CHAPTER 1303. RESIDENTIAL SERVICE COMPANIES - Texas Statutes

OCCUPATIONS CODE

TITLE 8. REGULATION OF ENVIRONMENTAL AND INDUSTRIAL TRADES

CHAPTER 1303. RESIDENTIAL SERVICE COMPANIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 1303.001. SHORT TITLE. This chapter may be cited as the

Residential Service Company Act.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.002. DEFINITIONS. In this chapter:

(1) "Commission" means the Texas Real Estate Commission.

(2) "Contract holder" means a person who is entitled to receive

services from a residential service company under a residential

service contract.

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

association, or other organization.

(4) "Residential service company" means a person who:

(A) issues a residential service contract; and

(B) performs or arranges to perform services under the contract.

(5) "Residential service contract" means an agreement under

which, in exchange for a fee, a person undertakes for a specified

period to maintain, repair, or replace all or any part of a

structural component, an appliance, or an electrical, plumbing,

heating, cooling, or air-conditioning system of a residential

property. The term does not include a service or maintenance

agreement sold, offered for sale, or issued by a manufacturer or

merchant under which the manufacturer or merchant undertakes to

maintain, repair, or replace a product or part of a product,

including a structural component, an appliance, or an electrical,

plumbing, heating, cooling, or air-conditioning system of a

residential property, that is:

(A) manufactured or sold by the manufacturer or merchant; or

(B) installed by the merchant in a building or residence.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.003. APPLICABILITY OF INSURANCE LAWS. (a) Except as

otherwise provided by this chapter, the insurance laws of this

state do not apply to a residential service company. This

subsection does not apply to an insurance company licensed and

regulated under the insurance laws of this state.

(b) This chapter does not exempt a warranty or service contract

other than a residential service contract from the Insurance

Code.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.0035. NONAPPLICABILITY OF LAW GOVERNING CANCELLATION

OF CERTAIN TRANSACTIONS. The sale of a residential service

contract governed by this chapter is not a good or service

governed by Chapter 601, Business & Commerce Code.

Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.336(a), eff.

Sept. 1, 2003.

Amended by:

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

885, Sec. 2.28, eff. April 1, 2009.

Sec. 1303.004. NONAPPLICABILITY TO CERTAIN PERSONS. (a) This

chapter does not apply to a person who:

(1) manufactures or sells a product or part of a product; and

(2) sells, offers to sell, or issues a service or maintenance

agreement that provides for the maintenance, repair, replacement,

or performance of the product or part of the product.

(b) A person described by Subsection (a) or an employee or agent

of a person described by Subsection (a) is not required to be

licensed or regulated under this chapter.

(c) This chapter does not apply to a person who engages in the

business of structural pest control in compliance with Chapter

1951.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.005. APPLICABILITY TO CERTAIN AGREEMENTS. This

chapter does not apply to:

(1) a performance guarantee given by:

(A) the builder of a residential property; or

(B) the manufacturer or seller of an appliance or other system

or component of a residential property;

(2) a residential service contract executed before August 28,

1979;

(3) a service contract, guarantee, or warranty that is:

(A) designed to guarantee or warrant the repair or service of an

appliance, system, or component of a residential property; and

(B) issued by a person who:

(i) does not engage in the business of a residential service

company; and

(ii) sells, services, repairs, or replaces the appliance,

system, or component at the time or before the contract,

guarantee, or warranty is issued;

(4) a service or maintenance agreement or a warranty that:

(A) is sold, offered for sale, or issued by a manufacturer or

merchant who manufactures or sells a product or part of a

product, including a structural component, an appliance, or an

electrical, plumbing, heating, cooling, or air-conditioning

system of a building or residence; and

(B) provides for, warrants, or guarantees the maintenance,

repair, replacement, or performance of the product or part of the

product; or

(5) home warranty insurance as defined by Section 2, Article

5.53-A, Insurance Code.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.006. LIABILITY FOR CERTAIN ACTIONS BY AGENT. This

chapter does not exempt a residential service company from common

law or statutory liability for an action taken by the company's

agent or representative that is relevant to the conduct of the

company's business.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

SUBCHAPTER B. COMMISSION POWERS AND DUTIES

Sec. 1303.051. GENERAL POWERS AND DUTIES OF COMMISSION;

DELEGATION. (a) The commission shall administer this chapter

and may adopt and enforce rules necessary to implement this

chapter.

(b) The commission may delegate a power, right, or duty under

this chapter to the administrator or assistant administrator of

the commission.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.052. FEES. (a) A residential service company must

pay to the commission a fee for filing an application for a

license or an amendment to the application.

(b) A residential service company shall pay to the commission a

fee for:

(1) filing an annual report under Section 1303.202; and

(2) any other filing required by this chapter.

(c) A residential service company shall pay to the commission a

fee for the cost of an examination conducted under Section

1303.053.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Amended by:

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

1411, Sec. 56, eff. September 1, 2007.

Sec. 1303.053. EXAMINATION OF RESIDENTIAL SERVICE COMPANY. (a)

The commission may examine the affairs of a residential service

company as necessary. For the purpose of an examination, the

commission may administer an oath to and examine an officer or

agent of the residential service company.

(b) A residential service company shall:

(1) make available for the examination its books and records

relating to its operation; and

(2) facilitate the examination in every way.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

SUBCHAPTER C. LICENSE REQUIREMENTS

Sec. 1303.101. LICENSE REQUIRED. (a) A person may not issue a

residential service contract or perform or arrange to perform

services under a residential service contract unless the person

is licensed as a residential service company under this chapter

or is the authorized representative of a person licensed as a

residential service company under this chapter.

(b) A person may not sell, offer to sell, arrange or solicit the

sale of, or receive an application for a residential service

contract unless:

(1) the person is:

(A) employed by a residential service company licensed under

this chapter; or

(B) licensed as a real estate salesperson, real estate broker,

mobile home dealer, or insurance agent in this state; and

(2) the contract is issued by a residential service company

licensed under this chapter.

(c) A person may not use the phrase "residential service

company" in the course of engaging in business unless the person:

(1) is licensed by the commission as provided by this chapter;

and

(2) complies with this chapter.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.102. ELIGIBILITY. (a) Notwithstanding any other law

of this state, any person may apply to the commission for and

obtain a license to issue residential service contracts in

compliance with this chapter.

(b) A foreign corporation may qualify under this chapter if the

corporation:

(1) registers to engage in business in this state as a foreign

corporation under the Texas Business Corporation Act; and

(2) complies with this chapter and other applicable statutes of

this state.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.103. LICENSE APPLICATION. (a) An application for a

license under this chapter must be:

(1) on a form prescribed by commission rule; and

(2) verified by the applicant or an officer or other authorized

representative of the applicant.

(b) Each application for a license must contain or be

accompanied by:

(1) a copy of the articles of incorporation, articles of

association, partnership agreement, trust agreement, or any other

basic organizational document of the applicant;

(2) a copy of any amendment to the applicant's basic

organizational document;

(3) a copy of any bylaws, rules, or other similar document that

regulates the conduct of the applicant's internal affairs;

(4) the name, address, and official position of each person who

will be responsible for the conduct of the applicant's affairs,

including:

(A) each member of the board of directors, board of trustees,

executive committee, or other governing body or committee of the

applicant;

(B) the applicant's principal officer, if the applicant is a

corporation; and

(C) each partner or member of the applicant, if the applicant is

a partnership or association;

(5) a copy of the residential service contract made or to be

made between the applicant and another person;

(6) a general description of the residential service contract or

the contract's coverage or plan;

(7) a financial statement that:

(A) is prepared by an independent certified public accountant

within six months preceding the date the application is

submitted; and

(B) shows the applicant's assets, liabilities, and sources of

financial support;

(8) a description of the applicant's proposed method of

marketing a residential service contract;

(9) a statement regarding the applicant's sources of working

capital and any other funding sources;

(10) if the applicant is not domiciled in this state, a power of

attorney appointing the administrator and the administrator's

successors in office, or the administrator's authorized deputy,

as the applicant's agent for service of process in this state in

a legal action arising in this state against the applicant or the

applicant's agents; and

(11) any other information the commission requires to make a

determination required by this chapter.

(c) For the proper administration of this chapter, the

commission may require additional or more recent financial

information than the financial information required under

Subsection (b)(7).

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.104. APPROVAL OF APPLICATION MATERIALS. (a) The

commission shall approve or disapprove the application materials

in writing as soon as reasonably possible after the date the

application materials are submitted. Except as provided by

Subsection (b), the application materials are considered approved

unless disapproved not later than the 30th day after the date the

application materials are submitted.

(b) The commission by official order may postpone approval or

disapproval of the application materials for a period necessary

for proper consideration, not to exceed 30 days.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.105. ISSUANCE OR DENIAL OF LICENSE. (a) On receipt

of an approved application as provided by Section 1303.104, the

commission shall determine whether the applicant has demonstrated

the potential ability to ensure that the services will be

provided in a timely and responsible manner. The commission shall

issue a license to an applicant if the commission determines

that:

(1) the applicant has demonstrated the potential ability to

ensure that the services will be provided in a timely and

responsible manner;

(2) the person responsible for the conduct of the applicant's

affairs is competent and trustworthy and possesses a good

reputation;

(3) the applicant may reasonably be expected to meet its

obligations under its residential service contract; and

(4) the applicant has complied with or will comply with this

chapter.

(b) In making the determination under Subsection (a)(3), the

commission shall consider:

(1) the applicant's financial soundness;

(2) any agreement between the applicant and another party to

provide the services required in the residential service

contract; and

(3) any other matter the commission considers relevant.

(c) Not later than the 75th day after the date the commission

receives an approved application, the commission shall, in

writing, issue or deny a license to the applicant.

(d) If the commission denies a license, the commission shall

notify the applicant in writing of the denial not later than the

fifth day after the date of denial.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.106. LICENSE DENIAL: APPEAL TO COMMISSION. (a) To

appeal the denial of a license as provided by Section 1303.354, a

license applicant must file not later than the 10th day after the

date of the notice of denial a written appeal requesting a

hearing before the commission. If an applicant fails to request a

hearing as provided by this subsection, the commission's decision

is final and not subject to judicial review.

(b) The commission shall:

(1) set a time and place for the hearing not later than the 30th

day after the date the commission receives the appeal; and

(2) notify the applicant in writing of the scheduled hearing not

later than the 10th day before the date of the scheduled hearing.

(c) The hearing may be continued with the applicant's consent.

After the hearing, the commission shall enter an appropriate

order.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.107. TERM OF LICENSE. A license continues in effect

as long as the license holder meets the requirements of this

chapter or until the license is:

(1) suspended or revoked by the commission; or

(2) terminated at the request of the license holder.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

SUBCHAPTER D. FINANCIAL REQUIREMENTS

Sec. 1303.151. RESERVE REQUIRED. A residential service company

shall maintain a funded reserve against its liability to provide

repair and replacement services under its outstanding residential

service contracts written in this state.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.152. AMOUNT OF RESERVE. (a) The amount of the

reserve required by Section 1303.151 is based on the amount of

liability remaining under outstanding residential service

contracts written in this state by the residential service

company, as determined by multiplying the total number of months

remaining on all of those contracts by the pro rata monthly

contract charge.

(b) The amount of the reserve must be equal to the lesser of:

(1) an amount equal to the amount of remaining liability

multiplied by the ratio of direct losses incurred by the

residential service company to contract fees earned by the

company during the preceding calendar year; or

(2) an amount equal to 50 percent of the amount of remaining

liability.

(c) For purposes of this chapter, the reserve is not required to

include a contract fee on a residential service contract to the

extent that provision is made for reinsurance of the outstanding

risk on the contract by:

(1) a residential service company licensed in this state;

(2) an admitted insurer; or

(3) a surplus line insurer or a surplus line bonding company if

the insurer or bonding company:

(A) is rated A+ or better by a rating service recognized by the

commission; and

(B) submits to the commission for its approval evidence, in the

form of a certified audit and other pertinent information the

commission may require, of the insurer's or bonding company's

ability to meet its contractual obligations.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.153. SECURITY REQUIRED. (a) As a guarantee that a

residential service company will meet its obligations to its

contract holders, the company shall maintain with the commission

a bond or other security accepted by the commission.

(b) A bond posted as security must:

(1) be issued by a carrier admitted in this state;

(2) be continuous;

(3) be cancellable by the surety only after not less than 90

days' notice to the commission; and

(4) recognize that the obligation continues for the terms of the

residential service contracts written by the residential service

company while the bond is in force.

(c) Any security provided under this section in a form other

than a bond must be convertible to cash by the commission for the

benefit of contract holders in this state, without resort to the

courts, if the commission determines that the residential service

company is in default of its financial obligations to the

contract holders. Any amount remaining after all contract

holders' claims are paid must be returned to the residential

service company not later than the 120th day after the date the

last outstanding residential service contract expires.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.154. AMOUNT OF SECURITY. (a) An applicant for a new

license must provide security in the amount of $25,000. The

amount of the security may not be reduced before the residential

service company files a second report under Section 1303.202.

(b) After a residential service company files the second report,

the company must maintain security in one of the following

minimum amounts based on the amount of claims paid in this state

during the preceding calendar year:

(1) $10,000, if the amount of claims paid is less than $50,000;

(2) $25,000, if the amount of claims paid is $50,000 or more but

less than $200,000;

(3) $50,000, if the amount of claims paid is $200,000 or more

but less than $500,000; and

(4) $100,000, if the amount of claims paid is $500,000 or more.

(c) A revision to the amount of security must be based on the

figures a residential service company provides in its report

under Section 1303.202. The company shall revise the amount of

security as required by the commission not later than the 30th

day after the date the company is notified by the commission of

the revised amount.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

SUBCHAPTER E. GENERAL POWERS AND DUTIES OF LICENSE HOLDER

Sec. 1303.201. NOTICE OF MODIFICATION. A residential service

company shall file notice with the commission before the company

modifies an operation or document described in Section 1303.103.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.202. ANNUAL REPORT. (a) Not later than April 1 of

each year, each residential service company shall file with the

commission a report covering the preceding calendar year.

(b) The report must:

(1) be on a form prescribed by the commission;

(2) be verified by at least two of the residential service

company's principal officers; and

(3) include:

(A) a financial statement of the residential service company,

including its balance sheet and receipts and disbursements for

the preceding year, certified by an independent public

accountant;

(B) any material change to the information submitted under

Section 1303.103;

(C) the number of residential service contracts entered into

during the year, the number of contract holders as of the end of

the year, and the number of contracts terminating during the

year; and

(D) any other information that:

(i) relates to the performance and solvency of the residential

service company; and

(ii) is necessary for the commission to perform its duties under

this chapter.

(c) Information provided by a residential service company under

Subsection (b)(3)(D) is:

(1) confidential; and

(2) for the exclusive use of the commission.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

SUBCHAPTER F. RESIDENTIAL SERVICE CONTRACTS

Sec. 1303.251. EVIDENCE OF COVERAGE. (a) Each contract holder

residing in this state is entitled to evidence of coverage under

a residential service contract. The residential service company

that issued the contract shall issue evidence of coverage under

the contract.

(b) A residential service company may not issue or deliver

evidence of coverage under a residential service contract, or an

amendment to that evidence, to a person in this state until a

copy of the evidence or amendment is filed with and approved by

the commission.

(c) The commission may require a residential service company to

submit relevant information the commission considers necessary to

determine whether to approve or disapprove the company's evidence

of coverage.

(d) The commission shall approve a residential service company's

evidence of coverage if the requirements of this section and

Section 1303.252 are met.

(e) If the commission disapproves a residential service

company's evidence of coverage, the commission shall notify the

company of the disapproval and in the notice shall specify in

detail the reason for the disapproval.

(f) A residential service company whose evidence of coverage is

disapproved by the commission may request a hearing on the

commission's decision. If a hearing is requested, the commission

shall set a hearing on the decision as soon as reasonably

possible. Not later than the 60th day after the date of the

hearing, the commission by written order shall approve or

disapprove the evidence. If the evidence is disapproved, the

commission shall state in the order the grounds for the

disapproval.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.252. CONTENTS OF EVIDENCE OF COVERAGE. (a) Evidence

of coverage under a residential service contract must contain a

clear and complete statement, if the evidence is a contract, or a

reasonably complete facsimile, if the evidence is a certificate,

of:

(1) the services or benefits to which the contract holder is

entitled;

(2) any limitation on the services, kinds of services, or

benefits to be provided, including a deductible or co-payment

provision;

(3) where and in what manner information is available on how to

obtain services;

(4) the period during which the coverage is in effect;

(5) the residential service company's agreement to perform

services on the contract holder's telephone request to the

company, without a requirement that a claim form or application

be filed before the services are performed;

(6) the company's agreement that, under normal circumstances,

the company will initiate the performance of services within 48

hours after the contract holder requests the services; and

(7) any service fee to be charged for a service call.

(b) Evidence of coverage may not contain a provision that

encourages misrepresentation or that is unjust, unfair,

inequitable, misleading, deceptive, or false.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.253. SCHEDULE OF CHARGES. (a) A residential service

company may not use in conjunction with a residential service

contract a schedule of charges for services covered under the

contract or an amendment to that schedule until a copy of the

schedule or amendment is filed with and approved by the

commission.

(b) The commission shall approve a schedule of charges if the

commission determines that the schedule is reasonably related to

the amount, term, and conditions of the contract.

(c) If the commission determines that the schedule of charges is

not reasonably related to the contract as described by Subsection

(b), the commission may reject the schedule. If the commission

rejects the schedule, the commission shall notify the company of

the rejection and shall specify in detail the reason for the

rejection.

(d) A residential service company whose schedule of charges is

rejected by the commission may request a hearing on the

commission's decision to be held as soon as reasonably possible.

Not later than the 60th day after the date of the hearing, the

commission by written order shall approve or reject the schedule.

If the schedule is rejected, the commission shall state in the

order the grounds for the rejection.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.254. REMEDIES NOT WAIVED; NOTICE. (a) A contract

holder does not waive under a residential service contract a

remedy that the holder may have under another law against another

person.

(b) A person may not sell or offer to sell a residential service

contract unless the contract contains the following statement in

at least 10-point bold type above or adjacent to the signature of

the buyer:

NOTICE: YOU THE BUYER HAVE OTHER RIGHTS AND REMEDIES UNDER THE

TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT WHICH ARE

IN ADDITION TO ANY REMEDY WHICH MAY BE AVAILABLE UNDER THIS

CONTRACT.

FOR MORE INFORMATION CONCERNING YOUR RIGHTS, CONTACT THE CONSUMER

PROTECTION DIVISION OF THE ATTORNEY GENERAL'S OFFICE, YOUR LOCAL

DISTRICT OR COUNTY ATTORNEY OR THE ATTORNEY OF YOUR CHOICE.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.255. CANCELLATION OF CONTRACT. A residential service

company may not cancel a residential service contract during the

initial term for which the contract is issued unless:

(1) the contract holder does not pay a fee or charge due under

the terms of the contract;

(2) the contract holder engages in fraud or misrepresentation of

facts material to the issuance of the contract; or

(3) an interest in the residential property covered under the

contract is sold, and the contract is contingent on an interest

in the property not being sold.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

SUBCHAPTER G. PROHIBITED PRACTICES

Sec. 1303.301. FALSE OR DECEPTIVE STATEMENTS PROHIBITED. (a) A

residential service company may not cause or permit the use of:

(1) a false or misleading advertisement or solicitation; or

(2) any deceptive evidence of coverage.

(b) Unless a residential service company is licensed as an

insurer, the company may not use in the company's name,

contracts, or literature the word "insurance," "casualty,"

"surety," or "mutual" or another word that is:

(1) descriptive of the insurance, casualty, or surety business;

or

(2) deceptively similar to the name or description of an

insurance or surety corporation or another residential service

company engaging in business in this state.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.302. CERTAIN CONDITIONAL SALES OF PROPERTY PROHIBITED.

(a) A seller of a residential property or the buyer's or

seller's agent may not condition the sale of the property on the

buyer's purchase of a residential service contract.

(b) A seller of a residential property or the buyer's or

seller's agent shall provide to the buyer a statement that

clearly and conspicuously states that:

(1) the purchase of a residential service contract is optional;

and

(2) the buyer may purchase similar coverage through another

residential service company or insurance company authorized to

engage in business in this state.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Amended by:

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

297, Sec. 13, eff. September 1, 2007.

Sec. 1303.303. CERTAIN CHARGES WITHOUT CONSENT PROHIBITED.

Unless a homeowner, lessor, or renter consents in writing, a

residential service company or the company's agent may not

knowingly charge the homeowner, lessor, or renter for duplication

of coverage or duties required by:

(1) state or federal law, including coverage under Subchapter H,

Chapter 1201;

(2) a warranty expressly issued by a manufacturer or seller of a

product; or

(3) an implied warranty enforceable against a lessor, seller, or

manufacturer of a product.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.304. CERTAIN PAYMENTS BY RESIDENTIAL SERVICE COMPANY

PROHIBITED. (a) A residential service company may not directly

or indirectly pay, as an inducement or compensation for the

issuance, purchase, or acquisition of a residential service

contract, a commission or other consideration to an agent,

representative, attorney, or employee of an owner or prospective

owner of a residential property for which a residential service

contract has been or will be issued.

(b) Notwithstanding Subsection (a), a residential service

company may pay a reasonable amount for the sale, advertising,

inspection, or processing of a residential service contract.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

SUBCHAPTER H. DISCIPLINARY ACTION AND OTHER PROCEDURES

Sec. 1303.351. DISCIPLINARY POWERS OF COMMISSION. The

commission may suspend or revoke a license issued to a

residential service company under this chapter if the commission

determines that a ground for discipline exists under Section

1303.352.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.352. GROUNDS FOR DISCIPLINARY ACTION. (a) The

commission may discipline a residential service company under

Section 1303.351 if the continued operation of the company would

be hazardous to its contract holders or if the company:

(1) operates in conflict with its basic organizational document

or in a manner that is contrary to that described in and

reasonably inferred from information submitted under Section

1303.103, unless an amendment to the information has been filed

with and approved by the commission;

(2) issues evidence of coverage that does not comply with

Sections 1303.251 and 1303.252;

(3) uses a schedule of charges that does not comply with Section

1303.253;

(4) is not financially responsible and may be reasonably

expected to be unable to meet the company's obligations to

contract holders;

(5) did not comply with Subchapter D;

(6) advertised or marketed the company's services in a false,

misrepresentative, misleading, deceptive, or unfair manner; or

(7) otherwise did not substantially comply with this chapter or

a rule adopted under this chapter.

(b) Subsection (a)(6) applies to any advertising or marketing

conducted on behalf of a residential service company by another

person.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.3525. HEARING. (a) The commission may authorize the

State Office of Administrative Hearings to conduct a hearing and

enter a final decision in a proceeding under Section 1303.351.

(b) All hearings conducted under Subsection (a) are governed by

Chapter 2001, Government Code.

Added by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.336(b), eff.

Sept. 1, 2003.

Amended by:

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

23, Sec. 7, eff. May 12, 2009.

Sec. 1303.353. DUTIES AFTER LICENSE REVOCATION. (a)

Immediately after the effective date of an order revoking a

residential service company's license, the company:

(1) shall wind up its affairs;

(2) may not engage in further advertising or solicitation; and

(3) may not conduct further business except as may be essential

to the orderly conclusion of the company's affairs.

(b) Notwithstanding Subsection (a), to provide contract holders

with the greatest practical opportunity to obtain services for

which they contracted, the commission by written order may permit

further operation of the residential service company as the

commission determines is in the best interests of the contract

holders.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.354. JUDICIAL REVIEW. (a) A person who is adversely

affected by a rule or decision of the commission may file in a

district court in Travis County a petition stating the particular

objection to the rule or decision. The commission is a defendant

in the action.

(b) The petition must be filed not later than the 20th day after

the date the commission enters an order.

(c) The district court may not enjoin or stay the commission's

decision except on application to that court after notice to the

commission.

(d) The substantial evidence rule applies to the proceedings in

the district court.

(e) Each party to the action may appeal from the district court.

The appeal takes precedence in the appellate court over all

actions of a different character pending in that court. The

commission is not required to give an appeal bond in an action

arising under this section.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.355. ADMINISTRATIVE PENALTY. (a) The commission may

impose an administrative penalty as provided by Subchapter O,

Chapter 1101, on a person who violates this chapter or a rule

adopted or order issued by the commission under this chapter.

(b) The amount of an administrative penalty may not exceed

$5,000 for each violation. Each day a violation continues or

occurs may be considered a separate violation for purposes of

imposing a penalty.

(c) In determining the amount of the penalty, the administrator

shall consider:

(1) the seriousness of the violation, including the nature,

circumstances, extent, and gravity of the violation;

(2) the economic harm caused by the violation;

(3) the history of previous violations;

(4) the amount necessary to deter a future violation;

(5) efforts to correct the violation; and

(6) any other matter that justice may require.

(d) The commission by rule shall adopt a schedule of

administrative penalties based on the criteria listed in

Subsection (c) for violations subject to an administrative

penalty under this section to ensure that the amount of a penalty

imposed is appropriate to the violation.

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

1411, Sec. 57, eff. September 1, 2007.

Sec. 1303.356. TEMPORARY SUSPENSION. (a) The presiding officer

of the commission shall appoint a disciplinary panel consisting

of three commission members to determine whether a person's

license to practice under this chapter should be temporarily

suspended.

(b) If the disciplinary panel determines from the information

presented to the panel that a person licensed to practice under

this chapter would, by the person's continued practice,

constitute a continuing threat to the public welfare, the panel

shall temporarily suspend the license of that person.

(c) A license may be suspended under this section without notice

or hearing on the complaint if:

(1) institution of proceedings for a hearing before the

commission is initiated simultaneously with the temporary

suspension; and

(2) a hearing is held under Chapter 2001, Government Code, and

this chapter as soon as possible.

(d) Notwithstanding Chapter 551, Government Code, the

disciplinary panel may hold a meeting by telephone conference

call if immediate action is required and convening the panel at

one location is inconvenient for any member of the panel.

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

1411, Sec. 57, eff. September 1, 2007.

SUBCHAPTER I. PENALTIES AND ENFORCEMENT PROVISIONS

Sec. 1303.401. HAZARDOUS FINANCIAL CONDITION OF RESIDENTIAL

SERVICE COMPANY. (a) If the financial condition of a

residential service company indicates that its continued

operation may be hazardous to its contract holders or creditors

or to the public, the commission may, after notice of hearing,

order the company to take reasonably necessary action to remedy

the condition, including:

(1) reducing the total amount of present and potential liability

for benefits by reinsurance or by obtaining an appropriate bond

from an admitted carrier or a surplus line carrier;

(2) reducing the volume of new business being accepted;

(3) reducing expenses by specified methods;

(4) suspending or limiting the writing of new business for a

period of time; or

(5) increasing the company's net worth by contribution.

(b) The commission by rule may establish:

(1) uniform standards and criteria for early warning that the

continued operation of a residential service company may be

hazardous to its contract holders or creditors or to the public;

and

(2) standards for evaluating the financial condition of a

residential service company that are consistent with the purposes

described in Subsection (a).

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.402. APPOINTMENT OF RECEIVER. (a) If in the

commission's opinion the continued operation of a residential

service company would be hazardous to its contract holders or the

public, the commission may request a district court of Travis

County to appoint a receiver.

(b) After adequate notice and a hearing, if the court determines

that a receiver should be appointed to protect the rights of the

contract holders or the public, the court shall issue an order

appointing a receiver. The order must clearly state whether the

receiver has the power to:

(1) manage and operate the residential service company's

business generally; or

(2) manage only the residential service company's finances.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.403. INJUNCTIVE RELIEF. (a) The commission may bring

an action in the name of the state in a district court of Travis

County for a restraining order, injunction, or other relief the

court determines is appropriate if it appears to the commission

that:

(1) a residential service company is violating or has violated

this chapter or a rule adopted under this chapter; and

(2) bringing the action is in the public interest.

(b) The commission has exclusive authority to bring an action

under this section.

(c) On application for injunctive relief and a finding that a

residential service company is violating or has violated this

chapter or a rule adopted under this chapter, the court shall

grant the injunctive relief that the facts warrant. The court

shall grant the relief without a bond.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.404. CIVIL PENALTY. (a) A person who violates this

chapter is liable for a civil penalty in an amount not to exceed

$2,500 for each violation or $50,000 in the aggregate for all

violations of a similar nature.

(b) The commission may bring an action to collect a civil

penalty under this section.

(c) For purposes of this section, violations are of a similar

nature if the violations consist of the same or a similar course

of conduct, action, or practice, regardless of the number of

times the conduct, act, or practice occurred.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.405. DECEPTIVE TRADE PRACTICE. A violation of this

chapter is actionable by a consumer as a deceptive trade practice

under Subchapter E, Chapter 17, Business & Commerce Code.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.406. CRIMINAL PENALTY. (a) A person commits an

offense if the person:

(1) wilfully violates this chapter or a rule adopted under this

chapter; or

(2) knowingly makes a false statement with respect to a report

or a statement required by this chapter.

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

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.

Sec. 1303.407. ADDITIONAL PENALTY. A residential service

company that engages in business in violation of this chapter

shall pay $100 for each day the company continues to write new

business while in violation of this chapter.

Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,

2003.