# The Attorney General of Texas

August 31, 1982 MARK WHITE Attorney General

Supreme Court Building P. 0. BOX 12546 Austin. TX. 76711. 2546 5121475-2501 Telex 9101674-1367 Telecopier 5121475.0266

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An Equal Opportunity1 Affirmative Action Employer Mr. SamKelley ConsumerCredit P. 0. Box 2107 Austin, Texas commissioner

78768 OpinionNo.m-511

Re: Construction of article 3.53, section 8B of the InsuranceCode regardingrefund of unearned insurance premiums
on terminatedpolicies

DearMr. Kelley:

You ask what position the Office of Consumer Credit should take in enforcing the minimum refund provisions in the consumer c-red:- it chapters of the Texas Credit Code which exempt refunds of unearned credit insurance premiums of less than one dollar. V.T.C.S. arts. 5069-3.18((j),5069-4.02(6), 5069-5.03(6), 5069-6.04(9), 5069-6A.08 (lo),and 5069-7.06(8).

As described inyour inquiry,confusionhas arisen as a result of two 1981 enactments by the Sixty-seventh Legislature amending the provision in the Texas Insurance Code which also governs refunds of credit insurance premiums. Ins. Code art. 3.53, §B(B). While not identical in scope there is substantial overlap of credit insurance covered by consumer credit chapters of the Credit Code and the Insurance Code. Compare V.T.C.S. arts. 5069-3.01, 5069-4.01, 5069-5.01, 5069-6.01, 5069-6A.02, 5069-7.01with Ins. Code art. 3.53, 52(A)(2).
Until the 1981 amendments, article 3.53, section 8(B) of the Insurance Code, was in complete harmony with the Credit Code in requiring refunds of all unearned credit insurance premiums of one dollar and more. In the last regular session, however, the legislaturepassed and the governorapproved two amendments to section 8(B) of article 3.53 which raised the minimum refund requirement. House Bill No. 2198, Acts 1981, Sixty-seventh Legislature, chapter 849, at 3227, exempts refund of unearned premiums of less than three dollars. House Bill No. 2388, Acts 1981, Sixty-seventhLegislature, chapter 493, at 2109, raised the exemption to less than five dollars. We are therefore presented with three facially inconsistent requirements for unearned credit insurance premium refunds: the provisions of the Texas Credit Code, House Bill No. 2198, and House BillNo. 2388.

p. 1844Mr. SamKelley - Page 2 (MW-511)

We need not decidewhether House Bill No. 2198 or House Bill NO. 2388 controlsarticle 3.53 of the InsuranceCode, sincewe believe the Credit Codeprovisionprevails in any event.

In 1963, article 3.53 of the Insurance Code was x-written and enacted in itspresent form. That enactment containeda savingclause which stated, inpart:

The provisions of thisAct shall be cumulative of, supplementaland in addition to theprovisions of Senate Bill 15, as passed by the Fifty-eighth Legislature, Regular Session, 1963, entitled 'TexasRegulatoryLoanAct,' and theprovisionsof thisAct shallnot in any manner repeal, amend or modify said Senate Bill 15, nor shall it be so construed,but to the contrary, thisAct shallbe
SO construed as to be consistent with the provisionsof said SenateBill 15.

Acts 1963, 58th Leg., ch. 405, at 986. Senate Bill 15, the Texas Regulatory Loan Act, referred to above, was also enacted in 1963. Acts 1963, 58th Leg., ch. 205, at 550. Clearly article 3.53 of the Insurance Code was made subordinate to the provisions of the RegulatoryLoanAct.

In 1967, the RegulatoryLoan Act was expressly reenactedas part of the Texas Credit Code. Acts 1967, 67th Leg., ch. 274, at 608. Generally, the Regulatory Loan Act is codified as chapter 3 of the Credit Code. V.T.C.S. art. 5069-3.01, et seq. The question becomes whether the subordination of article 3.53 of the Insurance Code continuesand carriesover to the CreditCode.

In enacting the Credit Code, the legislature expanded regulation of credit transactionsbeyond the loans coveredby theRegulatoryLoan Act. In doing so, however, similar stated intent and purpose were used. Both enactments were explicitly intended to establish a regulatory system to remedy the abuses which have occurred in many consumer credit transactions. See Acts 1963, 58th Leg., ch. 205, at 551; Acts 1967, 60th Leg., ch. 274, at 608, (Declaration of Legislative Intent contained inbothActs). Themain extensionof the Credit Code was the further classification of lender and regulated loans into a needed comprehensive code. Acts 1967, 60th Leg., ch. 274, at 609.

Due to the similar purposes of the Regulatory Loan Act and the Credit Code, it appears that the legislature's intent to subordinate article 3.53 of the InsuranceCode continues. Moreover, the continued subordination is necessary to maintain the comprehensiveness of the Credit Code. If the 1981 amendment to article 3.53, section 8(B) is

p. 1845Mr. SamKelley - Page 3 (Mw-511)

allowed to override theminimum refund provisions of the Credit Code, its purpose in being the self-contained system of consumer credit regulationwill be eroded.

The types of credit transactions covered by article 3.53 are different from those covered by the several chapters of the Credit Code. Article 3.53applies generally to accidentandhealth insurance sold in connectionwith credit transactions of less than five years duration, regardless of amount. Ins. Code art. 3.53, §2(2). In distinction,the severalchaptersof the CreditCode apply to specific types of consumer credit transactions and cover credit insurance involved in them. Chapter 3, for example, is limited in application to loans of $2,500.00 or less. While there is overlap, there clearly
are certain loan transactionswhich are coveredby article 3.53 of the InsuranceCodeand not by chapter 3 of the CreditCode.
Similarly, there are different areas of coverage contained in other Credit Code chapters. Chapter 4 applies to installment loans repayable in substantially equal monthly payments. Art. 5069-4.01, V.T.C.S. Chapter 5 is limited to secondary mortgage loans on real property improved by a dwelling designed for occupancy by four families or less and which are repaid in more than 90 days. Art. 5069-5.01,V.T.C.S. Chapter 6 applies to certain consumerinstallment sales. Art. 5069-6.01, V.T.C.S. Chapter 6A applies to retail installment sales of manufactured homes. Art. 5069-6A.01, V.T.C.S. Chapter 7 applies to retail installmentsalesofmotor vehicles. Art. 5069-7.01,V.T.C.S. Again therewill be loan transactionswhich will fall under the more general article 3.53 and not be covered by the CreditCode.

In addition to applyingonly to the stated loan transactions,the minimum refund provisions of the Credit Code are limited to the situationswhen the credit insurancepremium is receivedby theperson extending credit. Articles 5069-3.18(6), 5069-4.02(6), and 5069-5.03(6) of the Credit Code require refund of unearned premiums "received by the seller or holder." Articles 5069-6.04(9) and 5069-7.06(B) require refund of unearned premiums "received by the seller or holder." Article 5069-6A.8(10)requires refund of unearned premiums "receivedby the creditor."

Article 3.53 of the Insurance Code is not limited to situations when the insurance premium is integrated into a credit transaction. As set out in both amendments to section B(B) of that article, it applies generally to "an amount paid by or charged to the debtor for insurance." Comparatively, the refund provisions of the Credit Code aremuch more specificand defined in theirapplication.

If the legislature had intended to change the minimum refunded provision of the Credit Code, we believe it would have done so

p. 1846Mr. Sam Kelley - Page 4 (MW-511)

directly. Substantialchanges in the Credit Code were enactedby the legislature in 1981. Acts 1981, 67th Leg., ch. 99, at 221; ch. 111, at 273; ch. 496, at 2126; ch. 682, at 2555; ch. 707, at 2627. Since
none of theseamendmentsand new provisionschanged theminimum refund provisionsof the CreditCode, it is proper to concludethatno change
was intended.

Sam Bassett Lumber Company v. City of Houston, 198 S.W.2d 879 (Tex. 1947), sets out the established rule for reconcilinga specific statutewhich conflictswith amore generalone:

The general rule is that when the law makes a generalprovision,apparently for all cases,and a special provision for a particular class, the generalmust yield to the special in so far as the particularclass is concerned. Perezv. Perez, 59 Tex. 322. This rule is based upon the principle that all acts and parts thereof must stand, if possible, each occupying its proper place. and that the intention of the Legislature is more clearly reflectedby a particular statute than by
a general one. Accordingly a specific act is properly regarded as sn exception to, or qualification of, a general law on the same subject previously enacted. In such a case both statutes are permitted to stand, the general one being applicable to all cases except the particular one embraced in the specific act. Townsendv. Terrell, 118Tex. 463, 16 S.W.2d 1063.

198 S.W.2dat 881.

The minimum refundprovisions in the consumer credit chapters of theCredit Code aremore specific in coverage thanarticle 3.53 of the InsuranceCode. The Credit Code's object of comprehensiveregulation of consumer credit transactions is also more specific in the context of its coverage. Consequently, article 3.53, being more general in objectand inapplication,must yield to the Credit Codewhen a credit transaction falls under the specific coverage of a consumer credit chapter. This conclusion that the Credit Code minimum refund provisions prevail is consistent with the statements of legislative intent discussed above. This oninion should not be construed as abridging in any way regulation of other aspects of credit insurance by the State Board of Insurance. See, e.g., State Board of Insurance
v. Deffebach. 631 S.W.2d 794 (Tex. Civ. App. - Austin 1982, writ filed).

p. 1847. -

Mr. Sam Kelley - Page 5 (MW-511)

SUMMARY

For credit transactionscoveredby the consumer credit chapters, subtitle two of the Texas Credit Code, all unearned credit insurance premiums must be refunded except for amounts totalling less than
one dollar. V.T.C.S. arts. 5069-3.18(6),5069-4.02 (6)s 5069-5.03(6), 5069-6.04.(9), 5069-68.8(10), 5069-7.06(B). These requirementsare unaffectedby the 1981amendment to article 3.53, section 8(B) of theTexas InsuranceCode.

MAR< WHITE AttorneyGeneralof Texas

JOHNW. FAINTER,JR. FirstAssistantAttorneyGeneral

RICHARD E. GRAY III ExecutiveAssistantAttorneyGeneral
Preparedby Jeff Hart AssistantAttorney General

APPROVED: OPINION COMMITTEE

SusanL. Garrison,Chairman Jon Bible Rick Gilpin Jeff Hart PatriciaHinojosa JimMoellinger BruceYoungblood

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