CHAPTER 1304. SERVICE CONTRACT PROVIDERS AND ADMINISTRATORS
OCCUPATIONS CODE
TITLE 8. REGULATION OF ENVIRONMENTAL AND INDUSTRIAL TRADES
CHAPTER 1304. SERVICE CONTRACT PROVIDERS AND ADMINISTRATORS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1304.001. SHORT TITLE. This chapter may be cited as the
Service Contract Regulatory Act.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Sec. 1304.002. DEFINITIONS. In this chapter:
(1) "Administrator" means a person, other than the provider of
the service contract or an employee of the provider, who is
responsible for the third-party administration of a service
contract.
(2) "Commission" means the Texas Commission of Licensing and
Regulation.
(3) Repealed by Acts 2003, 78th Leg., ch. 816, Sec. 13.010(1);
Acts 2003, 78th Leg., ch. 1276, Sec. 14A.337(a).
(4) "Consumer" means an individual who, for a purpose other than
resale, buys tangible personal property that is:
(A) distributed in commerce; and
(B) normally used for personal, family, or household purposes
and not for business or research purposes.
(5) "Department" means the Texas Department of Licensing and
Regulation.
(5-a) "Executive director" means the executive director of the
department.
(6) "Person" means an individual or an association, company,
corporation, partnership, or other group.
(7) "Provider" means a person who is contractually obligated to
a service contract holder under the terms of a service contract.
(8) "Reimbursement insurance policy" means a policy of insurance
issued to a provider to:
(A) reimburse the provider under a service contract the provider
issued or sold; or
(B) pay on behalf of the provider all covered contractual
obligations that are incurred by the provider under a service
contract the provider issued or sold and that the provider does
not perform.
(9) "Service contract holder" means a person who purchases or
otherwise holds a service contract.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 816, Sec. 13.001,
13.010(1), eff. Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1276,
Sec. 14A.337(a), (b), eff. Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
63, Sec. 2, eff. January 1, 2006.
Sec. 1304.003. SERVICE CONTRACT. (a) In this chapter, "service
contract" means an agreement:
(1) that is entered into for a separately stated consideration
and for a specified term; and
(2) under which a provider agrees to repair, replace, or
maintain a product, or provide indemnification for the repair,
replacement, or maintenance of a product, for operational or
structural failure or damage caused by a defect in materials or
workmanship or by normal wear.
(b) A service contract may also provide for:
(1) incidental payment or indemnity under limited circumstances,
including towing, rental, and emergency road service;
(2) the repair or replacement of a product for damage resulting
from a power surge or for accidental damage incurred in handling
the product; or
(3) identity recovery, as defined by Section 1306.002, if the
service contract is financed under Chapter 348, Finance Code.
(c) For purposes of Subsection (a), normal wear for a motor
vehicle may include minor and reasonable wear and tear that a
vehicle sustains in everyday ordinary operation including:
(1) small dents, dings, and creases repairable by the process of
paintless dent removal without affecting the existing paint
finish and without replacing vehicle body panels or sanding,
bonding, or painting;
(2) small windshield chips and cracks repairable without
replacement of the entire windshield;
(3) worn tire tread;
(4) worn interior fabric or carpet items; and
(5) tire and wheel damage resulting from ordinary road hazards
such as potholes, rocks, wood debris, metal parts, glass,
plastic, or composite scraps.
(d) Subsection (c)(5) does not apply to tire damage covered
under an agreement sold by a tire manufacturer.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
1059, Sec. 1, eff. September 1, 2007.
Acts 2009, 81st Leg., R.S., Ch.
36, Sec. 2, eff. September 1, 2009.
Sec. 1304.0035. CONTROLLING PERSON. (a) In this chapter,
"controlling person" means an individual who:
(1) possesses direct or indirect control of at least 25 percent
of the voting securities of a corporation;
(2) possesses the authority to set policy and direct the
management of a business entity;
(3) is the president, the secretary, or a director of a
corporation; or
(4) is a general partner of a partnership.
(b) An individual who is a controlling person of a corporation
or other business entity that is the general partner of a limited
partnership is a controlling person of the limited partnership.
Added by Acts 2005, 79th Leg., Ch.
63, Sec. 3, eff. January 1, 2006.
Sec. 1304.004. EXEMPTIONS. (a) In this section:
(1) "Maintenance agreement" means an agreement that provides
only for scheduled maintenance for a limited period.
(2) "Warranty" means an undertaking made solely by the
manufacturer or importer of a product or the seller of a product
or service that:
(A) guarantees indemnity for a defective part, mechanical or
electrical breakdown, or labor cost or guarantees another
remedial measure, including the repair or replacement of the
product or the repetition of service;
(B) is made without payment of additional consideration;
(C) is not negotiated or separated from the sale of the product
or service; and
(D) is incidental to the sale of the product or service.
(b) This chapter does not apply to:
(1) a warranty;
(2) a maintenance agreement;
(3) a service contract sold or offered for sale to a person who
is not a consumer;
(4) a residential service contract sold by an entity licensed by
the Texas Real Estate Commission under Chapter 1303;
(5) an agreement issued by an automobile service club that holds
a certificate of authority under Chapter 722, Transportation
Code;
(6) a service contract sold by a motor vehicle dealer on a motor
vehicle sold by that dealer, if the dealer:
(A) is the provider;
(B) is licensed as a motor vehicle dealer under Chapter 2301;
and
(C) covers its obligations under the service contract with a
reimbursement insurance policy; or
(7) a contract offered by a local exchange telephone company
that provides for the repair of inside telephone wiring, if:
(A) the contract term does not exceed one month; and
(B) the consumer can terminate the contract before a new
contract term begins without liability except for payment of
charges for the term that has begun.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Sec. 1304.005. EXEMPTIONS FROM CERTAIN OTHER LAWS. Marketing,
selling, offering for sale, issuing, making, proposing to make,
and administering a service contract are exempt from:
(1) Chapter 1303;
(2) Chapter 722, Transportation Code; and
(3) the Insurance Code and other laws of this state regulating
the business of insurance.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Sec. 1304.006. PURCHASE REQUIREMENT PROHIBITED. A person,
including a bank, a savings and loan association, a lending
institution, or the manufacturer or seller of a product, may not
require the purchase of a service contract as a condition of a
loan or the sale of property.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Sec. 1304.007. GENERAL INVESTIGATIVE POWER OF EXECUTIVE
DIRECTOR. (a) The executive director may investigate a
provider, administrator, or other person as necessary to enforce
this chapter and protect service contract holders in this state.
(b) On request of the executive director, a provider shall make
the records required by Section 1304.155 available to the
executive director as necessary to enable the executive director
to reasonably determine compliance with this chapter.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 816, Sec. 26.038, eff.
Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1276, Sec. 14A.338, eff.
Sept. 1, 2003.
SUBCHAPTER C. REGISTRATION REQUIREMENTS
Sec. 1304.101. REGISTRATION REQUIRED; EXEMPTION FROM OTHER
LICENSING REQUIREMENTS. (a) A person may not operate as a
provider or administrator of service contracts sold in this state
unless the person is registered with the department.
(b) Except for the registration requirement of this subchapter,
a provider, service contract seller, administrator, or other
person who markets, sells, or offers to sell service contracts is
exempt from any licensing requirement of this state that relates
to an activity regulated under this chapter.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Amended by:
Acts 2005, 79th Leg., Ch.
63, Sec. 4, eff. March 1, 2006.
Sec. 1304.102. APPLICATION FOR REGISTRATION OR RENEWAL; GENERAL
REQUIREMENTS. (a) An applicant for registration or registration
renewal must submit an application to the executive director.
(b) The application must:
(1) be in the form prescribed by the executive director; and
(2) include evidence satisfactory to the executive director of
compliance with the applicable financial security requirements
prescribed by Section 1304.151, if the application is for a
provider registration or renewal.
(c) The department may refuse to issue or renew a registration
if the applicant or a controlling person of the applicant has
violated this chapter or a rule adopted or order issued by the
commission or executive director.
(d) A person who makes a false statement in an application or in
any document provided with an application is subject to
disciplinary action under Subchapter E, including denial of the
application or suspension or revocation of a registration.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 816, Sec. 26.039, eff.
Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1276, Sec. 14A.341, eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
63, Sec. 5, eff. January 1, 2006.
Sec. 1304.1025. ADDITIONAL REGISTRATION AND RENEWAL REQUIREMENTS
FOR PROVIDERS. (a) In addition to the requirements of Section
1304.102, an applicant for issuance or renewal of a provider
registration must file with the application:
(1) the reimbursement insurance policy, if the provider is using
a reimbursement insurance policy; and
(2) a biographical affidavit, in a form prescribed by the
executive director, for each controlling person of the provider.
(b) The executive director may not issue or renew a registration
to a provider unless the provider provides evidence to the
executive director that:
(1) each controlling person of the provider is trustworthy and
can competently manage the affairs of the provider in compliance
with this chapter; and
(2) the provider can meet the provider's obligations under
service contracts and this chapter.
(c) Not later than the 30th day after the date of a provider's
initial registration, the provider must provide to the department
a list of any Internet website address through which a consumer
may purchase the provider's service contracts and the name,
assumed name, street address, and telephone number of:
(1) any administrator appointed by the provider under Section
1304.153; and
(2) any seller of the provider's service contracts, other than a
seller that is:
(A) an employee of the provider; or
(B) a business with a physical location in this state at which a
consumer may purchase a service contract.
(d) The provider shall update the list required by Subsection
(c) with each renewal.
Added by Acts 2005, 79th Leg., Ch.
63, Sec. 6, eff. January 1, 2006.
Sec. 1304.103. REGISTRATION AND RENEWAL FEES. (a) The executive
director shall develop a tiered schedule of registration and
renewal fees under which a provider's fee is based on the number
of service contracts the provider sold in this state during the
preceding 12-month period.
(b) The commission shall set the amounts of fees to cover the
costs of administering this chapter, including registration and
renewal fees for administrators.
(c) To register or renew a registration, a provider or
administrator must pay the appropriate fee.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 816, Sec. 13.006, eff.
Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1276, Sec. 14A.342, eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
63, Sec. 7, eff. January 1, 2006.
Sec. 1304.104. INFORMATION CONCERNING NUMBER OF SERVICE
CONTRACTS SOLD. Information concerning the number of service
contracts sold by a provider that is submitted under Section
1304.103:
(1) is a trade secret to which Section 552.110, Government Code,
applies; and
(2) may be used only by the executive director and the
department in developing the tiered fee schedule under Section
1304.103.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 816, Sec. 26.040, eff.
Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1276, Sec. 14A.343, eff.
Sept. 1, 2003.
Sec. 1304.105. RENEWAL. The commission shall adopt rules
regarding the renewal of a registration issued under this
chapter.
Added by Acts 2003, 78th Leg., ch. 816, Sec. 13.007, eff. Sept.
1, 2003.
SUBCHAPTER D. PRACTICE BY SERVICE CONTRACT PROVIDERS AND
ADMINISTRATORS
Sec. 1304.151. FINANCIAL SECURITY REQUIREMENTS. (a) To ensure
the faithful performance of a provider's obligations to its
service contract holders, each provider must:
(1) insure the provider's service contracts under a
reimbursement insurance policy issued by an insurer authorized to
transact insurance in this state or by a surplus lines insurer
eligible to place coverage in this state under Chapter 981,
Insurance Code;
(2) maintain a funded reserve account covering the provider's
obligations under its service contracts that are issued and
outstanding in this state and place in trust with the executive
director a financial security deposit consisting of:
(A) a surety bond issued by an authorized surety;
(B) securities of the type eligible for deposit by an authorized
insurer in this state;
(C) a statutory deposit of cash or cash equivalents;
(D) a letter of credit issued by a qualified financial
institution; or
(E) another form of security prescribed by rules adopted by the
commission; or
(3) maintain, or have a parent company that maintains, a net
worth or stockholders' equity of at least $100 million.
(b) If the provider ensures its obligations under Subsection
(a)(2), the amount maintained in the reserve account may not be
less than an amount equal to 40 percent of the gross
consideration the provider received from consumers from the sale
of all service contracts issued and outstanding in this state,
minus any claims paid. The executive director may review and
examine the reserve account. The amount of the security deposit
may not be less than the greater of:
(1) $25,000; or
(2) an amount equal to five percent of the gross consideration
the provider received from consumers from the sale of all service
contracts issued and outstanding in this state, minus any claims
paid.
(c) If the provider ensures its obligations under Subsection
(a)(3), the provider must give to the executive director on
request:
(1) a copy of the provider's or the provider's parent company's
most recent Form 10-K or Form 20-F filed with the Securities and
Exchange Commission within the preceding calendar year; or
(2) if the provider or the provider's parent company does not
file with the Securities and Exchange Commission, a copy of the
provider's or the provider's parent company's audited financial
statements showing a net worth of the provider or its parent
company of at least $100 million.
(d) If the provider's parent company's Form 10-K, Form 20-F, or
audited financial statements are filed to show that the provider
meets the financial security requirement, the parent company
shall agree to guarantee the obligations of the provider relating
to service contracts sold by the provider in this state.
(e) The executive director may not require a provider to meet
any additional financial security requirement.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 816, Sec. 13.008, eff.
Sept. 1, 2003.
Sec. 1304.152. REIMBURSEMENT INSURANCE POLICY. (a) A
reimbursement insurance policy that a provider uses to comply
with Sections 1304.1025 and 1304.151(a)(1) must state that:
(1) the insurer that issued the policy shall:
(A) reimburse or pay on behalf of the provider any covered
amount the provider is legally obligated to pay; or
(B) provide the service that the provider is legally obligated
to perform according to the provider's contractual obligations
under the insured service contract;
(2) if the covered service is not provided to a service contract
holder not later than the 60th day after the date of proof of
loss, the insurer shall pay the covered amount directly to the
service contract holder or provide the required service; and
(3) if a refund is not paid to the service contract holder or
credited to the service contract holder's account as required by
Section 1304.158, the insurer, after receiving written notice,
shall pay the refund amount directly to the service contract
holder.
(a-1) For a reimbursement insurance policy to comply with
Section 1304.151(a)(1), the insurer issuing the policy must:
(1) maintain surplus as to policyholders and paid-in capital of
at least $15 million and annually file with the executive
director copies of the insurer's audited financial statements,
National Association of Insurance Commissioners annual statement,
and actuarial certification if the certification is required and
filed in the insurer's state of domicile; or
(2) maintain surplus as to policyholders and paid-in capital of
at least $10 million but not more than $15 million, demonstrate
to the satisfaction of the executive director that the insurer
maintains a ratio of net written premiums, wherever written, to
surplus as to policyholders and paid-in capital of not more than
three to one, and annually file with the executive director
copies of the insurer's audited financial statements, National
Association of Insurance Commissioners annual statement, and
actuarial certification if the certification is required and
filed in the insurer's state of domicile.
(b) The insurer may not cancel the reimbursement insurance
policy until the insurer delivers to the provider and the
executive director a written notice of cancellation that complies
with the notice requirements prescribed by Subchapters B and C,
Chapter 551, Insurance Code, for cancellation of an insurance
policy under those subchapters. Cancellation of the policy does
not affect the insurer's liability for a service contract issued
by the provider and insured under the policy before the effective
date of the cancellation.
(b-1) If the insurer or provider cancels the reimbursement
insurance policy, the provider named on the policy may not issue
a new service contract after the effective date of the
cancellation unless:
(1) the provider files with the executive director a copy of a
new policy that meets the requirements of this section and that
provides coverage after that date; or
(2) the provider complies with other financial security
requirements provided by Section 1304.151(a).
(c) A provider is considered the agent of an insurer that issues
a reimbursement insurance policy for purposes of obligating the
insurer to the service contract holder in accordance with the
service contract and this chapter. The insurer issuing the
reimbursement insurance policy is considered to have received the
premium for the policy on the date the service contract holder
pays the purchase price of the service contract.
(d) This chapter does not prevent or limit the right of the
insurer to seek indemnification or subrogation against a provider
for any amount the insurer pays or is obligated to pay to a
service contract holder on behalf of the provider.
(e) In this section, "net written premiums" means the sum of
direct written premiums and assumed reinsurance premiums, minus
ceded reinsurance premiums.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 816, Sec. 26.041, eff.
Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1276, Sec. 14A.345, eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
63, Sec. 9, eff. January 1, 2006.
Acts 2005, 79th Leg., Ch.
728, Sec. 11.150, eff. September 1, 2005.
Sec. 1304.153. APPOINTMENT AND RESPONSIBILITIES OF
ADMINISTRATOR. (a) A provider may appoint an administrator
registered under this chapter to be responsible for:
(1) all or any part of the administration or sale of service
contracts; and
(2) compliance with this chapter, except for Section 1304.151.
(b) The appointment of an administrator under this section does
not affect a provider's responsibility to comply with this
chapter.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Amended by:
Acts 2005, 79th Leg., Ch.
63, Sec. 10, eff. March 1, 2006.
Sec. 1304.154. PROVIDER REQUIREMENTS. A provider may not sell,
offer for sale, or issue a service contract in this state unless
the provider gives the service contract holder:
(1) a receipt for, or other written evidence of, the purchase of
the contract; and
(2) a copy of the contract within a reasonable period after the
date of purchase.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Sec. 1304.155. PROVIDER RECORDS. (a) A provider shall maintain
accurate accounts, books, and other records regarding
transactions regulated under this chapter. The provider's records
must include:
(1) a copy of each unique form of service contract sold;
(2) the name and address of each service contract holder who
provided the holder's name and address;
(3) a list of each location at which the provider's service
contracts are marketed, sold, or offered for sale; and
(4) written claims files that contain at least the date and a
description of each claim related to the service contracts.
(b) The records required by this section may be maintained in an
electronic medium or through other recordkeeping technology. If a
record is not in a hard copy, the provider must be able to
reformat the record into a legible hard copy at the request of
the executive director.
(c) Except as provided by Subsection (d), a provider shall
retain the records required by this section until at least the
first anniversary of the expiration date of the specified period
of coverage under the service contract.
(d) A provider that discontinues business in this state shall
retain its records until the provider furnishes the executive
director with proof satisfactory to the executive director that
the provider has discharged all obligations to service contract
holders in this state.
(e) An administrator appointed to maintain the provider's
records is responsible for compliance with this section to the
same extent as the provider.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 816, Sec. 26.042, eff.
Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1276, Sec. 14A.346, eff.
Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
63, Sec. 11, eff. January 1, 2006.
Sec. 1304.156. FORM OF SERVICE CONTRACT AND REQUIRED
DISCLOSURES. (a) A service contract marketed, sold, offered for
sale, issued, made, proposed to be made, or administered in this
state must:
(1) be written, printed, or typed in clear, understandable
language that is easy to read;
(2) state the name and address of the provider;
(3) state the purchase price of the contract and the terms under
which the contract is sold;
(4) state the terms and restrictions governing cancellation of
the contract by the provider or the service contract holder
before the expiration date of the contract;
(5) identify:
(A) any administrator;
(B) the contract seller; and
(C) the service contract holder, if the service contract holder
provides the holder's name;
(6) state the amount of any deductible;
(7) specify the products and services to be provided under the
contract and any limitation, exception, or exclusion;
(8) specify any restriction governing the transferability of the
contract;
(9) state the duties of the service contract holder, including
any duty to protect against any further damage and any
requirement to follow the instructions in the owner's manual; and
(10) state whether the contract provides for or excludes
consequential damages or preexisting conditions, if applicable.
(b) The identity of a person described by Subsection (a)(5) is
not required to be preprinted on the service contract and may be
added to the contract at the time of sale.
(c) The purchase price is not required to be preprinted on the
service contract and may be negotiated with the service contract
holder at the time of sale.
(d) A service contract insured under a reimbursement insurance
policy under Section 1304.151(a)(1) must:
(1) state the name and address of the insurer;
(2) state that the service contract holder may apply for
reimbursement directly to the insurer if:
(A) a covered service is not provided to the service contract
holder by the provider not later than the 60th day after the date
of proof of loss; or
(B) a refund or credit is not paid before the 46th day after the
date on which the contract is returned to the provider under
Section 1304.158; and
(3) contain a statement substantially similar to the following:
"Obligations of the provider under this service contract are
insured under a service contract reimbursement insurance policy."
(e) A service contract that is not insured under a reimbursement
insurance policy must contain a statement substantially similar
to the following: "Obligations of the provider under this service
contract are backed by the full faith and credit of the
provider." (V.A.C.S. Art. 9034, Secs. 10(a), (b), (c), (d), (e),
(f) (part), (g), as added Acts 76th Leg., R. S., Ch. 1559.)
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Amended by:
Acts 2005, 79th Leg., Ch.
63, Sec. 12, eff. January 1, 2006.
Sec. 1304.157. RETURNING A SERVICE CONTRACT. A service contract
must require the provider to allow the service contract holder to
return the contract to the provider not later than:
(1) the 20th day after the date the contract is mailed to the
service contract holder; or
(2) the 10th day after the date of delivery, if the contract is
delivered to the service contract holder at the time of sale.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Sec. 1304.158. VOIDING A SERVICE CONTRACT. (a) If a service
contract holder returns a service contract in accordance with
Section 1304.157 and a claim has not been made under the contract
before the contract is returned, the contract is void.
(b) A service contract holder may void the service contract at a
later time as provided by the contract.
(c) If a service contract is voided, the provider shall refund
to the service contract holder or credit to the account of the
service contract holder the full purchase price of the contract.
If the provider does not pay the refund or credit the service
contract holder's account before the 46th day after the date the
contract is returned to the provider, the provider is liable to
the service contract holder for a penalty each month an amount
remains outstanding. The monthly penalty may not exceed 10
percent of the amount outstanding.
(d) The right to void a service contract is not transferable.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Sec. 1304.159. CANCELING A SERVICE CONTRACT. (a) A provider
may cancel a service contract by mailing a written notice of
cancellation to the service contract holder at the service
contract holder's last known address according to the records of
the provider. The provider must mail the notice before the fifth
day preceding the effective date of the cancellation. The notice
must state the effective date of the cancellation and the reason
for the cancellation.
(b) The provider is not required to provide prior notice of
cancellation if the service contract is canceled because of:
(1) nonpayment of the consideration for the contract;
(2) a material misrepresentation by the service contract holder
to the provider; or
(3) a substantial breach of a duty by the service contract
holder relating to the covered product or its use.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Sec. 1304.160. LIMITATIONS ON PROVIDER NAME. (a) A provider
may not use a name that:
(1) includes "insurance," "casualty," "surety," or "mutual" or
any other word descriptive of the insurance, casualty, or surety
business; or
(2) is deceptively similar to the name or description of an
insurance or surety corporation or to the name of any other
provider.
(b) A provider may include in its name "guaranty" or a similar
word.
(c) This section does not apply to a provider that, before
September 1, 1999, included a word prohibited under this section
in its name. A provider described by this subsection must include
in each service contract a statement substantially similar to the
following: "This agreement is not an insurance contract."
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Sec. 1304.161. MISLEADING STATEMENTS PROHIBITED. A provider or
the provider's representative may not, in the provider's service
contracts or literature:
(1) make, permit, or cause to be made any false or misleading
statement; or
(2) deliberately omit a material statement if the omission would
be considered misleading.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
SUBCHAPTER E. DISCIPLINARY ACTION
Sec. 1304.201. DISCIPLINARY ACTION. (a) On a finding that a
ground for disciplinary action exists under this chapter, the
commission may impose an administrative sanction, including an
administrative penalty as provided by Subchapter F, Chapter 51.
(b) Repealed by Acts 2003, 78th Leg., ch. 816, Sec. 13.010(2).
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 816, Sec. 13.009,
13.010(2), eff. Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1276,
Sec. 14A.347(a), eff. Sept. 1, 2003.
Sec. 1304.202. INJUNCTIVE RELIEF; CIVIL PENALTY. (a) The
executive director may institute an action under Section 51.352
for injunctive relief to restrain a violation or a threatened
violation of this chapter or an order issued or rule adopted
under this chapter.
(b) In addition to the injunctive relief provided by Subsection
(a), the executive director may institute an action for a civil
penalty as provided by Section 51.352. The amount of a civil
penalty assessed under this section may not exceed:
(1) $2,500 for each violation; or
(2) $50,000 in the aggregate for all violations of a similar
nature.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 816, Sec. 26.043, eff.
Sept. 1, 2003.
Sec. 1304.203. MULTIPLE VIOLATIONS. For purposes of this
subchapter, violations are of a similar nature if the violations
consist of the same or a similar course of conduct, action, or
practice, regardless of the number of times the conduct, act, or
practice occurred.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003.
Sec. 1304.204. ADMINISTRATIVE PROCEDURE. Sections 51.305,
51.310, and 51.354 apply to disciplinary action taken under this
chapter.
Added by Acts 2001, 77th Leg., ch. 1421, Sec. 3, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 14A.347(b),
eff. Sept. 1, 2003.