Justification for Administrative Rule Adoption

For-Profit Legal Service Contract Companies

16 TAC, Chapter 57, repeal, §§57.1, 57.10, 57.21 - 57.23, 57.25, 57.70 - 57.72, 57.80, and 57.90.

The Texas Commission of Licensing and Regulation (Commission) adopts the repeal of existing rules at 16 Texas Administrative Code (TAC), Chapter 57, §§57.1, 57.10, 57.21 - 57.23, 57.25, 57.70 - 57.72, 57.80, and 57.90, regarding For-Profit Legal Service Contract Companies Program, without changes to the proposed text as published in the June 7, 2019, issue of the Texas Register (44 TexReg 2829).

EXPLANATION OF AND JUSTIFICATION FOR THE REPEAL

The adoption repeals the existing For-Profit Legal Service Contract Companies rules under 16 TAC Chapter 57, regarding the registration and regulation of for-profit legal service contract companies, administrators, and sales representatives by the Texas Department of Licensing and Regulation (Department). The rules under 16 TAC Chapter 57 implement Texas Occupations Code, Chapter 953, Regulation of For-Profit Legal Service Contract Companies.

The repeal of the existing rules is necessary to implement Senate Bill (S.B.) 2065 and House Bill (H.B.) 2113, 85th Legislature, Regular Session, 2017. These two bills eliminated the statewide registration requirements and regulation by the Department of for-profit legal service contract companies, administrators, and sales representatives under Occupations Code, Chapter 953. The two bills also eliminated requirements on for-profit legal service contract companies to submit financial security and other financial information to the Department and to maintain certain company records. These two bills, however, preserved other requirements under Chapter 953 regarding for-profit legal service contracts and for-profit legal service contract companies, administrators, and sales representatives. A violation of the remaining chapter is a deceptive trade practice actionable under Subchapter E, Chapter 17, Business and Commerce Code (Deceptive Trade Practices-Consumer Protection Act). These statutory changes will be effective September 1, 2019.

The adoption repeals the existing rules at 16 TAC Chapter 57, and the effective date of the repeal corresponds with the effective date of the statutory changes. As of September 1, 2019, the Department will no longer register or regulate for-profit legal service contract companies, administrators, and sales representatives.

SECTION-BY-SECTION SUMMARY

This adoption repeals §57.1, Authority. This section states that the rules are promulgated under the authority of Texas Occupations Code, Chapters 51 and 953.

This adoption repeals §57.10, Definitions. This section defines group legal service contract, group legal service contract manager, administrator, company, and sales representative.

This adoption repeals §57.21, Registration Requirements—Company. This section sets out the registration requirements, the registration term, and the requirements regarding financial security and other financial information for legal service contract companies.

This adoption repeals §57.22, Registration Requirements—Sales Representative. This section sets out the registration requirements and the registration term for legal service contract sales representatives.

This adoption repeals §57.23, Registration Requirements—Administrator. This section sets out the registration requirements and the registration term for legal service contract administrators.

This adoption repeals §57.25, Registration Requirements—Renewal. The section sets out the registration renewal requirements for companies, sales representatives, and administrators.

This adoption repeals §57.70, Responsibilities of Registrants—General. The section requires a registrant to notify the Department in writing within 30 days of any change in the registrant’s information.

This adoption repeals §57.71, Responsibilities of Registrants—Company. This section establishes the responsibilities of a legal service contract company, including: providing a receipt and a copy of the legal service contract to a contract holder; providing notice that the Department regulates legal service contract companies and sale representatives; and providing the Department’s contact information.

This adoption repeals §57.72, Responsibilities of Registrants—Sales Representative. This section provides that a sales representative may only sell legal service contracts under Texas Occupations Code, Chapter 953 and this chapter on behalf of a registered company.

This adoption repeals §57.80, Fees. This section sets out the initial and renewal registration fees for companies, administrators, and sales representatives; fees for revised or duplicate registrations; late renewal fees; and the annual premium tax replacement fee for companies.

This adoption repeals §57.90, Administrative Penalties and Sanctions. This section sets out the administrative penalties and sanctions for violations of the Department’s statutes and rules.

PUBLIC COMMENTS

The Department drafted and distributed the proposed repeal of the existing rules to persons internal and external to the agency. The proposed repeal was published in the June 7, 2019, issue of the Texas Register (44 TexReg 2829). The deadline for public comments was July 8, 2019. The Department received three comments from interested parties on the proposed repeal during the 30-day public comment period. The public comments are summarized below.

Comment--One commenter expressed support and thanks for repealing the rules. The commenter stated that licensing legal service contract representatives was a waste of time and money and that the decision to repeal would save Texans time and money.

Department Response--The Department appreciates the comment in support of the proposed repeal of the existing rules. The proposed repeal implements the changes made to Occupations Code, Chapter 953 by S.B. 2065 and H.B. 2113, 85th Legislature, Regular Session, 2017. The Department did not make any changes to the proposed repeal in response to this public comment.

Comment--Another commenter had a question about the meaning of the proposal and whether for-profit legal service contract companies would no longer be allowed to sell for-profit legal service contracts in Texas.

Department Response--The proposed repeal implements the changes made to Occupations Code, Chapter 953 by S.B. 2065 and H.B. 2113, 85th Legislature, Regular Session, 2017. Chapter 953 still exists and for-profit legal service contracts can still be written and sold in Texas. The two bills eliminated the requirements for for-profit legal service contract companies, administrators, and sales representatives to register with the Department and eliminated the regulation of Chapter 953 by the Department effective September 1, 2019. The bills, however, preserved other requirements under Chapter 953 regarding for-profit legal service contracts and for-profit legal service contract companies, administrators, and sales representatives. A violation of the remaining chapter is a deceptive trade practice actionable under the Deceptive Trade Practices-Consumer Protection Act. The Department did not make any changes to the proposed repeal in response to this public comment.

Comment--A third comment was submitted by a for-profit legal service contract company, which expressed support for repealing the existing rules under 16 TAC Chapter 57. The comment stated that the repeal of the rules is needed for implementation of the statutory changes made by S.B. 2065 and H.B. 2113. The comment expressed appreciation for the Department.

Department Response--The Department appreciates the comment in support of the proposed repeal of the existing rules. The proposed repeal implements the changes made to Occupations Code, Chapter 953 by S.B. 2065 and H.B. 2113, 85th Legislature, Regular Session, 2017. The Department did not make any changes to the proposed repeal in response to this public comment.

RECOMMENDATIONS AND COMMISSION ACTION

The Department staff recommended that the Commission adopt the proposed repeal of the existing rules as published in the Texas Register without changes. At its meeting on July 15, 2019, the Commission adopted the proposed repeal without changes as recommended by the staff.

STATUTORY AUTHORITY

The repeal is adopted under Texas Occupations Code, Chapter 51, which authorizes the Commission, the Department’s governing body, to adopt rules as necessary to implement this chapter and any other law establishing a program regulated by the Department.

The statutory provisions affected by the adoption are those set forth in Texas Occupations Code, Chapters 51 and 953, and Texas Business and Commerce Code, Chapter 17, Subchapter E. No other statutes, articles, or codes are affected by the adoption.

57.1. Authority.
57.10. Definitions.
57.21. Registration Requirements--Company.
57.22. Registration Requirements--Sales Representative.
57.23. Registration Requirements--Administrator.
57.25. Registration Requirements--Renewal.
57.70. Responsibilities of Registrants--General.
57.71. Responsibilities of Registrants--Company.
57.72. Responsibilities of Registrant--Sales Representative.
57.80. Fees.
57.90. Administrative Penalties and Sanctions.

REVIEW BY AGENCY COUNSEL

This agency hereby certifies that the adopted repeal has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State, on August 12, 2019.

Brad Bowman
General Counsel
Texas Department of Licensing and Regulation