Texas
A. Actions lender may take: TX-CPI §§307.051(a), 307.051(c) —
1. Collateral protection insurance is insurance coverage that:
a. Is purchased by a lender after the date of a credit agreement;
b. Provides monetary protection against loss of or damage to the collateral or against liability arising out of the ownership or use of the collateral; and
c. Is purchased according to the terms of a credit agreement as a result of a borrower's failure to provide evidence of insurance or failure to obtain or maintain insurance covering the collateral, with the costs of the collateral protection insurance, including interest and any other charges incurred by the lender in connection with the placement of collateral protection insurance, payable by a borrower.
2. Collateral protection insurance includes insurance coverage that is purchased to protect:
a. Only the interest of the lender; or
b. Both the interest of the lender and some or all of the interest of a borrower.
3. The term of a collateral protection insurance policy may be:
a. Not greater than 12 months; or
b. The remaining term of the credit transaction if the remaining term is less than or equal to 24 months.
4. The effective date of coverage for collateral protection insurance may be earlier than the date of issuance of the policy. The effective date may not be earlier than the date the collateral became uninsured.
5. A premium for collateral protection insurance may not be based on an amount that exceeds the actual amount of unpaid indebtedness of the borrower as of the effective date of the policy. This condition applies without regard to whether the coverage under the policy limits the insurer's liability to:
a. The amount of unpaid debt;
b. The cash value of the collateral; or
c. The cost of repair of the collateral.
6. Collateral protection insurance does not include insurance coverage that:
a. Is purchased by the lender for which the borrower is not charged;
b. Is purchased at the inception of a credit transaction in which the borrower is a party or to which the borrower agrees, whether or not costs are included in a payment plan under the credit transaction;
c. Is maintained by the lender for the protection of collateral that comes into the possession or control of the lender through foreclosure, repossession, or a similar event;
d. Is credit insurance, insurance issued to cover the life or health of the borrower, or any other insurance maintained to cover the inability or failure of the borrower to make payment under the credit agreement.
B. Notices required:
1. TX-CPI §§307.052(a) through 307.052(f) —
a. A lender who requires collateral protection insurance that is paid for directly or indirectly by a borrower may place collateral protection insurance if:
(1) The borrower has entered into a credit transaction with the lender for which a credit agreement exists;
(2) The credit agreement requires the borrower to maintain insurance on the collateral; and
(3) A notice has been included in the credit agreement or a separate document provided to the borrower at the time the credit agreement is executed that states that:
(a) The borrower is required to:
i) Keep the collateral insured against damage in the amount equal to the lessee's indebtedness to the lender;
ii) Purchase the insurance from an insurer that is authorized to do business in Texas or an eligible surplus lines insurer; and
iii) Name the lender as the person to be paid under the policy in the event of a loss;
(b) The borrower must, if required by the lender, deliver to the lender a copy of the policy and proof of the payment of premiums; and
(c) If the borrower fails to meet any requirement listed in B.1.a.(3)(a) or B.1.a.(3)(b), above, the lender may obtain collateral protection insurance on behalf of the borrower at the borrower's expense.
b. Not later than the 31st day after the date the collateral protection insurance is charged to the borrower, the lender, by prepaid, first class mail, must mail to each borrower at the last known address on file with the lender a notice that states:
(1) That the lender has purchased or will purchase collateral protection insurance on behalf of the borrower and at the debtor's expense as provided by the credit agreement;
(2) The type of insurance that the lender has obtained or will obtain, the extent of the coverage, and whose interest the policy protects;
(3) The beginning and ending dates of the policy period;
(4) The total cost of the policy to the borrower;
(5) The annual interest rate charged on the cost of insurance if that rate is different from the rate charged in the related credit transaction;
(6) The manner in which the borrower may pay the cost of insurance, interest, or finance charge relating to the purchase of the collateral protection insurance; and
(7) At the option of the lender, other repayment options to which the borrower has agreed in the original credit transaction.
c. The lender must mail the notice required under B.1.b., above, to each person who is a cosigner or guarantor to the debt, if the last known address of that person differs from the last known address of the borrower.
d. The lender may delegate the notice requirements under B.1.b. and B.1.c., above, to the insurer or the insurer's agent.
e. The notice required by X.B.1.b., above, must be printed in type that is:
(1) Underlined;
(2) In all capital letters;
(3) In all bold letters; or
(4) Otherwise conspicuous.
f. If the required notice to any borrower, cosigner, or guarantor is returned to the lender undelivered, the lender must:
(1) Locate the person by using the procedures the lender regularly uses for locating debtors; and
(2) Mail a second notice at the time the person is located.
2. TX-CPI §307.054 — A borrower may at any time cause the cancellation of collateral protection insurance by providing proper evidence to the lender that the borrower has obtained insurance as required by the credit agreement. If a borrower provides the lender with proper evidence that the borrower had insurance on the collateral as required by the credit agreement on or before the date the collateral protection insurance is effective and that the borrower continues to have insurance on the collateral as required by the credit agreement, the lender must cancel the insurance that it purchased and may not charge the borrower any costs, interest, or other charges in connection with the insurance.
C. Coverage required: No express statutory provision.
D. Charges permitted:
1. TX-CPI §307.052(g) — The terms for payment of the costs of the collateral protection insurance, including interest and any other charges actually incurred that the lender may impose in connection with the placement of the collateral protection insurance, must include one or more of the following:
a. A final balloon payment on or before the 30th day after the date of the last scheduled payment required by the credit agreement;
b. Full amortization over the term of the credit transaction, the term of the collateral protection insurance coverage, or the term for which the amortization is used by the lender; or
c. Any other repayment terms agreed to by a borrower in the original credit transaction.
2. TX-CPI §307.053 — If any form of amortization is used by the lender, the lender must send to each borrower notice of the terms of the amortization and any change in the borrower's periodic payment.
E. Finance charge allowed on lender's payment: TX-CPI §307.052(g) — The terms for payment of the costs of the collateral protection insurance, including interest and any other charges actually incurred that the lender may impose in connection with the placement of the collateral protection insurance, must include one or more of the following:
1. A final balloon payment on or before the 30th day after the date of the last scheduled payment required by the credit agreement;
2. Full amortization over the term of the credit transaction, the term of the collateral protection insurance coverage, or the term for which the amortization is used by the lender; or
3. Any other repayment terms agreed to by a borrower in the original credit transaction.
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