INSURANCE CODE - NOT CODIFIED
CHAPTER 24. FINANCING OF INSURANCE PREMIUMS
Art. 24.01. Definitions
In this chapter:
(1) "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, except that the preparation and delivery
of a premium finance agreement or disclosure statement required by
Section (f), Article 24.11 of this chapter by an insurance agent on
behalf of the insured is not doing business as an insurance premium
finance company;
(B) a person engaged in the business of acquiring premium finance
agreements from insurance agents or brokers or other 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
payable to him or her or his or her order.
(2) "Premium finance agreement" means an agreement by which an
insured or prospective insured promises to pay to a premium finance
company the amount advanced or to be advanced under the agreement to
an insurer or to an insurance agent in payment of premium on an
insurance contract.
(3) "Board" means the State Board of Insurance.
(4) "Licensee" means an insurance premium finance company holding a
license issued by the board under this chapter.
(5) "Annual percentage rate" means the annual percentage rate of
finance charge as determined in accordance with the Consumer Credit
Protection Act of 1970 (15 U.S.C.A. Section 1601 et seq.; 18
U.S.C.A. Section 891 et seq.) and Regulation Z (12 C.F.R. 226.1 et
seq.) promulgated under that Act.
(6) "Insured" means a person who enters into a premium finance
agreement with an insurance premium finance company.
(7) "Person" means an individual, partnership, corporation, joint
venture, trust, association, or any other legal entity, however
organized.
(8) "Insurer" as used in this chapter is any capital stock company,
title insurance company, reciprocal or interinsurance exchange,
Lloyd's association, fraternal benefit society, mutual and mutual
assessment company of any kind or type, statewide assessment
association, local mutual aid, burial association, county and farm
mutual association, fidelity, guaranty, and surety company, or
trust company. Said insurer shall be organized or authorized to do
business under the provisions of this code.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Subd. 8 added by Acts 1989, 71st Leg., ch. 690, Sec. 1, eff. Sept. 1,
1989.
Art. 24.02. License; Offices
(a) A person, without first obtaining a license from the board as
provided in Section (d), Article 24.03 of this chapter, may not
negotiate, transact, or engage in the business of insurance premium
financing in this state or contract for, charge, or receive
directly or indirectly on or in connection with any insurance
premium financing any charges, whether for interest, compensation,
consideration, expense, or otherwise, that in the aggregate are
greater than the person would be permitted by law to charge if the
person were not a licensee under this chapter. A license issued
under this chapter allows the holder to maintain only one office
from which business may be conducted. The board may issue more than
one license but not more than 60 licenses to any one person on
compliance with this chapter for each license.
(b) Any bank or savings and loan association doing business under
the laws of this state or the United States is entitled to receive a
license on notification to the board of its intention to operate
under this chapter. The board shall immediately issue a license to
that bank or savings and loan association.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Art. 24.03. License Application; Fees; Action by Board
(a) Each application for a license to engage in the business of
insurance premium financing must be in writing and in the form
prescribed by the board. It must be accompanied by an investigation
fee in an amount not to exceed $400 as determined by the board.
(b) Within 90 days after receipt of an application, the board shall
notify the applicant that:
(1) the application has been approved and a license will be issued
on payment of the appropriate license fee; or
(2) the application has been denied.
(c) The board may refuse to issue a license if it finds 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 business will be conducted
honestly, fairly, and efficiently; or
(2) the applicant does not have available for the operation for the
business net assets of at least $25,000.
(d) After approval and on receipt of the license fee, the board
shall execute the license to engage in the business of a premium
finance company at the location specified in the application and
shall transmit the license to the applicant.
(e) The refusal of the board to issue a license does not entitle the
applicant to a return of any part of the investigation fee that
accompanied the application.
(f) The fee for each license may be in an amount not to exceed $200
as determined by the board and shall be paid to the board. Except as
may be provided by a staggered renewal system adopted under Section
(j) of this article, each license shall be issued for the calendar
year and shall remain in force until December 31 of each year,
unless suspended, revoked, or surrendered in accordance with
Article 24.05 of this chapter. If a license is granted after June
30 of any year, the fee may be in an amount not to exceed $100 as
determined by the board for that year.
(g) Any person holding a license under Chapter 342, Finance Code, on
the effective date of this chapter is required only to pay the
license fee required under this article and is not required to pay
the investigation fee required by Section (a) of this article.
(h) Fees collected under this article shall be deposited in the
State Treasury to the credit of the State Board of Insurance
operating fund. Article 1.31A of this code applies to fees
collected under this article.
(i) An unexpired license may be renewed by paying the required
renewal fee to the board before the expiration date of the license.
If a license has been expired for not longer than 90 days, the
license may be renewed by paying to the board the required renewal
fee and a fee that is one-half of the original license fee. If a
license has been expired for longer than 90 days but less than two
years, the license may be renewed by paying to the board all unpaid
renewal fees and a fee that is equal to the original license fee. If
a license has been expired for two years or longer, the license may
not be renewed. A new license may be obtained by complying with the
requirements and procedures for obtaining an original license. At
least 30 days before the expiration of a license, the commissioner
of insurance shall send written notice of the impending license
expiration to the licensee at his last known address. This section
may not be construed to prevent the board from denying or refusing
to renew a license under applicable law or rules of the State Board
of Insurance.
(j) The board by rule may adopt a system under which licenses expire
on various dates during the year. For the year in which the license
expiration date is less than one year from the issuance or
anniversary date, the license fee shall be prorated on a monthly
basis so that each licensee shall pay only that portion of the
license fee that is allocable to the number of months during which
the license is valid. On each subsequent renewal of the license,
the total license renewal fee is payable.
(k) The board may waive any license requirement for an applicant
with a valid license from another state having license requirements
substantially equivalent to those of this state.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Secs. (a), (f) amended by Acts 1983, 68th Leg., p. 3992, ch. 622,
Sec. 82, eff. Sept. 1, 1983; Sec. (h) added by Acts 1983, 68th Leg.,
p. 3944, ch. 622, Sec. 38, eff. Sept. 1, 1983; Secs. (i) to (k)
added by Acts 1983, 68th Leg., p. 3992, ch. 622, Sec. 83, eff. Sept.
1, 1983; Sec. (g) amended by Acts 1997, 75th Leg., ch. 1396, Sec.
26, eff. Sept. 1, 1997; Subsec. (g) amended by Acts 1999, 76th
Leg., ch. 62, Sec. 7.73, eff. Sept. 1, 1999.
Art. 24.04. License Provisions; Posting; Change of Location;
Other Business
(a) A license issued under this chapter must state the name and
address of the licensee. The license shall be conspicuously posted
in the specified office of the licensee. Except as provided in this
chapter, the license is not transferable or assignable. Before a
licensee changes an office from one location to another, the
licensee shall give written notice of the change to the board which,
if it approves the change, shall issue an endorsement indicating
the change and the date of the change. The licensee shall attach
the endorsement to the license for that office. The endorsement
constitutes authority for the operation of the business under the
license at the new location.
(b) A licensee may conduct the business of premium financing under
this chapter in any office, suite, room, or place of business in
which any other business is solicited or engaged in or in
association or conjunction with any other business, unless the
board:
(1) finds, after a hearing, that the conduct by the licensee of the
other business in the particular licensed office has concealed
evasions of this chapter; and
(2) orders the licensee in writing to stop conducting the business
of premium financing in that office.
(c) A licensee may not conduct the business of premium financing
provided for by this chapter under any name or at any place of
business other than that stated in the license. The preparation and
delivery of a premium finance agreement by an insurance agent on
behalf of the insured does not constitute doing business as an
insurance premium finance company, unless the agreement is held for
the benefit of the agent in accordance with Article 24.01(1)(C) of
this chapter.
(d) Nothing in this chapter limits the premium financing of any
licensee to residents of the community in which the licensed office
is situated or prohibits the licensee from conducting premium
financing by mail.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Art. 24.05. Grounds for Revocation of License; Procedure
(a) After notice and hearing, the board may revoke or suspend any
license issued under this chapter if it finds:
(1) that the licensee has violated this chapter or any rule lawfully
made by the board under this chapter; or
(2) the existence of any fact or condition that, if it had existed
at the time of the original application for the license, clearly
would have warranted the board to refuse to issue the license.
(b) The board, after notice and hearing, may suspend or revoke a
license if it learns from the commissioner of insurance or from any
other source that the licensee has failed to return all amounts due
from the insurance premium finance company to the person whose
insurance policy has been canceled as required by Section (g),
Article 24.17 of this chapter.
(c) Any licensee may surrender any license by delivering to the
board written notice that the licensee surrenders the license. The
surrender of a license does not affect the licensee's civil or
criminal liability, if any, for acts committed before the
surrender.
(d) A revocation, suspension, or surrender of any license does not
affect the obligation of any insured under a lawful premium finance
agreement previously acquired or held by the licensee.
(e) If the board revokes or suspends a license, it shall immediately
execute in duplicate a written order to that effect and shall file
one copy of that order in the office of the secretary of state and
mail one copy to the licensee.
(f) The board may reinstate a suspended license or issue a new
license to a person whose license has been revoked if no fact or
condition then exists that clearly would have justified the board
in refusing originally to issue the license under this chapter.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Art. 24.06. Examinations, Investigations, and Use of Fees
(a) The board may make examinations or investigations necessary to
determine whether a licensee is in compliance with this chapter or
whether a licensee has conducted himself or herself so as to justify
the revocation of his or her license. The board or its duly
authorized representatives may require the attendance of any
person, may examine the person under oath, and may compel the
production of all relevant books, records, accounts, and documents.
(b) All reports of examinations or investigations and all
correspondence and memoranda concerning or arising out of those
examinations or investigations, including any duly authenticated
copy or copies of those reports in the possession of any licensee or
the board, are confidential communications, are not subject to
subpoena, and may not be made public, except in connection with a
hearing under Article 24.05 of this chapter and any appearance in
connection with such a hearing. Information obtained in the course
of these examinations or investigations may be made available to
other governmental agencies when the information involves matters
within the scope or jurisdiction of those agencies.
(c) In addition to the investigation and license fees set forth in
Article 24.03 of this chapter, each licensee shall pay to the board
an amount assessed by the board to cover the direct and indirect
cost of examinations and investigations made under this article and
a proportionate share of general administrative expense
attributable to the regulation of the persons licensed under this
chapter.
(d) Fees collected under this chapter shall be deposited in the
State Treasury to the credit of the State Board of Insurance
operating fund. The board may use any portion of those fees to
enforce this chapter. The board may employ persons as necessary to
examine or investigate and make reports on alleged violations of
this chapter or on compliance with the other provisions of this code
by persons licensed under this chapter and may pay the salaries and
expenses of those persons and of all office employees and the
expenses necessary to enforce this chapter.
(e) If any residue of those funds remains after the amounts
necessary to carry on the work, examinations, and investigations
and to employ the persons as authorized by this chapter have been
paid, the residue shall be carried over from year to year and used
in the enforcement of this chapter. All funds collected under this
provision must be deposited in the State Treasury in the State Board
of Insurance operating fund and shall be paid out for salaries,
traveling expenses, office expenses, and other expenses incurred by
the board under this chapter.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Secs. (d), (e) amended by Acts 1983, 68th Leg., p. 3945, ch. 622,
Sec. 39, eff. Sept. 1, 1983.
Art. 24.07. Hearings and Investigations; Subpoena Power
In conducting a hearing or investigation under this chapter, the
board or any person duly designated by it may:
(1) subpoena witnesses;
(2) take depositions of witnesses residing outside of the state in
the manner provided for in civil actions in district courts;
(3) pay to those witnesses the fees and mileage for their attendance
as provided for witnesses in civil actions in district courts; and
(4) administer oaths.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Art. 24.08. Violations
(a)(1) A person commits an offense if the person:
(A) intentionally, knowingly, recklessly, or negligently engages
in the operation of a premium finance company without first
obtaining a license;
(B) intentionally, knowingly, recklessly, or negligently acts in
violation of this chapter;
(C) intentionally or knowingly omits to state any material fact
necessary to give the board any information lawfully required of
the person; or
(D) refuses to permit any lawful investigation or examination under
this chapter.
(2) An offense under this chapter is a Class B misdemeanor.
(b) A premium finance company's taking or receiving from or
charging an insured a greater charge than authorized by this
chapter does not invalidate the premium finance agreement or the
principal balance payable under the agreement but may be adjudged a
forfeiture of all charges that the premium finance agreement
carries with it or that have been agreed to be paid by an insured,
the person paying the charge or the person's legal representative
may recover from the premium finance agency twice the entire amount
of the charges paid if action is brought within two years after the
day on which the payment is made.
(c) In addition to the penalties set in Subsections (a) and (b), the
board or any person duly designated by it may order sanctions as
provided by Section 7, Article 1.10, of this code and issue cease
and desist orders as provided by Article 1.10A of this code.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.33, eff. Sept. 1,
1991.
Art. 24.09. Rules
The board may adopt and enforce rules necessary to carry out this
chapter. Those rules may contain the classifications,
differentiations, or other provisions and may provide for the
adjustments and exceptions for any class of transactions that are
necessary to carry out the purposes of this chapter, to prevent
circumvention or evasion of this chapter, or to facilitate
compliance with this chapter. Those rules may not contain any
classification, differentiation, or other provision with respect
to or provide for any adjustment or exception for any class of
transaction that would result in less stringent disclosure
requirements than afforded that class of transaction under the
Federal Consumer Credit Protection Act of 1970 (15 U.S.C.A. Section
1601 et seq.; 18 U.S.C.A. Section 891 et seq.) and the applicable
portions of Regulation Z (12 C.F.R. 226.1 et seq.).
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Art. 24.10. Licensee's Books and Records
(a) The licensee shall keep and use books, accounts, and records in
enough detail to enable representatives of the board to determine
whether the licensee is complying with this chapter and with the
rules and regulations lawfully made by the board. The licensee
shall preserve and keep available for inspection those books,
accounts, and records, including cards used in a card system, if
any, for at least four years after the final entry of any premium
finance agreement is recorded in those books, accounts, and
records.
(b) On or before the first day of April of each year each licensee
shall file with the board a report giving the information that the
board requires concerning the business and operations during the
preceding calendar year of each licensed place of business
conducted by the licensee in the state.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980. Amended by Acts 1981, 67th Leg., p. 415, ch. 173, Sec. 1, eff.
May 20, 1981.
Art. 24.11. Written Premium Finance Agreement
(a) A premium finance agreement shall be in writing on a form
approved by the board.
(b) The agreement shall be dated and signed by the insured. If the
agreement contains policies for other than personal, family, or
household purposes and if the premiums for the policies exceed
$1,000, it may be signed on behalf of the insured by the insured's
agent.
(c) The agreement must contain:
(1) the name and business address of the insurance agent or
insurance 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 place of business of the 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 the down payment;
(8) the principal balance (difference between items (6) and (7));
(9) the total amount of the finance charge, with a description of
each amount included, using the term "finance charge"; and
(10) the balance payable by the insured (sum of items (8) and (9)).
(d) The premium finance agreement in addition must contain the
following items as applicable:
(1) the finance charge expressed as an annual percentage rate,
using the term "annual percentage rate";
(2) the number of installments required, the amount of each
installment expressed in dollars, and the due date or period of each
installment;
(3) the amount or method of computing the amount of any default or
delinquency charge that is payable in the event of late payment;
and
(4) identification of the method of computing any unearned portion
of the finance charge in the event of prepayment of the obligation.
(e) The disclosures required to be given shall be made clearly,
conspicuously, and in meaningful sequence. Where the terms
"finance charge" and "annual percentage rate" are required to be
used, they shall be printed more conspicuously than other
terminology required by this chapter. All numerical amounts and
percentages shall be stated in figures and shall be printed in not
less than the equivalent of 10-point type, 75/1,000 inch computer
type, or elite size typewritten numerals or shall be legibly
handwritten.
(f) It shall be a violation of this Act for any licensee to take an
insurance premium finance agreement that has not been fully
completed and executed at the time the insurance premium finance
agreement is executed. The insurance agent is responsible for the
completion of the insurance premium finance agreement and for
delivery to the insured any and all disclosure statements that are
required by any existing law.
(g) If, in a premium finance agreement, changes in an insured's
policy due to amending of the rate classification by endorsement or
otherwise result in an increased principal balance and the amount
under the previous contract has not been fully paid, the subsequent
increase may at the insured's option be included in and
consolidated with the previous contract, if so provided in the
premium finance agreement.
(h) Those additions 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 premium
finance company gives to the insured the following information in
writing:
(1) the amount of the premium increase;
(2) the down payment on increase;
(3) the principal amount of increase;
(4) the total amount of finance charge on increase;
(5) the total of additional balance due;
(6) the outstanding balance of original agreement;
(7) the consolidated agreement balance;
(8) the annual percentage rate of finance charge on additional
balance due;
(9) the revised schedule of payments;
(10) the amount or method of computing the amount of any default,
deferment, or similar charges authorized in Chapter 342, Finance
Code, payable in the event of late payments; and
(11) identification of the method of computing any unearned portion
of the finance charge in the event of prepayment of the obligation.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Subsec. (h) amended by Acts 1997, 75th Leg., ch. 1396, Sec. 27, eff.
Sept. 1, 1997; Subsec. (h) amended by Acts 1999, 76th Leg., ch. 62,
Sec. 7.74, eff. Sept. 1, 1999.
Art. 24.12. Application of Truth-in-Lending Act
A transaction, although subject to this chapter, is also subject to
the Consumer Credit Protection Act of 1970 (15 U.S.C.A. Section
1601 et seq.; 18 U.S.C.A. Section 891 et seq.) and those applicable
portions of Regulation Z (12 C.F.R. 226.1 et seq.) adopted under
that Act.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Art. 24.13. Deceptive Advertising
A licensee may not advertise or cause to be advertised in any manner
whatsoever any false, misleading, or deceptive statement or
representation with regard to the rates, terms, or conditions of
any premium finance agreement. If rates or charges are stated in
advertising, the licensee shall express them in terms of a simple
annual percentage rate as defined by federal law.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Art. 24.14. Rebate of Finance Charge; Filing of Premium Finance
Agreement
(a) A premium finance company or an employee of such a company may
not pay or allow or offer to pay or allow in any manner whatsoever to
an insurance agent or broker or any employee of an insurance agent
or broker or to any other person any consideration or compensation
whatsoever, either from the charge for financing specified in the
premium finance agreement or otherwise, or give or offer to give any
valuable consideration or inducement of any kind directly or
indirectly to an insurance agent or broker or any employee of an
insurance agent or broker other than an article of merchandise not
exceeding $1 in value on which there is an advertisement of the
premium finance company, except that nothing in this article
prevents payments by a premium finance company under contractual
arrangements with a validly organized and operating association of
insurance agents or its subsidiary, so long as no part of any funds
received under the agreement is distributed to any insurance agent
or broker or employee of any insurance agent or broker or inures
directly to the benefit of any member of the association or employee
of the member. All of those contractual agreements must be in
writing and are not valid until approval of the board has been
received.
(b) Filing of a premium finance agreement or a financing statement
is not necessary to perfect the validity of such an agreement as a
secured transaction against creditors, subsequent purchasers,
pledgees, encumbrancers, successors, or assigns of the insured or
any other party.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Art. 24.15. Services Charges; Limitation of Charges; Computation
A premium finance company may not take or receive from an insured a
greater rate or charge than is provided by Chapter 342, Finance
Code. Those charges begin on the date from which the insurance
company requires payment of the premium and payment was made to the
insurance company for the financed policy or on the effective date
of the policy, whichever is earlier. The finance charge shall be
computed on the balance of the premiums due after subtracting the
down payment made by the insured in accordance with the premium
finance agreement. On insurance premium finance agreements made
under this chapter, no insurance charges or any other charge or fee,
except those authorized by this chapter, are permitted.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Amended by Acts 1997, 75th Leg., ch. 1396, Sec. 28, eff. Sept. 1,
1997; Acts 1999, 76th Leg., ch. 62, Sec. 7.75, eff. Sept. 1, 1999.
Art. 24.16. Prepayment; Refund
Notwithstanding the provisions of any premium finance agreement to
the contrary, any insured may pay it in full at any time before the
maturity of the final installment of the balance of the agreement,
and if the insured does so and the agreement included an amount for
a charge, the insured shall receive for the prepayment either by
cash or by renewal a refund credit in accordance with the provisions
for refunds contained in Subchapter H, Chapter 342, Finance Code,
and the regulations issued under that article. Where the amount of
the credit for anticipation of payments is less than $1, no refund
need be made.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Amended by Acts 1997, 75th Leg., ch. 1396, Sec. 29, eff. Sept. 1,
1997; Acts 1999, 76th Leg., ch. 62, Sec. 7.76, eff. Sept. 1, 1999.
Art. 24.17. Default and Cancellation; Right to Cancel; Refund
(a) A premium finance agreement may provide for the payment of a
default charge by the insured as provided in Section 342.203,
Finance Code, the Insurance Code, and the regulations issued under
those statutes.
(b) A premium finance agreement may contain a power of attorney
enabling the premium finance company to cancel any insurance
contract or contracts listed in the agreement. An insurance
contract or contracts may not be canceled by the premium finance
company unless the cancellation is effectuated in accordance with
this section.
(c) If the insured fails to make the payments at the time and in the
amount provided in the premium finance agreement, the premium
finance company shall mail to the insured a written notice of the
intent of the premium finance company to cancel the insurance
contract because of the default in payments by the insured unless
the default in payments is cured within a time certain stated in the
notice. That time may not be earlier than the 10th day after the
date on which the written notice was mailed. The premium finance
company shall also mail a copy of the notice to the insurance agent
or insurance broker indicated on the premium finance agreements.
(d) After expiration of the period given to cure the default, the
premium finance company may cancel the insurance contract or
contracts by mailing to the insurer a notice of cancellation. The
insurance contract shall be canceled as if the notice of
cancellation had been submitted by the insured, but without
requiring the return of the insurance contract or contracts. The
premium finance company shall also mail a notice of cancellation to
the insured at the insured's last known address and to the insurance
agent or insurance broker indicated on the premium finance
agreement.
(e) All statutory, regulatory, and contractual restrictions
providing that the insurance contract may not be canceled unless
notice is given to a governmental agency, mortgagee, or other third
party apply where cancellation is effected under this section. The
insurer shall give the prescribed notice on behalf of itself or the
insured to any governmental agency, mortgagee, or other third party
on or before the second business day after the day on which it
receives the notice of cancellation from the premium finance
company and shall determine the effective date of cancellation
taking into consideration the number of days' notice required to
complete the cancellation.
(f) Whenever a financed insurance contract is cancelled, and the
premium finance agreement contains an assignment or power of
attorney for the benefit of the premium finance company, the
insurer shall return whatever unearned premiums are due under the
insurance contract directly to the premium finance company within
60 days after the policy cancellation date. The insurer, however,
may deduct from the unearned premium returned to the premium
finance company the amount of unearned commission due from the
agent or agency writing the insurance if the insurer notifies such
agent or agency that such unearned commission should be returned to
the premium finance company. The insurer shall remit the unearned
commission to the premium finance company within 120 days of the
policy cancellation date if the agent has not returned the same to
the premium finance company within 90 days after the policy
cancellation date.
Provided, however, agents or agencies shall be liable for the
return of unearned commissions on policies written through the
Texas Windstorm Insurance Association, the Texas Automobile
Insurance Plan, and the Texas Medical Liability Insurance
Underwriting Association. Agents or agencies placing business
through these plans shall return the unearned commissions to the
premium finance company within 60 days after the agent or agency has
been notified of the cancellation.
The insurer, except the Texas Windstorm Insurance Association, the
Texas Automobile Insurance Plan, and the Texas Medical Liability
Insurance Underwriting Association, may return the unearned
premiums to the producing agent or agency; however, the insurer
shall remain liable and remit to the premium finance company within
120 days of the policy cancellation date if the producing agent or
agency does not return the unearned premiums to the premium finance
company within 90 days after the policy cancellation date, provided
the premium finance company complied with the provisions of Article
24.22 herein. In the event the premium finance company fails to
comply with the provisions in Article 24.22 herein, the insurer,
including the Texas Windstorm Insurance Association, the Texas
Automobile Insurance Plan, and the Texas Medical Liability
Insurance Underwriting Association, may satisfy any legal
obligations it has to return the unearned premiums due under the
insurance contract to the insurance premium finance company or
returning said unearned premiums to the producing agent or agency.
(g) In the event that the crediting of return premiums to the
account of the insured results in a surplus over the amount due from
the insured, the premium finance company shall refund the excess to
the insured. No refund is required if it amounts to less than $1.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980. Amended by Acts 1981, 67th Leg., p. 2663, ch. 718, Sec. 2,
eff. Aug. 31, 1981; Subsec. (f) amended by Acts 1989, 71st Leg.,
ch. 690, Sec. 2, eff. Sept. 1, 1989; Subsec. (a) amended by Acts
1997, 75th Leg., ch. 1396, Sec. 30, eff. Sept. 1, 1997; Subsec. (f)
amended by Acts 1997, 75th Leg., ch. 438, Sec. 6, eff. Sept. 1,
1997; Subsec. (a) amended by Acts 1999, 76th Leg., ch. 62, Sec.
7.77, eff. Sept. 1, 1999.
Art. 24.18. Assignments
Unless the insured has notice of actual or intended assignment of a
premium finance agreement, payment under the agreement by the
insured to the last known holder of the agreement is binding on all
subsequent holders or assignees.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Art. 24.19. Restrictions on Premium Finance Agreements
(a) A premium finance agreement may not contain any provision by
which, in the absence of default of the insured, the premium finance
company holding the agreement may arbitrarily and without
reasonable cause accelerate the maturity of any part or all of the
amount owing thereunder. Reasonable cause without limitation
includes a proceeding in bankruptcy, receivership, or insolvency
being instituted by or against the insured or the insolvency of or
suspension of business or cessation of the right to conduct
business by an insurance company writing policies that are financed
for the insured under the premium finance agreement.
(b) A licensee may not take:
(1) any instrument in which the borrower waives any right accruing
to the borrower under this chapter;
(2) any instrument that has not been fully completed and executed by
the insured;
(3) an assignment of wages as security for any insurance premium
finance agreement made under this chapter;
(4) a lien on real estate as security for any insurance premium
finance agreement made under this chapter, except such a lien as is
created by law on the recording of an abstract of judgment; or
(5) any confession of judgment or any power of attorney running to
the licensee or to any third person to confess judgment or to appear
for a borrower in a judicial proceeding.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980.
Art. 24.20. Authority of Licensed Local Recording Agents to Charge
Interest to Certain Purchasers of Insurance
Notwithstanding any other provision of law, any person,
partnership, or corporation duly licensed as a local recording
agent under Article 21.14, Insurance Code, as amended, may enter
into or establish a written agreement with any purchaser of
insurance from the agent providing for the payment of interest to
the agent in an amount not to exceed the greater of a rate allowed by
Chapter 303, Finance Code, or the rate of one percent a month, on
any amount due and owing to the agent for insurance purchased by the
purchaser. In those instances the claim or defense of usury is
prohibited.
Added by Acts 1979, 66th Leg., p. 2149, ch. 825, Sec. 1, eff. Jan. 1,
1980. Amended by Acts 1981, 67th Leg., p. 286, ch. 111, Sec. 25,
eff. May 8, 1981.
Amended by Acts 1985, 69th Leg., ch. 163, Sec. 1, eff. May 24, 1985;
Acts 1997, 75th Leg., ch. 1396, Sec. 31, eff. Sept. 1, 1997; Acts
1999, 76th Leg., ch. 62, Sec. 7.78, eff. Sept. 1, 1999.
Art. 24.22. Existence of Agreement; Notification of Insurers
Any premium finance company which enters into a premium finance
agreement which includes an assignment or power of attorney shall
notify either the insurer or the Texas Windstorm Insurance
Association, the Texas Automobile Insurance Plan, or the Texas
Medical Liability Insurance Underwriting Association whose
premiums are being financed of the existence of such agreement and
to whom the premium payment has been made. Provided, however, the
premium finance company shall notify and fund all premiums to
county mutual insurance companies unless the premium finance
company is authorized in writing by the county mutual to notify or
fund an agent or managing general agent. Notification shall be made
within 30 days of the date the agreement is accepted by the premium
finance company.
Added by Acts 1981, 67th Leg., p. 2663, ch. 718, Sec. 1, eff. Aug.
31, 1981.
Amended by Acts 1989, 71st Leg., ch. 690, Sec. 3, eff. Sept. 1,
1989; Acts 1997, 75th Leg., ch. 438, Sec. 7, eff. Sept. 1, 1997.
