider registration must file with the application:
171	171	(1) the reimbursement insurance policy required by
172	172	Section 1306.102, if the provider is using a reimbursement
173	173	insurance policy; and
174	174	(2) a biographical affidavit, in a form prescribed by
175	175	the executive director, for each controlling person of the
176	176	provider.
177	177	(b) The executive director may not issue or renew a
178	178	registration to a provider unless the provider provides evidence to
179	179	the executive director that:
180	180	(1) each controlling person of the provider is
181	181	trustworthy and can competently manage the affairs of the provider
182	182	in compliance with this chapter; and
183	183	(2) the provider can meet the provider's obligations
184	184	under identity recovery service contracts and this chapter.
185	185	Sec. 1306.054. FEES. (a) As prescribed by this section, a
186	186	provider must pay annual registration and renewal fees and
187	187	quarterly fees based on the number of identity recovery service
188	188	contracts sold or issued and in force in this state. As prescribed
189	189	by this section, an administrator must pay annual registration and
190	190	renewal fees.
191	191	(b) To register or renew a registration, a provider or
192	192	administrator must pay the appropriate fee. The commission shall
193	193	set by rule the amounts of the registration and renewal fees
194	194	required to cover the costs of administering this chapter.
195	195	(c) Not later than the 30th day after the date each calendar
196	196	quarter ends, a provider must report to the department the number of
197	197	identity recovery service contracts sold or issued to consumers in
198	198	this state during the calendar quarter and submit to the department
199	199	a fee equal to $1 for each of those contracts.
200	200	(d) The information concerning the number of identity
201	201	recovery service contracts sold or issued by a provider that is
202	202	submitted under Subsection (c):
203	203	(1) is a trade secret to which Section 552.110,
204	204	Government Code, applies; and
205	205	(2) may be used only by the executive director and the
206	206	department for the purposes of this section.
207	207	(e) The commission shall adopt rules to implement this
208	208	section.
209	209	Sec. 1306.055. RENEWAL. The commission shall adopt rules
210	210	regarding the renewal of a registration issued under this chapter.
211	211	[Sections 1306.056-1306.100 reserved for expansion]
212	212	SUBCHAPTER C. PRACTICE BY IDENTITY RECOVERY SERVICE CONTRACT
213	213	PROVIDERS AND ADMINISTRATORS
214	214	Sec. 1306.101. FINANCIAL SECURITY REQUIREMENTS. (a) To
215	215	ensure the faithful performance of a provider's obligations to its
216	216	identity recovery service contract holders, each provider must:
217	217	(1) insure the provider's identity recovery service
218	218	contracts under a reimbursement insurance policy issued by an
219	219	insurer authorized to transact insurance in this state or by a
220	220	surplus lines insurer eligible to place coverage in this state
221	221	under Chapter 981, Insurance Code;
222	222	(2) maintain a funded reserve account covering the
223	223	provider's obligations under its identity recovery service
224	224	contracts that are issued and outstanding in this state and place in
225	225	trust with the executive director a financial security deposit
226	226	consisting of:
227	227	(A) a surety bond issued by an authorized surety;
228	228	(B) securities of the type eligible for deposit
229	229	by an authorized insurer in this state;
230	230	(C) a statutory deposit of cash or cash
231	231	equivalents;
232	232	(D) a letter of credit issued by a qualified
233	233	financial institution; or
234	234	(E) another form of security prescribed by rules
235	235	adopted by the commission; or
236	236	(3) maintain, or have a parent company that maintains,
237	237	a net worth or stockholders' equity of at least $100 million.
238	238	(b) If the provider ensures its obligations under
239	239	Subsection (a)(2), the amount maintained in the reserve account may
240	240	not be less than an amount equal to 40 percent of the gross
241	241	consideration the provider received from consumers from the sale of
242	242	all identity recovery service contracts issued and outstanding in
243	243	this state, minus any claims paid. The executive director may
244	244	review and examine the reserve account. The amount of the security
245	245	deposit may not be less than the greater of:
246	246	(1) $25,000; or
247	247	(2) an amount equal to five percent of the gross
248	248	consideration the provider received from consumers from the sale of
249	249	all identity recovery service contracts issued and outstanding in
250	250	this state, minus any claims paid.
251	251	(c) If the provider ensures its obligations under
252	252	Subsection (a)(3), the provider must give to the executive director
253	253	on request:
254	254	(1) a copy of the provider's or the provider's parent
255	255	company's most recent Form 10-K or Form 20-F filed with the
256	256	Securities and Exchange Commission within the preceding calendar
257	257	year; or
258	258	(2) if the provider or the provider's parent company
259	259	does not file with the Securities and Exchange Commission, a copy of
260	260	the provider's or the provider's parent company's audited financial
261	261	statements showing a net worth of the provider or its parent company
262	262	of at least $100 million.
263	263	(d) If the provider's parent company's Form 10-K, Form 20-F,
264	264	or audited financial statements are filed to show that the provider
265	265	meets the financial security requirement, the parent company shall
266	266	agree to guarantee the obligations of the provider relating to
267	267	identity recovery service contracts sold by the provider in this
268	268	state.
269	269	(e) The executive director may not require a provider to
270	270	meet any additional financial security requirement.
271	271	Sec. 1306.102. REIMBURSEMENT INSURANCE POLICY. (a) A
272	272	reimbursement insurance policy that a provider uses to comply with
273	273	Sections 1306.053 and 1306.101(a)(1) must state that:
274	274	(1) the insurer that issued the policy shall:
275	275	(A) reimburse or pay on behalf of the provider
276	276	any covered amount the provider is legally obligated to pay; or
277	277	(B) provide the service that the provider is
278	278	legally obligated to perform according to the provider's
279	279	contractual obligations under the insured identity recovery
280	280	service contract;
281	281	(2) if the covered service is not provided to an
282	282	identity recovery service contract holder before the 61st day after
283	283	the date of proof of loss, the insurer shall pay the covered amount
284	284	directly to the identity recovery service contract holder or
285	285	provide the required service; and
286	286	(3) if a refund is not paid to the identity recovery
287	287	service contract holder or credited to the identity recovery
288	288	service contract holder's account as required by Section 1306.108,
289	289	the insurer, after receiving written notice, shall pay the refund
290	290	amount directly to the identity recovery service contract holder.
291	291	(b) For a reimbursement insurance policy to comply with
292	292	Section 1306.101(a)(1), the insurer issuing the policy must:
293	293	(1) maintain surplus as to policyholders and paid-in
294	294	capital of at least $15 million and annually file with the executive
295	295	director copies of the insurer's audited financial statements,
296	296	National Association of Insurance Commissioners annual statement,
297	297	and actuarial certification if the certification is required and
298	298	filed in the insurer's state of domicile; or
299	299	(2) maintain surplus as to policyholders and paid-in
300	300	capital of at least $10 million but not more than $15 million,
301	301	demonstrate to the satisfaction of the executive director that the
302	302	insurer maintains a ratio of net written premiums, wherever
303	303	written, to surplus as to policyholders and paid-in capital of not
304	304	more than three to one, and annually file with the executive
305	305	director copies of the insurer's audited financial statements,
306	306	National Association of Insurance Commissioners annual statement,
307	307	and actuarial certification if the certification is required and
308	308	filed in the insurer's state of domicile.
309	309	(c) The insurer may not cancel the reimbursement insurance
310	310	policy until the insurer delivers to the provider and the executive
311	311	director a written notice of cancellation that complies with the
312	312	notice requirements prescribed by Subchapters B and C, Chapter 551,
313	313	Insurance Code, for cancellation of an insurance policy under those
314	314	subchapters. Cancellation of the policy does not affect the
315	315	insurer's liability for an identity recovery service contract
316	316	issued by the provider and insured under the policy before the
317	317	effective date of the cancellation.
318	318	(d) If the insurer or provider cancels the reimbursement
319	319	insurance policy, the provider named on the policy may not issue a
320	320	new identity recovery service contract after the effective date of
321	321	the cancellation unless:
322	322	(1) the provider files with the executive director a
323	323	copy of a new policy that meets the requirements of this section and
324	324	that provides coverage after that date; or
325	325	(2) the provider complies with other financial
326	326	security requirements provided by Section 1306.101(a).
327	327	(e) A provider is considered the agent of an insurer that
328	328	issues a reimbursement insurance policy for purposes of obligating
329	329	the insurer to the identity recovery service contract holder in
330	330	accordance with the identity recovery service contract and this
331	331	chapter. The insurer issuing the reimbursement insurance policy is
332	332	considered to have received the premium for the policy on the date
333	333	the identity recovery service contract holder pays the purchase
334	334	price of the identity recovery service contract.
335	335	(f) This chapter does not prevent or limit the right of the
336	336	insurer to seek indemnification or subrogation against a provider
337	337	for any amount the insurer pays or is obligated to pay to an
338	338	identity recovery service contract holder on behalf of the
339	339	provider.
340	340	(g) In this section, "net written premiums" means the sum of
341	341	direct written premiums and assumed reinsurance premiums, minus
342	342	ceded reinsurance premiums.
343	343	Sec. 1306.103. APPOINTMENT AND RESPONSIBILITIES OF
344	344	ADMINISTRATOR. (a) A provider may appoint an administrator
345	345	registered under this chapter to be responsible for:
346	346	(1) all or any part of the administration or sale of
347	347	identity recovery service contracts; and
348	348	(2) compliance with this chapter, except for Section
349	349	1306.101.
350	350	(b) The appointment of an administrator under this section
351	351	does not affect a provider's responsibility to comply with this
352	352	chapter.
353	353	Sec. 1306.104. PROVIDER REQUIREMENTS. A provider may not
354	354	sell, offer for sale, or issue an identity recovery service
355	355	contract in this state unless the provider gives the identity
356	356	recovery service contract holder:
357	357	(1) a receipt for, or other written evidence of, the
358	358	purchase of the contract; and
359	359	(2) a copy of the contract within a reasonable period
360	360	after the date of purchase.
361	361	Sec. 1306.105. PROVIDER RECORDS. (a) A provider shall
362	362	maintain accurate accounts, books, and other records regarding
363	363	transactions regulated under this chapter. The provider's records
364	364	must include:
365	365	(1) a copy of each unique form of identity recovery
366	366	service contract sold;
367	367	(2) the name and address of each identity recovery
368	368	service contract holder who provided the holder's name and address;
369	369	(3) a list of each location at which the provider's
370	370	identity recovery service contracts are marketed, sold, or offered
371	371	for sale; and
372	372	(4) written claims files that contain at least the
373	373	date and a description of each claim related to the identity
374	374	recovery service contracts.
375	375	(b) The records required by this section may be maintained
376	376	in an electronic medium or through other recordkeeping technology.
377	377	If a record is not in a hard copy, the provider must be able to
378	378	reformat the record into a legible hard copy at the request of the
379	379	executive director.
380	380	(c) Except as provided by Subsection (d), a provider shall
381	381	retain the records required by this section until at least the first
382	382	anniversary of the expiration date of the specified period of
383	383	coverage under the identity recovery service contract.
384	384	(d) A provider that discontinues business in this state
385	385	shall retain its records until the provider furnishes the executive
386	386	director with proof satisfactory to the executive director that the
387	387	provider has discharged all obligations to identity recovery
388	388	service contract holders in this state.
389	389	(e) An administrator appointed to maintain the provider's
390	390	records is responsible for compliance with this section to the same
391	391	extent as the provider.
392	392	Sec. 1306.106. FORM OF IDENTITY RECOVERY SERVICE CONTRACT
393	393	AND REQUIRED DISCLOSURES. (a) An identity recovery service
394	394	contract marketed, sold, offered for sale, issued, made, proposed
395	395	to be made, or administered in this state must:
396	396	(1) be written, printed, or typed in clear,
397	397	understandable language that is easy to read;
398	398	(2) state the name and address of the provider;
399	399	(3) state the purchase price of the contract and the
400	400	terms under which the contract is sold;
401	401	(4) state the terms and restrictions governing
402	402	cancellation of the contract by the provider or the identity
403	403	recovery service contract holder before the expiration date of the
404	404	contract;
405	405	(5) identify:
406	406	(A) any administrator;
407	407	(B) the contract seller; and
408	408	(C) the identity recovery service contract
409	409	holder, if the identity recovery service contract holder provides
410	410	the holder's name;
411	411	(6) state the amount of any deductible;
412	412	(7) specify the services to be provided under the
413	413	contract and any limitation, exception, or exclusion;
414	414	(8) specify any restriction governing the
415	415	transferability of the contract; and
416	416	(9) state the duties of the identity recovery service
417	417	contract holder, including any duty to protect against any further
418	418	damage and any requirement to follow the instructions in the
419	419	identity recovery service contract.
420	420	(b) The identity of a person described by Subsection (a)(5)
421	421	is not required to be preprinted on the identity recovery service
422	422	contract and may be added to the contract at the time of sale.
423	423	(c) The purchase price is not required to be preprinted on
424	424	the identity recovery service contract and may be negotiated with
425	425	the identity recovery service contract holder at the time of sale.
426	426	(d) An identity recovery service contract insured under a
427	427	reimbursement insurance policy under Section 1306.102 must:
428	428	(1) state the name and address of the insurer;
429	429	(2) state that the identity recovery service contract
430	430	holder may apply for reimbursement directly to the insurer if:
431	431	(A) a covered service is not provided to the
432	432	identity recovery service contract holder by the provider before
433	433	the 61st day after the date of proof of loss; or
434	434	(B) a refund or credit is not paid before the 46th
435	435	day after the date on which the contract is returned to the provider
436	436	under Section 1306.107; and
437	437	(3) contain a statement substantially similar to the
438	438	following: "Obligations of the provider under this identity
439	439	recovery service contract are insured under an identity recovery
440	440	service contract reimbursement insurance policy."
441	441	(e) An identity recovery service contract that is not
442	442	insured under a reimbursement insurance policy must contain a
443	443	statement substantially similar to the following: "Obligations of
444	444	the provider under this identity recovery service contract are
445	445	backed by the full faith and credit of the provider."
446	446	Sec. 1306.107. RETURNING AN IDENTITY RECOVERY SERVICE
447	447	CONTRACT. An identity recovery service contract must require the
448	448	provider to allow the identity recovery service contract holder to
449	449	return the contract to the provider not later than:
450	450	(1) the 20th day after the date the contract is mailed
451	451	to the identity recovery service contract holder; or
452	452	(2) the 10th day after the date of delivery, if the
453	453	contract is delivered to the identity recovery service contract
454	454	holder at the time of sale.
455	455	Sec. 1306.108. VOIDING AN IDENTITY RECOVERY SERVICE
456	456	CONTRACT. (a) If an identity recovery service contract holder
457	457	returns an identity recovery service contract in accordance with
458	458	Section 1306.107 and a claim has not been made under the contract
459	459	before the contract is returned, the contract is void.
460	460	(b) An identity recovery service contract holder may void
461	461	the identity recovery service contract at a later time as provided
462	462	by the contract.
463	463	(c) If an identity recovery service contract is voided under
464	464	Subsection (a), the provider shall refund to the identity recovery
465	465	service contract holder or credit to the account of the identity
466	466	recovery service contract holder the full purchase price of the
467	467	contract. If the provider does not pay the refund or credit the
468	468	identity recovery service contract holder's account before the 46th
469	469	day after the date the contract is returned to the provider, the
470	470	provider is liable to the identity recovery service contract holder
471	471	for a penalty each month an amount remains outstanding. The monthly
472	472	penalty may not exceed 10 percent of the amount outstanding.
473	473	(d) The right to void an identity recovery service contract
474	474	is not transferable.
475	475	Sec. 1306.109. CANCELING AN IDENTITY RECOVERY SERVICE
476	476	CONTRACT. (a) A provider may cancel an identity recovery service
477	477	contract by mailing a written notice of cancellation to the
478	478	identity recovery service contract holder at the identity recovery
479	479	service contract holder's last known address according to the
480	480	records of the provider. The provider must mail the notice before
481	481	the fifth day preceding the effective date of the cancellation. The
482	482	notice must state the effective date of the cancellation and the
483	483	reason for the cancellation.
484	484	(b) The provider is not required to provide prior notice of
485	485	cancellation if the identity recovery service contract is canceled
486	486	because of:
487	487	(1) nonpayment of the consideration for the contract;
488	488	(2) a material misrepresentation by the identity
489	489	recovery service contract holder to the provider; or
490	490	(3) a substantial breach of a duty by the identity
491	491	recovery service contract holder.
492	492	Sec. 1306.110. LIMITATIONS ON PROVIDER NAME. (a) A
493	493	provider may not use a name that:
494	494	(1) includes "insurance," "casualty," "surety," or
495	495	"mutual" or any other word descriptive of the insurance, casualty,
496	496	or surety business; or
497	497	(2) is deceptively similar to the name or description
498	498	of an insurance or surety corporation or to the name of any other
499	499	provider.
500	500	(b) A provider may include in its name "guaranty" or a
501	501	similar word.
502	502	(c) This section does not apply to a provider that, before
503	503	September 1, 2009, included a word prohibited under this section in
504	504	its name. A provider described by this subsection must include in
505	505	each identity recovery service contract a statement substantially
506	506	similar to the following: "This agreement is not an insurance
507	507	contract."
508	508	Sec. 1306.111. MISLEADING STATEMENTS PROHIBITED. A
509	509	provider or the provider's representative may not, in the
510	510	provider's identity recovery service contracts or literature:
511	511	(1) make, permit, or cause to be made any false or
512	512	misleading statement; or
513	513	(2) deliberately omit a material statement if the
514	514	omission would be considered misleading.
515	515	[Sections 1306.112-1306.150 reserved for expansion]
516	516	SUBCHAPTER D. DISCIPLINARY ACTION
517	517	Sec. 1306.151. DISCIPLINARY ACTION. On a finding that a
518	518	ground for disciplinary action exists under this chapter, the
519	519	commission may impose an administrative sanction, including an
520	520	administrative penalty as provided by Subchapter F, Chapter 51.
521	521	Sec. 1306.152. INJUNCTIVE RELIEF; CIVIL PENALTY. (a) The
522	522	executive director may institute an action under Section 51.352 for
523	523	injunctive relief to restrain a violation or a threatened violation
524	524	of this chapter or an order issued or rule adopted under this
525	525	chapter.
526	526	(b) In addition to the injunctive relief provided by
527	527	Subsection (a), the executive director may institute an action for
528	528	a civil penalty as provided by Section 51.352. The amount of a
529	529	civil penalty assessed under this section may not exceed:
530	530	(1) $2,500 for each violation; or
531	531	(2) $50,000 in the aggregate for all violations of a
532	532	similar nature.
533	533	Sec. 1306.153. MULTIPLE VIOLATIONS. For purposes of this
534	534	subchapter, violations are of a similar nature if the violations
535	535	consist of the same or a similar course of conduct, action, or
536	536	practice, regardless of the number of times the conduct, act, or
537	537	practice occurred.
538	538	Sec. 1306.154. ADMINISTRATIVE PROCEDURE. Sections 51.305,
539	539	51.310, and 51.354 apply to disciplinary action taken under this
540	540	chapter.
541	541	SECTION 4. Section 2306.003, Occupations Code, is amended
542	542	by adding Subsection (c) to read as follows:
543	543	(c) A vehicle protection product may also include identity
544	544	recovery, as defined by Section 1306.002, if the vehicle protection
545	545	product is financed under Chapter 348, Finance Code.
546	546	SECTION 5. (a) The change in law made by this Act applies
547	547	to an identity recovery service contract entered into on or after
548	548	January 1, 2010. An identity recovery service contract entered
549	549	into before January 1, 2010, is covered by the law in effect on the
550	550	date the contract was entered into, and the former law is continued
551	551	in effect for that purpose.
552	552	(b) Not later than November 1, 2009, the Texas Commission of
553	553	Licensing and Regulation shall adopt rules to implement Chapter
554	554	1306, Occupations Code, as added by this Act.
555	555	SECTION 6. (a) Except as provided by Subsection (b) of
556	556	this section, this Act takes effect September 1, 2009.
557	557	(b) Section 1306.051 and Subchapter D, Chapter 1306,
558	558	Occupations Code, as added by this Act, take effect January 1, 2010.
559	559	______________________________ ______________________________
560	560	President of the Senate Speaker of the House
561	561	I hereby certify that S.B. No. 778 passed the Senate on
562	562	April 9, 2009, by the following vote: Yeas 31, Nays 0; and that the
563	563	Senate concurred in House amendment on May 5, 2009, by the following
564	564	vote: Yeas 29, Nays 0.
565	565	______________________________
566	566	Secretary of the Senate
567	567	I hereby certify that S.B. No. 778 passed the House, with
568	568	amendment, on April 30, 2009, by the following vote: Yeas 144,
569	569	Nays 0, one present not voting.
570	570	______________________________
571	571	Chief Clerk of the House
572	572	Approved:
573	573	______________________________
574	574	Date
575	575	______________________________
576	576	Governor