2011 Texas Statutes
OCCUPATIONS CODE
TITLE 8 - REGULATION OF ENVIRONMENTAL AND INDUSTRIAL TRADES
CHAPTER 1306 - IDENTITY RECOVERY SERVICE CONTRACT PROVIDERS AND ADMINISTRATORS

OCCUPATIONS CODE

TITLE 8. REGULATION OF ENVIRONMENTAL AND INDUSTRIAL TRADES

CHAPTER 1306. IDENTITY RECOVERY SERVICE CONTRACT PROVIDERS AND ADMINISTRATORS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 1306.001.  SHORT TITLE. This chapter may be cited as the Identity Recovery Service Contract Regulatory Act.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Sec. 1306.002.  DEFINITIONS. In this chapter:

(1)  "Administrator" means a person, other than the provider of the identity recovery service contract or an employee of the provider, who is responsible for the third-party administration of an identity recovery service contract.

(2)  "Commission" means the Texas Commission of Licensing and Regulation.

(3)  "Consumer" means an individual who, for a purpose other than resale, buys a motor vehicle that is:

(A)  distributed in commerce; and

(B)  normally used for personal, family, or household purposes and not for business or research purposes.

(4)  "Department" means the Texas Department of Licensing and Regulation.

(5)  "Executive director" means the executive director of the department.

(6)  "Identity recovery" means a process, through a limited power of attorney and the assistance of an identity recovery expert, that returns the identity of an identity theft victim to pre-identity theft event status.

(7)  "Identity recovery service contract holder" means a person who purchases or otherwise holds an identity recovery service contract.

(8)  "Person" means an individual or an association, company, corporation, partnership, or other group.

(9)  "Provider" means a person who is contractually obligated to an identity recovery service contract holder under the terms of an identity recovery service contract.

(10)  "Reimbursement insurance policy" means a policy of insurance issued to a provider to:

(A)  reimburse the provider under an identity recovery service contract the provider issued or sold; or

(B)  pay on behalf of the provider all covered contractual obligations that are incurred by the provider under an identity recovery service contract the provider issued or sold and that the provider does not perform.

(11)  "Seller" means a person, other than the provider or administrator of an identity recovery service contract, who markets, sells, offers to sell, negotiates, or issues an identity recovery service contract to a consumer on behalf of a provider, but who is not contractually obligated to a service contract holder under the terms of an identity recovery service contract.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.01, eff. September 1, 2011.

Sec. 1306.003.  IDENTITY RECOVERY SERVICE CONTRACT.  In this chapter, "identity recovery service contract" means an agreement:

(1)  to provide identity recovery;

(2)  that is entered into for a separately stated consideration and for a specified term; and

(3)  that is financed through a retail installment contract under Chapter 348 or 353, Finance Code.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 117, Sec. 20, eff. September 1, 2011.

Sec. 1306.004.  CONTROLLING PERSON. (a) In this chapter, "controlling person" means an individual who:

(1)  possesses direct or indirect control of at least 25 percent of the voting securities of a corporation;

(2)  possesses the authority to set policy and direct the management of a business entity;

(3)  is the president, the secretary, or a director of a corporation; or

(4)  is a general partner of a partnership.

(b)  An individual who is a controlling person of a corporation or other business entity that is the general partner of a limited partnership is a controlling person of the limited partnership.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Sec. 1306.005.  EXEMPTIONS. This chapter does not apply to:

(1)  an identity recovery service contract sold or offered for sale to a person who is not a consumer; or

(2)  an identity recovery service contract sold by a motor vehicle dealer on a motor vehicle sold by that dealer, if the dealer:

(A)  is the provider;

(B)  is licensed as a motor vehicle dealer under Chapter 2301; and

(C)  covers its obligations under the identity recovery service contract with a reimbursement insurance policy.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Sec. 1306.006.  EXEMPTIONS FROM CERTAIN OTHER LAWS. Marketing, selling, offering for sale, issuing, making, proposing to make, and administering an identity recovery service contract are exempt from the Insurance Code and other laws of this state regulating the business of insurance.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

SUBCHAPTER A-1. POWERS AND DUTIES OF DEPARTMENT

AND COMMISSION

Sec. 1306.021.  GENERAL INVESTIGATIVE POWER OF EXECUTIVE DIRECTOR. (a)  The executive director may investigate a provider, administrator, seller, or other person as necessary to enforce this chapter and protect identity recovery service contract holders in this state.

(b)  On request of the executive director, a provider shall make the records required by Section 1306.105 available to the executive director as necessary to enable the executive director to reasonably determine compliance with this chapter.

Transferred, redesignated and amended from Occupations Code, Section 1306.008 by Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.03, eff. September 1, 2011.

Sec. 1306.022.  RULES.  The commission shall adopt rules necessary to implement and administer this chapter.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.02, eff. September 1, 2011.

SUBCHAPTER B. REGISTRATION REQUIREMENTS

Sec. 1306.051.  REGISTRATION REQUIRED; EXEMPTION FROM OTHER LICENSING REQUIREMENTS. (a)  A person may not operate as a provider or administrator of identity recovery service contracts sold or issued in this state unless the person is registered with the department.

(b)  Except for the registration requirement of this chapter, a provider, seller, administrator, or other person who markets, sells, issues, or offers to sell identity recovery service contracts is exempt from any licensing requirement of this state that relates to an activity regulated under this chapter.

(c)  If a person registered under Chapter 1304 registers under Chapter 1306, the financial security used to comply with Section 1304.151 fulfills the requirements of Section 1306.101.

(d)  A provider or administrator may not contract with or use the services of a person to perform an activity that requires registration with the department as a provider or administrator unless that person is appropriately registered.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. January 1, 2010.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.04, eff. September 1, 2011.

Sec. 1306.052.  APPLICATION FOR REGISTRATION OR RENEWAL; GENERAL REQUIREMENTS. (a) An applicant for registration or registration renewal must submit an application to the executive director.

(b)  The application must:

(1)  be in the form prescribed by the executive director; and

(2)  include evidence satisfactory to the executive director of compliance with the applicable financial security requirements prescribed by Section 1306.101, if the application is for a provider registration or renewal.

(c)  The department may refuse to issue or renew a registration, suspend or revoke a registration, or take any other disciplinary action under Subchapter D if the applicant or a controlling person of the applicant:

(1)  has violated this chapter or a rule adopted or order issued by the commission or executive director under this chapter;

(2)  has made a material misrepresentation or false statement in an application or in any document accompanying an application;

(3)  has had a license issued under Title 13, Insurance Code, revoked as provided by that code; or

(4)  has had a license or registration as a provider, administrator, or seller revoked in this state or another state.

(d)  Repealed by Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.19(a)(2), eff. September 1, 2011.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.05, eff. September 1, 2011.

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.19(a)(2), eff. September 1, 2011.

Sec. 1306.053.  ADDITIONAL REGISTRATION AND RENEWAL REQUIREMENTS FOR PROVIDERS. (a)  In addition to the requirements of Section 1306.052, an applicant for issuance or renewal of a provider registration must file with the application:

(1)  the reimbursement insurance policy required by Section 1306.102, if the provider is using a reimbursement insurance policy to meet the financial security requirements of Section 1306.101;

(2)  the financial security deposit and the documentation required by the department demonstrating adequate funding of the reserve account, if the provider is using a funded reserve account and financial security deposit to meet the financial security requirements of Section 1306.101;

(3)  the proof necessary to demonstrate the applicant or its parent company maintains at least $100 million net worth, if the applicant is using net worth to meet the financial security requirements of Section 1306.101; and

(4)  information about each controlling person of the applicant in a form prescribed by the executive director.

(b)  The executive director may not issue or renew a registration to a provider unless the provider provides evidence to the executive director that:

(1)  each controlling person of the provider is trustworthy and can competently manage the affairs of the provider in compliance with this chapter; and

(2)  the provider can meet the provider's obligations under identity recovery service contracts and this chapter.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.06, eff. September 1, 2011.

Sec. 1306.054.  FEES. (a) As prescribed by this section, a provider must pay annual registration and renewal fees and quarterly fees based on the number of identity recovery service contracts sold or issued and in force in this state.  As prescribed by this section, an administrator must pay annual registration and renewal fees.

(b)  To register or renew a registration, a provider or administrator must pay the appropriate fee.  The commission shall set by rule the fees required to cover the costs of administering this chapter.

(c)  Not later than the 30th day after the date each calendar quarter ends, a provider must report to the department the number of identity recovery service contracts sold or issued to consumers in this state during the calendar quarter and submit to the department a fee equal to $1 for each of those contracts.

(d)  The information concerning the number of identity recovery service contracts sold or issued by a provider that is submitted under Subsection (c)  is a trade secret to which Section 552.110, Government Code, applies.

(e)  The commission shall adopt rules to implement this section.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.07, eff. September 1, 2011.

Sec. 1306.055.  RENEWAL. The commission shall adopt rules regarding the renewal of a registration issued under this chapter.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

SUBCHAPTER C. PRACTICE BY IDENTITY RECOVERY SERVICE CONTRACT

PROVIDERS, ADMINISTRATORS, AND SELLERS

Sec. 1306.101.  FINANCIAL SECURITY REQUIREMENTS; DISTRIBUTION OF FUNDS HELD IN TRUST. (a)  To ensure the faithful performance of a provider's obligations to its identity recovery service contract holders, each provider must:

(1)  insure the provider's identity recovery service contracts under a reimbursement insurance policy issued by an insurer authorized to transact insurance in this state or by a surplus lines insurer eligible to place coverage in this state under Chapter 981, Insurance Code;

(2)  maintain a funded reserve account covering the provider's obligations under its identity recovery service contracts that are issued and outstanding in this state and place in trust with the executive director a financial security deposit consisting of:

(A)   a statutory deposit of cash;

(B)  a letter of credit issued by a qualified financial institution; or

(C)  a certificate of deposit issued by a qualified financial institution; or

(3)  maintain, or have a parent company that maintains, a net worth or stockholders' equity of at least $100 million.

(b)  If the provider ensures its obligations under Subsection (a)(2), the amount maintained in the reserve account may not be less than an amount equal to 40 percent of the gross consideration the provider received from consumers from the sale of all identity recovery service contracts issued and outstanding in this state, minus any claims paid.  The executive director may review and examine the reserve account.  The amount of the security deposit may not be less than $250,000.  The provider must submit to the executive director on request a copy of the provider's financial statements that must be prepared in accordance with generally accepted accounting principles, be without qualification as to the going concern status of the provider, and be audited by an independent certified public accountant.  The commission by rule may require the provider to submit additional financial reports.

(c)  If the provider ensures its obligations under Subsection (a)(3), the provider must give to the executive director on request:

(1)  a copy of the provider's or the provider's parent company's most recent Form 10-K or Form 20-F filed with the Securities and Exchange Commission within the preceding calendar year; or

(2)  if the provider or the provider's parent company does not file with the Securities and Exchange Commission, a copy of the provider's or the provider's parent company's audited financial statements showing a net worth of the provider or its parent company of at least $100 million.

(d)  If the provider's parent company's Form 10-K, Form 20-F, or audited financial statements are filed to show that the provider meets the financial security requirement, the parent company shall agree to guarantee the obligations of the provider relating to identity recovery service contracts sold by the provider in this state.

(e)  The executive director may not require a provider to meet any additional financial security requirement.

(f)  In the event of a provider's bankruptcy or a similar event affecting the ability of the provider to faithfully perform its obligations to its identity recovery service contract holders, the executive director may distribute any funds held in trust as financial security for the provider under this section to eligible identity recovery service contract holders as payment for claims.  The executive director must distribute the funds in an equitable and cost-effective manner as determined by the executive director.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.09, eff. September 1, 2011.

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.10, eff. September 1, 2011.

Sec. 1306.102.  REIMBURSEMENT INSURANCE POLICY. (a) A reimbursement insurance policy that a provider uses to comply with Sections 1306.053 and 1306.101(a)(1) must state that:

(1)  the insurer that issued the policy shall:

(A)  reimburse or pay on behalf of the provider any covered amount the provider is legally obligated to pay; or

(B)  provide the service that the provider is legally obligated to perform according to the provider's contractual obligations under the insured identity recovery service contract;

(2)  if the covered service is not provided to an identity recovery service contract holder before the 61st day after the date of proof of loss, the insurer shall pay the covered amount directly to the identity recovery service contract holder or provide the required service; and

(3)  if a refund is not paid to the identity recovery service contract holder or credited to the identity recovery service contract holder's account as required by Section 1306.108, the insurer, after receiving written notice, shall pay the refund amount directly to the identity recovery service contract holder.

(b)  For a reimbursement insurance policy to comply with Section 1306.101(a)(1), the insurer issuing the policy must:

(1)  maintain surplus as to policyholders and paid-in capital of at least $15 million and annually file with the executive director copies of the insurer's audited financial statements, National Association of Insurance Commissioners annual statement, and actuarial certification if the certification is required and filed in the insurer's state of domicile; or

(2)  maintain surplus as to policyholders and paid-in capital of at least $10 million but not more than $15 million, demonstrate to the satisfaction of the executive director that the insurer maintains a ratio of net written premiums, wherever written, to surplus as to policyholders and paid-in capital of not more than three to one, and annually file with the executive director copies of the insurer's audited financial statements, National Association of Insurance Commissioners annual statement, and actuarial certification if the certification is required and filed in the insurer's state of domicile.

(c)  The insurer may not cancel the reimbursement insurance policy until the insurer delivers to the provider and the executive director a written notice of cancellation that complies with the notice requirements prescribed by Subchapters B and C, Chapter 551, Insurance Code, for cancellation of an insurance policy under those subchapters.  Cancellation of the policy does not affect the insurer's liability for an identity recovery service contract issued by the provider and insured under the policy before the effective date of the cancellation.

(d)  If the insurer or provider cancels the reimbursement insurance policy, the provider named on the policy may not issue a new identity recovery service contract after the effective date of the cancellation unless:

(1)  the provider files with the executive director a copy of a new policy that meets the requirements of this section and that provides coverage after that date; or

(2)  the provider complies with other financial security requirements provided by Section 1306.101(a).

(e)  A provider is considered the agent of an insurer that issues a reimbursement insurance policy for purposes of obligating the insurer to the identity recovery service contract holder in accordance with the identity recovery service contract and this chapter.  The insurer issuing the reimbursement insurance policy is considered to have received the premium for the policy on the date the identity recovery service contract holder pays the purchase price of the identity recovery service contract.

(f)  This chapter does not prevent or limit the right of the insurer to seek indemnification or subrogation against a provider for any amount the insurer pays or is obligated to pay to an identity recovery service contract holder on behalf of the provider.

(g)  In this section, "net written premiums" means the sum of direct written premiums and assumed reinsurance premiums, minus ceded reinsurance premiums.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Sec. 1306.1021.  FINANCIAL SECURITY TRANSITION. (a)  In this section, "provider that maintained a funded reserve account" means a provider that, in order to ensure the faithful performance of the provider's obligations to identity recovery service contract holders, maintained a funded reserve account covering the provider's obligations under identity recovery service contracts that were issued and outstanding in this state and placed in trust with the executive director a financial security deposit consisting of:

(1)  a surety bond issued by an authorized surety;

(2)  securities of the type eligible for deposit by an authorized insurer in this state;

(3)  a statutory deposit of cash or cash equivalents;

(4)  a letter of credit issued by a qualified financial institution; or

(5)  another form of security prescribed by commission rules.

(b)  This section applies only to a provider that maintained a funded reserve account on August 31, 2011.

(c)  Not later than September 1, 2012, a provider that maintained a funded reserve account shall submit to the executive director documentation that the provider is in compliance with the financial security requirements provided by Section 1306.101 for identity recovery service contracts sold or issued in this state on or after September 1, 2012.  A provider that maintained a funded reserve account may not sell or issue an identity recovery service contract on or after September 1, 2012, unless the provider is in compliance with this subsection.

(d)  A provider that maintained a funded reserve account shall:

(1)  continue to maintain the funded reserve account and security deposit at appropriate levels for identity recovery service contracts that were sold or issued in this state before September 1, 2012, until the contracts are no longer in effect; or

(2)  provide financial security for identity recovery service contracts sold or issued before September 1, 2012, by complying with the financial security requirements of Section 1306.101.

(e)  If a provider provides financial security for identity recovery service contracts sold or issued before September 1, 2012, by complying with the financial security requirements of Section 1306.101, the provider shall give to the executive director satisfactory documentation that the reimbursement insurance policy, funded reserve account and security deposit, or net worth covers all outstanding identity recovery service contracts issued before September 1, 2012.

(f)  An identity recovery service contract that is sold or issued before September 1, 2012, and is covered under a funded reserve account and security deposit may not be extended or renewed at the end of the identity recovery service contract term unless the provider provides financial security for those service contracts by complying with the financial security requirements of Section 1306.101 before the extension or renewal.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.11, eff. September 1, 2011.

Sec. 1306.103.  APPOINTMENT AND RESPONSIBILITIES OF ADMINISTRATOR. (a) A provider may appoint an administrator registered under this chapter to be responsible for:

(1)  all or any part of the administration or sale of identity recovery service contracts; and

(2)  compliance with this chapter, except for Section 1306.101.

(b)  The appointment of an administrator under this section does not affect a provider's responsibility to comply with this chapter.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Sec. 1306.1031.  IDENTITY RECOVERY SERVICE CONTRACT SELLERS; RESPONSIBILITIES. (a)  A provider may employ or contract with a seller to be responsible for:

(1)  all or any part of the sale or marketing of identity recovery service contracts for the provider; and

(2)  compliance with this chapter in connection with the sale or marketing of identity recovery service contracts.

(b)  The hiring of or contracting with a seller under this section does not affect a provider's responsibility to comply with this chapter.

(c)  Unless registered as a provider or administrator, a seller is prohibited from engaging in activities that would require registration as a provider or administrator.

(d)  A seller shall process an identity recovery service contract application and a payment from a consumer in accordance with this chapter and with any sales agreement or contract between the provider and the seller.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.11, eff. September 1, 2011.

Sec. 1306.104.  PROVIDER REQUIREMENTS. A provider may not sell, offer for sale, or issue an identity recovery service contract in this state unless the provider gives the identity recovery service contract holder:

(1)  a receipt for, or other written evidence of, the purchase of the contract; and

(2)  a copy of the contract within a reasonable period after the date of purchase.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Sec. 1306.105.  PROVIDER RECORDS. (a) A provider shall maintain accurate accounts, books, and other records regarding transactions regulated under this chapter.  The provider's records must include:

(1)  a copy of each unique form of identity recovery service contract sold;

(2)  the name and address of each identity recovery service contract holder who provided the holder's name and address;

(3)  a list of each location at which the provider's identity recovery service contracts are marketed, sold, or offered for sale; and

(4)  written claims files that contain at least the date and a description of each claim related to the identity recovery service contracts.

(b)  The records required by this section may be maintained in an electronic medium or through other recordkeeping technology.  If a record is not in a hard copy, the provider must be able to reformat the record into a legible hard copy at the request of the executive director.

(c)  Except as provided by Subsection (d), a provider shall retain the records required by this section until at least the first anniversary of the expiration date of the specified period of coverage under the identity recovery service contract.

(d)  A provider that discontinues business in this state shall retain its records until the provider furnishes the executive director with proof satisfactory to the executive director that the provider has discharged all obligations to identity recovery service contract holders in this state.

(e)  An administrator appointed to maintain the provider's records is responsible for compliance with this section to the same extent as the provider.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Sec. 1306.106.  FORM OF IDENTITY RECOVERY SERVICE CONTRACT AND REQUIRED DISCLOSURES. (a)  An identity recovery service contract marketed, sold, offered for sale, issued, made, proposed to be made, or administered in this state must:

(1)  be written, printed, or typed in clear, understandable language that is easy to read;

(2)  state the name and address of the provider;

(3)  state the purchase price of the contract and the terms under which the contract is sold;

(4)  state the terms and restrictions governing cancellation of the contract by the provider or the identity recovery service contract holder before the expiration date of the contract;

(5)  identify:

(A)  any administrator and any registration number issued to the administrator under this chapter;

(B)  the seller; and

(C)  the identity recovery service contract holder, if the identity recovery service contract holder provides the holder's name;

(6)  state the amount of any deductible;

(7)  specify the services to be provided under the contract and any limitation, exception, or exclusion;

(8)  specify any restriction governing the transferability of the contract; and

(9)  state the duties of the identity recovery service contract holder, including any duty to protect against any further damage and any requirement to follow the instructions in the identity recovery service contract.

(b)  The identity and, if applicable, registration number issued under this chapter of a person described by Subsection (a)(5) is not required to be preprinted on the identity recovery service contract and may be added to the contract at the time of sale.

(c)  The purchase price is not required to be preprinted on the identity recovery service contract and may be negotiated with the identity recovery service contract holder at the time of sale.

(d)  An identity recovery service contract insured under a reimbursement insurance policy under Section 1306.102 must:

(1)  state the name and address of the insurer;

(2)  state that the identity recovery service contract holder may apply for reimbursement directly to the insurer if:

(A)  a covered service is not provided to the identity recovery service contract holder by the provider before the 61st day after the date of proof of loss; or

(B)  a refund or credit is not paid before the 46th day after the date on which the contract is canceled under Section 1306.1081; and

(3)  contain a statement substantially similar to the following:  "Obligations of the provider under this identity recovery service contract are insured under an identity recovery service contract reimbursement insurance policy."

(e)  An identity recovery service contract that is not insured under a reimbursement insurance policy must contain a statement substantially similar to the following:  "Obligations of the provider under this identity recovery service contract are backed by the full faith and credit of the provider."

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.12, eff. September 1, 2011.

Sec. 1306.1081.  CANCELLATION BY IDENTITY RECOVERY SERVICE CONTRACT HOLDER; REFUND. (a)  An identity recovery service contract must allow the identity recovery service contract holder to cancel the identity recovery service contract at any time.

(b)  If an identity recovery service contract holder cancels an identity recovery service contract before the 31st day after the date of purchase, the provider:

(1)  shall refund to the identity recovery service contract holder or credit to the account of the identity recovery service contract holder the full purchase price of the contract, decreased by the amount of any claims paid under the contract; and

(2)  may not impose a cancellation fee.

(c)  If an identity recovery service contract holder cancels an identity recovery service contract on or after the 31st day after the date of purchase, the provider:

(1)  shall refund to the identity recovery service contract holder or credit to the account of the identity recovery service contract holder the prorated purchase price of the contract reflecting the remaining term of the contract, based on mileage, time, or another reasonably applicable measure of the remaining term that must be disclosed in the contract, decreased by the amount of any claims paid under the contract; and

(2)  may impose a reasonable cancellation fee not to exceed $50.

(d)  A provider may allow an identity recovery service contract holder to cancel an identity recovery service contract on other terms included in the contract, provided the terms do not conflict with this section.

(e)  A provider who does not pay the refund or credit the identity recovery service contract holder's account before the 46th day after the date notice of cancellation is received by the provider is liable to the identity recovery service contract holder for a penalty for each month an amount remains outstanding equal to 10 percent of the amount outstanding.  The penalty is in addition to the full or prorated purchase price of the contract that is owed to the identity recovery service contract holder under this section or the terms of the contract.

(f)  The right to cancel an identity recovery service contract is not transferable to a subsequent holder of the contract.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.13, eff. September 1, 2011.

Sec. 1306.109.  CANCELLATION BY A PROVIDER; REFUND. (a) A provider may cancel an identity recovery service contract by mailing a written notice of cancellation to the identity recovery service contract holder at the identity recovery service contract holder's last known address according to the records of the provider.  The provider must mail the notice before the fifth day preceding the effective date of the cancellation.  The notice must state the effective date of the cancellation and the reason for the cancellation.

(b)  The provider is not required to provide prior notice of cancellation if the identity recovery service contract is canceled because of:

(1)  nonpayment of the consideration for the contract;

(2)  fraud or a material misrepresentation by the identity recovery service contract holder to the provider or the provider's administrator; or

(3)  a substantial breach of a duty by the identity recovery service contract holder.

(c)  An identity recovery service contract holder whose contract is canceled by the provider in accordance with this section is entitled to a prorated refund of the purchase price of the contract reflecting the remaining term of the contract, based on mileage, time, or another reasonably applicable measure of the remaining term that must be disclosed in the contract, decreased by the amount of any claims paid under the contract.  A provider who cancels a contract under this section may not impose a cancellation fee.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.14, eff. September 1, 2011.

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.15, eff. September 1, 2011.

Sec. 1306.110.  LIMITATIONS ON PROVIDER NAME. (a) A provider may not use a name that:

(1)  includes "insurance," "casualty," "surety," or "mutual" or any other word descriptive of the insurance, casualty, or surety business; or

(2)  is deceptively similar to the name or description of an insurance or surety corporation or to the name of any other provider.

(b)  A provider may include in its name "guaranty" or a similar word.

(c)  This section does not apply to a provider that, before September 1, 2009, included a word prohibited under this section in its name.  A provider described by this subsection must include in each identity recovery service contract a statement substantially similar to the following:  "This agreement is not an insurance contract."

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Sec. 1306.111.  PROHIBITED ACTS. (a)  A provider, administrator, seller, or other representative of the provider may not, in the provider's identity recovery service contracts or literature or in any written communication:

(1)  make, permit, or cause to be made any false, deceptive, or misleading statement; or

(2)  deliberately omit a material statement if the omission would be considered misleading.

(b)  A person regulated by Chapter 2301 may not require the purchase of an identity recovery service contract as a condition of a loan or the sale of a vehicle.

(c)  A provider, administrator, seller, or other representative of the provider may not make a telemarketing call to a consumer as provided by Sections 304.002 and 304.003, Business & Commerce Code, unless the provider, administrator, seller, or representative has an established business relationship, as defined by Section 304.002, Business & Commerce Code, with the consumer.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. September 1, 2009.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.16, eff. September 1, 2011.

SUBCHAPTER D. DISCIPLINARY ACTION

Sec. 1306.151.  DISCIPLINARY ACTION.  On a finding that a ground for disciplinary action exists under this chapter, the commission or executive director may impose an administrative sanction or administrative penalty or seek a civil penalty or any other remedy as provided by this chapter and Chapter 51.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. January 1, 2010.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.17, eff. September 1, 2011.

Sec. 1306.152.  INJUNCTIVE RELIEF; CIVIL PENALTY. (a) The executive director may institute an action under Section 51.352 for injunctive relief to restrain a violation or a threatened violation of this chapter or an order issued or rule adopted under this chapter.

(b)  In addition to the injunctive relief provided by Subsection (a), the executive director may institute an action for a civil penalty as provided by Section 51.352.  The amount of a civil penalty assessed under this section may not exceed:

(1)  $2,500 for each violation; or

(2)  $50,000 in the aggregate for all violations of a similar nature.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. January 1, 2010.

Sec. 1306.153.  MULTIPLE VIOLATIONS. For purposes of this subchapter, 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 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. January 1, 2010.

Sec. 1306.154.  ADMINISTRATIVE PROCEDURE. Sections 51.305, 51.310, and 51.354 apply to disciplinary action taken under this chapter.

Added by Acts 2009, 81st Leg., R.S., Ch. 36, Sec. 3, eff. January 1, 2010.

Sec. 1306.155.  REMEDY FOR IDENTITY RECOVERY SERVICE CONTRACT HOLDERS. (a)  If the commission by order, including an agreed order, determines that a person has operated as a provider or administrator in this state without holding the appropriate registration under this chapter, the person shall offer to an identity recovery service contract holder who holds an identity recovery service contract sold or issued by the person during the period that the person was not registered under this chapter the right to:

(1)  cancel the contract and obtain a refund of the full purchase price of the contract; or

(2)  retain the contract.

(b)  If a seller fails to process an identity recovery service contract application or a payment from a consumer in accordance with this chapter and any sales agreement or contract between the provider and the seller, the commission or executive director may, by commission order, including an agreed order, require the seller to refund the full purchase price of the contract to the consumer.

(c)  The remedies described in this section are in addition to any administrative penalty, administrative sanction, civil penalty, or other disciplinary or enforcement action sought under this chapter or Chapter 51.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1081, Sec. 2.18, eff. September 1, 2011.