Texas Administrative Code
Title 7. Banking and Securities
Part 2. Texas Department of Banking
Chapter 25. Prepaid Funeral Contracts
Subchapter B. Regulation of Licenses
§25.11. [Repealed Effective March 8, 2012.]
§25.11. Recordkeeping Requirements for Trust-Funded Contracts.
(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 or stored on microfiche
or in an electronic database 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, or on microfiche or in an electronic
database 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.
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