1. (a) A credit union may offer any debt cancellation product it could offer if it were operating as a federal credit union, so long as it complies with this section. For the purposes of this section, a debt cancellation product is an agreement between the credit union and the member under which the credit union agrees to waive, suspend, defer, or cancel all or part of a member's obligation to pay an indebtedness under a lease, loan, or other extension of credit upon the occurrence of a specified event. The credit union may offer debt cancellation products for a fee. If the debt cancellation product is offered on a fee basis, then participation must be optional for the member.

2. (b) For any debt cancellation product offered by a credit union:

   1. (1) The credit union must purchase insurance, from an insurer authorized to do business in Texas, to indemnify itself from loss resulting from operation of the product;
   2. (2) The credit union may not extend credit nor alter the terms or conditions of an extension of credit conditioned upon the member choosing a debt cancellation product; and
   3. (3) The debt cancellation product must provide for the refunding of, or crediting to, the member any unearned fees resulting from termination of the member's participation in the product, whether by prepayment of the extension of credit or otherwise. Any unearned fees must be calculated using a method that produces a result at least as favorable to the member as the actuarial method. The credit union must disclose, in writing, prior to purchase of the debt cancellation product that the purchase of the debt cancellation product is optional; the conditions for and method of calculating any refund of the debt cancellation fee, including when fees are considered earned by the credit union; that the member should carefully review all of the terms and conditions of the debt cancellation agreement prior to signing the agreement.

3. (c) A credit union must notify the commissioner in writing of its intent to offer any type of debt cancellation product at least 30 days prior to any such product being offered to members. The notice must contain:

   1. (1) A statement describing the type(s) of debt cancellation product(s) that the credit union will offer to its membership; and
   2. (2) The name of the insurer from whom the credit union will purchase the insurance policy required under subsection (b)(1) of this section.
4. (d) Each credit union, before offering any debt cancellation products, shall adopt written policies approved by its board of directors that establish and maintain effective risk management and control processes over the offering of these products. The policies shall also establish reasonable fees, if any, that will be charged; the appropriate disclosures that will be given; and the claims processing procedures that will be utilized.
5. (e) For purposes of this section "actuarial method" means the method of allocating payments made on a debt between the amount financed and the finance charge pursuant to which a payment is applied first to the accumulated finance charge and any remainder is subtracted from, or any deficiency is added to, the unpaid balance of the amount financed.

Source Note:The provisions of this §91.403 adopted to be effective May 13, 1999, 24 TexReg 3473; amended to be effective June 8, 2003, 28 TexReg 4411; amended to be effective March 6, 2005, 30 TexReg 1064.