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H.B. No. 2965
AN ACT
relating to regulation of sharing of certain profits and fees by
premium finance companies and certain related persons or entities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 651.001, Insurance Code, is amended by
adding Subdivisions (2-a) and (8-a) to read as follows:
(2-a) "Insurance agent" means a person licensed under
Subchapter E, Chapter 981 or Chapter 4051, 4052, 4053, 4054, 4055,
4056, or 4153.
(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.
SECTION 2. Section 651.051, Insurance Code, is amended to
read as follows:
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.
SECTION 3. The heading to Subchapter C, Chapter 651,
Insurance Code, is amended to read as follows:
SUBCHAPTER C. REGULATION OF INSURANCE PREMIUM
FINANCE COMPANIES AND OTHERS
SECTION 4. Section 651.110, Insurance Code, is amended to
read as follows:
Sec. 651.110. LIMITATIONS ON CERTAIN INDUCEMENTS OR SHARING
OF PROFITS AND FEES [REBATE OF FINANCE CHARGE]. (a) This section
applies to:
(1) an [An] insurance premium finance company;
(2) an insurance agent;
(3) a premium finance agreement servicer; or
(4) [or] 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, [or] allow, or give in any manner to an insurance agent [or
broker] or an employee of an insurance agent [or broker or to any
other person] any consideration, [or] compensation, or inducement
for soliciting, accepting an application for, delivering, or
administering[, from the charge for financing specified in the]
premium finance agreements [agreement or from another source]; [or]
(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 [give or offer to give any valuable consideration or
inducement of any kind directly or indirectly to an insurance agent
or broker or an employee of an insurance agent or broker].
(b) Subsection (a-1) [(a)(2)] 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 [$1] or less
on which there is an advertisement of the insurance premium finance
company.
(c) Subsection (a-1) [(a)] does not prohibit a person,
partnership, or other entity described by Subsection (a) [an
insurance premium finance company] 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 broker]
or an employee of an insurance agent [or broker]; 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 [department]
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.
SECTION 5. Section 651.158(b), Insurance Code, is amended
to read as follows:
(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 [$1], the
insured is not entitled to a refund credit.
SECTION 6. (a) The change in law made by this Act applies
only to an act committed or a transaction that occurs on or after
the effective date of this Act.
(b) An act committed or a transaction that occurs before
the effective date of this Act is covered by the law in effect on the
date that the act was committed or the transaction occurred, and the
former law is continued in effect for that purpose.
SECTION 7. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2005.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2965 was passed by the House on May
13, 2005, by the following vote: Yeas 142, Nays 0, 2 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 2965 on May 27, 2005, by the following vote: Yeas 142, Nays 0,
2 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 2965 was passed by the Senate, with
amendments, on May 25, 2005, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor