INSURANCE CODE
CHAPTER 556. UNFAIR METHODS OF COMPETITION AND UNFAIR PRACTICES BY
FINANCIAL INSTITUTIONS
SUBCHAPTER A. GENERAL PROVISIONS
§ 556.001. DEFINITIONS. In this chapter:
(1) "Affiliate" means a person who, directly or
indirectly or through one or more intermediaries, controls or is
controlled by another person or is under common control with
another person.
(2) "Depository institution" has the meaning assigned
by Section 4001.003.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 556.002. RULES. The commissioner may adopt
reasonable rules to comply with federal law applicable to the sale
of insurance and for the implementation and administration of this
chapter.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER B. UNFAIR METHODS OR PRACTICES
§ 556.051. UNFAIR METHOD OF COMPETITION OR UNFAIR
PRACTICE: TYING. (a) A depository institution engages in an
unfair method of competition or an unfair practice in the sale of
insurance by the depository institution if the depository
institution:
(1) is an agent and, as a condition of extending or
renewing credit, leasing or selling property, or furnishing
services, requires the purchase of insurance from the depository
institution or a subsidiary or affiliate of the depository
institution, or from or through a particular agent, insurer, or any
other person or entity;
(2) conditions the terms of credit or the sale or lease
of property on acquisition of insurance from or through the
depository institution, a subsidiary or affiliate of the depository
institution, or any other particular person or entity;
(3) rejects a required policy solely because the
policy has been issued or underwritten by a person or entity that is
not associated with the depository institution; or
(4) imposes a requirement on an agent or broker who is
not associated with the depository institution that is not imposed
on an agent or broker who is associated with the depository
institution or a subsidiary or affiliate of the depository
institution.
(b) This section does not prevent a person who lends money
or extends credit from placing insurance on property if the
mortgagor, borrower, or purchaser fails to provide required
insurance in accordance with the terms of the loan or credit
document.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 556.052. UNFAIR METHOD OF COMPETITION OR UNFAIR
PRACTICE: FAILURE TO DISCLOSE. A depository institution engages
in an unfair method of competition or an unfair practice in the sale
of insurance by the depository institution if, on the premises of
the depository institution or in connection with a product offering
of the depository institution, the depository institution sells or
solicits the purchase of insurance or a person sells or solicits the
purchase of insurance recommended or sponsored by the depository
institution and the depository institution or person fails to
clearly disclose in all promotional materials relating to an
insurance product distributed to customers and potential customers
that:
(1) an insurance product sold through or in the
depository institution or a subsidiary or affiliate of the
depository institution is not insured by the Federal Deposit
Insurance Corporation;
(2) the insurance product is not issued, guaranteed,
or underwritten by the depository institution or the Federal
Deposit Insurance Corporation; and
(3) the insurance product involves investment risk, if
appropriate, including potential loss of principal.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER C. REGULATION OF PRACTICES
§ 556.101. PROHIBITION ON CERTAIN REFERRALS OR
SOLICITATIONS TO PURCHASE INSURANCE. (a) An individual who is an
employee or agent of a depository institution or a subsidiary or
affiliate of a depository institution may not directly or
indirectly make a referral related to insurance to, or solicit the
purchase of any insurance by, a customer knowing that the customer
has applied for a loan or other extension of credit from a financial
institution, before:
(1) the customer receives a written commitment
relating to that loan or extension of credit; or
(2) if a written commitment has not been or will not be
issued in connection with the loan or extension of credit, the
customer receives notification of approval of that loan or
extension of credit by the financial institution and the financial
institution creates a written record of the approval.
(b) This section does not prohibit a depository institution
from:
(1) informing a customer that insurance is required in
connection with a loan;
(2) contacting a person in the course of a direct or
mass mailing to a group of persons in a manner that is not related to
the person's loan application or credit decision; or
(3) selling credit life, credit disability, credit
property, or involuntary unemployment insurance that is:
(A) specifically authorized by this code;
(B) approved for sale in this state; and
(C) sold in connection with a credit transaction.
(c) This section does not apply to an insurance policy
described by Section 556.151.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 556.102. INSURANCE SALE WITH LOAN
TRANSACTION. (a) If insurance is offered or sold to a depository
institution's customer in connection with a loan transaction by the
depository institution, the insurance salesperson involved in that
insurance transaction may not be involved in that loan transaction
and may not be the person making that loan.
(b) This section does not apply to:
(1) a depository institution that has $40 million or
less in total assets, as reported in the most recent Consolidated
Report of Condition and Income by the Federal Financial
Institutions Examination Council or any successor report required
by federal or state law; or
(2) a credit life, credit disability, credit property,
or involuntary unemployment insurance product that is:
(A) specifically authorized by this code;
(B) approved for sale in this state; and
(C) sold in connection with a credit transaction.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 556.103. DESIGNATION OF PLACE OF INSURANCE
ACTIVITIES. (a) The place where a depository institution sells
or solicits the purchase of insurance or the place on the premises
of a depository institution where insurance is sold or solicited
for purchase shall be clearly and conspicuously indicated by signs
so that the public can readily distinguish the sale or solicitation
as separate from the lending and deposit-taking activities of the
depository institution.
(b) The commissioner may grant a waiver from the
requirements of this section to a person who files a written request
that:
(1) demonstrates that, due to the size of the physical
premises of the person, compliance with the requirements is not
possible; and
(2) identifies other steps that will be taken to
minimize customer confusion.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 556.104. USE OF CUSTOMER INFORMATION. (a) In this
section:
(1) "Customer" means a person with an investment,
security, deposit, trust, or credit relationship with a financial
institution.
(2) "Nonpublic customer information" means
information relating to an individual that is derived from a bank
record, including information concerning insurance premiums, the
terms and conditions of insurance coverage, insurance expirations,
insurance claims, and insurance history of the individual. The
term does not include a customer's name, address, or telephone
number.
(b) A person may not use nonpublic customer information for
the purpose of selling or soliciting the purchase of insurance, or
provide nonpublic customer information to a third party for the
purpose of another's selling or soliciting the purchase of
insurance, unless:
(1) it is clearly and conspicuously disclosed that the
nonpublic customer information may be used for that purpose; and
(2) the customer has been provided an opportunity to
object before the time the information is used.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER D. DISCLOSURES
§ 556.151. APPLICABILITY OF SUBCHAPTER. This
subchapter does not apply to a credit life, credit accident and
health, credit property, or credit involuntary unemployment
insurance policy that is:
(1) specifically authorized by this code;
(2) approved for sale in this state; and
(3) sold in connection with a credit transaction.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 556.152. PROMOTIONAL MATERIALS DISCLOSURE. (a) This
section applies to each agent that is a depository institution or
that, on the premises of a depository institution or in connection
with a product offering of a depository institution, sells or
solicits the purchase of insurance recommended or sponsored by the
depository institution.
(b) Promotional materials relating to an insurance product
distributed to a customer or potential customer must clearly
disclose that an insurance product sold through an agent affiliated
with a depository institution:
(1) is not insured by the Federal Deposit Insurance
Corporation;
(2) is not issued, guaranteed, or underwritten by the
depository institution or the Federal Deposit Insurance
Corporation; and
(3) involves investment risk, if appropriate,
including potential loss of principal.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 556.153. DISCLOSURE AT TIME OF LOAN
APPLICATION. (a) At the time a loan application is made, a
depository institution shall provide to the customer a written
disclosure as required by this section and Section 556.154.
(b) The disclosure must be separate from any loan
application or loan document.
(c) The depository institution employee who presents the
disclosure and the customer shall sign and date the disclosure.
(d) The depository institution shall maintain one copy of
the disclosure in the loan file and shall provide one copy to the
customer.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 556.154. FORM OF DISCLOSURE. (a) The disclosure
required by Section 556.153 must be in substantially the following
form:
"CUSTOMER DISCLOSURE
"You have applied for a loan with the depository institution.
As permitted by Title 4, Finance Code, the depository institution
is requiring that collateral used to secure the loan be insured to
cover the amount of the loan to the extent insurance is available on
the property to be insured, against the usual and customary
casualty losses.
"You have the right to provide this insurance either through
existing policies already owned or controlled by you or by
obtaining the insurance through any insurance agent or insurer
authorized to engage in business in Texas.
"The depository institution, through its own insurance
agency, can also make this insurance available to you. However,
federal and state laws provide that the depository institution
cannot require you to obtain insurance through the depository
institution, its subsidiary, an affiliate, or any particular
unaffiliated third party, either as a condition to obtaining this
credit or to obtain special terms or consideration.
"Insurance products sold through or in the depository
institution or its affiliate or subsidiary are not insured by the
Federal Deposit Insurance Corporation and are not issued,
guaranteed, or underwritten by the depository institution or the
Federal Deposit Insurance Corporation.
"You are not required or obligated to purchase insurance from
the depository institution or any subsidiary, affiliate, or
particular unaffiliated third party as a condition to obtaining
your loan, and your decision as to insurance agents will not affect
your credit terms in any way.
______________________ ______________________
Customer Date
______________________
Employee of Depository Institution"
(b) The commissioner may amend the disclosure form as
necessary to comply with federal or state law.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
