HBA-ATS S.B. 1076 76(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 1076 By: Carona Insurance 4/26/1999 Engrossed BACKGROUND AND PURPOSE Currently, when a consumer makes a small loan, that consumer may purchase credit insurance from a regulated loan licenser to insure the amount of the loan in the event of an unexpected occurrence. A consumer also has the option of purchasing from such a licenser noncredit insurance such as term life, disability, accident and health, or loss of income coverage and other products such as a home security plan, an automobile club membership, or an extended service contract. While a consumer may finance the premiums for credit insurance, state law does not permit such financing for noncredit insurance. S.B. 1076 authorizes a customer of a regulated loan licenser to finance the charges for noncredit insurance and other products. This bill also authorizes customers of a regulated loan licenser to finance the a charge for noncredit insurance and other products. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 1.01 (Article 3A.717, V.T.C.S.) of this bill. SECTION BY SECTION ANALYSIS ARTICLE 1. AMENDMENTS TO TITLE 79, REVISED STATUTES SECTION 1.01. Amends Article 5069-3A.701 et seq., V.T.C.S., by adding Article 3A.717, as follows: Art. 3A.717. NONCREDIT INSURANCE AND OTHER PRODUCTS. (a) Authorizes an authorized lender to offer certain types of noncredit insurance and other products, in connection with or subsequent to a loan made under Subchapter E or G, if agent licensing requirements and policy forms comply with the applicable provisions of the Insurance Code and other insurance laws of this state. (b) Authorizes the cost of noncredit insurance or another product under Subsection (a) to be collected from the borrower only under certain conditions. (c) Prohibits an authorized lender from charging or collecting an amount for a type of noncredit insurance or other product that is not specified in Subsection (a) unless the commissioner of insurance (commissioner) authorizes the charge or collection. (d) Provides that the cost of noncredit insurance and other products purchased under this chapter, and any gain or advantage received by an authorized lender or an employee, officer, director, general or other agent, affiliate, or associate of the lender as a result of a charge for noncredit insurance or other products authorized under this chapter, is not considered a further or other charge or amount received in connection with a loan made under this chapter. (e) Requires the commissioner, by rule, to provide for Spanish-language disclosure of the information required in Subsection (b). SECTION 1.02. Amends Article 5069-3A.710, V.T.C.S., as follows: Art. 3A.710. New title: PAYMENT FOR INSURANCE AND OTHER PRODUCTS FROM LOAN PROCEEDS. (a) Provides that a lender who offers insurance or another product as permitted by this subchapter, rather than accepts insurance, may deduct the premium for the insurance or charge for the other product from the proceeds of the loan and shall pay the deducted amounts to the insurance company writing the insurance or to the vendor of the other product. Deletes text authorizing the lender to deduct an identifiable charge for the insurance. SECTION 1.03. Amends Article 5069-3A.852(b), V.T.C.S., to authorize a lender to assess and collect from the borrower an amount incurred by the lender for the premium, received in connection with the sale of insurance or the charge for any other product authorized under this chapter, on a loan subject to Subchapter E or a secondary mortgage loan subject to Subchapter G. Makes conforming changes. ARTICLE 2. AMENDMENTS TO FINANCE CODE SECTION 2.01. Amends Subchapter I, Chapter 342, Finance Code, by adding Section 342.4021, to make conforming changes. SECTION 2.02. Amends Section 342.410, Finance Code, as follows: Sec. 342.410. New title: PAYMENT FOR INSURANCE OR OTHER PRODUCTS FROM LOAN PROCEEDS. Makes conforming and nonsubstantive changes. SECTION 2.03. Amends Section 342.502(b), Finance Code, to make conforming changes. ARTICLE 3. EFFECTIVE DATE; APPLICATION; EMERGENCY SECTION 3.01. (a) Effective date: September 1, 1999, except as provided by Subsections (b) and (c). (b) Provides that Article 1 of this Act takes effect only if the Act of the 76th Legislature, Regular Session, 1999, relating to nonsubstantive additions to and corrections in enacted codes does not take effect. (c) Provides that Article 2 of this Act takes effect only if the Act of the 76th Legislature, Regular Session, 1999 relating to nonsubstantive additions to and corrections in enacted codes takes effect. SECTION 3.02. Makes application of this Act prospective. SECTION 3.03. Emergency clause.