Ever since the beginning of the home warranty industry, many customers have been scammed. Today, Texas home warranty companies are being regulated to protect customers from fraud, malpractice, or other offenses. But the question is, who regulates home warranty companies in Texas?
Well, this article will break it for you! Here, we will tell you who regulates the companies and lots more about regulation in the state. But first, let’s quickly learn if home warranty regulations are the same as home insurance regulations.
Home warranty regulation is often considered to be the same as home insurance regulation. But in reality, they are not the same.
|Home Insurance Regulation||Home Warranty Regulation|
|Regulated by the Federal Insurance Office at the Department of Treasury, National Association of Insurance Commissioners, and the Financial Stability Oversight Council.||Regulated by federal and state organizations. The states have the flexibility to regulate warranty companies under their jurisdiction while strictly adhering to the federal law.|
|Regulatory bodies make sure that insurance companies have the financial ability to pay claims.||Regulatory bodies are responsible for licensing and enforcement of state laws.|
The Texas Real Estate Commission regulates the residential service contracts by adopting amendments under “Texas Occupations Code Chapter 1303 Residential Service Company act,” while strictly following the federal laws.
The Texas Real Estate Commission was established in 1949 under the Texas Legislature to safeguard customers in matters concerning real property transactions and valuations. TREC shares resources and staff members with the Texas Appraiser Licensing and Certification Board (TALCB), an independent TREC subdivision. TALCAB was established in 1991 when the federal law demanded increased regulation of appraisals.
Today, TREC and TALCB administer home warranties, real property appraisals, real estate brokerage, inspections, timeshare, and right-of-way services. TREC provides licensing, regulation, and enforcement of state laws and complaint investigation services in Texas.
According to the Chapter 1303, a residential service contract is nothing but an agreement under which a company undertakes a repair, or replace all or any part or component of an appliance or a system, in exchange for a fee.The appliances and systems include refrigerator, dishwasher, plumbing, electrical, or heating, systems, air-conditioning system, etc. of a residential property.However, there are certain exclusions under the definition of a residential service contract. Some of them include:
Based on RSC’s definition and its exclusions in Chapter 1303, TREC does not regulate the Texas Insurance Code defined home warranty insurance. It also does not regulate residential service contracts that took effect before August 28, 1979 and contracts included in the original price for a product or service, or free warranties.Some other types of contracts that TREC does not regulate include:
Normally, any company or individual who administers or issues a home warranty in Texas should be licensed by TREC as a residential service company. However, Chapter 1303’s certain provisions exempt some persons or companies from having a TREC license.
For instance, the agents and employees of manufacturers or merchants do not require a TREC license, provided the manufacturer or merchant is itself exempted from TREC regulation.
Besides exempting some people from having a TREC license, Chapter 1303 also limits the individual category allowed to sell residential service contracts.
Licensed individuals in Texas like a real estate broker, real estate salesperson, insurance agent, or mobile home dealer may sell home warranty contracts, provided they are issued by a licensed Residential Service Company.
Employees of a licensed RSC can sell contracts issued by their company without having an individual TREC license. Moreover, since an employee is an authorized individual, the employee can also provide and administer home warranties for their employer.
Authorized representatives of a licensed RSC can issue and administer a residential service contract without holding an individual TREC license. However, they cannot sell a service contract unless they fall within an exception included in Chapter 1303.
Note – TREC’s rules define what it means to a residential service company’s employee, including a requirement that an employer has the authority to direct and monitor the employee’s performance.
A company or person seeking a TREC license must submit an application and pay a fee. The application should include documents listed in Texas Occupations Code Section 1303.103. TREC will review the license application and approve or disapprove it within the timeline defined in Texas Occupations Code Section 1303.
A Residential Service Company must adhere to the financial requirements specified by Chapter 1303. The requirements would help to ensure that a company is capable of meeting its obligations under its contracts.Besides financial requirements, a Residential Service Company must follow the listed under Chapter 1303:
If a Residential Service Company fails to comply with the TREC requirements mentioned above-mentioned, then as per Chapter 1303, TREC can take disciplinary action against the company. TREC can also take action against an RSC in the following circumstances.
Chapter 1303 includes provisions that govern the enforcement proceedings against RSCs. Some of them are as listed.
In addition to these penalties and remedies, TREC can impose criminal penalties for violations specified in the Texas Occupations Code Section 1303.406. Some of the violations include (i) willful violations of TREC’s rules or Chapter 1303 or and (ii) providing false information regarding a statement or report required by Chapter 1303.
The Texas Real Estate Commission resolves customer complaints through the RSC Ombudsman program. TREC established it with the aim to help customers with issues related to Residential Service Companies like claim denials or delays or denials.Customers can file a complaint through mail or fax. The representative typically responds within 12 to 24 hours. The customers can rely on this program by providing an intermediary between the service company and the customer himself.
With that said, though the Texas Real Estate Commission protects against home warranty frauds, as a customer, you should thoroughly read the contract before buying a home warranty in Texas.
Some of the factors which you should look for in a home warranty contract are:
Converge options vary from one company to another. While some plans cover all components of home devices, others may provide partial protection. Therefore, check what your plan covers and what not before buying a plan.
The cost of plans vary depending on the coverage options. Determine the exact cost of your home warranty plan and service call fee or trade fee. Also, determine if there are any other charges except the premium and the service call fee.
Some companies let you cancel your service contract without any cost, but others may require you to pay a charge. Determine if your provider includes any fee. Also, check if there are any conditions included in the cancellation process.
While some home warranty companies in Texas may allow you to transfer your warranty plan, others do not include such provisions. Read the contract and determine if your provider lets you transfer your plan and if any fee is associated with it.
Determine if your provider gives you flexible payment options. That is, check if you can pay the premium monthly, bi-annually, or annually. Also check if you can choose and pay the amount through your preferred payment method.
Home warranty companies have a network of licensed technicians who offer high-quality services. While some companies allow you to choose to obtain service from your preferred technician, others may not provide this option.
Some companies pay maximum $1,000 per item, others pay $1,500 throughout the contract period. Determine how much your home warranty company will pay and if there are any conditions included
Home devices do not pick at time to malfunction. Check if your company provides support 24 hours, 7 days a week, 365 days a year. Also, determine what steps it takes to speed up services in case of emergencies.
Some companies provide services immediately after the purchase of the policy but others have a waiting period. Check if your company has any waiting period. If yes, determine when the policy will come into effect.
Home warranty plans come into effect immediately or after 30 days, depending on a company’s policies.When your home system or appliance breaks, you must first file a claim with your company. The company will first determine whether your plan indeed covers your broken appliance or system.Step 1 – File A ClaimHome warranty companies usually have a network of contractors. If your faulty device is covered, the company will assign you a contractor. Or if given an option, you can choose your preferred contractor.Step 2 – Choose A ContractorThe contractor will call you and schedule a mutually agreed appointment. He will then visit your home to inspect the faulty appliance or system. On inspecting, the contractor will report the issue to the company.Step 3 – Schedule An AppointmentThe company will check if your policy covers the issue. If yes, it will ask the contractor to fix the device. If the faulty device is beyond repair or the repair cost is more than the replacement, the company will replace the device.Step 4 – Get The Device RepairedOnce the contractor fixes your faulty device, you will be required to pay only a service call fee or trade fee which ranges between $75 to $125 depending on the company. The repair or replacement cost will be borne by the company.Step 5 – Pay A Trade Fee
Home warranty plans in Texas can help you save your money spent on repairing or replacing appliances and systems. If you have new home devices, home warranties may not be used since they will be covered under the manufacturer’s warranty.But you should consider buying a home warranty if you have home devices that are not covered under the manufacturer’s warranty or are 4+ years old. Other situations include:
Note that TREC licenses the above-listed companies.
Purchasing home warranties from regulated companies can protect you from any fraud and give you peace of mind. If you haven’t purchased a home warranty yet, quickly get a free quote from leading providers and stay protected.