CHAPTER 651. FINANCING OF INSURANCE PREMIUMS - Texas Statutes

INSURANCE CODE

TITLE 5. PROTECTION OF CONSUMER INTERESTS

SUBTITLE E. PREMIUM FINANCING

CHAPTER 651. FINANCING OF INSURANCE PREMIUMS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 651.001. DEFINITIONS. In this chapter:

(1) "Annual percentage rate" means the annual percentage rate of

finance charge determined under the Consumer Credit Protection

Act and Regulation Z.

(2) "Consumer Credit Protection Act" means the Consumer Credit

Protection Act of 1970 (15 U.S.C. Section 1601 et seq.; 18 U.S.C.

Section 891 et seq.).

(2-a) "Insurance agent" means a person licensed under Subchapter

E, Chapter 981 or Chapter 4051, 4052, 4053, 4054, 4055, 4056, or

4153.

(3) "Insurance premium finance company" means:

(A) a person engaged in the business of making loans under this

chapter by entering into premium finance agreements with insureds

or prospective insureds;

(B) a person engaged in the business of acquiring premium

finance agreements from insurance agents or brokers or from other

insurance premium finance companies; or

(C) an insurance agent or broker making loans under this chapter

who holds premium finance agreements made and delivered by

insureds that are payable to the agent or broker or to the

agent's or broker's order.

(4) "Insured" means a person who enters into a premium finance

agreement with an insurance premium finance company.

(5) "Insurer" means an entity organized or authorized to engage

in the business of insurance under this code as a capital stock

insurance company, title insurance company, reciprocal or

interinsurance exchange, Lloyd's plan, fraternal benefit society,

mutual or mutual assessment company of any kind, statewide mutual

assessment company, local mutual aid association, burial

association, county or farm mutual insurance company, fidelity,

guaranty, or surety company, or trust company.

(6) "License holder" means an insurance premium finance company

that holds a license issued under Subchapter B.

(7) "Person" means an individual, partnership, corporation,

joint venture, trust, association, or other legal entity,

regardless of organization.

(8) "Premium finance agreement" means an agreement by which an

insured or prospective insured promises to pay to an insurance

premium finance company the amount advanced or to be advanced

under the agreement to an insurer or to an insurance agent in

payment of the premiums on an insurance contract.

(8-a) "Premium finance agreement servicer" means a person who

provides a premium finance company with collection, billing, or

other services related to the administration of premium finance

agreements.

(9) "Regulation Z" means the federal regulations adopted under

the Consumer Credit Protection Act as 12 C.F.R. Section 226.1 et

seq.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Amended by:

Acts 2005, 79th Leg., Ch.

757, Sec. 1, eff. June 17, 2005.

Sec. 651.002. CERTAIN CONDUCT NOT ENGAGING IN BUSINESS AS

INSURANCE PREMIUM FINANCE COMPANY. (a) The preparation or

delivery by an insurance agent of a premium finance agreement or

disclosure statement required by Section 651.155 on behalf of the

insured does not constitute engaging in business as an insurance

premium finance company.

(b) Subsection (a) does not apply to a premium finance agreement

held for the benefit of the insurance agent as provided by

Section 651.001(3)(C).

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.003. RULES. (a) The commissioner may adopt and

enforce rules necessary to administer this chapter.

(b) The rules may contain classifications, differentiations, or

other provisions and provide for adjustments or exceptions for

any class of transactions necessary to:

(1) accomplish the purposes of this chapter;

(2) prevent circumvention or evasion of this chapter; or

(3) facilitate compliance with this chapter.

(c) A rule adopted by the commissioner may not contain any

classification, differentiation, or other provision with respect

to any class of transactions or provide for any adjustment or

exception for any class of transactions that would result in a

less stringent disclosure requirement than required for that

class of transactions by the Consumer Credit Protection Act or

Regulation Z.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.004. EMPLOYMENT OF EXAMINERS AND INVESTIGATORS; PAYMENT

OF EXPENSES. The department may:

(1) employ persons as necessary to examine or investigate and

make reports on alleged violations of this chapter and compliance

with any other provision of this code by a license holder;

(2) pay the salaries and expenses of persons described by

Subdivision (1) and of all office employees; and

(3) pay an expense necessary to enforce this chapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.005. DEPOSIT AND USE OF FEES. Each fee collected under

this chapter:

(1) shall be deposited to the credit of the Texas Department of

Insurance operating account; and

(2) may be used by the department to enforce this chapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.006. ASSESSMENTS. (a) A license holder shall pay to

the department:

(1) an amount imposed by the department to cover the direct and

indirect cost of examinations and investigations made under this

chapter; and

(2) a proportionate share of the general administrative expense

attributable to the regulation of license holders.

(b) Each amount required by this section is in addition to any

investigation or license fee imposed under Subchapter B.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.007. APPLICABILITY OF CONSUMER CREDIT PROTECTION ACT

AND REGULATION Z. A transaction that is subject to this chapter

is also subject to:

(1) the Consumer Credit Protection Act; and

(2) the applicable provisions of Regulation Z.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.008. AUTHORITY OF CERTAIN PROPERTY AND CASUALTY AGENTS

TO CHARGE INTEREST TO CERTAIN PERSONS. (a) Notwithstanding any

other law, a general property and casualty agent or a personal

lines property and casualty agent who holds a license under

Chapter 4051 may enter into a written agreement with a purchaser

of insurance from the agent that provides for the payment of

interest to the agent on any amount due to the agent for the

insurance purchased. The interest is computed at a rate not to

exceed the greater of:

(1) a rate allowed by Chapter 303, Finance Code; or

(2) the rate of one percent a month.

(b) A claim or defense of usury may not be raised in connection

with a written agreement under this section.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

548, Sec. 2.06, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

548, Sec. 2.07, eff. September 1, 2007.

SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS

Sec. 651.051. LICENSE REQUIRED. (a) Unless the person is a

license holder, a person may not:

(1) negotiate, transact, or engage in the business of insurance

premium financing in this state; or

(2) contract for, charge, or receive directly or indirectly on

or in connection with an insurance premium financing any charge,

regardless of whether the charge is for interest, compensation,

consideration, expense, or otherwise, if in the aggregate the

amount of the charge exceeds the amount the person would be

permitted by law to charge if the person were not a license

holder.

(b) This subchapter does not apply to a person who purchases or

otherwise acquires a premium finance agreement from a license

holder if the license holder:

(1) retains the right to service the agreement and to collect

payments due under the agreement; and

(2) remains responsible for servicing the agreement in

compliance with this chapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Amended by:

Acts 2005, 79th Leg., Ch.

757, Sec. 2, eff. June 17, 2005.

Sec. 651.052. LICENSE FEE. (a) The department shall establish

the fee for a license under this subchapter in an amount not to

exceed $200.

(b) The fee for a license issued after June 30 may not exceed

$100.

(c) Section 201.001 applies to fees collected under this

section.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.053. ENTITLEMENT OF BANKS AND SAVINGS AND LOAN

ASSOCIATIONS TO LICENSE. (a) A bank or a savings and loan

association is entitled to receive a license under this

subchapter if the bank or savings and loan association:

(1) is engaging in business under the laws of this state or the

United States; and

(2) notifies the department of its intention to operate under

this chapter.

(b) On receipt of notice under Subsection (a)(2), the department

shall immediately issue a license to the bank or savings and loan

association.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.054. APPLICATION FOR LICENSE; INVESTIGATION FEE;

EXEMPTION. (a) An application for a license to engage in the

business of insurance premium financing must:

(1) be in writing on a form prescribed by the commissioner; and

(2) be accompanied by a nonrefundable investigation fee in an

amount not to exceed $400 as established by the department.

(b) A person who on January 1, 1980, held a license under

Chapter 3, Title 79, Revised Statutes (Article 5069-3.01 et seq.,

Vernon's Texas Civil Statutes), is not required to pay an

investigation fee.

(c) Section 201.001 applies to fees collected under this

section.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.055. REFUSAL TO ISSUE LICENSE. The department may

refuse to issue a license to an applicant if the department

determines that:

(1) the financial responsibility, experience, character, or

general fitness of the applicant or any person associated with

the applicant does not command the confidence of the community

and does not warrant the belief that the applicant will engage in

the business of insurance premium financing honestly, fairly, and

efficiently; or

(2) the applicant does not have available for the operation of

the business net assets of at least $25,000.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.056. NOTICE OF ACTION ON APPLICATION. Not later than

the 90th day after the date the department receives an

application under Section 651.054, the department shall notify

the applicant that:

(1) the application has been approved and the department will

issue a license to the applicant on payment of the required

license fee; or

(2) the application has been denied.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.057. ISSUANCE OF LICENSE. After approval of an

application and on receipt of the required license fee, the

department shall:

(1) issue a license authorizing the license holder to engage in

business as an insurance premium finance company at the location

specified in the license holder's application; and

(2) send the license to the applicant.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.058. RECIPROCAL LICENSE. The department may waive any

license requirement for an applicant who holds a valid license

from another state that has license requirements substantially

equivalent to the requirements prescribed by this state.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.059. ISSUANCE OF MULTIPLE LICENSES. The department may

issue a person more than one license under this subchapter but

may not issue one person more than 60 of those licenses.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.060. SINGLE BUSINESS LOCATION AUTHORIZED BY LICENSE. A

license authorizes the license holder to maintain only one

location where the business of insurance premium financing may be

conducted.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.061. APPEARANCE OF LICENSE; POSTING. (a) A license

must state the name and address of the license holder.

(b) The license must be conspicuously posted at the location

where the license holder engages in the business of insurance

premium financing.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.062. TRANSFER OR ASSIGNMENT OF LICENSE PROHIBITED. A

license may not be transferred or assigned.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.063. TERM OF LICENSE. Unless a staggered renewal

system is adopted under Section 651.065, a license is issued for

the calendar year and remains valid until December 31 of that

year, unless suspended, revoked, or surrendered in accordance

with Section 651.204 or 651.206.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.064. PROCEDURE FOR LICENSE RENEWAL. (a) A license

holder may renew an unexpired license by paying the required

renewal fee to the department.

(b) A person whose license has been expired for 90 days or less

may renew the license by paying to the department:

(1) the required renewal fee; and

(2) an additional fee equal to one-half of the original license

fee.

(c) A person whose license has been expired for more than 90

days but less than two years may renew the license by paying to

the department:

(1) all unpaid renewal fees; and

(2) an additional fee equal to the original license fee.

(d) A person whose license has been expired for two years or

more may not renew the license. The person may obtain a new

license by complying with the requirements and procedures for

obtaining an original license.

(e) Not later than the 30th day before the date a person's

license expires, the department shall send written notice of the

impending license expiration to the person at the person's last

known address.

(f) This section may not be construed to prevent the department

from denying or refusing to renew a license under an applicable

law or a rule adopted by the commissioner.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.065. STAGGERED RENEWAL SYSTEM. (a) The commissioner

by rule may adopt a system under which licenses expire on various

dates during the year.

(b) For a year in which the license expiration date is less than

one year from the date of license issuance or the anniversary of

that date, the license fee shall be prorated so that each license

holder pays only that portion of the license fee allocable to the

number of months during which the license is valid. On each

subsequent renewal of the license, a license holder must pay the

total renewal fee.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

SUBCHAPTER C. REGULATION OF INSURANCE PREMIUM

FINANCE COMPANIES AND OTHERS

Sec. 651.101. BOOKS, ACCOUNTS, AND RECORDS. (a) A license

holder shall maintain books, accounts, and records in sufficient

detail to enable a representative of the department to determine

whether the license holder is in compliance with this chapter and

rules adopted by the commissioner.

(b) A license holder shall maintain for inspection the license

holder's books, accounts, and records, including any cards used

in a card system, for at least four years after the date the

final entry of any premium finance agreement is recorded in those

books, accounts, and records.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.102. ANNUAL REPORT. On or before April 1 of each year,

a license holder shall file with the department a report

containing information required by the department concerning the

business and operations of the license holder during the

preceding calendar year at each licensed location where the

license holder engages in the business of insurance premium

financing in this state.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.103. BUSINESS NAME. A license holder may not engage in

the business of insurance premium financing under any name other

than the name stated on the license.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.104. BUSINESS LOCATION. A license holder may not

engage in the business of insurance premium financing at any

location other than the address stated on the license.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.105. RELOCATION OF PLACE OF BUSINESS. (a) A license

holder who proposes to relocate the place where the holder

engages in the business of insurance premium financing shall give

written notice of the proposed change to the department.

(b) If the department approves the proposed relocation, the

department shall issue an endorsement to the license holder

indicating the change and the date of the change.

(c) The endorsement authorizes the license holder to engage in

the business of insurance premium financing at the new location.

The license holder shall attach the endorsement to the license

for that location.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.106. BUSINESS PREMISES. (a) Except as provided by

Subsection (b), a license holder may engage in the business of

insurance premium financing:

(1) in any office, suite, room, or place of business in which

any other business is solicited or engaged in; or

(2) in association or in conjunction with any other business.

(b) Subsection (a) does not apply if the department:

(1) determines, after a hearing, that the conduct by the license

holder of the other business at the location for which the

license was issued has concealed evasions of this chapter; and

(2) orders the license holder in writing to stop engaging in the

business of insurance premium financing at that location.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.107. ENGAGING IN BUSINESS BY MAIL OR OUTSIDE THE

COMMUNITY. This chapter does not prohibit a license holder from

engaging in the business of insurance premium financing:

(1) by mail; or

(2) with persons who do not reside in the same community as the

licensed location.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.108. CERTAIN CHARGES PROHIBITED. In connection with a

premium finance agreement entered into under this chapter, an

insurance charge or any other charge or fee may not be imposed

unless the charge or fee is authorized by this chapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.109. LIMITATIONS ON RATES AND CHARGES. (a) An

insurance premium finance company may not take or receive from an

insured a greater rate or charge than is authorized by Chapter

342, Finance Code.

(b) For purposes of this section, a charge begins on the earlier

of:

(1) the date from which the insurer requires payment of the

premium and payment was made to the insurer for the financed

policy; or

(2) the effective date of the policy.

(c) The finance charge is computed on the balance of the

premiums due after subtracting any down payment made by the

insured in accordance with the premium finance agreement.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.110. LIMITATIONS ON CERTAIN INDUCEMENTS OR SHARING OF

PROFITS AND FEES. (a) This section applies to:

(1) an insurance premium finance company;

(2) an insurance agent;

(3) a premium finance agreement servicer; or

(4) an affiliate, employee, agent, or other representative of an

insurance premium finance company or a premium finance agreement

servicer.

(a-1) A person, partnership, or other entity described by

Subsection (a) and involved in transactions related to the

financing of insurance premiums may not:

(1) directly or indirectly pay, allow, give, or offer to pay,

allow, or give in any manner to an insurance agent or an employee

of an insurance agent any consideration, compensation, or

inducement for soliciting, accepting an application for,

delivering, or administering premium finance agreements;

(2) pay, allow, or offer to pay or allow an insurance agent or

an employee of an insurance agent to share the profits of any

person, partnership, or other entity if any portion of the share

of profits is determined, either in whole or in part, by the

amount of premium dollars financed or premium finance agreements

placed; or

(3) pay, allow, or offer to pay or allow an insurance agent or

an employee of an insurance agent to share any portion of fees,

including late fees, that are related to the premium finance

agreement.

(b) Subsection (a-1) does not prohibit the giving or offering

of an article of merchandise to an insurance agent or an employee

of an insurance agent that has a value of $10 or less on which

there is an advertisement of the insurance premium finance

company.

(c) Subsection (a-1) does not prohibit a person, partnership,

or other entity described by Subsection (a) from making a payment

under a contractual agreement with a validly organized and

operating association of insurance agents or a subsidiary of the

association if no part of a payment received under the agreement:

(1) is distributed to an insurance agent or an employee of an

insurance agent; or

(2) inures directly to the benefit of a member of the

association or an employee of the member.

(d) A contractual agreement under Subsection (c):

(1) must be in writing; and

(2) is not valid until commissioner approval is received.

(e) Subsection (a-1) does not prohibit an insurance agent from

being the sole owner or sole shareholder of an insurance premium

finance company and receiving profits and fees of the insurance

premium finance company if the insurance agent discloses in

writing the agent's ownership interest in the insurance premium

finance company to all insureds placed by the agent with the

insurance premium finance company owned by the agent.

(f) Subsections (a-1) and (e) do not apply to a person,

partnership, or other entity described by Subsection (a) and

involved in transactions related to the financing of insurance

premiums for commercial lines of insurance if, with respect to

those transactions:

(1) the insurance agent discloses in writing the source of any

compensation to be received by the agent as a result of the

insured entering into a premium finance agreement;

(2) the agent provides in writing to the insured the amount of

compensation, as a percentage of the premiums financed, if the

amount of compensation received by the agent exceeds two percent

of the premium amount financed; and

(3) the amount of compensation is based only on actual premiums

financed and is not paid as:

(A) an advance on future premium finance agreements; or

(B) a form of bonus for the agent agreeing to place finance

agreements with the premium finance company.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Amended by:

Acts 2005, 79th Leg., Ch.

757, Sec. 4, eff. June 17, 2005.

Sec. 651.111. DECEPTIVE ADVERTISING PROHIBITED. (a) A license

holder may not advertise or cause to be advertised in any manner

any false, misleading, or deceptive statement or representation

with regard to the rates, terms, or conditions of a premium

finance agreement.

(b) If rates or charges are stated in advertising, the license

holder must express the rates or charges in terms of a simple

annual percentage rate as defined by federal law.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

SUBCHAPTER D. PREMIUM FINANCE AGREEMENTS

Sec. 651.151. REQUIRED FORM AND CONTENTS OF PREMIUM FINANCE

AGREEMENT. (a) A premium finance agreement must be in writing

on a form approved by the commissioner.

(b) A premium finance agreement must be dated and signed by the

insured. An agreement may be signed on behalf of the insured by

the insured's agent if:

(1) the agreement contains policies for other than personal,

family, or household purposes; and

(2) the premiums for the policies exceed $1,000.

(c) A premium finance agreement must contain:

(1) the name and business address of the insurance agent or

broker negotiating the related insurance contract;

(2) the name and residence or business address of the insured as

specified by the insured;

(3) the name and business location of the insurance premium

finance company to which payments are to be made;

(4) a description of each insurance contract involved;

(5) the amount of the premium for each insurance contract;

(6) the total amount of the premiums for all insurance

contracts;

(7) the amount of any down payment;

(8) the principal balance, which is the difference between the

amounts under Subdivisions (6) and (7);

(9) the total amount of the finance charge, which must describe

each amount included and use the term "finance charge"; and

(10) the balance payable by the insured, which is the sum of the

amounts under Subdivisions (8) and (9).

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.152. OTHER REQUIRED CONTENTS. In addition to the items

required by Section 651.151, a premium finance agreement must

contain the following, as applicable:

(1) the finance charge expressed as an annual percentage rate,

using the term "annual percentage rate";

(2) the number of installments required under the agreement;

(3) the amount of each installment expressed in dollars;

(4) the due date or period of each installment;

(5) the amount or method of computing the amount of any default

or delinquency charge that is payable in the event of late

payment; and

(6) the method of computing any unearned portion of the finance

charge in the event of prepayment of the obligation.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.153. FORM OF DISCLOSURES. (a) The disclosures

required by Sections 651.151 and 651.152 must be made clearly,

conspicuously, and in meaningful sequence.

(b) If the term "finance charge" or "annual percentage rate" is

required to be used, the term must be printed more conspicuously

than other required terminology.

(c) Each numerical amount or percentage must be expressed as a

figure and:

(1) legibly handwritten; or

(2) printed in not less than the equivalent of 10-point type,

75/1,000-inch computer type, or elite-size typewritten numerals.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.154. CONSOLIDATION OF INCREASE ATTRIBUTABLE TO

AMENDMENT OF RATE CLASSIFICATION. (a) If, in a premium finance

agreement, a change in an insured's policy that is caused by an

amendment of the rate classification by endorsement or otherwise

results in an increased principal balance and the amount under

the previous contract has not been fully paid, the subsequent

increase, at the insured's option, may be consolidated with the

previous contract if the agreement provides for consolidation.

(b) A consolidation under this section may be accomplished by a

memorandum of agreement between the agent and the insured if,

before the first scheduled payment date of the amended

transaction, the insurance premium finance company provides to

the insured the following information in writing:

(1) the amount of the premium increase;

(2) the down payment on the increase;

(3) the principal amount of the increase;

(4) the total amount of any finance charge on the increase;

(5) the total of the additional balance due;

(6) the outstanding balance due under the original agreement;

(7) the balance due under the consolidated agreement;

(8) the annual percentage rate of any finance charge on the

additional balance due;

(9) the revised schedule of payments;

(10) the amount or method of computing the amount of any

default, deferment, or similar charge authorized by Chapter 342,

Finance Code, that is payable in the event of late payment; and

(11) the method of computing any unearned portion of the finance

charge in the event of prepayment of the obligation.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.155. RESPONSIBILITIES OF INSURANCE AGENT. An insurance

agent shall:

(1) prepare a premium finance agreement; and

(2) deliver to the insured each disclosure statement required by

law.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.156. TAKING OF INCOMPLETE PREMIUM FINANCE AGREEMENT

PROHIBITED. A license holder may not take a premium finance

agreement that has not been fully completed and executed at the

time the agreement is executed.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.157. PERFECTION OF PREMIUM FINANCE AGREEMENT AS SECURED

TRANSACTION: FILING NOT REQUIRED. Filing of a premium finance

agreement or a financing statement is not necessary to perfect

the agreement as a secured transaction against a creditor,

subsequent purchaser, pledgee, encumbrancer, successor, or assign

of the insured or any other party.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.158. PREPAYMENT AND REFUND. (a) Notwithstanding the

provisions of any premium finance agreement to the contrary, an

insured may pay the balance due under the agreement in full at

any time before the maturity of the final installment of the

balance.

(b) If an insured pays a premium finance agreement in full as

authorized by this section and the agreement included an amount

for a charge, the insured is entitled to receive for the

prepayment by cash or renewal a refund credit in accordance with

Subchapter H, Chapter 342, Finance Code, and rules adopted under

that subchapter. If the amount of the credit for prepayment is

less than $5, the insured is not entitled to a refund credit.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Amended by:

Acts 2005, 79th Leg., Ch.

757, Sec. 5, eff. June 17, 2005.

Sec. 651.159. DEFAULT CHARGE. A premium finance agreement may

provide for the payment of a default charge by the insured as

provided by Section 342.203, Finance Code, this code, or a rule

adopted under those statutes.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.160. POWER OF ATTORNEY. A premium finance agreement

may contain a power of attorney that enables the insurance

premium finance company to cancel any or all of the insurance

contracts listed in the agreement as provided by Section 651.161.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.161. CANCELLATION OF INSURANCE CONTRACT. (a) An

insurance premium finance company may not cancel an insurance

contract listed in a premium finance agreement except as provided

by this section for an insured's failure to make a payment at the

time and in the amount provided in the agreement.

(b) The insurance premium finance company must mail to the

insured a written notice that the company will cancel the

insurance contract because of the insured's default in payment

unless the default is cured at or before the time stated in the

notice. The stated time may not be earlier than the 10th day

after the date the notice is mailed.

(c) The insurance premium finance company must also mail a copy

of the notice to the insurance agent or broker identified in the

premium finance agreement.

(d) After the time stated in the notice required by Subsection

(b), the insurance premium finance company may cancel each

applicable insurance contract by mailing a notice of cancellation

to the insurer. Each insurance contract shall be canceled as if

the insured had canceled the contract, except that the return of

a canceled contract is not required.

(e) The insurance premium finance company must also mail a

notice of cancellation to:

(1) the insured at the insured's last known address; and

(2) the insurance agent or broker identified in the premium

finance agreement.

(f) A statutory, regulatory, or contractual restriction that

provides that an insurance contract may not be canceled unless

notice is given to a governmental agency, mortgagee, or other

third party applies to a cancellation under this section. The

insurer shall:

(1) give the prescribed notice on behalf of the insurer or the

insured to each governmental agency, mortgagee, or other third

party on or before the second business day after the date the

insurer receives the notice of cancellation from the insurance

premium finance company; and

(2) determine the effective date of cancellation, taking into

consideration the number of days' notice required to complete the

cancellation.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.162. RETURN OF UNEARNED PREMIUMS AND COMMISSIONS. (a)

This section applies only to a premium finance agreement that

contains an assignment or power of attorney for the benefit of

the insurance premium finance company.

(b) If an insurance contract listed in a premium finance

agreement is canceled, the insurer shall return all unearned

premiums that are due under the contract directly to the

insurance premium finance company before the 61st day after the

cancellation date.

(c) The insurer may deduct from the unearned premiums returned

to the insurance premium finance company the amount of any

unearned commission due from the agent writing the insurance if

the insurer notifies the agent to return the unearned commission

to the insurance premium finance company. If the agent does not

return the unearned commission to the insurance premium finance

company before the 91st day after the cancellation date, the

insurer shall remit the unearned commission to the insurance

premium finance company before the 121st day after the

cancellation date.

(d) Notwithstanding Subsections (a)-(c), an agent is liable for

the return of unearned commissions on an insurance contract

written through the Texas Windstorm Insurance Association, the

Texas Automobile Insurance Plan Association, or the Texas Medical

Liability Insurance Underwriting Association. An agent placing

business through one of those plans shall return the unearned

commissions to the insurance premium finance company before the

61st day after the date the agent is notified of the

cancellation.

(e) An insurer, other than the Texas Windstorm Insurance

Association, the Texas Automobile Insurance Plan Association, or

the Texas Medical Liability Insurance Underwriting Association,

may return the unearned premiums to the producing agent. The

insurer remains liable and shall remit the unearned premiums to

the insurance premium finance company before the 121st day after

the cancellation date if:

(1) the producing agent does not return the unearned premiums to

the insurance premium finance company before the 91st day after

the cancellation date; and

(2) the insurance premium finance company complied with Section

651.165.

(f) If the insurance premium finance company failed to comply

with Section 651.165, the insurer, including the Texas Windstorm

Insurance Association, the Texas Automobile Insurance Plan

Association, and the Texas Medical Liability Insurance

Underwriting Association, may comply with its legal duty to

return the unearned premiums due under the insurance contract to

the insurance premium finance company by returning those unearned

premiums to the producing agent.

(g) If the crediting of return premiums to the account of an

insured results in a surplus over the amount due from the

insured, the insurance premium finance company shall refund the

excess to the insured. If the amount of the excess is less than

$5, the insured is not entitled to a refund.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

417, Sec. 1, eff. June 19, 2009.

Sec. 651.163. ASSIGNMENT OF PREMIUM FINANCE AGREEMENT. Unless

the insured has notice of an actual or intended assignment of a

premium finance agreement, payment by an insured under the

agreement to the last known holder of the agreement is binding on

all subsequent holders or assignees.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.164. RESTRICTIONS ON PREMIUM FINANCE AGREEMENTS. (a)

A premium finance agreement may not contain any provision under

which, absent default by the insured, the insurance premium

finance company holding the agreement may arbitrarily or without

reasonable cause accelerate the maturity of all or any part of

the amount owing under the agreement.

(b) For purposes of Subsection (a), reasonable cause includes a

proceeding in bankruptcy, receivership, or insolvency instituted

by or against the insured or the insolvency of or suspension of

business or cessation of the right to engage in business by an

insurer writing policies that are financed for the insured under

the premium finance agreement.

(c) A license holder may not take:

(1) an instrument in which the insured waives any right accruing

to the insured under this chapter;

(2) an instrument that has not been fully completed and executed

by the insured;

(3) an assignment of wages as security for an insurance premium

finance agreement entered into under this chapter;

(4) a lien on real property as security for a premium finance

agreement entered into under this chapter, except any lien

created by law on the recording of an abstract of judgment; or

(5) a confession of judgment or a power of attorney in favor of

the license holder or a third person to confess judgment or to

appear for an insured in a judicial proceeding.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.165. REQUIRED NOTICE OF CERTAIN PREMIUM FINANCE

AGREEMENTS. (a) An insurance premium finance company that

enters into a premium finance agreement that includes an

assignment or power of attorney shall notify the insurer or the

Texas Windstorm Insurance Association, the Texas Automobile

Insurance Plan Association, or the Texas Medical Liability

Insurance Underwriting Association whose premiums are being

financed:

(1) of the existence of the agreement; and

(2) to whom the premium payment has been made.

(b) An insurance premium finance company shall notify and fund

all premiums to a county mutual insurance company unless the

insurance premium finance company is authorized in writing by the

county mutual insurance company to notify or fund an agent or

managing general agent.

(c) Notice required under this section must be made before the

31st day after the date the premium finance agreement is accepted

by the insurance premium finance company.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.166. TAKING, RECEIVING, OR CHARGING UNAUTHORIZED

AMOUNT. (a) Taking or receiving from an insured or the charging

of an insured by an insurance premium finance company of a charge

greater than authorized by this chapter does not invalidate:

(1) the premium finance agreement; or

(2) the principal balance payable under the agreement.

(b) An action described by Subsection (a) may be adjudged a

forfeiture of all charges that:

(1) are authorized under the premium finance agreement; or

(2) the insured has agreed to pay.

(c) A person who pays an unauthorized charge or the person's

legal representative may bring an action against the insurance

premium finance company to recover twice the total amount of the

charge paid. The action must be brought within two years after

the date the unauthorized charge is paid.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.167. EFFECT OF LICENSE REVOCATION, SUSPENSION, OR

SURRENDER ON PREMIUM FINANCE AGREEMENT. The revocation,

suspension, or surrender of a license does not affect the

obligation of an insured under a lawful premium finance agreement

previously acquired or held by the person whose license was

revoked, suspended, or surrendered.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

SUBCHAPTER E. DISCIPLINARY PROCEDURES AND PENALTIES; OFFENSES

Sec. 651.201. EXAMINATIONS AND INVESTIGATIONS OF LICENSE

HOLDERS. (a) The department may conduct an examination or

investigation that is necessary to determine whether a license

holder:

(1) is in compliance with this chapter; or

(2) has engaged in conduct that would warrant the revocation or

suspension of the license holder's license.

(b) The department or an authorized representative of the

department may:

(1) require the attendance of any person;

(2) examine the person under oath; and

(3) compel the production of any relevant book, record, account,

or document.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.202. CONFIDENTIALITY OF REPORTS AND RELATED MATERIAL.

(a) A report of an examination or investigation under Section

651.201 and any correspondence or memoranda concerning or arising

from the examination or investigation:

(1) are confidential communications;

(2) are not subject to subpoena; and

(3) may not be made public, except in connection with a hearing

under Section 651.204 or an appearance in connection with the

hearing.

(b) Subsection (a) applies to an authenticated copy of a report

described by Subsection (a) in the possession of the

commissioner, the department, or a license holder.

(c) Information obtained in the course of an examination or

investigation may be made available to another governmental

agency if the information involves a matter within the scope or

jurisdiction of the agency.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.203. HEARINGS AND INVESTIGATIONS; SUBPOENA POWER. In

conducting a hearing or investigation under this chapter, the

department or a person designated by the department may:

(1) administer oaths;

(2) subpoena witnesses;

(3) take depositions of witnesses who reside outside of this

state in the manner provided for in a civil action in district

court; and

(4) pay to those witnesses a fee and mileage for attendance as

provided for a witness in a civil action in district court.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.204. REVOCATION OR SUSPENSION OF LICENSE. After notice

and hearing, the department may revoke or suspend a license if:

(1) the department finds:

(A) that the license holder has violated this chapter or a rule

adopted by the commissioner under this chapter; or

(B) the existence of a fact or condition that, if the fact or

condition existed at the time of the original application for the

license, clearly would have warranted the refusal of the license;

or

(2) the department learns from any source that the license

holder has failed to return all amounts due from an insurance

premium finance company to the person whose insurance policy has

been canceled as required by Section 651.162.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.205. ISSUANCE OF REVOCATION OR SUSPENSION ORDER. If

the department revokes or suspends a license, the department

shall:

(1) immediately issue in duplicate a written order of revocation

or suspension;

(2) file one copy of the order in the office of the secretary of

state; and

(3) mail one copy of the order to the license holder.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.206. SURRENDER OF LICENSE; EFFECT. (a) A license

holder may surrender a license by delivering to the department

written notice that the license holder surrenders the license.

(b) The surrender of a license does not affect any civil or

criminal liability of the person for an act committed before the

surrender.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.207. LICENSE REINSTATEMENT. The department may

reinstate a suspended license or issue a new license to a person

whose license has been revoked if no fact or condition exists

that clearly would have warranted the refusal to issue the

license originally.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.208. OFFENSE. (a) A person commits an offense if the

person:

(1) intentionally, knowingly, recklessly, or negligently engages

in the operation of an insurance premium finance company and does

not hold a license issued under this chapter;

(2) intentionally, knowingly, recklessly, or negligently

violates this chapter;

(3) intentionally or knowingly omits to state a material fact

necessary to give the commissioner or the department information

lawfully required of the person; or

(4) refuses to permit an investigation or examination authorized

under this chapter.

(b) An offense under this section is a Class B misdemeanor.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 651.209. SANCTIONS; CEASE AND DESIST ORDERS. In addition

to each penalty provided by Sections 651.166 and 651.208, the

commissioner or a person designated by the commissioner may:

(1) order a sanction under Subchapter B, Chapter 82; or

(2) issue a cease and desist order under Chapter 83.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.