TITLE 7. BANKING AND SECURITIES
PART 1. FINANCE COMMISSION OF TEXAS
Subchapter A. Contract Forms
(a) A word or term that is defined in Finance Code, Chapter 154, retains the same meaning when used in this subchapter unless the word or term is defined otherwise in subsection (b) of this section.
(b) The following words and terms have the following meanings when used in this subchapter, unless the context in which a word or term is used clearly indicates a different meaning that is consistent with the purpose of Finance Code, Chapter 154:
(1) "Contract beneficiary" means the person named in a prepaid funeral benefits contract as the intended recipient of contracted funeral merchandise and services.
(2) "Funeral goods and services" means funeral merchandise and services that are regulated as prepaid funeral benefits, as that term is defined by Finance Code, §154.002(9), except to the extent provided otherwise in §25.3(b) of this title (relating to What Requirements Apply to a Non-Model Contract or Waiver) and related provisions.
(3) "Funeral Provider" or "Provider" has the meaning assigned by Finance Code, §154.002(6), specifically a person that agrees in a prepaid funeral benefits contract to provide specified prepaid funeral benefits.
(4) "Insurance-funded contract" means a prepaid funeral benefits contract funded by an insurance policy.
(5) "Insurance policy" has the meaning assigned by Finance Code, §154.002(7), specifically a life insurance policy or an annuity contract. The term does not include a policy for any other form of insurance.
(6) "Model contract" means a prepaid funeral benefits contract form developed and published by the department for your use.
(7) "Model waiver" means the waiver form developed and published by the department for your use, to govern the voluntary waiver of a purchaser's right to cancel a prepaid funeral benefits contract as permitted by Finance Code, §154.156(a).
(8) "Non-guaranteed cash advance items" are items for which a purchaser of prepaid funeral benefits may agree to advance funds for all or any portion of the reasonable estimated cost of the items included in the prepaid funeral benefits contract, the actual cost of which are to be determined by existing prices at the time the items are delivered or provided by a Third Party Provider in connection with at-need performance of the contracted funeral.
(9) "Non-model contract" means a prepaid funeral benefits contract form that differs from the model contract with respect to the requirements and standards of §25.3 of this title and §25.4 of this title (relating to What Are the Plain Language Requirements for a Non-Model Contract or Waiver). A model contract does not become a non-model contract because you add your name, trademark, or other information about you, or information about the provider. A contract in electronic form is a non-model contract.
(10) "Non-model waiver" means a form of waiver that has the same purpose as but differs from the model waiver with respect to the requirements and standards of §25.2(c) of this title (relating to Am I Required to Use the Model Contract and Model Waiver) and §25.4 of this title. For example, a model waiver does not become a non-model waiver because you add your name, trademark, or other information about you, or information about the provider. A waiver in electronic form is a non-model waiver.
(11) "Prepaid funeral benefits contract" or "contract" means a contract or agreement for prepaid funeral benefits, whether trust-funded or insurance-funded.
(12) "Purchaser" means the person who contracts to buy prepaid funeral benefits. The purchaser may also be the contract beneficiary. If permitted by the context, the term includes the purchaser's authorized agent.
(13) "Responsible person" means the person charged with the disposition of the contract beneficiary's remains by Health and Safety Code, §711.002(a).
(14) "Seller" has the meaning assigned by Finance Code, §154.002(10), specifically a person selling, accepting money or premiums for, or soliciting contracts for prepaid funeral benefits or contracts or insurance policies to fund prepaid funeral benefits in this state.
(15) "Third Party Provider" means a legal entity that is separate from the Funeral Provider and which will provide non-guaranteed cash advance items under a prepaid funeral benefits contract. Separate legal entities have different federal tax identification numbers but may be related by common ownership or be subsidiaries or affiliates of one another.
(16) "Trust-funded contract" means a prepaid funeral benefits contract funded by trust deposits made on behalf of the purchaser.
(17) "You" (or "I" in a section title) means a seller that is licensed under Finance Code, Chapter 154, and is subject to this chapter.
Source: The provisions of this §25.1 adopted to be effective March 14, 2002, 27 TexReg 1706; amended to be effective January 7, 2010, 35 TexReg 204; amended to be effective July 10, 2014, 39 TexReg 5141; amended to be effective November 10, 2016, 41 TexReg 8814.
(a) Use of model contract and waiver. You may use the appropriate model contract or the model waiver described in this subsection except as provided in paragraph (2) of this subsection, but you are not required to do so if you obtain approval to use a non-model contract or waiver. PDF forms of model contracts or waivers and PDF forms of approved non-model contracts or waivers do not need to be approved by department as provided in §25.5.
(1) The department has adopted two model contracts, one for sale of trust-funded prepaid funeral benefits and one for sale of insurance-funded prepaid funeral benefits where the purchaser is also the policy owner, and a model waiver, in English and in Spanish, for your use. Each model contact or waiver meets all statutory requirements and the requirements of this subchapter with respect to the type of transaction it is designed to govern. You may acquire copies of model contracts and the model waiver by downloading them from the department's web site or requesting them by mail. The department's web site address is http://www.dob.texas.gov.
(2) If you sell insurance-funded contracts, the insurance-funded model contract is suitable only if the person named in the contract as the purchaser is also the insurance policy owner. If the contract purchaser and the insurance policy owner are not to be the same person, you must use an approved non-model contract that correctly addresses this arrangement.
(3) You may use a current model contract or model waiver after the department verifies that your proposed form document is a current model document that has been customized by inserting your name and permit number. Your submitted form document may also exclude the disclosure shown in Figure 7 TAC §25.3(i)(4)(E), if it is not applicable; and contain other information about you or a provider as long as you do not otherwise alter the model document. The department shall approve or disapprove a customized model document on or before the 10th business day following the day the document is filed with the department.
(b) Non-model contracts. Before you use a non-model contract, it must:
(1) satisfy the substantive content requirements of §25.3 of this title (relating to What Requirements Apply to a Non-Model Contract or Waiver);
(2) qualify under the plain language principles stated in §25.4 of this title (relating to What Are the Plain Language Requirements for a Non-Model Contract or Waiver); and
(3) be approved by the department as provided in §25.5 of this title (relating to How Do I Obtain Approval of a Non-Model Contract or Waiver).
(c) Non-model waivers. You may use a non-model waiver if it addresses substantially the same matters in substantially the same order as the model waiver, to promote comparability and consumer understanding. Your proposed non-model waiver form may contain additional provisions that are fair to consumers in light of the purpose of Finance Code, Chapter 154. You must submit a non-model waiver to the department for approval in the manner required by §25.5 of this title. The model waiver in English appears as:
(d) Transactions conducted in Spanish. If you intend to conduct any prepaid funeral benefits transaction predominately in Spanish, you may use a current model contract or model waiver in Spanish as provided by subsection (a) of this section. If the department has approved your non-model document in English under §25.5 of this title, you may use a Spanish version of the document after you file a copy of your Spanish document and a certification from a translation service acceptable to the department that the Spanish version is a true and correct translation of the submitted English document. If the English version of your Spanish non-model document has not previously been approved, you may not use your Spanish non-model document until you comply with subsection (b) of this section.
(e) Interpretation of required content and form. The department considers the model contracts and model waiver to satisfy the substantive content requirements of §25.3 of this title and qualify under the plain language principles stated in §25.4 of this title. If you have questions regarding the intent and meaning of a requirement in this subchapter, locate and review the related clause in the model contracts or model waiver. You are not required to include a broader or more comprehensive provision than is contained in the relevant model document unless additional explanation or disclosure is necessary to clarify or prevent misleading provisions in your non-model document.
(f) Sale of Prepaid Funeral Benefits Electronically.
(1) You may sell prepaid funeral benefits and deliver contracts and waivers by electronic means if the purchaser has consented to transacting electronically.
(2) A purchaser must consent to the use of electronic documents before you present the document to the purchaser, consistent with Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §7001.
(3) A contract or waiver is not considered as entered into or delivered electronically if a completed paper copy in the approved form is given to the purchaser at the time of sale.
Source: The provisions of this §25.2 adopted to be effective March 14, 2002, 27 TexReg 1706; amended to be effective January 7, 2010, 35 TexReg 204; amended to be effective November 4, 2011, 35 TexReg 9696; amended to be effective November 10, 2016, 41 TexReg 8814.
(a) Contract requirements. The department must approve a non-model contract before you can use it. Your proposed non-model contract must:
(1) contain a disclosure informing the purchaser of the funeral goods and services that will be provided or excluded under the contract, as described by subsections (b) and (c) of this section;
(2) define terms used in the contract as described by subsection (d) of this section;
(3) state and explain the purchaser's obligations, your obligations, and the name and obligations of the provider if you are not performing all funeral services under the contract;
(4) if the provider is not the licensed seller, a statement that the provider agrees to discharge the responsibilities imposed on a funeral provider by Finance Code §154.161;
(5) the impact of terms in the insurance policy on the contract if the contract is insurance-funded, as described by subsection (e) of this section;
(6) disclose and explain the purchaser's cancellation rights under the contract and, if the contract is insurance-funded, the effect of insurance policy cancellation or assignment on the contract, as described by subsection (f) of this section;
(7) state events of default under the contract for all parties and explain the consequences of default, as described by subsection (g) of this section;
(8) state and explain the circumstances under which the responsible person may modify or change the contract at the death of the contract beneficiary, as described by subsection (h) of this section;
(9) disclose and explain all payment terms under the contract and related provisions as described by subsection (i) of this section;
(10) contain a section for required signatures and related notices as described by subsection (j) of this section;
(11) contain a standard disclosure explaining how a purchaser can make inquiries or file complaints with specified regulatory agencies, as described by subsection (k) of this section;
(12) comply with subsections (l) and (m) of this section;
(13) comply with §25.4 of this title (relating to What Are the Plain Language Requirements for a Non-Model Contract or Waiver); and
(14) be approved by the department as provided by §25.5 of this title (relating to How Do I Obtain Approval of a Non-Model Contract or Waiver).
(b) Statement of guaranteed funeral goods and services selected. The first section of a proposed prepaid funeral benefits contract must inform the purchaser of the guaranteed funeral goods and services that you will provide under the contract, as required by Finance Code, §154.151(e). This section must appear entirely on page one of the contract exactly as set out in the model contract and in the following figure, including substantially the same formatting and spacing, except:
(1) you may move specific goods and services between general description categories;
(2) you may move specific goods and services from figure 7 TAC §25.3(c)(1) to figure 7 TAC §25.3(b), if you guarantee the price of the good or service and include any required Federal Trade Commission disclosures regarding cash advance items;
(3) you may change the description of specific goods or services if the alteration does not change the intent of the description in the standard disclosure;
(4) you may add other, specific funeral goods and services to the list of funeral goods and services to be provided;
(5) you may delete check boxes and related text for sealing features in casket and outer burial container descriptions, for example, "gasketed","non-gasketed", "seal", and "non-seal", if these features are not included in the funeral home's price list; and
(6) if the goods and services you sell are specifically limited and constitute significantly less than those goods and services normally required for a funeral, you may substitute a simplified disclosure that the contract is for your specific goods and services only and that you do not offer any other funeral goods and services. For example, you may substitute this limited disclosure if you sell only services relating to opening and closing of the grave or unique memorials that utilize a token portion of cremains, or if you only sell limited funeral goods such as outer burial containers or caskets without furnishing funeral services.
(7) The Explanation of Certain Charges language may be moved from figure 7 TAC §25.3(c)(1) to figure 7 TAC §25.3(b).
(8) If your contract is in electronic form, the statement of guaranteed funeral goods and services selected must appear on a single screen or consecutive screens, near the beginning or top of the contract, immediately following consumer disclosures and consent required by 7 TAC §25.2(f).
(c) Statement of non-guaranteed cash advance items selected.
(1) The second section of a proposed prepaid funeral benefits contract must inform the purchaser of the non-guaranteed cash advance items that you will provide under the contract, as required by Finance Code §154.1511(b). The section must appear entirely on either page one or two of the contract exactly as set out in the model contract and in the following figure, including substantially the same formatting and spacing, except;
(A) you may delete the non-guaranteed cash advance items section if you do not sell cash advance items;
(B) you may move the Explanation of Certain Charges language to figure 7 TAC §25.3(b);
(C) you may change the subtotal pages references if figures 7 TAC §25.3(b) and 7 TAC §25.3(c)(1) are to be placed on the same page of the contract;
(D) you may move specific goods and services from figure 7 TAC §25.3(c)(1) to figure 7 TAC §25.3(b) if you guarantee the price of the good or service;
(E) you may change the description of specific goods or services if the alteration does not change the intent of the description in the standard disclosure;
(F) you may add other specific funeral goods and services to the list of non-guaranteed funeral goods and services to be provided only through a non-model filing; and
(G) if your contract is in electronic form, this section must appear on a single screen immediately following the statement of guaranteed funeral goods and services selected.
(2) If you delete the statement of non-guaranteed cash advance items:
(A) for a paper contract, you must include figure 7 TAC §25.3(c)(2)(B) on the bottom of page one of the contract, including substantially the same formatting and spacing; and
(B) for a contract in electronic form, you must include the following figure immediately following the statement of guaranteed funeral goods and services selected:
(d) Definitions. Your proposed prepaid funeral benefits contract must list, define, and use the terms "contract beneficiary", "responsible person", "provider", "purchaser", and "seller", or terms commonly understood by consumers to be equivalent, substantially as defined in a model contract. For example, you may use a combined term such as "seller/provider" if you believe the alternate term is more descriptive of your services. If your proposed contract is insurance-funded, you must also list, define, and use the terms "insurance company", "insurance policy", and "premiums" in the contract, or terms commonly understood by consumers to be equivalent, substantially as defined in the department's insurance-funded model contract. You may list, define and use additional terms if they are consistent with the requirements of §25.4 of this title.
(e) General provisions. Your proposed prepaid funeral benefits contract must recognize and explain the purchaser's obligations, your obligations, and the obligations of the provider if you are not performing all funeral services under the contract, and the impact of terms in the insurance policy on the contract if the contract is insurance-funded, with respect to:
(1) your obligation (and that of the provider) to furnish the guaranteed funeral goods and services selected in the contract for a cost not to exceed the total contract price applicable to the guaranteed charges at the death of the contract beneficiary, if the purchaser has fully complied with the contract and with each insurance policy, if the contract is insurance-funded;
(2) your obligation (and that of the provider) to furnish the non-guaranteed cash advance items selected in the contract, if current costs are paid at the time of death or how any unallocated and remaining non-guaranteed funds will be refunded;
(3) the purchaser's inability to change the selected funeral goods and services during the life of the contract unless the contract is voided and replaced with a new contract;
(4) the extent to and conditions under which the purchaser may change the provider specified in the contract or, with respect to a trust-funded contract, the contract beneficiary;
(5) whether the purchaser may incur tax liability for earnings under a trust-funded contract or for growth under an insurance policy if the contract is insurance-funded;
(6) the extent to which you offer any warranties or guarantees or assert any specific disclaimers of warranty;
(7) the prohibition on partial cancellation of or loans against the contract;
(8) if the transaction may result in available funds in excess of the contract price at the time the funeral is performed, identification of who is entitled to such excess funds;
(9) each party's general contractual duties under the contract and the extent to which the contract is binding on a person who assumes the rights or obligations of a party to the contract;
(10) the manner in which a party must notify other parties of a change of address; and
(11) if the contract is insurance-funded, the requirement that terms of the insurance policy must be consulted for information concerning the obligations of the insurance company and those of the policy owner.
(f) Cancellation or assignment. Your proposed prepaid funeral benefits contract must recognize and explain:
(1) with respect to a trust-funded contract:
(A) the manner in and conditions under which the purchaser may cancel the contract, including the procedural requirements applicable to a cancellation, including the purchaser's obligation to request cancellation in writing on department-approved forms and your obligation to pay a refund not later than the 30th day after receipt of the purchaser's written cancellation notice;
(B) the amount of the refund or other payment that you will owe the purchaser if the contract is canceled and the conditions or circumstances that may alter the refund amount; and
(C) the refund or other benefits you will owe the purchaser if the contract is canceled at your request; or
(2) subject to modifications or clarifications required by §25.2(a)(2) of this title (Relating to Am I Required to Use the Model Contract and Model Waiver), with respect to an insurance-funded contract:
(A) the purchaser's right to assign the purchaser's interest in an insurance policy by signing a separate document;
(B) the qualification that canceling the contract does not automatically cancel the insurance policy but canceling the insurance policy does cancel the contract;
(C) the procedural requirements applicable to a cancellation of the contract, including the purchaser's obligation to request cancellation in writing on department-approved forms and the statutory obligation, if applicable, to pay a refund not later than the 30th day after receipt of the purchaser's written cancellation notice;
(D) the purchaser's obligation to read the insurance policy to determine the conditions imposed upon cancellation and the potential amount of refund that would be due if the policy is canceled during or after the "free look" period;
(E) notice and acknowledgement by the purchaser that if the insurance policy is cancelled at the purchaser's request, the surrender value may be significantly less than the premiums the purchaser paid. The disclosure must appear in the cancellation section exactly as set out in the model contract and in the following figure, without modification, including substantially the same formatting and spacing:
(F) the consequences the purchaser may expect, whether refund of premium, receipt of cash surrender value, or other benefits from you or another person, if the contract is canceled at your request; and
(G) the effect that loans against or withdrawal of proceeds accrued under an insurance policy will have on the contract and on price guaranties in the contract.
(g) Default. Your proposed prepaid funeral benefits contract must explain events and consequences of default under the contract and under each insurance policy if the contract is insurance-funded, including:
(1) the potential effect on the contract if the purchaser fails to make a payment or makes a late payment under the contract or under an insurance policy if the contract is insurance-funded;
(2) the effect on the contract and on payments due if the contract beneficiary dies:
(A) before the purchaser's payment obligations have been fulfilled under a trust-funded contract; or
(B) if the contract is insurance-funded:
(i) during a period when an insurance policy pays reduced benefits, if applicable; or
(ii) before the premium obligations have been fulfilled on an insurance policy, if applicable; and
(3) the conditions under which you may owe a full or partial refund to the purchaser of funds received under a contract, or a full or partial abandonment of your rights to anticipated proceeds of an insurance policy if the contract is insurance-funded and proceeds are not yet received, as a consequence of your inability (or the provider's inability, if you are relying on another to perform portions of the contract) to furnish the selected funeral goods and services;
(4) a statement that the Prepaid Funeral Guaranty Fund guarantees performance of the prepaid funeral seller and the designated funeral provider, as well as associated administrative functions required by law.
(h) Changes to disposition or funeral goods and services at the death of contract beneficiary. Your proposed prepaid funeral benefits contract must disclose the circumstances under which the contract may be modified by the responsible person at the death of the contract beneficiary, as required by Finance Code, §154.151(e). The disclosure must appear exactly as set out in the model contract and in the following figure, without modification, except that the phrase "fully funded" may be substituted for the phrase "fully paid" wherever it appears in this disclosure when used in an insurance-funded contract. In addition, you may use a larger type size if feasible.
(i) Payment terms. Your proposed prepaid funeral benefits contract must clearly state and explain payment terms and related provisions, including:
(1) how and when you will deposit a payment received under a trust-funded contract, or forward any premiums received to the insurance company for application to an insurance policy if the contract is insurance-funded;
(2) with respect to a trust-funded contract, whether and the extent to which you will retain a portion of the purchaser's payments for reimbursement of your operating and selling expenses;
(3) with respect to a trust-funded contract, the finance charges you will impose, if applicable, provided that the description must also comply with Finance Code, Chapter 345, and other state and federal law governing such charges;
(4) subject to modifications or clarifications required by §25.2(a)(2) of this title, with respect to an insurance-funded contract:
(A) the effect on the contract if insurance coverage is denied and that all premiums will be returned to the policy owner;
(B) if payment terms under the insurance policy are not disclosed in the contract, a space for the purchaser to initial or sign to acknowledge that the purchaser has received written information regarding the terms governing premium payments in another document that the purchaser received at the time of sale, such as the application for insurance or the insurance policy;
(C) if the information the purchaser receives regarding payment terms under an insurance policy is based on an estimate of premiums, that must be noted;
(D) notice and acknowledgement by the purchaser that insurance premiums paid on the insurance policy or policies may be more or less than the total contract price, and an estimate for total premiums to be paid. The disclosure must appear in the payment terms section exactly as set out in the model contract and in the following figure, without modification, including substantially the same formatting and spacing:
(E) notice and acknowledgement by the purchaser if you initially issue insurance policy(s) with an aggregate initial face value that exceed(s) the total contract price by more than 5%. The disclosure must include the total amount of the policy(s) in excess of 100% of the contract price. The disclosure must appear in the payment terms section exactly as set out in the following figure, without modification, including substantially the same formatting and spacing; and,
(5) other contract provisions that materially relate to payment terms under a contract or under an insurance policy.
(j) Required signatures and notices. Your proposed prepaid funeral benefits contract must contain a section for required signatures and related notices that appears in its entirety on the last page of the contract, or near the bottom of the contract if in electronic form. This section must include:
(1) a list of all items that must be received or offered before the contract can be signed;
(2) if required by state or federal law, cooling-off period language that includes spaces to note when and where the contract was signed;
(3) notice that the purchaser will receive a copy of the contract;
(4) notice that the purchaser is required to be provided an informational brochure for contracts sold after June 1, 2010;
(5) the Department's prepaid funeral contract informational website address;
(6) if the contract is insurance-funded:
(A) notice that the policy owner will receive a copy of the insurance policy from the insurance company; or
(B) if the insurance company is not legally required to deliver a copy of the insurance policy to the policy owner, notice that the policy owner may request a copy of the insurance policy from the insurance company;
(7) spaces for:
(A) the purchaser's printed name, mailing address, telephone number, social security number (if required), and signature line;
(B) if you are not directly providing the funeral goods and services, the printed name, mailing address, and telephone number of the provider, and spaces for the printed name and signature of the authorized officer or agent signing on behalf of the provider;
(C) your printed name, mailing address, and telephone number, and spaces for the printed name and signature of the authorized officer or agent signing on your behalf; and
(D) the printed name, mailing address, and date of birth of the sole individual designated as contract beneficiary; and
(8) other provisions, party identifications, or certifications legally required for valid execution of the contract.
(k) Inquiries and complaints notice. Your proposed prepaid funeral benefits contract must disclose how a purchaser, potential purchaser or consumer can make consumer inquiries and complaints to the department as required by Finance Code, §11.307(a), and §25.41 of this title (relating to How Do I Provide Information to Consumers on How to File a Complaint and What Action Must I Take When I Receive a Complaint?), and to other specified state regulatory agencies with appropriate jurisdiction.
(1) This disclosure must appear exactly as set out in the relevant model contract, including the names and contact information for each regulatory agency, without modification, and will vary in context depending on whether the proposed contract is trust-funded or insurance-funded. The model disclosures for both trust-funded and insurance-funded contracts appear in:
(2) If the disclosure does not appear at the bottom of the last page of the contract following the signatures of the parties, it must be placed at the top or bottom of a preceding page and be separated from other contract text by at least 1/2 inches of white space. If the contract is in electronic form, the disclosure must appear immediately preceding the area a purchaser can sign the contract. The disclosure may not be placed on a page by itself.
(l) Additional requirements. A proposed prepaid funeral benefits contract must also contain:
(1) page numbers, unless in an electronic form that does not contain pages;
(2) a document title that discloses the contract is for the purpose of prearranging a funeral, such as "Prepaid Funeral Benefits Contract";
(3) a distinguishing form number or name;
(4) your permit number; and
(5) a space for the contract number on at least one of the contract pages.
(m) Your proposed non-model contract or waiver form may contain:
(1) additional contract clauses that are fair to consumers in light of the purpose of Finance Code, Chapter 154; and
(2) additional consumer disclosures that you determine:
(A) will assist the purchaser in understanding the transaction; or
(B) are required by other state or federal law for the type of transaction the contract represents.
(n) Electronic contract requirements. A proposed non-model contract in electronic form must contain all consumer disclosures required under Electronic Signatures in Global and National Commerce Act, 15 U.S.C., §7001, before any other provision and may be on a separate screen.
Source: The provisions of this §25.3 adopted to be effective March 14, 2002, 27 TexReg 1706; amended to be effective January 7, 2010, 35 TexReg 204: amended to be effective November 4, 2011, 35 TexReg 9696; amended to be effective September 8, 2011, 36 TexReg 5668; amended to be effective January 5, 2012, 36 TexReg 9284; amended to be effective November 10, 2016, 41 TexReg 8814.
(a) Overview. If you elect to not use a model contract or waiver, you must prepare a non-model prepaid funeral benefits contract or a waiver of cancellation rights, whether in English or Spanish, in plain language designed to be easily understood by the average consumer. Your proposed non-model document must also be printed or displayed in an easily readable font and type size. The department is charged with enforcing these requirements by Finance Code, §154.151(d).
(b) Plain language principles for English documents. The department will consider the extent to which you have incorporated plain language principles into the organization, language, and design of a non-model document that you submit for approval. At a minimum, your proposed non-model document, including an electronic non-model document, should substantially comply with each of the plain language writing principles identified in this subsection.
(1) You must present information in clear, concise sections, paragraphs, and sentences. Whenever possible, you should use the active voice with strong verbs in short, explanatory sentences and bullet lists. Passive voice is not banned but should be used sparingly.
(2) You should use everyday words whenever possible and avoid the use of legal and highly technical business terminology. In those instances where no plain language alternative is apparent, you should explain what the term means when the term is first used. Use of a defined term may improve readability in such instances.
(3) You should group related information together whenever possible to help identify and eliminate repetitious information.
(4) You should use first-person plural (we, us, our/ours) and second-person singular (you, your/yours) pronouns.
(5) You should make complex information more understandable by using an example scenario or a "question and answer" format.
(c) Attributes to avoid. The department will consider the extent to which you avoid the detrimental attributes identified in this subsection. In preparing your proposed non-model document, you should not:
(1) include a term in definitions unless the meaning of the term is unclear from the context and cannot be easily explained in context, or rely on artificially defined terms as the primary means of explaining information;
(2) use superfluous words (words that can be replaced with fewer words that mean the same thing) that detract from understanding;
(3) rely on legalistic or overly complex presentations;
(4) copy complex information directly from legal documents, statutes, or rules without a clear and concise explanation of the material;
(5) unnecessarily repeat information in different sections of the non-model document; or
(6) use multiple negatives.
(d) Typeface (font). Typefaces come in two varieties: serif and sans serif. All serif typefaces have small lines at the beginning or ending strokes of each letter. Sans serif typefaces lack those small connective lines.
(1) The text of your proposed non-model document must be set in a serif typeface. Popular serif typefaces include Times, Scala, Caslon, Century Schoolbook, and Garamond.
(2) A sans serif typeface may be used for titles, headings, subheadings, captions, and illustrative or explanatory tables or sidebars to distinguish between different levels of information or provide emphasis. Popular sans serif typefaces include Scala Sans, Franklin Gothic, Frutiger, Helvetica, Ariel, and Univers.
(e) Type size and line spacing. You must select a type size for your proposed non-model document that is clearly legible. Minimum type size and line spacing are specified in this subsection. If other state or federal law requires a different type size for a specific disclosure or contractual provision, you should set the specific disclosure or contractual provision in the type size specified by other law.
(1) Typeface size is referred to in points (pt). Because different typefaces in the same point size are not of equal size, type size is not strictly defined in this subsection but is expressed as a minimum size in the Times typeface for visual comparative purposes. Use of a larger size typeface is encouraged. Generally, the type size must be at least as large as 10pt in the Times typeface, except the type size must be at least as large as 9pt in the Times typeface for:
(A) the statement of funeral goods and services selected, as described in §25.3(b) and (c) of this title (relating to What Requirements Apply to a Non-Model Contract); and
(B) the consumer inquiries and complaints disclosure, described in §25.3(k) of this title.
(2) You must use line spacing that is at least 120% of the type size. For example, a 10pt type should be set with 12pt leading (two points of additional leading between the lines).
(3) The department may approve a smaller type size or denser line spacing than specified in this subsection in limited circumstances, such as keeping related disclosures grouped together or satisfying a requirement to keep specified text on a single page. However, you must offset smaller type size or denser line spacing by use of other readability enhancements such as a more readable typeface or greater use of white space through wider margins or divisions between sections of the document.
(f) Formatting and design. The department will consider the extent to which your non-model document uses the plain language formatting and design concepts described in this subsection.
(1) You should use left-justified text (text aligned flush on the left, with a loose, or ragged, right edge) in any paragraph or section of your document that has text lines exceeding 70 characters in length. If you seek approval of a document containing any full-justified paragraph or section with text lines exceeding 70 characters in length (text aligned flush on both left and right sides), the full-justified portions of your proposed document should at a minimum use a larger type size than specified in subsection (e) of this section. You should also add other readability enhancements, such as a more readable typeface or greater use of white space, including wider margins and additional leading between lines.
(2) The minimum recommended page size of a proposed non-model contract is 8-1/2 inches by 11 or 14 inches and 8-1/2 inches by 11 inches for a proposed non-model waiver. However, the page size should ordinarily not be larger than 8-1/2 inches by 17 inches. This paragraph does not apply to a contract in electronic form.
(3) You must use descriptive headings and subheadings that are conceptually similar to or match the headings in the department's model contract.
(4) You may use tabular presentations or bullet lists to simplify disclosure of complex material. You may also use pictures, logos, charts, graphs, or other design elements so long as the design is not misleading and the required information is clear.
(g) Readability statistics. The department will consider the readability statistics generated by your non-model document in the tests described in this subsection.
(1) The department's evaluation of your proposed non-model document will include results of automated readability tests applied to the complete document, without omission of titles or other attributes of the document. These tests are commonly available in word processing software, including Microsoft Word and Corel WordPerfect. Because mechanical readability formulas do not evaluate the substantive content of a document, the department will exercise judgment when considering the readability statistics generated by these tests. However, absent explanatory circumstances or additional justification persuasive to the commissioner, your proposed non-model document will ordinarily not be approved if:
(A) over 21% of the sentences are passive in structure;
(B) the average sentence length exceeds 19 words;
(C) the Flesch reading ease score is less than 47.0; and
(D) the Flesch-Kincaid grade level score is higher than 11.0.
(2) As part of your application for department approval, you must disclose the readability statistics you generated in evaluating the final draft of your proposed document and explain the circumstances and justifications for any scores outside the parameters expressed in this subsection.
Source: The provisions of this §25.4 adopted to be effective March 14, 2002, 27 TexReg 1706; amended to be effective January 7, 2010, 35 TexReg 204; amended to be effective November 10, 2016, 41 TexReg 8814.
(a) Authority. Finance Code, §154.151(a), requires the department to approve a prepaid funeral benefits contract form before you use the form. Finance Code, §154.156(a), requires the department to approve a waiver of cancellation rights form in the same manner. You may use the department's model contracts or model waiver as provided in §25.2(a) of this title (relating to Am I Required to Use the Model Contract and Model Waiver). This section describes:
(1) how to apply to the department for approval of your proposed non-model contract, what information, documents, and fees you must file as part of your application before the department will accept it for filing, and what fees the department may impose, in subsection (b) of this section;
(2) what procedures the department will follow to approve or deny approval of your proposed non-model document and when you may reasonably expect the department to decide, in subsection (c) of this section;
(3) what actions you must take to obtain a second review by the department or a hearing before the commissioner if the department denies approval of your proposed non-model document, in subsection (d) of this section;
(4) how you may request a hearing before the commissioner, how the hearing will be conducted, and what the staff of the department must prove to uphold the disapproval, in subsection (e) of this section; and
(5) when you may no longer use an approved contract form, in subsection (f) of this section.
(b) Application for approval. Your application for approval of your proposed non-model document must be in writing and include all additional information, documents, and fees required by this subsection. You should file your application as far in advance of the date you intend to use your proposed document as possible.
(1) The additional information, documents, and fees that you must file as part of your application include:
(A) both a printed copy of your proposed non-model document and an electronic version of the document, prepared using Microsoft Word or Corel WordPerfect software, including computer screenshots of any portion to be used in electronic form;
(B) except as provided in §25.2(d) of this title, an English translation if the proposed non-model document is in Spanish and a certification from a translation service acceptable to the department that the filed English version is a true and correct translation of the proposed Spanish non-model document filed for approval;
(C) if your application is for approval of amendments to a previously approved non-model document:
(i) a printed copy of the proposed non-model document that is specifically marked to show all text proposed to be added and all text proposed to be deleted; and
(ii) a written summary of the amendments, both additions and deletions, explaining their purpose;
(D) a certification on a form supplied by the department, signed and acknowledged by you or your authorized agent, that you have reviewed the proposed non-model document that you filed for approval and to the best of your knowledge:
(i) your proposed non-model document complies with all applicable state and federal law, including Finance Code, Chapter 154, and this chapter;
(ii) if in electronic form, your proposed non-model document also complies with Business and Commerce Code, Chapter 322, and Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §7001, et seq; and
(iii) if your application is for approval of amendments to a previously approved non-model document, the proposed non-model document is identical to the previously approved document except for text specifically marked as additions and deletions;
(E) unless you notify the department that it already has a copy on file:
(i) a copy of all related contracts and agreements that are part of your prepaid funeral arrangement, such as a separate finance charge agreement; and
(ii) if the proposed non-model document is an insurance-funded contract, a copy of the insurance policy form you intend to use and written evidence from the Texas Department of Insurance that the insurance policy has been approved for use in conjunction with the sale of prepaid funeral benefits; and
(F) payment of a $250 filing fee, except that upon request the department may waive or reduce the fee for review of minor amendments to a previously approved non-model document that are submitted under subparagraph (C) of this paragraph.
(2) Your application is considered accepted for filing and eligible for consideration if the application is substantially complete with all information, documents, and fees required by paragraph (1) of this subsection. At your request, the department will inform you in writing of the date it considers your application accepted for filing.
(3) If the department's review of a non-model document takes longer than four employee hours, you must pay a review fee of $60 per employee hour in excess of four hours. If you fail to pay review fees on or before the 10th day after you receive a written statement of charges due from the department, the department may exercise its discretion to conclude that you have withdrawn your application.
(c) Review process. This subsection describes when you may reasonably expect the department to approve or deny approval of your proposed non-model document and the procedure the department will follow in making its initial decision.
(1) The time the department's decision is due regarding your proposed non-model document will vary depending upon the date your application is accepted for filing under subsection (b)(2) of this section and on the nature of the document you seek to have approved.
(A) If your proposed non-model contract filing is the result of legislative amendments to Finance Code Chapter 154 effective on or after September 1, 2009, your non-model contract filing will be considered a new contract filing and the department will approve or deny approval on or before the 45th day after the date your application is accepted for filing.
(B) If your proposed non-model document is a non-model waiver or an amended version of a non-model contract previously approved by the department under this section, the department will approve or deny approval on or before the 30th day after the date your application is accepted for filing, except the department will either approve or deny approval on or before the 10th day after the date your application is accepted for filing if the proposed amendments are limited to changed or added information about you or a funeral home.
(2) The department may extend the date its decision is due under this subsection by up to an additional 30 days if it determines that your application raises issues requiring additional information or additional time for analysis. The department may request additional information from you in writing if the information is reasonably necessary for an informed decision to approve or deny approval of your proposed non-model document. If you receive a written request for additional information, you must file the information or a satisfactory written explanation of when the information can be filed with the department on or before the 30th day after the date you receive the request. If you fail to reply within this time period the department may exercise its discretion to conclude that you have withdrawn your application.
(3) The department will approve your proposed non-model document unless a specific basis exists to deny approval. The department will deny approval if your proposed non-model document fails to comply with the standards of this subchapter that apply. If the department discovers and confirms that use of the proposed non-model document will clearly violate a mandatory requirement of an applicable state or federal law other than Finance Code, Chapter 154, and this chapter, the department will deny approval. However, the department will ordinarily not review a proposed non-model document for compliance with other law, and approval of a non-model document under this section does not mean the department has determined that the non-model document complies with any state and federal law other than Finance Code, Chapter 154, and this chapter.
(4) If the department denies approval of your proposed non-model document, the department will send you a written notice of denial that:
(A) states the specific basis for the denial in writing and cites the specific provisions of law that the document does not satisfy;
(B) informs you that, on or before the 30th day after the date you receive the notice of denial, you must exercise your rights under subsection (d) of this section, to file either a written request for hearing or a revised non-model document for second review, or the denial will become final.
(d) Your rights after initial denial. This subsection describes the further actions you may take to obtain approval of your non-model document if the department initially denies approval under subsection (c) of this section.
(1) If the department denies approval of your proposed non-model document under subsection (c) of this section, you may file a written request for hearing before the commissioner under subsection (e) of this section or seek the department's second review by filing a new version of your proposed non-model document that you have specifically revised to address the reasons for denial.
(2) If you elect to file a new version of your proposed non-model document for second review, the department will consider the revised document to be part of your original application and will not require a new filing fee but may charge additional review fees under subsection (b)(3) of this section. The department will approve or deny approval of your revised non-model document on or before the 10th day following the date of its filing.
(3) If the department denies approval of your revised non-model document, the department will send you a second written notice of denial that:
(A) states the specific basis for the denial in writing and cites the specific provisions of law that the revised non-model document does not satisfy;
(B) if minor changes to the proposed document would result in approval and you have not previously been given the opportunity to make these changes, informs you of the opportunity to obtain approval by submitting your document with the specified changes on or before the 10th day after the date you receive the department's second written notice of denial; and
(C) informs you that you must file a written request for hearing with the department under subsection (e) of this section on or before the 30th day after the date you receive the department's second written notice of denial or the denial will become final.
(e) Commissioner hearing. This subsection describes how you may obtain a hearing before the commissioner and how the hearing will be conducted.
(1) To obtain a hearing before the commissioner, you must file a written request for hearing with the department on or before the 30th day after the date you receive the department's written notice of denial. Your written request for hearing must state with specificity the reasons you allege the department's denial of approval is in error.
(2) The department will forward your request for hearing to the administrative law judge, who shall enter appropriate orders and conduct the hearing on or before the 60th day after the date your request for hearing was received, under Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemaking) and Government Code, Chapter 2001. Your complete application, the department's notice or notices of denial, and your request for hearing will be made a part of the record.
(3) At the hearing, the staff of the department bears the burden of proof that approval of your proposed non-model document should be denied.
(4) The proposal for decision, exceptions and replies to the proposal for decision, the order of the commissioner, and motions for rehearing are governed by Chapter 9 of this title and Government Code, Chapter 2001.
(f) Withdrawn approval. The department may withdraw its approval of a model or previously approved non-model document for future use if governing law is changed or clarified by statute, rule, or judicial opinion. The department will notify you in writing if you are affected by a withdrawn approval.
Source: The provisions of this §25.5 adopted to be effective March 14, 2002, 27 TexReg 1706; amended to be effective March 11, 2004, 29 TexReg 2301; amended to be effective January 7, 2010, 35 TexReg 204; amended to be effective November 10, 2016, 41 TexReg 8814.
(a) At the conclusion of a discussion about funeral arrangements, if someone purchases prepaid funeral goods or services, whether trust-funded or insurance-funded, you must give the purchaser a copy of the contract and all related agreements.
(b) On or before the 30th day after the contract is executed by all parties, you must give a copy of the fully-executed contract to the purchaser, to any third-party provider or administrator that has responsibility for any portion of the contract, and, with respect to an insurance-funded contract, to the insurance company issuing the insurance policy, if the insurance company is a party to the contract.
(c) If a purchaser signs a written waiver of cancellation rights, you must give the purchaser a copy of the executed waiver at the time of execution.
(d) To give a purchaser a copy of the contract, you must give the purchaser a paper copy unless an electronic contract was used.
(e) If an electronic contract was used, you may deliver an electronic record of the contract and all related agreements by email or other electronic means to the purchaser if the purchaser has consented to receiving an electronic record as specified in §25.2(f)(1)-(2). If the purchaser requests a paper copy or is unable to retrieve the electronic record, you must give the purchaser a paper copy. You may not charge a fee for providing a paper copy.
Source: The provisions of this §25.6 adopted to be effective March 14, 2002, 27 TexReg 1706; amended to be effective November 10, 2016, 41 TexReg 8814.
(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Casket-A rigid container, including but not limited to casket inserts and rest beds, which is designed for the encasement of human remains and which is usually constructed of wood, metal, fiberglass, plastic, or like material, and ornamented and lined with fabric.
(2) Contract-The prepaid funeral benefits contract.
(3) Outer-burial container-Any container which is designed for placement in the grave around the casket including, but not limited to, containers commonly known as burial vaults, grave boxes, and grave liners. The term "outer-burial container" does not include lawn crypts regulated under the Texas Health and Safety Code, Chapters 711 and 712.
(4) Urn-A temporary or permanent receptacle used for the containment of cremated remains.
(b) Descriptions.
(1) Conformity of descriptions. The prepaid funeral benefits contract must fully describe all services and merchandise purchased, including the casket or urn and any outer-burial container, as required by this section.
(2) Description content.
(A) Caskets. The description of a casket under this section must, at a minimum, include the following specifications:
(i) The type of material that is predominately used in the construction of the merchandise, i.e.:
(I) steel, identified as stainless or by gauge, e.g., 18 gauge;
(II) wood, identified by type, e.g., pecan or cherry;
(III) bronze, described by weight, e.g., 32 oz.;
(IV) copper, described by weight, e.g., 32 oz.; or
(V) other specifically named material, e.g., as cardboard or corrugated wood;
(ii) The type of sealing feature, e.g., sealer, non-sealer, gasketed, or non-gasketed, if specified on the permit holder´s price list; and
(iii) The material lining the interior of the casket, e.g., crepe, velvet, satin, twill, or silk.
(B) Urns. The description of an urn under this section must, at a minimum, include the type of material predominately used in its construction. Bronze urns must be described as sheet bronze or cast bronze, whichever is applicable.
(C) Outer-burial container. The description of an outer-burial container under this section must, at a minimum, include the following specifications:
(i) The type of material that is predominately used in the construction of the merchandise, i.e.:
(I) concrete, specifying type of construction, e.g., liner, box, or vault;
(II) steel, identified as stainless or by gauge, e.g., 12 gauge (or described as galvanized of a particular gauge);
(III) wood;
(IV) bronze or copper, described by weight or gauge, e.g., 32 oz. or 18 gauge;
(V) other specifically named material; and
(ii) The type of sealing feature, e.g., sealer, non-sealer, if specified on the permit holder´s price list.
(D) Caskets, urns, and outer-burial containers. Merchandise that is marketed as being of a particular content or fabrication, e.g., a fiberglass liner, must be described under this section according to the particular content or fabrication referenced in marketing the product.
(E) Optional disclosures. Except for information required under this section, no additional description of caskets, urns, or outer burial containers is required; however, relevant information, e.g., a model number or color, may be added to a description at the election of the permit holder.
(c) Rule application. With respect to contracts entered prior to the effective date of this section or the effective date of any amendment to this section, a permit holder will not violate this section or such amendment if it fails to comply with one or more requirements of this section or an amendment that were not previously required by statute or rule.
Source: The provisions of this §25.7 adopted to be effective March 25, 1997, 22 TexReg 2870; amended to be effective January 7, 2010, 35 TexReg 204, amended to be effective May 7, 2020, 45 TexReg 2829.
(a) For purposes of this section, the term "funeral goods" means tangible and nonperishable items of personalty, designed for use in connection with a funeral service, that are sold or offered for sale directly to the public, including an alternative container, casket, or outer burial container, but not including a marker, monument, or tombstone.
(b) A person who sells or offers to sell funeral goods prior to the death of the person for whom the goods are to be used is considered to be selling or offering to sell funeral merchandise on a preneed basis, and must be licensed under Finance Code, Chapter 154, unless, with respect to each and every offer or sale of funeral goods:
(1) the offer to sell funeral goods contemplates only a contemporaneous exchange of consideration and either delivery of actual physical possession and control of the funeral goods to the purchaser, or shipment of the goods directly to the purchaser;
(2) within 72 hours of the time of sale, the seller delivers actual physical possession and control of the funeral goods or orders a third party to immediately ship the goods directly to the purchaser;
(3) within 72 hours of the time of sale, the purchaser removes the funeral goods from the premises of the seller from whom and where the goods are purchased, or receives confirmation of shipping instructions consistent with paragraph (2) of this subsection;
(4) neither the seller nor another person that receives consideration for the sale of the funeral goods or, within the actual knowledge of the seller, for a prepaid funeral service in which the goods are intended for use directly or indirectly offers to store or stores the goods for the purchaser; and
(5) the goods are not sold in connection with, or in contemplation of trade or barter for, prepaid funeral benefits to be delivered by the seller or an affiliate of the seller.
(c) A seller of funeral goods is not considered to be selling funeral merchandise on a preneed basis solely because the seller takes a promissory note as consideration for the sale and retains a nonpossessory security interest in the funeral goods sold, provided the conditions of subsection (b) of this section are otherwise met.
(d) A seller of funeral goods must maintain written records of each sale adequate to demonstrate compliance with this section. Such records are subject to subpoena by the department pursuant to Finance Code, §35.203. Failure to comply with the conditions for exemption with respect to each and every sale of funeral goods may subject to seller to criminal and civil remedies set forth in Finance Code, §35.201 et seq and §154.401 et seq.
Source: The provisions of this §25.8 adopted to be effective October 5, 1998, 23 TexReg 9973.
(a) For purposes of this section, the term "package sale" means a grouping of multiple funeral goods and services which is offered to the purchaser at a single price.
(b) Each good or service included in a package sale may have its individual value listed on the prepaid contract.
(1) If individual values are listed, and the package price is different than the sum of the listed values of each good or service included in the package sale, the contract must represent the package sale by listing a discount, credit, or price adjustment representing the difference.
(2) If individual values are listed, the value assigned to any funeral good or service included in a package sale, minus a proportional fraction of the package discount or credit, must be used:
(A) for purposes of compliance with Finance Code §154.1551 in the event of modification after the death of the beneficiary; and
(B) as the "agreed price" for purposes of preparing a written pre-need to at-need reconciliation under Finance Code §154.161(a)(2)(B).
(c) If individual values are not listed for each good or service included in a package sale, the word "included" must be listed for each item, provided that the following disclosure statement be made: "No refund or credit will be issued for package sale goods or services which remain unused by the customer at the time of need."
(1) Such disclosure statement may be included in the contract form, the provider's price list, or provided as an addendum. If included in the contract form, the disclosure statement must be included on page one or two of the contract. If included on the price list, the disclosure statement must be on each package price page. If provided as an addendum to the contract, it must be signed by both parties.
(2) In the event of modification after the death of the beneficiary, prices of funeral goods and services at the time of death must be used for purposes of compliance with Finance Code §154.1551.
(d) This section is effective for contracts executed after January 31, 2012.
Source: The provisions of this §25.9 adopted to be effective January 5, 2012, 36 TexReg 9284.
Subchapter B. Regulation of Licenses
(a) Application and general requirements. This section applies to a permit holder that sells or maintains insurance-funded prepaid funeral benefit contracts (prepaid contracts). Unless the commissioner grants an exception as provided for in subsections (f)(3) and (g) of this section, a permit holder must maintain and produce for examination the records as specified in this section. The permit holder:
(1) must make the records available to the department for examination at the physical location in Texas or if approved by the commissioner, in another state that the permit holder has designated in written notice to the department on file at the time of the examination;
(2) is required to make all the records specified in the department's pre-examination records request available to the department at the beginning of an examination and must produce such other records that provide additional clarification of required documents as may be requested during the examination in a manner that does not impede the efficient completion of the examination; and
(3) must maintain the records either in hard-copy form, in an electronic database, or on another form of media from which the record can be retrieved and printed in hard copy in a manner that does not impede the efficient completion of the examination.
(b) Corporate records. Corporate records of a permit holder subject to this section and all corporate minutes must be maintained and made available to the department at each examination.
(c) General files. A permit holder subject to this section must maintain and produce for department examination general files regarding its prepaid funeral benefits operations. The files must contain the original or a copy of the following:
(1) financial statements of the permit holder or the permit holder's parent or holding company including a balance sheet and income statement dated not later than the last day of the permit holder's preceding fiscal year, or the permit holder's most recent income tax return, or if the permit holder is an insurance company, the most recent statement filed with the insurance regulatory agency of the insurance company's state of domicile;
(2) if the permit holder received a uniform risk rating of 3, 4, or 5 at the last examination or if the last examination was a limited scope examination, the examination report acknowledgments, signed by the permit holder's board of directors, for the last examination report;
(3) the Texas Department of Insurance (TDI) approval letter and sample copy of policy form for each policy currently being issued to fund prepaid funeral contracts in the Texas preneed market;
(4) all written complaints received related to insurance-funded prepaid funeral contracts, documents related to any regulatory action, and documents evidencing litigation activity since the last examination;
(5) all recordkeeping exceptions and other department or commissioner approvals or directions upon which the permit holder relies in connection with its current operations;
(6) if the permit holder is an insurance company or an entity that controls or is controlled by an insurance company, a copy of the examination reports of the insurance regulatory agency of the insurance company's state of domicile for the period since the last examination, and the responses to the regulatory agency regarding examination report findings that are pertinent to the prepaid funeral benefits business, unless the law of the state of domicile prohibits disclosure of the examination reports and related correspondence to the department;
(7) for any outstanding prepaid contract with a funeral provider that has an issue date since the last examination, either:
(A) general, casket, outer burial container, and urn price lists for the corresponding or contracted funeral provider; or
(B) alternative documentation that demonstrates compliance with required casket, outer-burial container and urn merchandise descriptions;
(8) a list of funeral home providers for all outstanding contracts;
(9) a list of TDI licensed insurance agents currently selling for the permit holder; and
(10) a list of funeral home providers that are known to the permit holder to have ceased business since the last examination.
(d) Individual files.
(1) A permit holder subject to this section must maintain a file for each prepaid funeral contract. The file must either be maintained separately or be capable of retrieval separately for outstanding contracts and may be maintained either chronologically, alphabetically or serially by policy number. Each file must contain all correspondence pertaining to the contract, including documentation to evidence that the executed prepaid funeral contract has been issued to the contract purchaser and the funding policy has been issued to the policy owner within 30 days of the receipt of the initial down payment and insurance application.
(2) Each file pertaining to an outstanding prepaid funeral contract must contain a copy of the executed policy application, executed prepaid funeral contract, any irrevocable assignments, and the data face sheet of the insurance policy or annuity contract funding the prepaid funeral contract.
(3) Each file pertaining to a matured prepaid funeral contract must be retained for the period since the last examination. The file must contain copies of all documents required for an outstanding prepaid funeral contract. In addition:
(A) a matured-contract file for which services were provided by the contracted funeral provider or were provided under an assignment, by an agreed to Texas successor provider must contain:
(i) the original or a final copy of the completed at-need contract or funeral purchase agreement, itemization of services performed and merchandise delivered, or the interment order if the prepaid contract relates only to a grave opening and closing fee, outer burial container or other related merchandise and services. The document must be signed by the decedent's personal representative and indicate the prepaid credits and discounts applied and the balance due, if any, from the family at the time of death;
(ii) documentation to substantiate any upgrades or downgrades or discounts or credits given and to explain any differences between the prepaid and the at-need contracts;
(iii) a copy of a Texas certified death certificate or a death certificate from the state in which death occurred;
(iv) evidence of payment of the policy(s) death benefits to the servicing funeral provider;
(v) documentation that reflects the balance owing, if any, on the funding policy(s) and the death benefits available at the time of claim;
(vi) if applicable, evidence of payment to the decedent's personal representative of any refund of contract overcharges by the provider; and
(vii) pre-need to at-need reconciliation, which must be signed by the funeral provider, if the provider is not also the seller.
(B) a matured contract file for which services were provided by a person other than a person listed in subparagraph (A) of this paragraph must contain:
(i) a signed assignment of benefits statement from the purchaser or purchaser's representative requesting the delivery of funds to the servicing funeral provider;
(ii) evidence of payment to the servicing funeral provider;
(iii) a copy of a Texas certified death certificate or a death certificate from the state in which death occurred; and
(iv) documentation to support the death benefits available at the time of claim.
(4) Each file pertaining to a canceled prepaid contract must be retained for the period since the last examination. The file must contain copies of all documents required for an outstanding contract, a completed departmental withdrawal form or evidence of departmental withdrawal approval, documentation to support the available cash surrender value of the funding policy, and evidence of payment of cancellation benefit.
(5) Each file pertaining to a prepaid contract whose funding insurance policy has changed status since the last examination, for example, to a reduced paid-up, lapsed, or extended term insurance policy, must be retained for the period since the last examination. The file must contain:
(A) copies of all documents required for an outstanding contract;
(B) a copy of the permit holder's letter to the purchaser which:
(i) informs the purchaser of contract status;
(ii) states the date of the status change and, if applicable, the reduced death benefit coverage amount;
(iii) states the termination date of such coverage; and
(iv) informs the purchaser that the prepaid benefits may not be honored by the funeral provider due to the non-forfeiture or delinquent status of the funding policy; and
(C) for a reduced paid-up or extended term policy, copies of an election form indicating the purchaser has chosen reduced paid-up or extended term status, unless the policy has automatic non-forfeiture provisions.
(e) Reports. A permit holder subject to this section must maintain the following records regarding its prepaid funeral benefits operations for both new and conversion sales:
(1) a report detailing new business issued within the reporting period sorted by policy type and maintained either chronologically by date of policy issuance, alphabetically by the insured's name, or serially by policy number. The new issue report must balance to the reconciliation report required under paragraph (4) of this subsection. Information required to be in separate columns includes:
(A) the insured's name;
(B) the policy number or numbers;
(C) the prepaid contract total;
(D) the date of policy issuance; and
(E) the death benefit, or insurance in force, whichever is applicable.
(2) reports detailing out-of-force and non-forfeiture policies, sorted by policy type, and subtotaled in count and reduced coverage amount by status codes for death maturity, canceled, surrendered, lapsed, reduced paid-up, extended term, voided, not taken, or such other codes which may be used to designate policies no longer in force, maintained either chronologically by date of policy issuance, alphabetically by the insured's name, or serially by policy number. If the reports cannot be sub-totaled, a separate report must be generated for each type of termination status or non-forfeiture change. The reports must balance to the reconciliation report required under paragraph (4) of this subsection. Information required to be in separate columns includes:
(A) the insured's name;
(B) the date of policy issuance;
(C) the policy number or numbers;
(D) the date the policy matured, lapsed, or was surrendered or canceled; and
(E) the death benefit amount that has been paid, reduced, deleted, or transferred.
(3) an in-force policy report, sorted by policy type and maintained either chronologically by date of policy issuance, alphabetically by the insured's name, or serially by policy number. The in-force report must balance to the reconciliation report required under paragraph (4) of this subsection. The report must provide the grand total number of policies or prepaid funeral contracts in force and the grand total of death benefit or insurance in force. Information required to be included in separate columns includes:
(A) the insured's name;
(B) the policy number or numbers;
(C) the prepaid contract total;
(D) the date of policy issuance;
(E) the death benefit, or insurance in force, whichever is applicable; and
(F) growth, e.g., dividends and interest, attributable to outstanding policies for the reporting period unless maintained on a separate report.
(4) a reconciliation report that shows the activity related to each policy that was identified in the new issue report required under paragraph (1) of this subsection and the out-of-force and non-forfeiture policy reports required under paragraph (2) of this subsection. In addition to the required reports detailed above, the permit holder must provide documentation to support any other changes to contract/policy count and/or death benefit reported. The ending totals of the respective reconciliation period for contract/policy count and death benefit reported, must balance to the totals on the corresponding in-force policy report required under paragraph (3) of this subsection. The permit holder may use the department's Annual Report Recapitulation of Policy Activity format to complete this report. The report must at a minimum be balanced as of June 30 and December 31 of each year; and
(5) a suspense report of all premiums being held on paid-up policies and premium paying policies where the premiums in suspense are equal to or greater than the modal premium amount.
(f) Exceptions.
(1) A permit holder that sells only insurance-funded contracts is not required to maintain records that are applicable only to trust-funded contracts.
(2) With respect to contracts sold prior to the effective date of this section, a permit holder will not violate this section if it cannot produce records required under this section which were not previously required by statute or rule. However, basic reporting of in-force benefit amounts and policy activity from the last examination date to the current examination date will be required of all permit holders for insurance companies that have outstanding insurance policies funding prepaid contracts in Texas.
(3) A permit holder may apply to the commissioner for an exception to the requirements of this section. An exception may be granted or revoked for good cause only by prior written direction of the commissioner.
(g) Relocation of records. Prior to changing the location where required records are maintained or where the examination is to be performed pursuant to §154.053(a) of the Texas Finance Code, a permit holder must notify the department, specifying the new address in writing, and, if the change in location requires the granting of an exception, comply with subsection (f)(3) of this section before required records are moved to the new location. The commissioner may revoke a records location if the commissioner determines that such action is necessary to effectively regulate the permit holder and examine the records.
(h) Maintenance of files. Documents and records required to be maintained under this section must be filed within 30 days of receipt. Cash withdrawn on death maturity must be posted within 30 days of actual withdrawal.
(i) Disaster recovery plan. If required records are maintained electronically, the permit holder must provide evidence of a disaster recovery plan, including documentation to substantiate periodic testing and test results or compliance with TDI business continuity planning requirements if applicable, that includes offsite data storage capabilities regarding all records and documentation related to prepaid funeral contracts.
Source: The provisions of this §25.10 adopted to be effective November 8, 2007, 32 TexReg 7897; amended to be effective July 8, 2010, 35 TexReg 5804, amended to be effective May 7, 2020, 45 TexReg 2829.
(a) Application and general requirements. This section applies to a permit holder that sells or maintains trust-funded prepaid funeral benefit contracts (prepaid contracts). Unless the commissioner grants an exception as provided for in subsections (f)(2) and (g) of this section, a permit holder must maintain and produce for examination the records as specified in this section. The permit holder:
(1) must make the records available to the department for examination at its physical location in Texas or if approved by the commissioner, in another state that the permit holder has designated in written notice to the department on file at the time of the examination;
(2) is required to make all the records specified in the department's pre-examination records request available to the department at the beginning of an examination and must produce such other records that provide additional clarification of required documents as may be requested during the examination in a manner that does not impede the efficient completion of the examination; and
(3) must maintain the records either in hard-copy form, in an electronic database, or on another form of media from which the record can be retrieved and printed in hard copy in a manner that does not impede the efficient completion of the examination.
(b) Corporate Records. All corporate records of a permit holder subject to this section and all corporate minutes created since the last examination must be maintained and made available to the department at each examination.
(c) General files. A permit holder subject to this section must maintain and produce for department examination general files regarding its prepaid funeral benefits operations. The files must contain the original or a copy of the following:
(1) unless the permit holder is restricted from selling prepaid funeral benefits, financial statements of the permit holder or the permit holder's parent or holding company including a balance sheet and income statement dated not later than the last day of the permit holder's preceding fiscal year, or the permit holder's most recent income tax return, which must also include a balance sheet;
(2) if the permit holder received a uniform risk rating of 3, 4, or 5 at the last examination or if the last examination was a limited scope examination, the examination report acknowledgements, signed by the permit holder's board of directors for the last examination report;
(3) all written complaints received since the last examination related to prepaid contracts, and all documents received or created since the last examination related to any regulatory action or evidencing litigation activity;
(4) all recordkeeping exceptions and other department or commissioner approvals or directions upon which the permit holder relies in connection with its current operations;
(5) all trust agreements approved by the department since the last examination and all trust agreements that are still active, including amendments and changes to the trust agreements and all successor trust agreements;
(6) all investment plans and reports created or received since the last examination, and all such plans and reports that apply to active trust funds;
(7) all preneed abandoned property reports filed with the department and the State Comptroller of Public Accounts since the last examination;
(8) records of the trustee/depository, reflecting at a minimum all savings account statements, certificate of deposit records, and/or trust statements, received since the last examination;
(9) a copy of all price lists for any outstanding prepaid contract that has an issue date since the last examination;
(10) if the permit holder sells through multiple locations or entities, provide a list of funeral home providers for all outstanding contracts; and
(11) a list of funeral home providers or entities that have outstanding contracts under this permit that are known to the permit holder to have ceased business since the last examination.
(d) Individual files.
(1) A permit holder subject to this section shall maintain a prepaid contract file on each purchaser. The file must either be maintained separately or be capable of retrieval separately for outstanding contracts and may be maintained either chronologically or alphabetically. Each file must contain all correspondence pertaining to the contract.
(2) Each file pertaining to an outstanding contract must contain a copy of the executed prepaid contract, any revocable and irrevocable assignments, the individual ledger, and, if applicable, all power of attorney agreements or letters of guardianship.
(3) Each file pertaining to a matured contract must be retained for the period since the last examination. The file must contain copies of all documents required for an outstanding prepaid contract. In addition, a matured contract file must contain:
(A) a fully executed and completed department withdrawal form or evidence of department withdrawal approval, and a computation of earnings withdrawal, if applicable, unless computation procedures are otherwise documented in the general file;
(B) the original or a final copy of the completed at-need contract or funeral purchase agreement, itemization of services performed and merchandise delivered, or the interment order if the prepaid contract relates only to a grave opening and closing fee, outer burial container or other related merchandise and services. The document must be signed by the decedent's personal representative and indicate the prepaid credits and discounts applied and the balance due, if any, from the family at the time of death;
(C) a copy of a Texas certified death certificate or a death certificate from the state in which death occurred;
(D) documentation to substantiate any upgrades or downgrades or discounts or credits given and to explain any differences between the prepaid and the at-need contracts;
(E) a pre-need to at-need reconciliation, which must be signed by the funeral provider, if the provider is not also the seller; and
(F) if applicable, evidence of payment to the decedent's personal representative of any refund of prepaid contract overcharges by the funeral provider.
(4) Each file pertaining to a matured-contract file for which services were provided by a funeral provider other than the permit holder or a permit holder related by common ownership, must be retained for the period since the last examination. The file must contain copies of all documents required for an outstanding prepaid contract and:
(A) a signed statement from the purchaser or purchaser's representative requesting the delivery of funds to the servicing funeral provider;
(B) evidence of payment to the servicing funeral provider; and
(C) a copy of a Texas certified death certificate or a death certificate from the state in which death occurred.
(5) Each file pertaining to a canceled prepaid contract must be retained for the period since the last examination. The file must contain copies of all documents required for an outstanding contract, a completed departmental withdrawal form or evidence of departmental withdrawal approval; and evidence of payment of the cancellation benefit.
(e) Other records. A permit holder subject to this section must maintain the following records regarding its prepaid funeral benefits operations in hard-copy form, in an electronic database, or on another form of media from which they may be reasonably retrieved in hard-copy form:
(1) an historical contract register, maintained either chronologically or by contract number, indicating:
(A) the contract number;
(B) the date of purchase;
(C) the purchaser's name;
(D) the beneficiary's name (if different from the purchaser's name);
(E) the amount of the contract; and
(F) final disposition of the contract, including notations as to whether the contract is matured or canceled, the date of withdrawal from the depository or date withdrawal requested from the depository, and the amount of funds withdrawn; or, in lieu thereof, a record separate from the register, listing matured and canceled contracts for the examination period and setting out the contract number, contract purchaser, date of withdrawal from the depository or date withdrawal was requested from the depository, and amount of the withdrawal;
(2) cash receipts records reflecting payments collected;
(3) deposit records reflecting payments deposited;
(4) individual ledgers for each contract purchaser, balanced at least quarterly to the control ledger and to the records of the trustee/depository, reflecting the:
(A) contract purchaser's name;
(B) contract number;
(C) the date of purchase;
(D) the face amount of the prepaid funeral contract;
(E) total finance charges payable under the contract, if any;
(F) total retention allowable under the contract, if any;
(G) beginning contract balance;
(H) amounts paid on the contract itemized to reflect retention, finance charges and principal paid with individual cumulative totals;
(I) earnings on deposits, if any; and
(J) total amount of the trust; and
(5) a control ledger for all purchasers, balanced at least quarterly to the principal total and contract count total of the individual ledgers and in total to the records of the trustee/depository, reflecting:
(A) the net cumulative total of outstanding contracts;
(B) deposits of payments;
(C) withdrawal of payments;
(D) net amount of payments on deposit;
(E) earnings of deposit accounts;
(F) earnings withdrawn on deposit accounts; and
(G) net amount of earnings.
(f) Exceptions.
(1) With respect to contracts sold prior to the effective date of this section, a permit holder will not violate this section if it cannot produce records required under this section which were not previously required by statute or rule.
(2) A permit holder may apply to the commissioner for an exception to the requirements of this section. An exception may be granted or revoked for good cause only by prior written direction of the commissioner.
(g) Relocation of Records. Prior to changing the location where required records are maintained or where the examination is to be performed pursuant to §154.053(a) of the Texas Finance Code, a permit holder must notify the department, specifying the new address in writing, and, if the change in location requires the granting of an exception, comply with subsection (f)(2) of this section before required records are moved to the new location. The commissioner may revoke approval of a records location if the commissioner determines that such action is necessary to effectively regulate the permit holder and examine the records.
(h) Maintenance of Files. Documents and records required to be maintained under this section must be filed within thirty days of receipt. Cash received must be posted within 30 days of receipt, and cash withdrawn on death maturity must be posted within 30 days of the actual withdrawal.
(i) Disaster recovery plan. If required records are maintained electronically, the permit holder must provide evidence of a disaster recovery plan, including documentation to substantiate periodic testing and test results, including offsite data storage capabilities regarding all records and documentation related to prepaid contracts.
Source: The provisions of this §25.11 adopted to be effective March 8, 2012, 37 TexReg 1497, amended to be effective May 7, 2020, 45 TexReg 2829.
(a) Death maturity. The funds on deposit on a matured contract may be withdrawn as prescribed by Finance Code, §154.262 and §154.263, without prior approval of the banking commissioner (the commissioner).
(b) Cancellation. The funds on deposit on a cancelled contract may be withdrawn as prescribed by Finance Code, §154.155 and §154.205, without prior approval of the commissioner.
(c) Payment of charges. Withdrawal of earnings for paying reasonable and necessary charges of a bank, savings bank, savings and loan association, trust department of a bank, or trust company does not need prior approval of the commissioner, but will be subject to examination.
(d) Payment of taxes. Withdrawal of earnings for the purpose of paying taxes caused or created by the existence of prepaid funeral deposit or trust accounts requires prior written approval of the commissioner. Approval may be requested by submitting documentation to substantiate the additional tax liability from prepaid funeral benefits earnings.
(e) Payment of guaranty fund assessments. A permit holder is authorized, without prior approval of the commissioner, to withdraw earnings for the purpose of paying guaranty fund assessments levied pursuant to the authority of Finance Code, §154.261.
(f) Payment of examination costs and assessments made in conjunction with examinations. Withdrawal of earnings for the purpose of paying to the department examination costs and assessments made in conjunction with the examination under Finance Code, §154.261, does not require prior approval of the commissioner.
(g) Abandoned funds. Withdrawal of abandoned funds under Finance Code, §154.303, require prior written approval of the commissioner of banking. Approval may be requested by submitting to the department a completed application for unclaimed property on a form prescribed by the Texas treasury department.
(h) Preparation of financial statements. A permit holder is authorized, with prior written approval of the commissioner, to withdraw earnings for the purpose of paying for the preparation of financial statements required by the department pursuant to the authority of Finance Code, §154.261, including financial statements required in lieu of an examination by the department. Approval may be requested by submitting a written request to the department together with the bill for preparation of the financial statement.
Source: The provisions of this §25.12 adopted to be effective May 2, 1984, 9 TexReg 2236; amended to be effective March 23, 1994, 19 TexReg 1651.
(a) Valid permit. A permit issued by the department to sell prepaid funeral benefits remains in effect until it is revoked by the department or surrendered by the permit holder.
(b) Date of filing. Each permit holder with outstanding prepaid funeral benefit contracts must file an annual report with the department by March 1 of each year for the preceding calendar year.
(c) Contents of filing. The Annual Report filing must be sworn to by an authorized agent or corporate officer of the permit holder before a notary and must provide:
(1) the name and permit number of the permit holder;
(2) a contact name and contact information for the permit holder;
(3) a recapitulation of the prepaid funeral benefits contract activity for the preceding calendar year, including beginning balances, additions, deletions, adjustments, and ending balances;
(4) a copy of the permit holder's in-force policy run or control ledger as of December 31 that substantiates the ending balances;
(5) an explanation for any material variances between the ending balances in the recapitulation described in subsection (c)(3) of this section, and those in the in-force policy run or control ledger described in subsection (c)(4) of this section;
(6) a sworn affidavit completed and signed by the insurance company or depository institution attesting to the permit holder's holdings, balances, or accounts as of December 31; and
(7) the Guaranty Fund assessment, if applicable.
Source: The provisions of this §25.13 adopted to be effective March 11, 2010, 35 TexReg 1952; amended to be effective September 8, 2019, 44 TexReg 4708, amended to be effective May 7, 2020, 45 TexReg 2829.
(a) In general. All prepaid funeral benefit permit holders are subject to periodic examination. As a result of the examination, the permit holder will be assigned a confidential uniform risk rating of 1 to 5 as further described in this section. The uniform risk rating represents a judgment of the overall risk profile presented by the permit holder in relation to the purposes of regulation. In general, a rating of 1 indicates the highest level of compliance and the least degree of supervisory concern, and a rating of 5 indicates the lowest level of compliance and the highest degree of supervisory concern. A rating of 3, 4 or 5 is considered less than satisfactory for purposes of Finance Code §154.053(b)(1)(A).
(b) Overall risk profile. Evaluation of the overall risk profile of the permit holder can be described as involving three interrelated attributes or components, although these attributes are not separately rated.
(1) Management. This attribute or portion of the evaluation involves judgment of the ability, skill, and motivation of management and staff of the permit holder to identify, measure, monitor, and control potential problems and risks. Competent management should be able to develop and apply management practices and procedures suitable to the size of the permit holder and the nature and complexity of its activities. In addition, the willingness and ability of management to comply with applicable laws and regulations are important considerations.
(2) Compliance. This attribute or portion of the evaluation involves judgment of the degree to which the permit holder administers prepaid funeral contracts in accordance with governing instruments and applicable laws and regulations and the degree to which the permit holder adheres to sound fiduciary principles. The examiner will consider the extent and nature of violations discovered during the examination, and will assess the manner and methods by which the permit holder discovers and corrects violations. Correction of violations cited in previous examinations will also be considered.
(3) Financial condition. This attribute or portion of the evaluation involves judgment of the overall financial condition of the permit holder in relation to the risks imposed by its size and the nature and complexity of its activities. An important consideration is the extent of the financial resources available to the permit holder for the purpose of fulfilling its responsibilities and obligations over the life of the prepaid funeral contracts under its control, including those currently outstanding and those reasonably anticipated to exist in the future. Availability of financial resources can be demonstrated through or enhanced by undertakings of a parent company or associated holding company.
(c) Uniform risk ratings. The uniform risk rating is a single number, 1 to 5, that is based upon a qualitative analysis of the overall risk profile of the permit holder. The rating is not determined through application of a mathematical formula, but is instead based upon a judgment that balances an assessment of the attributes described in subsection (b) of this section in light of all other relevant factors, such as the size of the permit holder and the complexity of its operations.
(1) Rating "1" (Strong Overall Condition). Permit holders assigned a uniform risk rating of 1 are sound in every respect; any adverse findings or comments are of a minor nature and can be resolved in the normal course of business by management. Permit holders in this group give no cause for supervisory concern.
(A) Management.
(i) Consistently and effectively identifies, measures, monitors, and controls potential problems and risks. Demonstrates the ability to promptly and successfully address existing and potential problems and risks.
(ii) Demonstrates strong management practices and procedures relative to the size of the permit holder and the nature and complexity of its activities.
(iii) Demonstrates a willingness and ability to comply with applicable laws and regulations.
(B) Compliance.
(i) Administers prepaid funeral contracts in accordance with governing instruments and applicable laws and regulations.
(ii) Demonstrates adherence to sound fiduciary principles.
(iii) Any noted violations are isolated, technical in nature and easily correctable.
(iv) Corrects any violations in a timely manner and correction may occur after self evaluation.
(C) Financial condition.
(i) The overall financial condition of the permit holder is strong in relation to the risks imposed by its size and the nature and complexity of its activities.
(ii) Demonstrates more than sufficient financial resources available for the purpose of fulfilling the permit holder's responsibilities and obligations over the life of the prepaid funeral contracts under its control, including those currently outstanding and those reasonably anticipated to exist in the future.
(2) Rating "2" (Satisfactory Overall Condition). Permit holders assigned a uniform risk rating of 2 are generally satisfactory but may reflect a few weaknesses. To the extent that deficiencies are correctable in the normal course of business, supervisory concern is not warranted.
(A) Management.
(i) In general, effectively identifies, measures, monitors, and controls potential problems and risks. Minor weaknesses may exist, but are not material to the soundness of the permit holder and are being addressed.
(ii) Demonstrates satisfactory management practices and procedures relative to the size of the permit holder and the nature and complexity of its activities.
(iii) Demonstrates a willingness and ability to comply with applicable laws and regulations.
(B) Compliance.
(i) Administers prepaid funeral contracts in substantial compliance with governing instruments and applicable laws and regulations.
(ii) Demonstrates adherence to sound fiduciary principles.
(iii) Any noted violations are generally technical in nature and few in number.
(iv) Corrects violations in a timely manner.
(C) Financial condition.
(i) The overall financial condition of the permit holder is satisfactory in relation to the risks imposed by its size and the nature and complexity of its activities.
(ii) Demonstrates sufficient financial resources available for the purpose of fulfilling the permit holder's responsibilities and obligations over the life of the prepaid funeral contracts under its control, including those currently outstanding and those reasonably anticipated to exist in the future.
(3) Rating "3" (Marginal Overall Condition). Permit holders assigned a uniform risk rating of 3 exhibit operating and compliance weaknesses ranging from moderate to marginally severe. Permit holders in this group require more than normal supervision to assure correction of deficiencies and are considered less than satisfactory.
(A) Management.
(i) May inadequately identify, measure, monitor, or control potential problems and risks. The capabilities or resources of management may be insufficient to address existing and potential problems and risks.
(ii) Management practices and procedures need improvement or are less than satisfactory in relation to the size of the permit holder and the nature and complexity of its activities.
(iii) May demonstrate a reluctance to take all necessary steps to comply with applicable laws and regulations.
(B) Compliance.
(i) Compliance practices are less than satisfactory. Contract administration may be in substantial noncompliance with governing instruments, and applicable laws.
(ii) May fail to consistently adhere to sound fiduciary principles.
(iii) Violations may be in evidence, some of which may be repeat criticisms.
(iv) May fail to correct violations in a timely manner.
(C) Financial condition.
(i) The overall financial condition of the permit holder is less than satisfactory in relation to the risks imposed by its size and the nature and complexity of its activities.
(ii) Financial resources may not be sufficient for the purpose of fulfilling the permit holder's responsibilities and obligations over the life of the prepaid funeral contracts under its control, including those currently outstanding and those reasonably anticipated to exist in the future. The permit holder's financial condition needs to be improved.
(4) Rating "4" (Poor Overall Condition). Permit holders assigned a uniform risk rating of 4 exhibit poor operating and compliance weaknesses. Permit holders in this group require increased supervisory attention to assure prompt corrective action.
(A) Management.
(i) The level of problems and risk exposure is excessive. Problems and risks are inadequately identified, measured, monitored, or controlled and require immediate action by management to preserve the soundness of the permit holder. Identified criticisms are not being addressed or resolved.
(ii) Management practices and procedures are inadequate relative to the size of the permit holder and the nature and complexity of its activities.
(iii) May demonstrate an unwillingness or inability to take all necessary steps to comply with applicable laws and regulations.
(B) Compliance.
(i) The level of compliance problems is significant. Contract administration may be notably deficient and in substantial noncompliance with governing instruments, and applicable laws.
(ii) May fail to consistently adhere to sound fiduciary principles.
(iii) Substantive violations exist and may remain uncorrected from previous examinations.
(iv) May fail to correct violations in a timely manner.
(C) Financial condition.
(i) The overall financial condition of the permit holder is deficient or deteriorating in relation to the risks imposed by its size and the nature and complexity of its activities.
(ii) Demonstrates insufficient financial resources available for the purpose of fulfilling the permit holder's responsibilities and obligations over the life of the prepaid funeral contracts under its control, including those currently outstanding and those reasonably anticipated to exist in the future. The permit holder's financial condition needs to be improved.
(5) Rating "5" (Critically Deficient Overall Condition). Permit holders assigned a uniform risk rating of 5 exhibit performance or conditions which are critically deficient in numerous major respects. Permit holders in this group are of the greatest supervisory concern and as such, require ongoing supervisory attention.
(A) Management.
(i) Problems and risks are inadequately identified, measured, monitored, or controlled and now threaten the continued viability of the permit holder or the ability to perform as contracted. Incompetent or neglectful administration and inadequate resources may have contributed to existing problems. Management has not demonstrated the ability to promptly and successfully address existing and potential problems and risks.
(ii) Management practices and procedures are critically deficient relative to the size of the permit holder and the nature and complexity of its activities, and may evidence a flagrant disregard for the interests of contract purchasers and beneficiaries.
(iii) May demonstrate an unwillingness or inability to take all necessary steps to comply with applicable laws and regulations.
(B) Compliance.
(i) The level of compliance problems is critically deficient. Contract administration may be critically deficient or incompetent and there is a flagrant disregard for the terms of the governing instruments, and interests of contract beneficiaries.
(ii) May frequently engage in transactions that compromise its duties and sound fiduciary principles.
(iii) Numerous substantive violations exist and may be flagrant or repeated.
(iv) Fails to correct violations in a timely manner.
(C) Financial condition.
(i) The overall financial condition of the permit holder is critically deficient in relation to the risks imposed by its size and the nature and complexity of its activities.
(ii) Demonstrates insufficient financial resources available for the purpose of fulfilling the permit holder's responsibilities and obligations over the life of the prepaid funeral contracts under its control, including those currently outstanding and those reasonably anticipated to exist in the future. The continued viability of the permit holder is threatened.
Source: The provisions of this §25.14 adopted to be effective March 11, 2010, 35 TexReg 1953.
(a) Fund established. Pursuant to Finance Code Chapter 154, Subchapter H, guaranty fund is established to guarantee performance by sellers and providers of prepaid funeral services. The fund is named the Prepaid Funeral Guaranty Fund, and is supervised by an advisory council composed of members as set out in Finance Code §154.355. The fund is composed of two separate accounts, one for trust-funded contracts and one for insurance-funded contracts.
(b) Advisory Council. The advisory council is named the Guaranty Fund Advisory Council. The consumer representative and the insurance-funded industry representative serve a two-year term beginning on January 1 of an even-numbered year and ending December 31 of the following odd-numbered year. The trust-funded industry representative serves a two-year term beginning on January 1 of an odd-numbered year and ending December 31 of the following even-numbered year. The banking commissioner or the commissioner's official designee serves as the chairperson of the council.
(c) Assessments. The department shall make and collect assessments from all sellers of prepaid funeral benefits pursuant to Finance Code Chapter 154, Subchapter H. Each seller shall remit the amount of its calculated assessment to the department each year with its Annual Report filing.
(d) Expenses. The commissioner may use any earnings from the Prepaid Funeral Guaranty Fund for reimbursement of travel expenses incurred by the industry and the consumer representatives of the Guaranty Fund Advisory Council pursuant to the travel guidelines applicable to state employees, and for the expenses of providing any other legislatively mandated action with respect to the Prepaid Funeral Guaranty Fund, including but not limited to audits.
(e) Meetings. The Guaranty Fund Advisory Council shall meet on a periodic basis as determined by the commissioner in order to fulfill the requirements of supervising the operation and maintenance of the Prepaid Funeral Guaranty Fund.
Source: The provisions of this §25.17 adopted to be effective November 5, 2009, 34 TexReg 7597; amended to be effective November 10, 2011, 36 TexReg 7505, amended to be effective May 7, 2020, 45 TexReg 2829.
(a) Notice. Within 30 days of cancellation of a permit to sell prepaid funeral benefits, the department shall notify the parties to the contracts sold by the cancelled permit holder of the cancellation. The notice shall provide information regarding the purchaser's options, the Prepaid Funeral Guaranty Fund, and the process for seeking a successor permit holder.
(b) Bid list. The department shall maintain a bid list of entities that wish to:
(1) bid for the right to assume a cancelled trust-funded permit holder's obligations under prepaid funeral contracts and the right to receive the balance of prepaid funeral funds paid or to be paid under those contracts; or
(2) bid for the right to assume a cancelled insurance-funded permit holder's obligations under prepaid funeral contracts; or
(3) bid to provide administrative and record keeping services related to a cancelled permit holder's outstanding prepaid funeral contracts.
(c) Solicitation of bids. On or before the 60th day after the date of cancellation of a permit to sell prepaid funeral benefits, the department shall notify those on the bid list and all permit holders in the vicinity of the cancelled permit holder of the cancellation. If the cancelled permit is trust-funded, the department shall additionally notify all funeral providers in the vicinity of the canceled permit holder of the cancellation. The commissioner shall have the discretion to combine or group contracts for bidding and sale purposes. The notice must include:
(1) the name and address of the cancelled permit holder;
(2) the number and aggregate dollar amount of unperformed prepaid funeral contracts;
(3) the balance of unearned prepaid funeral funds in trust or the value of insurance policies related to unperformed prepaid funeral contracts;
(4) the date by which sealed bid proposals must be submitted to the department to be considered for the bid award;
(5) instructions as to how eligible potential bidders may inspect the cancelled permit holder's prepaid funeral contract records; and
(6) a statement that, with the exception of bids to provide administrative and record keeping services, all successful bidders must have or obtain an appropriate permit to sell prepaid funeral contracts in Texas.
(d) Selection considerations. After the deadline has expired for submitting sealed bids, the commissioner may select a successor to the cancelled permit holder or may select a provider of administration and record keeping services in a situation where no acceptable successor permit holder is found.
(1) If the bidder is a permit holder, the commissioner shall consider:
(A) whether the bidder has demonstrated an ability to properly manage, maintain, and account for its own prepaid funeral funds;
(B) whether the bidder has properly remedied violations of law cited by the department in its examination reports;
(C) whether the bidder has a history of repeated or continuous violations;
(D) whether the bidder has the ability to fulfill the terms of the prepaid funeral contract;
(E) whether the bidder poses any other significant regulatory concern;
(F) the current or potential claim against the Prepaid Funeral Guaranty Fund; and
(G) any other relevant information.
(2) If the bidder is a non-permit holder funeral provider, the commissioner shall consider, to the extent applicable, all of the factors listed in paragraph (1) of this subsection, as applicable, and the following:
(A) the bidder's general reputation in the community where it is located;
(B) whether the bidder's business ability, experience, character, and general fitness warrant the confidence of the public;
(C) any state or federal law enforcement, administrative, or other action taken against the bidder; and
(D) the bidder's willingness to obtain a permit from the commissioner to sell prepaid funeral benefits in the State of Texas and to abide by the statutes and rules governing such permits.
(3) If the bidder is a provider of administration and record keeping services, the commissioner shall consider the following:
(A) the bidder's business experience and knowledge of Chapter 154 of the Finance Code;
(B) the bidder's financial capacity;
(C) the bidder's fee structure and its effect on the Prepaid Funeral Guaranty Fund;
(D) the bidder's general reputation;
(E) whether the bidder's business ability, experience, character, and general fitness warrant the confidence of the public;
(F) any state or federal regulatory or law enforcement, administrative, or other action taken against the bidder; and
(G) any other relevant information.
(e) Selection of successor. The commissioner alone shall be responsible for the selection of a successor permit holder or service provider under this section. However, the commissioner shall make no contract that obligates the Prepaid Funeral Guaranty Fund unless approved by the Guaranty Fund Advisory Council.
(f) Rejection of bids. The commissioner may reject all bid proposals received pursuant to this section.
(1) If all bids for a cancelled trust-funded permit are rejected, a new bid proposal may be solicited or, alternatively, the balance of trust-funded prepaid funeral funds paid or to be paid under the contracts of the cancelled permit holder shall be placed in the Prepaid Funeral Guaranty Fund for management by the Guaranty Fund Advisory Council. The department shall manage the prepaid funeral contracts; provided, however, that the commissioner may thereafter solicit additional bid proposals under subsection (d) of this section.
(2) If all bids for a cancelled insurance-funded permit are rejected, a new bid proposal may be solicited or, alternatively, the department shall manage the prepaid funeral contracts; provided, however, that the commissioner may thereafter solicit additional bid proposals under subsection (d) of this section.
(g) Additional solicitation of bids. The department may from time to time solicit bids on prepaid funeral contracts from a cancelled permit for which no bids were accepted or received as a result of the original or any subsequent bid solicitations.
(h) Employment of persons to assist. The department may, with the approval of the Guaranty Fund Advisory Council, employ persons to assist with the bid solicitation and selection process as needed.
Source: The provisions of this §25.18 adopted to be effective November 5, 2009, 34 TexReg 7597.
(a) Claims not eligible. In addition to claims excluded under Finance Code Section 154.359, the following claims are not eligible for payment from the Prepaid Funeral Guaranty Fund:
(1) a claim based on a trust-funded prepaid funeral benefits contract that was purchased prior to August 31, 1987;
(2) a claim based on a prepaid funeral benefits contract purchased from a contract seller that did not hold a permit to sell prepaid funeral benefits at the time of sale;
(3) a claim based on a prepaid funeral benefits contract purchased under a plan that does not pay assessments to the guaranty fund, such as the plan litigated in Sexton v. Mount Olivet Cemetery Association, 720 S.W. 2d 129 (Tex. App.-Austin 1986, no writ) (specifically including, but not limited to, any prepaid funeral benefits purchased from Mount Olivet Cemetery Association);
(4) a claim under an insurance-funded prepaid funeral contract for a loss arising from or relating to the occurrence of one of the following events:
(A) default of a funeral provider under a contract written prior to June 19, 2011;
(B) contract default of a permit holder that occurred prior to September 1, 2009;
(C) the suspension or revocation of a permit under Chapter 154 of the Finance Code prior to September 1, 2009; or
(D) the bankruptcy, receivership, seizure, or other failure of the permit holder prior to September 1, 2009.
(b) Claimant's filings. A claimant shall file with the department a completed claim form prescribed by the department together with the following documents and information:
(1) a copy of the prepaid funeral contract and any amendments thereto;
(2) evidence of the amount paid on the prepaid funeral contract;
(3) a copy of a certified copy of the death certificate for the contract beneficiary, if applicable;
(4) if the claimant is not the purchaser of the contract, evidence of the claimant's authority to file a claim and receive any funds awarded;
(5) if claimant is acting for the benefit of a group of purchasers as part of a plan to arrange for a successor permit holder, a copy of the plan, and information required by Finance Code §154.3595(c);
(6) a statement setting forth any special circumstances that may bear on the claim; and
(7) other information that may be pertinent to the claim that is requested by the department.
(c) Claims review process.
(1) The Guaranty Fund Advisory Council may delegate to the commissioner the authority to settle and determine claims against the Prepaid Funeral Guaranty Fund up to such amount and with such restrictions as the council may from time to time determine.
(2) A claimant may request that the Guaranty Fund Advisory Council review a determination by the commissioner regarding a claim against the Prepaid Funeral Guaranty Fund by submitting a request for review of the action to the Guaranty Fund Advisory Council within 30 days of receipt of notice of the commissioner's action. Such request shall be addressed to the Guaranty Fund Advisory Council in care of the commissioner and filed with the commissioner on or before the close of business on the last day of the 30-day period. The Guaranty Fund Advisory Council shall review and may revise the commissioner's determination.
Source: The provisions of this §25.19 adopted to be effective November 5, 2009, 34 TexReg 7597; amended to be effective November 10, 2011, 36 TexReg 7505, amended to be effective May 7, 2020, 45 TexReg 2829.
(a) Occupations Code, §651.159 mandates the Texas Department of Banking, the Texas Funeral Service Commission, and the Texas Department of Insurance to adopt by rule a joint memorandum of understanding relating to prepaid funeral services and transactions that:
(1) outlines the responsibilities of each agency in regulating these services and transactions;
(2) establishes procedures to be used by each agency in referring complaints to one of the other agencies;
(3) establishes procedures to be used by each agency in investigating complaints;
(4) establishes procedures to be used by each agency in notifying the other agencies of a complaint or of the investigation of a complaint;
(5) describes actions the agencies regard as deceptive trade practices;
(6) specifies the information the agencies provide consumers and when that information is to be provided; and
(7) sets the administrative penalties each agency imposes for violations.
(b) Any revisions to the joint memorandum of understanding will be adopted by rule by each agency.
(c) The joint memorandum of understanding entered into by the three agencies is found at §25.22 of this title (relating to Joint Memorandum of Understanding).
Source: The provisions of this §25.21 adopted to be effective September 21, 1993, 18 TexReg 5977; amended to be effective July 11, 2002, 27 TexReg 5963.
(a) Pursuant to Occupations Code, §651.159, the Texas Funeral Service Commission (herein referred to as the "TFSC"), the Texas Department of Insurance (herein referred to as the "TDI"), and the Texas Department of Banking (herein referred to as the "DOB") hereby adopt the following joint memorandum of understanding (JMOU) relating to prepaid funeral benefits as defined in Finance Code, Chapter 154. The TFSC, TDI, and DOB intend this memorandum of understanding to serve as a vehicle to assist the three agencies in their regulatory activities, and to make it as easy as possible for a consumer with a complaint to have the complaint acted upon by all three agencies, where appropriate. In order to accomplish this end, where not statutorily prohibited, the three agencies will share information between the agencies which may not be available to the public generally under the Public Information Act, Government Code, Chapter 552. Such information will be transmitted between agencies with the understanding that it is considered confidential, is being furnished to the other agencies in furtherance of their joint responsibilities as state agencies in enforcing their respective statutes, and that it may not be disseminated to others except as required.
(b) Responsibilities of each agency in regulating prepaid funeral benefits.
(1) The Texas Funeral Service Commission is responsible for the following:
(A) licensing funeral directors, embalmers, provisional funeral directors, provisional embalmers, crematory, and funeral establishments. The TFSC may refuse to license a person or establishment which violates Finance Code, Chapter 154, under Occupations Code, §651.460(b)(3);
(B) taking action under Occupations Code, §651.460(b)(3) against any licensee violating Finance Code, Chapter 154; and
(C) taking action under Occupations Code, §651.460(b)(3) against any funeral director in charge, crematory owner, and/or funeral establishment owner for violations of Finance Code, Chapter 154, by persons directly or indirectly connected to the crematory or funeral establishment.
(2) The Texas Department of Banking is responsible for administering Finance Code, Chapter 154 and 7 Texas Administrative Code (TAC), Chapter 25, including, but not limited to, the following:
(A) bringing enforcement actions against any person, including licensees of TFSC and TDI, who violate Finance Code, Chapter 154 and/or 7 TAC, Chapter 25; and
(B) all other actions authorized by Chapter 154 and 7 TAC, Chapter 25.
(3) The Texas Department of Insurance is responsible for the following:
(A) regulating insurers that issue or propose to issue life insurance policies or annuity contracts which may fund prepaid funeral contracts;
(B) regulating any person that performs the acts of an insurance agent as defined in the Insurance Code, Chapter 4001 and Insurance Code, Chapter 101;
(C) regulating insurance policies and annuity contracts that may fund prepaid funeral contracts;
(D) regulating unfair trade practices relating to the insurance policies and annuity contracts that may fund prepaid funeral contracts pursuant to the Insurance Code, Chapter 542;
(E) regulating unfair claims settlement practices by insurance companies pursuant to the Insurance Code, Chapter 542.
(c) Procedures used by each agency in exchanging information with or referring complaint to one of the other agencies.
(1) Exchanging information. If, upon receipt of a complaint, or during the course of an investigation, an agency (referred to as the receiving agency) receives any information that might be deemed of value to another of the agencies (referred to as the reviewing agency), the receiving agency will contact the reviewing agency and will forward the relevant information to the reviewing agency at its request.
(2) Referral of complaints for handling. When an agency receiving a complaint refers the complaint to another agency for handling, the receiving agency will contact the complainant in writing informing him or her of the referral, provide contact information to the reviewing agency, and encourage the complainant to recontact the receiving agency if she or he has any problem with the reviewing agency's processing of the complaint.
(d) Procedures to be used by each agency in investigating a complaint.
(1) All agencies.
(A) Each agency will develop internal complaint procedures for violations relating to prepaid funeral benefits. The procedures should at a minimum provide for:
(i) identification of necessary data and documents to be obtained from the complainant; and
(ii) such other steps deemed necessary for the agency to perform an adequate and appropriate investigation.
(B) Each agency may assist either of the other agencies with investigations relating to prepaid funeral benefits.
(2) The Texas Funeral Service Commission.
(A) Complaints received by the TFSC will be logged in and investigated as required under Occupations Code, Chapter 651. A complaint about violations of Chapter 154 and/or 7 TAC, Chapter 25, will be referred to the DOB.
(B) If disciplinary action against a licensee of the TFSC is found to be appropriate, the matter will be referred to the Administrator of Consumer Affairs & Compliance Division of TFSC.
(C) If the complaint involves a matter handled by either the DOB or TDI, as well as a violation of the TFSC statutes or regulations, it will be referred to the appropriate agency for further action. DOB will be primarily responsible for enforcing violations of Chapter 154 or 7 TAC, Chapter 25. The agencies will coordinate their investigations to avoid duplication of effort.
(D) In the event that the TFSC issues an order against a person or entity who also sells or provides prepaid funeral benefits or is a licensee under the jurisdiction of TDI, the TFSC will send the DOB and the TDI a copy of the order.
(3) Texas Department of Banking.
(A) Complaints received by the Special Audit Division will be entered into a complaint log and assigned a reference number. If, after agency notice to the subject of the complaint, the complaint is not resolved, the DOB will investigate.
(B) If disciplinary action against a person who violated Finance Code, Chapter 154 or 7 TAC, Chapter 25 is appropriate, the matter will be referred to the agency's legal staff.
(C) If the complaint involves a matter handled by either the TDI or TFSC, as well as a violation of Finance Code, Chapter 154 or 7 TAC, Chapter 25, the DOB will coordinate with those agencies. DOB will be primarily responsible for enforcing violations of Chapter 154 or 7 TAC, Chapter 25.
(D) In the event that the DOB issues an order against a person or entity who is a licensee under the jurisdiction of the TFSC or the TDI, the DOB will send the TFSC and the TDI a copy of the order.
(4) Texas Department of Insurance.
(A) Complaints received by the Consumer Protection Division of TDI will be logged in and investigated, except that if a complaint is solely about violations of Chapter 154 and/or 7 TAC, Chapter 25, the complaint will be referred to the DOB. Other areas of TDI can be called upon for assistance in the investigation of the complaint where appropriate.
(B) If disciplinary or other regulatory action against a licensee of the TDI is found to be appropriate, the matter will be referred to the Compliance Intake Unit of TDI.
(C) If the complaint involves a matter handled by either the DOB or TFSC, as well as a violation of the TDI statutes or regulations, it will be referred to the appropriate agency for further action. DOB will be primarily responsible for enforcing violations of Chapter 154 or 7 TAC, Chapter 25. The agencies will coordinate their investigations to avoid duplication of effort.
(D) In the event that the Commissioner of Insurance issues an order against a person that also sells, funds or provides prepaid funeral benefits, or is subject to the jurisdiction of the DOB or the TFSC, the TDI will send the DOB and the TFSC a copy of the order.
(e) Actions the agencies regard as deceptive trade practices.
(1) The TFSC, the DOB, and the TDI regard as deceptive trade practices those actions found under Business and Commerce Code, §17.46.
(2) With respect to trade practices within the business of insurance, the TDI regards as deceptive trade practices those actions found under Insurance Code, Chapter 541, other chapters of the Code and the regulations promulgated by the TDI thereunder.
(f) Information the agencies will provide consumers and when that information is to be provided.
(1) TFSC, DOB, and TDI will continue to provide consumers with the brochure entitled "Facts About Funerals" developed by TFSC (in Spanish and in English). DOB will continue to provide consumers with information on its website in accordance with Finance Code, §154.132, including the informational brochure developed in accordance with Finance Code, §154.131.
(2) DOB, TDI, and TFSC will maintain their toll-free numbers.
(3) TFSC, DOB, and TDI, as state agencies, are subject to the Public Information Act, Government Code, Chapter 552. Upon written request, the three agencies will provide consumers with public information which is not exempt from disclosure under that Act. As noted in the preamble to this JMOU, the agencies may, where not statutorily prohibited, exchange information necessary to fulfill their statutory responsibilities among each other, without making such information public information under the Public Information Act.
(g) Administrative penalties each agency imposes for violations.
(1) Texas Funeral Service Commission. The TFSC may impose an administrative penalty, issue a reprimand, or revoke, suspend, or place on probation any licensee who violates Finance Code, Chapter 154. TFSC administrative penalties vary based on the violation; TFSC sanctions are imposed under Occupations Code, Chapter 651.
(2) Texas Department of Banking. DOB administrative penalties vary based on the violation; DOB sanctions are imposed under Finance Code, Chapter 154.
(3) Texas Department of Insurance. TDI administrative penalties vary based on the violation; TDI sanctions are imposed under Insurance Code, Chapter 82.
Source: The provisions of this §25.22 adopted to be effective September 21, 1993, 18 TexReg 5977; amended to be effective July 11, 2002, 27 TexReg 5963; amended to be effective September 8, 2011, 36 TexReg 5668.
(a) Definitions.
(1) Outstanding contracts--Unmatured, prepaid funeral benefit contracts.
(2) You, Your or I--A person having a valid permit to sell prepaid funeral benefit contracts issued by the Department under §154.101 of the Finance Code, except that, for purposes of subsection (b)(1) of this section, "you," "your," or "I" means an applicant for a new prepaid funeral benefits permit.
(b) Application fees. The application fees set forth in this subsection have been set in accordance with the Finance Code, Chapter 154, for the purpose of defraying the cost of administering the Finance Code, Chapter 154. Except as otherwise provided in this subsection, all fees are due at the time the application is filed and are nonrefundable. An application submitted without the appropriate filing fee will be deemed incomplete and will not be considered.
(1) New permit application fee. If you apply for a new prepaid funeral benefits permit, you must pay a $500 fee. In addition to the application fee, you must pay any extraordinary costs incurred by the department pursuant to any out of state investigation of you as required by the Finance Code, §154.102(3). You must pay any extraordinary costs within 20 days after written request by the department.
(2) Conversion application fee. If you apply to convert a trust-funded prepaid funeral benefits operation to an insurance-funded prepaid funeral benefits operation, you must pay a $1,000 fee per application. In the event additional processing time is required because the application is incomplete, you must pay the additional processing costs incurred in excess of the filing fee originally submitted, at the rate of $600 per eight-hour employee day, provided that the total fee cannot exceed $2,000. Until you have paid any such additional fee, the application will be deemed incomplete and will not be considered.
Source: The provisions of this §25.23 adopted to be effective February 24, 1994, 19 TexReg 1037; amended to be effective August 18, 1994, 19 TexReg 6092; amended to be effective November 17, 1997, 22 TexReg 10958; amended to be effective July 11, 2002, 27 TexReg 5963; amended to be effective March 6, 2003, 28 TexReg 1834; amended to be effective September 9, 2004, 29 TexReg 8505; amended to be effective November 10, 2005, 30 TexReg 7210; amended to be effective November 8, 2007, 32 TexReg 7904; amended to be effective November 5, 2009, 34 TexReg 7599; amended to be effective September 8, 2019, 44 TexReg 4708.
(a) Definitions.
(1) Examination--the process of evaluating the books and records of a permit holder relating to its sale of prepaid funeral benefit contracts to provide all safeguards to protect the prepaid funds and to assure that the funds will be available to pay for prearranged funeral services.
(2) Fiscal year--the 12-month period from September 1st to August 31st.
(3) You, Your or I--a person having a valid permit to sell prepaid funeral benefit contracts issued by the department under §154.101 of the Finance Code.
(b) As a prepaid funeral benefits seller, what fees must I pay for department examinations?
(1) An annual assessment must be paid as an examination fee to the department to defray the cost of administering Chapter 154 of the Finance Code. The amount of your annual assessment is based on the number of outstanding contracts as reflected on your most recent annual report filed with the department. You must pay the annual assessment specified in the following table:
(2) If more than one examination is required in the same fiscal year as a result of your failure to comply with the Finance Code, Chapter 154, this chapter, or a request by the department, you must pay for each additional examination at a rate of $75 per hour for each examiner required to conduct the additional examination and all associated travel expenses.
(3) If you are a new permit holder and have not yet filed your first annual report required by Section 154.052 of the Finance Code, you must pay an examination fee of $75 per hour for each examiner and all associated travel expenses. Your subsequent annual assessment will be calculated in accordance with paragraph (1) of this subsection.
(c) How will the department bill me for the examination fees and when must I pay them?
(1) Your annual examination fee (annual assessment) may be billed in quarterly or fewer installments each fiscal year. You must pay a billed installment by ACH debit or by another method if directed to do so by the department. At least 15 days prior to the scheduled ACH transfer, the department will send you a notice specifying the amount of the payment due and the date the department will initiate payment by ACH debit. The commissioner may decrease your annual assessment if it is determined that a lesser amount than would otherwise be collected is adequate to administer the Act.
(2) You will be billed for additional examinations described in subsection (b)(2) of this section with the delivery of the examination report. You must pay this fee upon receipt of the examination report.
(d) Adjustments for inflation. In this section, "GDPIPD" means the Gross Domestic Product Implicit Price Deflator, published quarterly by the Bureau of Economic Analysis, United States Department of Commerce. The "annual GDPIPD factor" is equal to the percentage change in the GDPIPD index values published for the first quarter of the current year compared to the first quarter of the previous year (the March-to-March period immediately preceding the calculation date), rounded to a hundredth of a percent (two decimal places).
(1) Beginning September 1, 2020, and each September 1 thereafter, the table in subsection (b)(1) of this section, as most recently revised before such date pursuant to this subsection, may be revised as follows:
(A) the base assessment amount listed in column three of the table may be increased (or decreased) by an amount proportionate to the measure of inflation (or deflation) reflected in the annual GDPIPD factor, rounded to whole dollars; and
(B) each factor listed in column three of the table may be increased (or decreased) by an amount proportionate to the measure of inflation (or deflation) reflected in the annual GDPIPD factor, rounded to two decimal places.
(2) If the table in subsection (b)(1) of this section is revised for inflation (or deflation), then not later than August 1 of each year, the department shall calculate and prepare a revised table reflecting the inflation-adjusted values to be applied effective the following September 1 and will provide each permit holder with notice of and access to the revised table.
Source: The provisions of this §25.24 adopted to be effective March 6, 2003, 28 TexReg 1835; amended to be effective November 10, 2005, 30 TexReg 7210; amended to be effective November 8, 2007, 32 TexReg 7904; amended to be effective November 10, 2011, 36 TexReg 7505; amended to be effective September 8, 2019, 44 TexReg 4708, amended to be effective May 7, 2020, 45 TexReg 2829.
(a) Definitions. Definitions of words and terms in Finance Code, §154.002, are incorporated in this section by reference. The following words and terms have the following meanings when used in this section, unless the context clearly indicates otherwise.
(1) Aggregate trust funds--The trust funds to be transferred with respect to an individual prepaid contract as of the transfer date, comprised of the paid-in principal plus the earnings attributable to that prepaid contract. As the context may require, the term also refers to the sum of the aggregate trust funds for all prepaid contracts subject to conversion.
(2) Applicant--A permit holder under Finance Code, Chapter 154, who files an application under this section.
(3) Contract beneficiary--The person named in a prepaid contract as the intended recipient of contracted funeral merchandise and services.
(4) Conversion--A transaction under Finance Code, §154.204, and this section, to convert all outstanding trust-funded prepaid funeral benefits under existing prepaid contracts administered by the applicant to insurance-funded prepaid funeral benefits to be administered by the post-conversion permit holder after conversion.
(5) Insurance company--The insurance company designated in an application filed under this section to issue the annuities required for the conversion. The insurance company may also be the post-conversion permit holder if permitted under applicable insurance law and regulations.
(6) Paid-in principal--The amount required to be deposited in trust by the applicant with respect to an individual prepaid contract pursuant to Finance Code, §154.253. As the context requires, the term may also refer to the total amount deposited in trust by the applicant for all prepaid contracts.
(7) Post-conversion permit holder--The permit holder designated in an application filed under this section to hold and administer the prepaid contracts after conversion. The post-conversion permit holder may also be the insurance company if permitted under applicable insurance law and regulations.
(8) Prepaid contract--A contract for prepaid funeral benefits under Finance Code, Chapter 154.
(9) Purchaser--An individual who purchased a trust-funded prepaid contract that is the subject of an application filed under this section. The purchaser may also be the contract beneficiary. If permitted by the context, the term includes the purchaser's authorized agent.
(10) TDI--Texas Department of Insurance.
(11) Unpaid principal balance--The unpaid portion of the purchase price of a prepaid contract.
(b) Standards for approval and eligibility. The department will not approve a proposed conversion unless the following general requirements have been met.
(1) Standards for approval. The proposed insurance-funded benefits arrangement must safeguard the rights and interests of the purchasers to substantially the same degree as the trust-funded benefits arrangement sought to be replaced, as provided by Finance Code, §154.204, and this section. An application may be approved or denied without the necessity of a hearing, subject to the right of the applicant or the post-conversion permit holder to request a hearing. Without limiting its ability to consider any matter relevant to the determination of substantial equivalency, the department will not approve a proposed conversion unless:
(A) the form(s) of insurance policy proposed for use in the conversion is a single or flexible premium deferred fixed (not variable) annuity that is structured to protect and preserve the existing rights and interests of the purchaser, including the amount of funds the purchaser would be entitled to receive upon cancellation of the prepaid contract and the amount of funds payable upon maturity of the prepaid contract;
(B) the post-conversion permit holder directly or indirectly controls, is controlled by, or is under common control with the insurance company;
(C) neither the applicant nor the post-conversion permit holder have a record of noncompliance with respect to the requirements of Finance Code, Chapter 154, and this chapter, as evidenced by paragraph (2) of this subsection;
(D) the post-conversion permit holder accepts responsibility for verifying that the prepaid contracts proposed for conversion are performed in accordance with their terms, and undertakes to maintain the records the department requires to determine compliance with Finance Code, Chapter 154, and this chapter; and
(E) the post-conversion permit holder demonstrates the organizational and financial capability to discharge its accepted responsibilities.
(2) Eligibility. At the time the application is filed, processed and approved, the applicant and the post-conversion permit holder must each be in good standing with the department. To be in good standing with the department, the department's most recent report of examination of either permit holder must not cite any violation of applicable laws and regulations or other material deficiencies that have not been remedied or corrected to the satisfaction of the department, and the permit holder must not be delinquent with respect to any fees or filings due to the department. Within 45 days after an application for conversion is filed with the department, the department may conduct an examination of the applicant or the post-conversion permit holder or both before approving or denying the application if an examination has not been conducted within the preceding 12 months or for the purpose of verifying that previously cited violations or other deficiencies have been satisfactorily eliminated or corrected.
(c) Contents of application. An application for conversion must respond to each paragraph of this subsection by number. Overlapping or duplicate responses may be cross-referenced for brevity.
(1) Letter requesting conversion. The applicant shall submit a letter to the commissioner, signed by a duly authorized officer, that:
(A) requests approval of the conversion of the applicant's prepaid contracts;
(B) requests authorization to transfer the applicant's responsibility for the prepaid contracts to the post-conversion permit holder;
(C) summarizes the amount of aggregate trust funds by depository and account number and the component amounts of paid-in-principal and earnings, and requests authorization to transfer the aggregate trust funds from the currently approved depository or trustee to the insurance company;
(D) represents that the applicant is in compliance with Finance Code, §154.301, regarding prepaid contracts presumed to be abandoned, and has filed the reports and delivered funds as required by Finance Code, §154.304; and
(E) if the applicant is not an individual, includes a certified resolution of the applicant's board authorizing the conversion, the application, and the execution of related documents by the submitting officer.
(2) Agreement regarding conversion. The applicant must submit an original, signed copy of the agreement among the applicant, the post-conversion permit holder, and the insurance company regarding the transfer, receipt, and application of trust funds upon conversion that, among other matters, contains the following provisions:
(A) agreement of the parties that all prepaid contracts of the applicant in existence as of the date of the application will be subject to conversion, excluding prepaid contracts that are presumed abandoned under Finance Code, §154.301;
(B) agreement of the insurance company that:
(i) the formula for determining the cash surrender value or cancellation benefit of each annuity to be issued in the conversion will be at least as generous to the purchaser as the formula that would have applied under Finance Code, §154.155, had the prepaid contract not been converted from trust-funded to insurance-funded;
(ii) the face amount of the annuity to be issued with respect to each prepaid contract will not be less than the amount of aggregate trust funds transferred for that prepaid contract;
(iii) for any prepaid contract which is not fully paid and the balance due not included in the annuity described in clause (ii) of this subparagraph, the face amount of the supplemental annuity to be issued may not be less than the unpaid principal balance, and no credit or reduction will be applied to the unpaid principal balance for earnings attributable to paid-in principal under the prepaid contract;
(iv) upon request, a copy of the specifications page of the funding annuity or annuities will be furnished to the purchaser of the prepaid contract to be funded; and
(v) no commissions or other compensation will be paid out of or deducted from the aggregate trust funds to be transferred in the proposed conversion.
(C) agreement of the post-conversion permit holder with respect to the converted prepaid contracts to:
(i) maintain all records required by §25.10 of this title (relating to Recordkeeping Requirements for Insurance-Funded Contracts);
(ii) verify that each death or cancellation benefit claim under a converted prepaid contract is paid in accordance with Finance Code, Chapter 154, and this chapter;
(iii) verify that each prepaid contract is performed by the funeral provider at maturity in accordance with its terms;
(iv) verify that any additional charges imposed by the funeral provider and collected from the decedent's representatives are for additional services or merchandise not otherwise contemplated by and funded under the prepaid contract and, if not, promptly refund or require the funeral provider to refund any prepaid contract overcharges to the decedent's representatives; and
(v) if within the five-year period following approval of the conversion a purchaser presents a fully executed prepaid contract that was not listed in the applicant's pre-conversion or post-conversion summaries and provides proof of payments made on the contract, take action to cause the insurance company to issue one or more annuities with respect to the previously omitted prepaid contract as if it had originally been included in the conversion or, if cancellation is requested by the purchaser, pay or take action to cause the purchaser to be paid the cancellation benefit due. The maximum potential responsibility imposed by this clause is 5.0% of the aggregate trust funds transferred, except that if 5.0% of the aggregate trust funds is:
(I) less than $5000, the maximum potential responsibility imposed by this clause is $5,000;
(II) greater than $20,000, the maximum potential responsibility imposed by this clause is $20,000.
(3) Compensation to insiders. The applicant must submit a written disclosure of the estimated total commissions and other compensation to be paid by the insurance company in connection with the conversion to each insurance agent that controls, is controlled by, or is under common control with the applicant or a funeral provider under any of the prepaid contracts to be converted, expressed as a percentage, dollar amount, or both, and the identity of each such agent.
(4) Agreement of post-conversion permit holder and applicant. The applicant must submit a written agreement between the post-conversion permit holder and the applicant that, at a minimum, requires the applicant to relinquish the individual prepaid contract ledgers formerly maintained by the applicant under §25.11 of this title (relating to Recordkeeping Requirements for Trust-Funded Contracts) and obligates the post-conversion permit holder to maintain such ledgers to reflect the paid-in-principal and the unpaid principal balance under each converted prepaid contract.
(5) Agreements between post-conversion permit holder and funeral providers. The applicant must submit the written agreement between the post-conversion permit holder and each person designated as the funeral provider under any prepaid contract to be converted that, at a minimum:
(A) sets forth the nature and scope of the relationship between the permit holder and the funeral provider and the respective rights and responsibilities of the parties with respect to the prepaid contracts of that funeral provider, including allocation of responsibilities for refunding any prepaid contract overcharges identified by the permit holder or the department;
(B) requires the funeral provider to perform and deliver the funeral benefits under each converted prepaid contract of that funeral provider in accordance with its terms;
(C) requires the funeral provider to provide the post-conversion permit holder with the documentation necessary to enable the permit holder to maintain the records required by Finance Code, Chapter 154, and §25.10 of this title; and
(D) obligates the parties to protect any nonpublic personal financial or health information of the purchaser and contract beneficiary under the prepaid contract in compliance with applicable law.
(6) Agreement of post-conversion permit holder and insurance company. If the proposed post-conversion permit holder is not the insurance company, the applicant must submit a written agreement between the post-conversion permit holder and the insurance company that, at a minimum, requires the insurance company to provide the post-conversion permit holder with the documentation necessary to enable the permit holder to maintain the records required by §25.10 of this title. The agreement must also obligate the parties to protect any nonpublic personal financial or health information of the purchaser and contract beneficiary under each converted prepaid contract and the owner and insured under each annuity issued in the proposed conversion in compliance with applicable law.
(7) Commitment of insurance company. If the post-conversion permit holder is not the insurance company and is unable to independently demonstrate that it has the organizational and financial resources to discharge its permit holder responsibilities, or otherwise intends to rely on the insurance company to provide such resources, the insurance company or its insurance holding company must commit to the department in writing to take all necessary steps to maintain the existence of the current or a successor post-conversion permit holder, cause such permit holder to maintain a permit, and provide adequate resources to such post-conversion permit holder to enable it to maintain the financial condition and general fitness necessary to discharge the post-conversion permit holder's responsibilities under Finance Code, Chapter 154, and this chapter.
(8) Commitment of applicant. The applicant must commit to the department in writing to obtain and maintain a permit under Chapter 154 and assume the post-conversion permit holder's responsibilities with respect to each converted contract for any year in which any converted contract remains outstanding. The commitment must obligate the applicant to submit its completed application with all required fees not later than the 31st day after the date the department notifies the applicant in writing of the facts that require licensure under the commitment.
(9) Form of annuity. The applicant must submit a copy of the form(s) of annuity proposed to be issued as part of the conversion. The submitted form(s) must be accompanied by a copy of the TDI notice of action approval letter. The applicant and not TDI is responsible for ensuring that the form of annuity complies with this section. Among other matters, the annuity must:
(A) provide guaranteed growth of the death benefit based on a fixed annual interest rate, compounded annually on gross premiums paid beginning in the first year of the policy, that is at least equal to a rate determined as the lesser of:
(i) 3.0%; and
(ii) the average of the five-year Constant Maturity Treasury Rate reported by the Federal Reserve Board of Governors for the 90 calendar day period ending not more than 30 days prior to the date of the commissioner's order of approval, rounded to the nearest 1/20th of one percent, less 125 basis points, but not less than 1.0%;
(B) provide a formula for determining cash surrender value or cancellation benefit that will be at least as generous to the purchaser as the formula that would have applied under Finance Code, §154.155, had the prepaid contract not been converted from trust-funded to insurance-funded;
(C) provide a death benefit for the duration of the prepaid contract that equals the sum of the aggregate trust funds transferred at conversion, all future premiums paid, and accumulated growth thereon as provided by subparagraph (A) of this paragraph, provided that the death benefit can never be less than the amount that would have been available under the prepaid contract on the date of conversion had the prepaid contract not been converted from trust-funded to insurance-funded; and
(D) not include any provision that allows for contesting coverage or limiting death benefits, refers to or requires a physical examination, or otherwise operates as an exclusion, limitation, or condition on payment of death benefits other than provisions requiring submission of proof of death or surrender of the annuity at the time the annuity matures or is canceled.
(10) Federal income tax treatment. The applicant must submit a written summary describing the pre-conversion, federal income tax status of the purchasers' trusts, in the aggregate, as either qualified funeral trusts under 16 U.S.C. §685 or grantor trusts, for the preceding taxable year. Disclosure of differing treatment of individual purchaser trusts is not required if the summary identifies and quantifies the percentage of purchaser trusts treated as grantor trusts and qualified funeral trusts. The applicant must also describe the post-conversion manner in which taxable income arising from the annuities will be reported for federal income tax purposes, including taxable income arising from payment of cash surrender value.
(11) Past performance. For purposes of this paragraph, the annual growth under an annuity equals the growth rate credited by the insurance company to the death benefit for the year. The applicant must submit separate historical yield tables or graphs reflecting the annual rate of growth in the death benefit, expressed as a percentage for each year of the most recent five-year period, under:
(A) previously issued annuities similar to the form of annuity proposed to be issued by the insurance company in the proposed conversion, to the extent such annuities were in existence in those periods; and
(B) annuities sold by the insurance company in this state during the most recent five-year period for the purpose of funding new prepaid funeral contracts.
(12) Form of assignment. The applicant must submit a copy of the form of assignment, if any, to be used in assigning annuity rights or proceeds to the post-conversion permit holder.
(13) Qualifications of post-conversion permit holder. With respect to the post-conversion permit holder, the applicant must submit:
(A) if the proposed post-conversion permit holder is not also the insurance company, a copy of the post-conversion permit holder's most recent annual financial statements and the most current year-to-date financial statements;
(B) a list of all previous conversions in this state accepted by the post-conversion permit holder and, with respect to each conversion, the date of the order approving the conversion and the date that the converted prepaid contracts were formally transferred to the post-conversion permit holder;
(C) a summary of the number and aggregate purchase price of all prepaid contracts administered by the post-conversion permit holder as of the end of the immediately preceding calendar year;
(D) a description of how the prepaid contracts to be converted will be administered by the post-conversion permit holder, including a description of activities or functions, other than delivery of funeral services and merchandise by the designated funeral provider, that will be outsourced and the contractor that will perform such activities or functions; and
(E) if any contractor named in response to subparagraph (D) of this paragraph, directly or indirectly controls, is controlled by, or is under common control with the post-conversion permit holder, a summary of the contracting relationship for each of the preceding three fiscal years that includes a description of the services performed and the compensation paid by the post-conversion permit holder.
(14) Qualifications of insurance company. With respect to the insurance company, the applicant must submit:
(A) a letter from the insurance company addressed to the department, dated not more than 60 days prior to the date the application is filed, representing that the insurance company is in good standing and currently authorized to conduct the business of insurance in this state;
(B) to the extent available, a list of the current financial strength ratings of the insurance company determined by A.M. Best Company, Standard & Poor's, Wiess Research, Duff & Phelps, and Moody's Investors Service; and
(C) a list of all previous conversions in this state that were funded by the insurance company and, with respect to each conversion, the date of the order approving the conversion and the date that trust funds were formally transferred to the insurance company.
(15) Notice to purchasers. The applicant must submit the proposed form of public notice required by subsection (e)(2) of this section and each proposed letter regarding the proposed conversion to be sent to purchasers from the applicant, the post-conversion permit holder, or the insurance company, for approval by the department. The proposed form of notification letter from the applicant must:
(A) briefly and fairly disclose the terms of the proposed conversion in a manner that is not misleading and that enables the purchaser to understand the terms of the proposed conversion and the impact on the purchaser and the purchaser's contract;
(B) conspicuously disclose, by means of bolded type within a bordered text box or another method acceptable to the department, the purchaser's right under Finance Code, §154.204(b), to decline the conversion and remain in the existing trust-funded funeral benefit arrangement by filing a written request with the department within 60 days;
(C) inform the purchaser that a copy of the specifications page of the funding annuity is available upon request, if such notice is not contemporaneously provided by the insurance company in a separate letter;
(D) advise the purchaser that questions or complaints regarding the prepaid contract or the proposed conversion may be directed to the Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705; 1-877-276-5554 (toll free);
(E) disclose that the prepaid funeral guaranty fund will no longer guarantee performance of the prepaid contract after conversion, that a successor funeral provider may not agree to provide the previously selected funeral services and merchandise for the same price specified in the prepaid contract with the original funeral provider, and at the option of the applicant, disclose as an aid for comparison that payment of the funding annuity, but not performance of the contract itself, will be guaranteed by the Texas Life, Accident, Health, and Hospital Service Insurance Guaranty Association after conversion (provided that, if approved by the department, such disclosure will not be deemed a violation of Insurance Code, §463.451);
(F) not contain promotional statements or claims that express subjective rather than objective views of the merits or benefits of conversion;
(G) if the prepaid contract allows the contract beneficiary to be changed and the annuity contract does not allow the annuitant to be changed, disclose that the prepaid contract beneficiary may no longer be changed after the funding annuity is issued; and
(H) explain any change in federal income taxation related to cancellation and maturity resulting from the conversion that is anticipated to affect the purchaser.
(16) Pre-conversion summary. The applicant must submit a pre-conversion summary pertaining to each prepaid contract to be converted, determined as of a date no earlier than 30 days prior to the date the application is filed, with totals for all prepaid contracts to be converted, if applicable, addressing each of the following categories:
(A) name and, if available, date of birth of the purchaser;
(B) date of contract;
(C) contract purchase price;
(D) paid-in-principal;
(E) unpaid principal balance, if any;
(F) accumulated earnings;
(G) cancellation benefit due to the purchaser, assuming cancellation were to occur on the calculation date;
(H) amount eligible to be withdrawn from the trust fund by the applicant upon death of the contract beneficiary, assuming death were to occur on the calculation date;
(I) amount retained by the applicant under Finance Code, §154.252; and
(J) the guaranteed minimum interest rate to be applied to the death benefit calculated as if the date of the application were the date of the commissioner's order of approval.
(17) Pro forma post-conversion summary. The applicant must submit a pro forma post-conversion summary pertaining to each prepaid contract as if converted, determined as of the same date as the pre-conversion summary, with totals for all prepaid contracts, if applicable, addressing each of the following categories:
(A) name of annuitant;
(B) contract purchase price;
(C) paid-in-principal;
(D) unpaid principal balance, if any;
(E) the amount of transferred trust funds applied to the premium for the annuity;
(F) amount retained by the applicant under Finance Code, §154.252;
(G) cash surrender value of each annuity, assuming the annuity were to be surrendered on the calculation date;
(H) death benefit under each annuity, assuming death were to occur on the calculation date; and
(I) the guaranteed minimum interest rate to be applied to the death benefit, including the actual calculation as determined under paragraph (9)(A) of this subsection.
(18) Voluntary cancellation of permit. If the applicant will not sell trust-funded prepaid contracts or administer previously sold trust-funded prepaid contracts after the conversion, the applicant must submit a completed form to voluntarily cancel its trust-funded permit. The applicant's voluntary cancellation will not be processed unless the conversion is approved, and will not be effective until the department completes the close-out examination of the applicant.
(19) Application fee. In connection with an application submitted under this section, the applicant must submit the conversion application fee required by §25.23 of this title (relating to Application Fees).
(20) Side agreements. To the extent not otherwise required by this subsection, the applicant must submit copies of any other agreements between or among the applicant, a funeral provider, the post-conversion permit holder, and/or the insurance company that contain contractual provisions or informal understandings or undertakings addressing any aspect of the proposed conversion or the future relationship among the applicant, a funeral provider, the post-conversion permit holder, and/or the insurance company with respect to any converted prepaid contract.
(d) Consideration of application; hearing. If the application is deficient, the department may require any person connected with the proposed conversion to submit additional information. An application may be approved or denied without the necessity of a hearing, subject to the right of the applicant or the post-conversion permit holder to request a hearing.
(1) Conditions in order approving conversion. An order approving conversion will impose certain conditions that are not subject to objection, as described in subsection (e) of this section. The order may also impose other, nonstandard conditions specific to the conversion at issue. The applicant or the post-conversion permit holder must submit a written request for hearing pursuant to paragraph (2) of this subsection if any nonstandard condition in the order is objectionable, in which case the order is deemed to be a denial. Consummation of the conversion transaction constitutes confirmation of acceptance by the applicant, the post-conversion permit holder, and the insurance company of any conditions imposed by the order and is considered for all purposes an agreement with the department enforceable against the applicant, the post-conversion permit holder, and the insurance company.
(2) Hearing. The applicant or the post-conversion permit holder may file a written request for hearing with the commissioner on or before the 30th day after the date of the order denying the application, or an order imposing nonstandard conditions objectionable to the applicant or the post-conversion permit holder, stating with specificity the reasons the applicant alleges that the decision of the department is in error. The request for hearing will be forwarded to the administrative law judge who must enter appropriate orders and conduct the hearing on or before the 60th day after the date the request for hearing was received, or as soon as is otherwise reasonably possible, under Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings) and Government Code, Chapter 2001. The applicant or the post-conversion permit holder has the burden of proof to demonstrate that the proposed insurance-funded prepaid funeral benefits safeguards the rights and interests of each affected purchaser to substantially the same degree as the existing trust-funded prepaid funeral benefits sought to be replaced. A denial of an application may not be appealed until a final order is issued.
(e) Standard conditions in order approving conversion. An order approving conversion will impose six required conditions that are not subject to objection. Failure to satisfy any of these conditions constitutes a violation of an order of the commissioner subject to possible enforcement action under Finance Code, Chapter 154.
(1) The order approving conversion will prohibit issuance of the annuities prior to the expiration of the time period for a purchaser to decline conversion, including any extended time period required by paragraph (4) of this subsection, except that the annuities may be issued prior to that date if expiration of the time period will occur during the free look period or if a purchaser electing to decline conversion will not be required to pay an early withdrawal penalty for cancellation of the annuity.
(2) Pursuant to Finance Code, §154.204(b), the order approving conversion will require the applicant to notify purchasers of the proposed conversion by the following means:
(A) The notification letter from the applicant described by subsection (c)(15) of this section must be sent to purchasers by certified mail or another form of mail that requires or provides proof of delivery to the last known address of the purchaser.
(B) The applicant must publish a one-time public notice in a newspaper of general circulation in the county in which the applicant is located, or in another publication or location as directed by the department, as evidenced by a publisher's affidavit attesting to the date of publication, advising purchasers of trust-funded prepaid contracts from applicant of the pending conversion, the right of a purchaser to decline conversion, and the manner in which a purchaser may obtain more information about the purchaser's rights and options regarding the conversion.
(3) The order approving conversion will provide that a prepaid contract for which the notification letter is returned unclaimed may not be converted to the insurance-funded funeral benefit arrangement approved in the order unless the requirements of this paragraph are met.
(A) With respect to each notification letter returned unclaimed because the address is incorrect, the addressee is unknown or has moved without leaving a forwarding address, or the addressee's forwarding order has expired, the applicant must search for a new address for the purchaser using available non-fee based resources. If a new address is located, the applicant must resend the notification letter one time in the manner required by subsection (e)(2)(A) of this section.
(B) With respect to each unclaimed notification letter for which a new address is not located and with respect to each re-mailed notification letter that is returned unclaimed, the applicant must review the related contract file in light of the returned letter to verify or change its prior determination that the contract should not be presumed abandoned under Finance Code, §154.301, and must retain documentation evidencing its review for examination by the department. A prepaid contract subject to this paragraph may be converted to the insurance-funded funeral benefit arrangement approved in the order only if the applicant makes a new affirmative finding that the contract should not be presumed abandoned. On or before the 120th day after the date of the order, the applicant must submit a report to the department summarizing its activities under this subparagraph and reporting the basis for findings made.
(4) The order approving conversion will require the post-conversion permit holder, on or before the 120th day after the date of the order, to submit to the department a notarized statement attesting that the annuities have been issued and funded on behalf of the purchasers listed in the pro forma post-conversion summary included in the conversion application and disclosing the date that the notification letters included in the conversion application were mailed to the purchasers.
(5) The order approving conversion will require the post-conversion permit holder, on or before the 120th day after the date the trust funds are transferred as authorized by the order, to submit to the department a final post-conversion summary pertaining to each converted prepaid contract, determined as of the conversion date, with totals for all prepaid contracts, if applicable, addressing each of the following categories:
(A) name of annuitant;
(B) policy number of the annuity issued to the annuitant, or of each annuity if a supplemental annuity is also issued;
(C) contract purchase price;
(D) paid-in-principal;
(E) unpaid principal balance, if any;
(F) the amount of transferred trust funds applied to the premium for each annuity;
(G) amount retained by the applicant under Finance Code, §154.252;
(H) cash surrender value of each annuity, assuming the annuity were to be surrendered on the conversion date; and
(I) death benefit under each annuity, assuming death were to occur on the conversion date.
(6) The order approving conversion will require the conversion transaction to be fully implemented and completed on or before the 150th day after the date of the conversion order.
Source: The provisions of this §25.25 adopted to be effective January 8, 2009, 34 TexReg 177; amended to be effective July 5, 2012, 37 TexReg 4866, amended to be effective May 7, 2020, 45 TexReg 2829.
(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise:
(1) Commissioner--The banking commissioner of Texas.
(2) Official--An individual applying for or holding a permit, or an owner, officer, or holder of more than 25 percent of the outstanding shares of an applicant for or holder of a permit that is an entity.
(3) Permit-The authorization issued by the commissioner pursuant to Finance Code, Chapter 154, Subchapter C, to sell or accept money for prepaid funeral benefits, or solicit an individual´s designation of prepaid funeral benefits to be paid out of a fund, investment, security, or contract.
(b) Effect of criminal conviction on proposed or existing permit. The commissioner may deny an application for a permit, or cancel or suspend a permit if an official has been convicted of a crime which directly relates to the duties and responsibilities of a seller or servicer of prepaid funeral benefits contracts. Adverse action by the commissioner in response to a conviction of a crime specified in subsection (c) of this section is subject to mitigating circumstances and rights of the applicant or permit holder as specified in subsections (d) - (h) of this section.
(c) Crimes directly related to fitness for permit. The sale and servicing of prepaid funeral benefits involves or may involve representations to prospective plan purchasers, collection and investment of money paid by purchasers of prepaid funeral benefits, payment of premiums on insurance policies to fund the benefits, provision of funeral services on matured contracts, and compliance with reporting requirements to governmental agencies. Consequently, a crime involving the misrepresentation of costs or benefits of a product or service, the improper handling of money or property entrusted to the person for the future benefit of another, or the failure to file a governmental report or the filing of a false report is a crime directly related to the duties and responsibilities of a permit holder, including a crime involving:
(1) fraud, misrepresentation, deception, or forgery;
(2) breach of trust or other fiduciary duty;
(3) dishonesty or theft;
(4) violation of a statute of this or another state governing prepaid funeral benefits plans;
(5) violation of a statute of this or another state governing the provision of funeral services;
(6) failure to file a required report with a governmental body, or filing of a false report; or
(7) attempt, preparation, or conspiracy to commit one of the preceding crimes.
(d) Mitigating considerations. In determining whether a conviction for a crime specified in subsection (d) of this section renders an official presently unfit to be a permit holder, the commissioner shall consider:
(1) the extent and nature of the official´s past criminal activity;
(2) the age of the official at the time of the commission of the crime;
(3) the time elapsed since the official´s last criminal activity;
(4) the conduct and work activity of the official prior to and following the criminal activity;
(5) the official´s rehabilitation or rehabilitative effort while incarcerated or following release; and
(6) the official´s present fitness for a permit, evidence of which may include letters of recommendation from prosecution, law enforcement, and correctional officers who prosecuted, arrested, or had custodial responsibility for the official, the sheriff and chief of police in the community where the official resides, and other persons in contact with the convicted official.
(e) Required documentation. The applicant must, to the extent possible, secure and provide to the commissioner reliable documents and/or testimony evidencing the information required to make a determination under subsection (d) of this section, including the recommendations of the prosecution, law enforcement, and correctional authorities. The applicant must also furnish proof in such form as may be required by the commissioner that the official has maintained a record of steady employment, has supported such official´s dependents, has otherwise maintained a record of good conduct, and has paid all outstanding court costs, supervision fees, fines, and restitution as may have been ordered in all criminal cases in which the official has been convicted.
(f) Notification of adverse action. If a permit application is denied, or if a permit is canceled or suspended because of the criminal conviction of an official, the commissioner will so notify the applicant or permit holder in writing. The notification must include a statement of the reasons for the action and a description of the procedure for administrative or judicial review of the action.
(g) Administrative hearing. An applicant whose permit application is denied, or a permit holder whose permit is suspended or canceled may request a hearing. A hearing on an order of suspension or cancellation must be requested not later than the 15th day after the date the order is mailed. A hearing is subject to the provisions of the Administrative Procedure Act, Chapter 2001, Government Code and the provisions of Chapter 9, Subchapter B of this title (relating to Contested Case Hearings).
(h) Judicial review. An applicant whose permit application has been denied, or a permit holder whose permit has been suspended or canceled because of the criminal conviction of an official may appeal a final order as set forth in Government Code, Chapter 2001, Subchapter G.
Source: The provisions of this §25.31 adopted to be effective August 25, 1999, 24 TexReg 6473, amended to be effective May 7, 2020, 45 TexReg 2829.
(a) Definitions
(1) "Consumer" means an individual who obtains or has obtained a product or service from you that is to be used primarily for personal, family, or household purposes.
(2) "Consumer complaint" means a written complaint you receive from a consumer regarding the manner in which you operate your business selling prepaid funeral benefits or perform your obligations under a prepaid funeral benefits contract or Finance Code, Chapter 154. The term includes a written complaint you receive either directly from the consumer or through the Department. The term does not include an oral complaint.
(3) "Department" means the Texas Department of Banking.
(4) "Privacy notice" means any notice which you give regarding a consumer's right to privacy as required by a specific state or federal law.
(5) "Required notice" means a notice in a form set forth or provided for in subsection (b) (1) of this section.
(6) "You" or "I" means a prepaid funeral benefits contract seller that is licensed or permitted by the Texas Department of Banking under the Finance Code.
(b) How do I provide notice of how to file complaints?
(1) You must use the following notice in order to let your consumers know how to file complaints: Inquiries should be directed as below. All complaints must be in writing. Concerning the Prepaid Contract: Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705; 1-877/276-5554 (toll free); www.dob.texas.gov.
(2) You must provide the required notice in the language in which a transaction is conducted.
(3) You must include the required notice with each privacy notice that you send out. The language and form of the notice must substantially conform to the required notice set out in paragraph (1) of this subsection.
(4) Regardless of whether you are required by any state or federal law to give privacy notices, you must take appropriate steps to let your consumers know how to file complaints by giving them the required notice in compliance with paragraph (1) of this subsection.
(5) You must use the following measures to give the required notice:
(A) You must give the required notice when the consumer first obtains a product or service from you. This may be accomplished by including the required notice in all prepaid funeral benefits contract forms in compliance with §25.3(j) of this title (relating to What Requirements Apply to a Non-Model Contract or Waiver).
(B) Those portions of your website that offer consumer goods and services must contain access to the required notice. The language and form of the notice must substantially conform to the required notice set out in paragraph (1) of this subsection.
(c) When must I respond to a written consumer complaint and what must my response include?
(1) You must respond to the consumer complaint in writing on or before the 30th day after the date you receive the consumer complaint.
(2) In your written response, you must:
(A) set out the actions you have taken or plan to take, with a corresponding timeline, to resolve or otherwise dispose of the consumer complaint; or
(B) if you dispute the consumer complaint or do not believe any corrective or other action is required, explain your conclusion and refer to any supporting legal authority.
(3) If the consumer complaint was forwarded to you by the Department, you must send the Department a copy of your response on or before the 5th day after the date you mail the response to the consumer.
(d) Must I keep records of the consumer complaints I receive? Yes. You must keep the records regarding consumer complaints.
Source: The provisions of this §25.41 adopted to be effective January 3, 2002, 26 TexReg 10851; amended to be effective May 21, 2002, 27 TexReg 4325; amended to be effective November 4, 2010, 35 TexReg 9696; amended to be effective November 10, 2011, 36 TexReg 7505.
Subchapter C. Investment of Trust Funds
(a) An application for a prepaid funeral sellers permit or perpetual care cemetery certificate of authority granted by the commissioner must be filed on a form or in a manner approved by the banking commissioner. The department shall issue a written notice informing each applicant either that the application is complete and accepted for filing, or that the application is deficient and that specific additional information is required. The department shall issue the notice to the applicant within 10 business days of the receipt of the application.
(b) The commissioner shall determine whether to deny or approve an application within the following periods and in the following manner after a complete application has been accepted for filing:
(1) prepaid funeral seller's permits: 45 days; and
(2) perpetual care cemetery certificates of authority: 45 days.
(c) An applicant may appeal directly to the commissioner for a timely resolution of a dispute arising from a violation of the periods set forth in this section. An applicant shall perfect an appeal by filing a written request therefor prior to the expiration of 30 days after the date a decision is made on the application, addressed to the commissioner, requesting review by him of the application to determine whether the commissioner or the department exceeded the established period for the granting or denying of the application. The commissioner shall base his decision on the written appeal by the applicant and any response by the department and, if he deems necessary, the commissioner may require a hearing.
(d) The commissioner shall decide the appeal in the applicant's favor if he determines that he or the department exceeded the time period set out herein and failed to establish good cause for exceeding the period. The commissioner shall issue a written decision to the applicant within 60 days of the filing of an appeal. If an appeal is decided in an applicant's favor, the applicant will be reimbursed all of its application fees.
Source: The provisions of this §27.1 adopted to be effective May 3, 1988, 13 TexReg 1911; amended to be effective September 6, 2001, 26 TexReg 6670; amended to be effective November 10, 2011, 36 TexReg 7507.
(1).jpg){kind=link}