Identity Recovery Service Contract Providers and Administrators Frequently Asked Questions

General Questions
Licensing – Providers
Licensing – Administrators
Renewals – Providers
Renewals – Administrators
Enforcement
Consumer Protection
How to Stay Informed on Program Changes

I. General Questions

1. What is the new law? When did it become effective?

Senate Bill 778 was enacted during the 81st Legislature, Regular Session, 2009. Among its changes, Senate Bill 778 added a new chapter to the Texas Occupations Code, Chapter 1306, the Identity Recovery Service Contract Regulatory Act (“Act”). The Act gives authority to TDLR to regulate certain identity recovery service contract providers and administrators. The Act applies to identity recovery service contracts that are sold to consumers at the time of purchase of a motor vehicle where the vehicle and the identity recovery service contract are financed.

The Act was effective September 1, 2009.

2. What is an identity recovery service contract?

An identity recovery service contract as defined by the Act is an agreement to provide identity recovery services, is entered into for a separately stated consideration and for a specified term, and is financed through a retail installment contract under Chapter 348 of the Texas Finance Code.

Identity recovery is defined as a service that, through a limited power of attorney and the assistance of an identity recovery expert, returns the identity of an identity theft victim to pre-identity theft event status. The identity recovery service contract provider is a person or company who is contractually obligated to an identity recovery service contract holder (generally, the consumer) under the terms of an identity recovery service contract.

3. Does the new law apply to all identity recovery service contracts?

No, not all service contracts fall under the Identity Recovery Service Contract Regulatory Act (“Act”).

Only identity recovery service contracts entered into on or after January 1, 2010, fall under the jurisdiction of this Act.
While an agreement may be labeled as an “identity recovery service contract,” it may not be the type of service contract regulated by TDLR.
TDLR only regulates identity recovery service contracts where:

the consumer purchases such a contract at the same time that the consumer purchases a vehicle,
the consumer pays a separate fee for the contract, and
the consumer finances the service contract along with the vehicle.

If the identity recovery service contract is purchased other than at the automobile dealer or during the purchase of a vehicle or if the contract and vehicle are not financed, then the identity recovery service contract would not fall under the jurisdiction of this Act. For example, if you purchased an identity recovery service contract from your bank, your credit card company, or the internet and you did not purchase a car, this Act does not apply to your contract.
This Act does not apply to identity recovery service contracts sold or offered for sale to persons who are not consumers (as defined in the Act).
The Act also does not apply to contracts where the company monitors someone’s credit reports but does not engage in the identity recovery process (as defined in the Act).

4. Who is a “consumer” under the Act?

A consumer is defined as an individual who buys a motor vehicle that is used for personal, family or household purposes. An individual who buys a motor vehicle for the purpose of resale or for business or research purposes does not qualify as a “consumer” under the Act.

5. I currently have an identity recovery service contract. How will the new law impact my identity recovery service contract?

An identity recovery service contract entered into before January 1, 2010, will not be impacted by the new law. The only identity recovery service contracts that will be impacted by these changes are those entered into on or after January 1, 2010.

6. How will these changes impact service contracts under the Service Contract Regulatory Act?

Senate Bill 778 also made changes to the existing Service Contract Regulatory Act under Texas Occupations Code Chapter 1304. Senate Bill 778 expanded the scope of what is covered under a service contract as defined under Chapter 1304 to include identity recovery services. See the FAQs for the Service Contract Providers and Administrators program for more details.

7. How will these changes impact Vehicle Protection Products?

Senate Bill 778 also made changes to the existing Vehicle Protection Product Regulatory Act under Texas Occupations Code Chapter 2306. Senate Bill 778 expanded the scope of what is covered under a Vehicle Protection Product as defined under Chapter 2306 to include identity recovery services. See the FAQs for the Vehicle Product Protection Warrantors program for more details.

II. Licensing Questions - Providers

1. How much does it cost to register as an Identity Recovery Service Contract Provider?

Initial registration fee: $1,000.00

Annual renewal registration fee: $1,000.00

Identity Recovery Service Contract Providers also must pay a quarterly fee of $1 per contract sold to consumers in Texas in the previous calendar quarter (see #16 below).

2. When are providers required to be registered?

The provider registration requirements are effective January 1, 2010. Providers may begin registering with TDLR starting December 1, 2009.

3. Does the seller of the identity recovery service contract need to register?

No, the Identity Recovery Service Contract Provider, who is the person, company or entity that is contractually and financially obligated to the identity recovery service contract holder under terms of the contract, is required to register. The only sellers of the identity recovery service contracts covered under the Act will be certain motor vehicle dealers, as described below in question #4.

4. Does a motor vehicle dealer have to register as an Identity Recovery Service Contract Provider?

It depends:

If the motor vehicle dealer is only selling another company’s identity recovery service contracts, but is not contractually or financially responsible under those contracts, then the motor vehicle is a seller. As discussed in question #3, sellers do not register with TDLR.
If the motor vehicle dealer is selling its own identity recovery service contracts, and it is contractually and financially responsible for those contracts, then the motor vehicle dealer is an identity recovery service contract provider, and must register with TDLR.
However, if a motor vehicle dealer is a provider and meets the following qualifications, the motor vehicle dealer does not have to register with TDLR:

The dealer is selling identity recovery service contracts only on the vehicles the dealer sells; AND
The dealer is licensed as a motor vehicle dealer under Texas Occupations Code Chapter 2301; AND
The dealer is covering the dealer’s financial obligations under the identity recovery service contracts with reimbursement insurance.

5. What are the requirements to obtain a provider registration?

To obtain your initial provider registration, you must provide TDLR with all of the following required information, using the most recent TDLR forms available:

Completed registration form;
Biographical affidavit from each controlling person as defined in Texas Occupations Code Section 1306.004;
Completed criminal history questionnaire from each controlling person, if applicable;
List of administrator(s) appointed by the provider, if any, including each administrator’s name, assumed name, street address, phone number, and TDLR registration number;
List of sellers of the provider’s identity recovery service contracts, including each seller’s name, assumed name, street address, and telephone number;
Initial registration fee of $1,000.00; AND
Proof of financial security.

These forms and instructions are available on TDLR's website under Identity Recovery Service Contract Forms.

6. What are the financial requirements for being a provider?

A provider must maintain financial security to ensure the faithful performance of a provider’s obligations to its contract holders, and for the benefit of those who suffer actual financial loss due to the provider’s failure to perform those obligations.

A provider must submit proof of one of the following three forms of financial security:

a reimbursement insurance policy;
a funded reserve account and a security deposit; OR
net worth of at least $100 million.

For additional information on the financial security requirements that apply to all three options, see Occupations Code Section 1306.101, Financial Security Requirements; and Rule 90.40, Financial Security-General Requirements.

7. How do I obtain a reimbursement insurance policy?

You should contact an insurance company to obtain this type of policy. You can search the Texas Department of Insurance website at www.tdi.state.tx.us or call 1-800-578-4677 (Texas only) or 512-463-6169 to find out if a specific insurance company is authorized to write this type of liability insurance.

A reimbursement insurance policy must include:

the Identity Recovery Service Contract Provider Texas Endorsement (TDLR is currently developing this form); AND
a copy of the approval letter from the Texas Department of Insurance for using the endorsement.

For additional information on reimbursement insurance policy requirements, see Occupations Code Section 1306.101, Financial Security Requirements; Occupations Code, Section 1306.102, Reimbursement Insurance Policy; and Rule 90.41, Financial Security-Reimbursement Insurance Policy.

8. What are the requirements for using a funded reserve account and security deposit to meet the financial obligations?

A funded reserve account maintained by the provider must:

ensure the amount maintained in the reserve account is not less than an amount equal to 40 percent of the gross consideration the provider received from consumers from the sale of all identity recovery service contracts issued and outstanding in Texas, minus any claims paid;
be kept separate from the provider’s operating accounts; AND
not be used for any purpose other than to cover the provider’s obligations under its identity recovery service contracts that are issued and outstanding in Texas.

In addition to maintaining the funded reserve account, the provider must submit one of the following forms of security deposit:

a surety bond;
a certificate of deposit that is assigned to the Executive Director;
securities of the type eligible for deposit by an authorized insurer in Texas;
a deposit of cash or cash equivalents; OR
an original letter of credit.

For additional information on funded reserve and security deposit requirements, see Occupations Code Section 1306.101, Financial Security Requirements and Rule 90.42, Financial Security-Funded Reserve Account and Security Deposit.

9. How do I obtain a surety bond?

You should contact an insurance company or a bonding company to obtain a surety bond. You can search the Texas Department of Insurance website or call 1-800-578-4677 (Texas only) or 512-463-6169 to find out if a specific insurance or bonding company is authorized to write bonds. Please use the Identity Recovery Service Contract Provider Surety Bond, located on the website under Identity Recovery Service Contract Forms (TDLR is currently developing this form).

10. What are the requirements for a surety bond?

A surety bond must:

be issued by a surety company authorized to do business in the state of Texas;
conform to the Texas Insurance Code;
be on a TDLR-approved form;
be payable to the Executive Director for the satisfaction of eligible identity recovery service contract holder claims; AND
state that the surety company will provide TDLR 60 days prior written notice of its intent to cancel the bond.

A TDLR-approved surety bond form is available to download (TDLR is currently developing this form).

11. What are the requirements for using an original letter of credit?

An original letter of credit must be:

irrevocable;
issued by a qualified financial institution which is financially responsible in the amount of the letter of credit;
must not require examination of the performance of the underlying transaction between TDLR and the provider;
payable to TDLR on demand or within a reasonably brief period of time after presentation of all required documents; AND
does not include any condition that makes payment to TDLR contingent upon the consent of or other action by the provider or other party.

A TDLR-approved sample letter of credit is available to download (TDLR is currently developing this letter).

12. What are the requirements for using a minimum net worth of $100 million to meet the financial security obligations?

The provider must submit:

a copy of the provider’s or provider’s parent company’s most recent Form 10-K or Form 20-F filed with the Securities and Exchange Commission within the preceding calendar year; OR
a copy of the provider’s or the provider’s parent company’s audited financial statements showing a net worth of the provider or its parent company of at least $100 million.

For additional information on minimum net worth requirements, see Occupations Code Section 1306.101, Financial Security Requirements and Rule 90.43, Financial Security-Minimum Net Worth.

13. How long do I have to maintain the financial security?

A provider must maintain financial security for the entire time the provider continues to do business in this state or is registered to do business in this state. In addition, the provider must keep the financial security in effect until the later of:

two years after the provider ceases to do business in this state;
two years after the provider’s registration expires; OR
the executive director receives satisfactory proof from the provider and determines that the provider has discharged or otherwise adequately met all obligations to its identity recovery service contract holders in this state.

When a provider registers, it must submit proof of financial security to TDLR that will cover the one-year registration period plus two years after the registration expiration date.

14. How do I change information on my Identity Recovery Service Contract Provider registration?

You must submit any changes in writing to the Texas Department of Licensing and Regulation, P.O. Box 12157, Austin, TX 78711, within 30 days of the change.

15. How do I get another copy of my license if I lose it?

Send a check or money order in the amount of $25 to TDLR with a written request for a duplicate license:

           TDLR
           P. O. Box 12157
           Austin TX 78711-2157

16. How do I pay the quarterly contract fee?

TDLR is currently developing this payment process. TDLR will update this response when the process has been developed and approved. Please check back for updates.

17. Will TDLR accept the Texas Department of Insurance NAIC Biographical Affidavit, in lieu of the Identity Recovery Service Contract Provider Biographical Affidavit?

No. You must use the TDLR Identity Recovery Service Contract Provider Biographical Affidavit form.

18. How do I obtain an approval letter from Texas Department of Insurance (TDI) for the identity recovery service contract provider endorsement language?

You should contact the insurance company (insurer) that wrote the policy and request a copy of the approval letter from TDI. If the endorsement language has not been filed with TDI, the insurer must file for approval with TDI. For more information, contact TDI at 512-463-6169 or 1-800-578-4677.

19. How do I obtain the Identity Recovery Service Contract Provider Endorsement language?

You may obtain the endorsement language from the TDLR website under Identity Recovery Service Contract Provider Forms, Endorsement Form (TDLR is currently developing this form).

20. Are there any advertising and disclosure requirements for providers?

Yes, the provider and any registered administrator appointed by the provider must comply with the advertising and disclosure requirements in the statute and rules. In addition, if a provider uses a seller to market and sell the provider’s identity recovery service contracts, the provider is responsible for the seller complying with these requirements too.

For additional information regarding advertising and disclosure requirements, see Rule 90.70, Responsibilities of Registrant – Provider and Administrator.

21. I am a registered provider and I am surrendering my license or ceasing operations in Texas. What do I need to do?

You must notify TDLR no later than 60 days prior to ceasing operations in this state. If you are filing for bankruptcy or being placed in receivership, you must notify TDLR as soon as possible, and you must provide the contact information for the bankruptcy trustee or receiver and the court handling these proceedings.

Within 10 days after notifying TDLR, you must submit:

the names of the identity recovery service contracts sold or issued by the provider in the state and the number of active identity recovery service contracts under each contract name;
the names and addresses of the identity recovery service contract holders with active identity recovery service contracts in this state and the remaining amount of time left on these active identity recovery service contracts; AND
any other information determined necessary by TDLR relating to the provider ceasing operations in this state.

A provider must notify identity recovery service contract holders with active identity recovery service contracts in this state no later than 30 days prior to the provider ceasing operations in this state. The provider remains financially responsible to identity recovery service contract holders with active identity recovery service contracts in this state.

III. Licensing Questions – Administrators

1. What is an administrator?

An administrator is defined as a person, other than the provider of the identity recovery service contract or an employee of the provider, who is responsible for the third-party administration of an identity recovery service contract.

2. Is the administrator of an identity recovery service contract required to register with TDLR?

Yes. The Identity Recovery Service Contract Administrator Application and Instructions are available on TDLR's website under Identity Recovery Service Contract Forms.

3. When does an administrator need to have a separate license from the provider?

If the administrator is a separate legal entity from the Identity Recovery Service Contract Provider, then the administrator needs a separate Identity Recovery Service Contract Administrator license. If the Identity Recovery Service Contract Provider is administering its own contracts, the Identity Recovery Service Contract Provider does not need a separate administrator license.

4. What functions may an Identity Recovery Service Contract Administrator perform?

An Identity Recovery Service Contract Administrator may perform the following third-party administration activities on behalf of an Identity Recovery Service Contract Provider:

Perform or arrange the collection, maintenance, or disbursement of money to compensate any party for claims or repairs pursuant to an identity recovery service contract;
Participate in processing or adjustment of claims arising under an identity recovery service contract;
Maintain records required by Texas Occupations Code, Chapter 1306; or
Comply with the provider requirements, other than the financial security requirements, of Texas Occupations Code, Chapter 1306.

5. When are administrators required to be registered?

The administrator registration requirements are effective January 1, 2010. Administrators may begin registering with TDLR starting December 1, 2009.

6. How much does it cost to register as an Identity Recovery Service Contract Administrator?

Initial registration fee: $1,000.00
Annual renewal registration fee: $250.00

7. What are the requirements to obtain an administrator registration?

To obtain your initial administrator registration, you must provide TDLR with all of the following required information, using the most recent TDLR forms available:

Completed registration form;
List of providers for which the person will act as an administrator, including each provider’s name, assumed name, street address, telephone number, and TDLR registration number;
A list of the administrator’s controlling persons as defined in Texas Occupations Code Section 1306.004; AND
Initial registration fee in the amount of $1,000.00.

These forms and instructions will be located on the website under ID Recovery Service Contract Forms (TDLR is currently developing these forms).

8. How do I change information on my Identity Recovery Service Contract Administrator registration?

You must submit any changes in writing to the Texas Department of Licensing and Regulation, P.O. Box 12157, Austin TX 78711, within 30 days of the change.

9. How do I get a duplicate or replacement copy of my registration certificate?

Send a check or money order in the amount of $25 to TDLR with a written request for a duplicate license to:

Texas Department of Licensing and Regulation
P. O. Box 12157
Austin, TX 78711.

IV. Renewals – Providers

1. How often is an Identity Recovery Service Contract Provider required to renew its registration?

In order for a provider to continue operating in Texas, a registration must be renewed annually. Initial and renewal registrations last for a period of one year from the date of issue.

2.What are the requirements to renew a provider registration?

To renew your provider registration, you must provide TDLR with all of the following required information, using the most recent TDLR forms available:

Completed registration form;
Biographical affidavit from each controlling person. If there has been no change in a biographical affidavit since the previous registration, you can submit a Biographical No-Change form;
Completed criminal history questionnaire from each controlling person, if applicable;
Updated list of administrator(s) appointed by the provider, if any, including each administrator’s name, assumed name, street address, phone number, and TDLR registration number;
Updated list of sellers of the provider’s identity recovery service contracts, including each seller’s name, assumed name, street address, and telephone number;
Renewal fee of $1,000.00; AND
Proof of new or continuing financial security.

These forms and instructions will be located on the website under ID Recovery Service Contract Forms (TDLR is currently developing these forms).

3. Do I have to submit financial security documents upon renewal every year?

Yes, a provider must submit proof of new or continuing financial security every year. When a provider renews its registration, it must submit proof of financial security to TDLR that will cover the new one-year registration period plus two years after the new registration expiration date.

If a provider insures its identity recovery service contracts with a reimbursement insurance policy, the insurer’s audited financial statements, NAIC annual statement, and actuarial certification (actuarial opinion) must be submitted every year upon renewal.

4. Are Biographical Affidavits for controlling persons required upon renewal every year even if there are no changes?

If there has been no change, including no change in criminal history, the controlling person may submit an ID Recovery Service Contract Provider Biographical Affidavit No Change of Information form (TDLR is currently developing this form).

If there are any changes in information, including any changes in criminal history, the controlling person must complete the entire ID Recovery Service Contract Provider Biographical Affidavit (TDLR is currently developing this form). These forms and instructions will be located on the website under ID Recovery Service Contract Provider Forms (TDLR is currently developing these forms).

5. What happens if I don’t renew the license by the expiration date?

If you renew after your expiration date, you must pay late renewal fees:

1 – 90 days late:

$1,500.00 total to renew

91 days – but less than 18 months late:

$2,000.00 total to renew

18 months but less than 3 years late:

$2,000.00 total to renew
Must submit to the Executive Director for approval

At 18 months but less than 3 years from the expiration date, you may submit for approval a written request stating the reason your license should be renewed or "Request to Executive Director for Expired Renewal" form.

You may be subject to enforcement actions, including administrative penalties and sanctions, for operating with an expired license (expired less than 18 months) or operating without a license (expired 18 months or more).

If your renewal application is received postmarked before your expiration date, it is considered a timely renewal.

V. Renewals – Administrators

1. How often is an administrator required to renew their registration?

In order for an administrator to continue operating in Texas, a registration must be renewed annually. Initial and renewal registrations last for a period of one year from the date of issue.

2. What are the requirements to renew an administrator registration?

To renew your administrator registration, you must provide TDLR with all of the following required information, using the most recent TDLR forms available:

Completed registration form;
Updated list of providers for which the person will act as an administrator, including each provider’s name, assumed name, street address, telephone number, and TDLR registration number;
A list of the administrator’s controlling persons; AND
Renewal fee of $250.00.

These forms and instructions will be located on the website under ID Recovery Service Contract Forms (TDLR is currently developing these forms).

3. What happens if I don’t renew the license by the expiration date?

If you renew after your expiration date, you must pay late renewal fees:

1 – 90 days late:

$375.00 total to renew

91 days – but less than 18 months late:

$500.00 total to renew

18 months but less than 3 years late:

$500.00 total to renew
Must submit to the Executive Director for approval

If your renewal application is received postmarked before your expiration date, it is considered a timely renewal.

VI. Enforcement Questions

1. What are the administrative penalties for failure to register with the department?

TDLR is currently developing the list of violations and the administrative penalties for each violation. When the list of violations and the related penalties have been approved by the Commission, they will be published on this website under “Enforcement Plan” at http://www.license.state.tx.us/enforcement.htm.

Please check back for updates.

2. Are there administrative penalties for other violations of the Act and Rules?

Please check back for updates.

3. Can I be subject to an investigation or audit by the state if I am a registered provider or an administrator?

Yes, in fact, failure to allow the Department access to records is a violation of Occupations Code Section 1306.008 and Rule 90.70(j).

4. Can my original or renewal application for registration be denied?
Yes. An original or renewal application for registration may be denied for a number of reasons, including but not limited to:

A criminal conviction or deferred adjudication that reflects on the applicant’s or controlling person’s ability, capacity, or fitness required to perform the duties and discharge the responsibilities of a Provider or Administrator. Please go to http://www.license.state.tx.us/crimconvict.htm for more details.
A prior violation by the applicant or a controlling person of the Identity Recovery Service Contract Regulatory Act or rules,, or a rule or an order issued by the Commission or Executive Director.
Falsification of information on an original or renewal application.
Failure to provide the registration fee and all of the information required for original applications or renewal applications.
For providers, failure to meet the financial security requirements.
For providers, falsification of information in the quarterly reports of the number of contracts sold or issued in Texas during the quarter.
For providers, failure to report the number of identity recovery service contracts sold or issued in Texas in the quarter and failure to pay the quarterly fees based on the number of contracts sold or issued.

VII. Consumer Protection Questions

1. How can I find out if an Identity Recovery Service Contract Provider or Identity Recovery Service Contract Administrator is registered?

You may search the Licensing Database on the TDLR website. You can also call us at 800-803-9202, or 512-463-6599, and speak with a customer service representative.

2. How do I get a list of registered Identity Recovery Service Contract Providers?

To get a list of all registered Identity Recovery Service Contract Providers, you may search the Licensing Database on the TDLR website.

3. How do I get a list of registered Identity Recovery Service Contract Administrators?

To get a list of all registered Identity Recovery Service Contract Administrators, you may search the Licensing Database on the TDLR website.

4. I plan on purchasing a car. Am I required to buy an identity recovery service contract when I buy my car?

No. A motor vehicle dealer may not require the purchase of an identity recovery service contract as a condition of a loan or the sale of a vehicle.

5. How do I file a complaint?

To file a complaint, you may:

file a complaint online or
download the Complaint Form from the TDLR website (TDLR is currently developing this form) or
contact TDLR at 1-800-803-9202 (Texas only) or 512-463-6599.

If you are a consumer and have a complaint about your identity recovery service contract, TDLR suggests contacting the identity recovery service contract provider first to find out if your complaint can be resolved. A registered provider is required to provide you with its complaint resolution procedures. If you are unable to resolve the complaint with the provider, you may file a complaint with TDLR by any of the methods stated above.

VIII. How to Stay Informed on Program Changes

1. How do I receive notification of new and changing information with your department?

You can sign up to the TDLR E-mail Subscriber Notification Lists on our website. These lists were established to allow subscribers to receive automated notification of new and changing information.

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