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TEXAS DEPARTMENT OF BANKING
TFDA 121st
Annual Convention
Corpus Christi, Texas
June 11-15, 2007
On
The Bay with TFDA
Topics
of Discussion
Industry
and DOB Update
FDIC Insurance
Coverage
Legislative
Update
Chapter
25 Rule Review
Insurance-Funded
Contracts
Contract
Modifications
New
Faces at the DOB:
Eric Dahlquist,
Jose Calunga, and Nathaniel Short 00Field Examiners all stationed
in the Houston Region
Becki McCready
00PFC/PCC Administrator
OVERALL
PFC RATINGS
Industry
Statistics
(As of 12/31/2006)
$2,880,966,339
821,600
420
TOTALS
$1,970,922,913
456,251
58
Insurance
Funded
$910,043,426
365,349
362
Trust
Funded
Dollars
Number
of Contracts
Number
of Permits
Seizure
Activity
Augustus Funeral
Home, Texas City and La Marque 0008/06
Selling
without a license
Collected
$25,844 from four consumers
Referred to
the Texas Attorney General00 Office to file claim for restitution
Restitution
discharged by Bankruptcy Court
Saxet Funeral
Home, Corpus Christi 0008/06
Selling without
a license
Collected
$3,695.68 from four consumers
Restitution
collected and $4,000 penalty assessed against funeral home
Seizure
Activity (cont.)
Austin-Peel
& Son Funeral Home, Austin 00/06
Failure to
properly renew permit
Four contracts
outstanding
Unable to
locate consumers or contracts
No shortage
determined and funds escheated to Comptroller00 Office in name of
consumers
Cedar Crest
Funeral Home, Dallas 0005/07
Voluntary
surrender of license
Currently
reviewing documents
FDIC
Insurance Coverage Limits
The Federal
Deposit Insurance Corporation (FDIC) recently issued additional guidance
on insurance limits for a bank that holds preneed funds.
An initial
review of the letter appears favorable that FDIC will now insure 00ach00
individual preneed purchasers00interest separately, rather than 00ombining00
the accounts to determine FDIC insurance limits.
Legislative
Update
HB 2393 passed
related to the investment of trust-funded preneed funeral contracts:
A trustee
shall invest and manage preneed trust assets in accordance with the
Uniform Prudent Investor Act (Chapter 117, Property Code).
Allows Department
to adopt reasonable rules to administer and clarify law regarding preneed
trust funds.
Repeals all
specific investment requirements for preneed trust funds currently in
the Finance Code.
The Act will
take effect on September 1, 2007.
Legislative
Update (cont.)
Remember:
If you plan
on making any changes to your preneed investment portfolio based on
HB 2393:
You will
need to file a new investment plan with the Department; and,
You may need
to execute a new trustee agreement, if your current agreement specifically
limits your investment options.
Chapter
25 Rule Review
A state agency
is required to review each of its rules every four years.
The Department
is currently in the process of developing amendments to the following
sections of Chapter 25 of the TAC:
Preneed
Contract Forms
Recordkeeping
Requirements for both Insurance and Trust Funded Preneed Contracts
Permit Renewal
Process
Examination
Costs and Assessments
Insurance-Funded
Contracts
The Commissioner00
Memorandum, sent to all permit holders on May 29, 2007, addresses the
following:
New applications
for permits to sell insurance-funded contracts;
Applications
to convert existing prepaid contracts from trust to insurance funding;
and,
Existing insurance
permit holders.
Insurance-Funded
Contracts (cont.)
The Memorandum
explains that, in order to protect the public and achieve the purposes
for which Chapter 154 was enacted, the Department will not approve a
new application or a conversion application unless, among other matters,
the applicant is able to satisfactorily demonstrate that the insurance-funded
contract will be performed and funded in accordance with their terms
and the requirements of Chapter 154 of the Texas Finance Code.
Insurance-Funded
Contracts (cont.)
The Department
intends to provide additional guidance regarding how a new permit or
conversion applicant can satisfactorily demonstrate these requirements.
Insurance-Funded
Contracts (cont.)
The Memorandum
became necessary to address recent assertions by several insurance permit
holders that they are not legally responsible for the contract00 performance
or funding at maturity and should not be required to maintain the records
specified in Chapter 25.10.
Contract
Modifications at the Time of Death
Contract modifications
can be made to a contract not paid-in-full at the time of death,
if agreed to by the seller and person charged with disposition under
711.002(a) of the Health and Safety Code.
Contract
Modifications at the Time of Death
(Cont.)
Paid-in-full
contracts may not be modified, if the purchaser signs
this part of the preneed contract:
00u>This
contract is for my funeral service and, if paid in full at the time
of my death, the funeral goods and services selected may not be changed
after my death.
Contract
Modifications at the Time of Death
(Cont.)
If a purchaser
does not sign that he/she does not want to prevent changes to a paid-in-full
contract; then,
A funeral
provider has two choices:
Agree to
all of the changes, as long as purchaser00 representative receives
all proper credits from the preneed contract on the at-need contract.
Disagree with
the changes and only have to allow changes up to 10% of the total contract
price.
Contract
Modifications at the Time of Death
(Cont.)
If the Funeral
Provider disagrees with the contract modifications and
is limiting the changes to 10% of the total contract price, the Funeral
Provider only has to:
Provide credit
for items deleted - refund not required if credit offered.
Receive compensation
for additions.
Contract
Modifications at the Time of Death
(Cont.)
All merchandise
and/or service contract modifications must be calculated on a comparable
time-price basis. (Refer to Section 154.1551(a)(2) of the Finance
Code)
Contract
Modifications at the Time of Death
(Cont.)
Changes can
only be executed by the person charged with disposition under 711.002(a)
of the Health and Safety Code.
Final Disposition of Remains
Remember:
The only way the means of final disposition can be changed, if
the purchaser and beneficiary are the same person, is by a subsequent
written document executed by the purchaser.
Any Questions?
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