Alabama 2022 Regular Session

Alabama Senate Bill SB48 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1	1		1 SB48
2		-	2 214963-6
	2	+	2 214963-4
3	3		3 By Senator Whatley
4	4		4 RFD: Judiciary
5	5		5 First Read: 11-JAN-22
6	6
7		-	Page 0 SB48
8		-	1 SB48
	7	+	Page 0 1 SB48
9	8		2
10	9		3
11		-	4 ENROLLED, An Act,
12		-	5 Relating to the credit financing of the sale or
13		-	6 lease of motor vehicles; to amend Section 8-37-2 of the Code
14		-	7 of Alabama 1975; to further define a guaranteed asset
15		-	8 protection waiver or GAP waiver to include excess wear and use
16		-	9 waivers in consumer lease agreements; and to add Chapter 37A
17		-	10 to Title 8 of the Code of Alabama 1975, to authorize providers
18		-	11 to sell motor vehicle value protection agreements to reduce
19		-	12 motor vehicle credit financing agreement deficiency balances
20		-	13 under certain conditions.
21		-	14 BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
22		-	15 Section 1. Section 8-37-2 of the Code of Alabama
23		-	16 1975, is amended to read as follows:
24		-	17 "§8-37-2.
25		-	18 "For the purposes of this chapter, the following
26		-	19 words have the following meanings:
27		-	20 "(1) ADMINISTRATOR. A person, other than an insurer
28		-	21 or creditor, that performs administrative or operational
29		-	22 functions pursuant to guaranteed asset protection waiver
30		-	23 programs.
31		-	24 "(2) BORROWER. A debtor, retail buyer or lessee,
32		-	25 under a finance agreement.
33		-	Page 1 SB48
34		-	1 "(3) CREDITOR means any of the following:
35		-	2 "a. The lender in a loan or credit transaction.
36		-	3 "b. The lessor in a lease transaction.
37		-	4 "c. Any retail seller of motor vehicles in a retail
38		-	5 installment transaction.
39		-	6 "d. The seller in commercial retail installment
40		-	7 transactions.
41		-	8 "e. The assignees of any of the foregoing to whom
42		-	9 the credit or lease obligation is payable.
43		-	10 "(4) FINANCE AGREEMENT. A loan, lease, or retail
44		-	11 installment sales contract for the purchase or lease of a
45		-	12 motor vehicle.
46		-	13 "(5) FREE LOOK PERIOD. The period of time from the
47		-	14 effective date of the GAP waiver until the date the borrower
48		-	15 may cancel the GAP waiver without penalty, fees, or costs to
49		-	16 the borrower. This period of time shall not be shorter than 30
50		-	17 days.
51		-	18 "(6) GUARANTEED ASSET PROTECTION WAIVER or GAP
52		-	19 WAIVER. A contractual agreement in which a creditor agrees
53		-	20 for, with or without a separate charge, to cancel or waive all
54		-	21 or part of amounts due on a borrower's finance agreement in
55		-	22 the event of a total physical damage loss or unrecovered theft
56		-	23 of the motor vehicle, which agreement shall be part of, or a
57		-	24 separate addendum to, the finance agreement. A GAP waiver may
58		-	25 also provide, with or without a separate charge, a benefit
59		-	Page 2 SB48
60		-	1 that waives an amount or provides a borrower with a credit
61		-	2 towards the purchase of a replacement motor vehicle. The term
62		-	3 also includes an excess wear and use waiver contractual
63		-	4 agreement in which a creditor agrees, with or without a
64		-	5 separate charge, to cancel or waive all or part of amounts
65		-	6 that may become due under a motor vehicle lease agreement of a
66		-	7 borrower as a result of excessive wear and use of a leased
67		-	8 motor vehicle, including excess mileage, which agreement shall
68		-	9 be part of, or a separate addendum to, the lease agreement.
69		-	10 "(7) INSURER. An insurance company licensed,
70		-	11 registered, or otherwise authorized to do business under the
71		-	12 insurance laws of this state.
72		-	13 "(8) MOTOR VEHICLE. Self-propelled or towed vehicles
73		-	14 designed for personal or commercial use, including, but not
74		-	15 limited to, automobiles, trucks, motorcycles, recreational
75		-	16 vehicles, all terrain vehicles, snowmobiles, campers, boats,
76		-	17 personal watercraft, and motorcycle, and boat, camper, and
77		-	18 personal watercraft trailers.
78		-	19 "(9) PERSON. An individual, company, association,
79		-	20 organization, partnership, business trust, corporation, and
80		-	21 every form of legal entity."
81		-	22 Section 2. Chapter 37A is added to Title 8 of the
82		-	23 Code of Alabama 1975, to read as follows:
83		-	24 Chapter 37A
84		-	25 §8-37A-1.
85		-	Page 3 SB48
86		-	1 (a) The purpose of this chapter is to define motor
	10	+	4 ENGROSSED
	11	+	5
	12	+	6
	13	+	7 A BILL
	14	+	8 TO BE ENTITLED
	15	+	9 AN ACT
	16	+	10
	17	+	11 Relating to the credit financing of the sale or
	18	+	12 lease of motor vehicles; to amend Section 8-37-2 of the Code
	19	+	13 of Alabama 1975; to further define a guaranteed asset
	20	+	14 protection waiver or GAP waiver to include excess wear and use
	21	+	15 waivers in consumer lease agreements; and to add Chapter 37A
	22	+	16 to Title 8 of the Code of Alabama 1975, to authorize providers
	23	+	17 to sell motor vehicle value protection agreements to reduce
	24	+	18 motor vehicle credit financing agreement deficiency balances
	25	+	19 under certain conditions.
	26	+	20 BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
	27	+	21 Section 1. Section 8-37-2 of the Code of Alabama
	28	+	22 1975, is amended to read as follows:
	29	+	23 "§8-37-2.
	30	+	24 "For the purposes of this chapter, the following
	31	+	25 words have the following meanings:
	32	+	26 "(1) ADMINISTRATOR. A person, other than an insurer
	33	+	27 or creditor, that performs administrative or operational
	34	+	Page 1 1 functions pursuant to guaranteed asset protection waiver
	35	+	2 programs.
	36	+	3 "(2) BORROWER. A debtor, retail buyer or lessee,
	37	+	4 under a finance agreement.
	38	+	5 "(3) CREDITOR means any of the following:
	39	+	6 "a. The lender in a loan or credit transaction.
	40	+	7 "b. The lessor in a lease transaction.
	41	+	8 "c. Any retail seller of motor vehicles in a retail
	42	+	9 installment transaction.
	43	+	10 "d. The seller in commercial retail installment
	44	+	11 transactions.
	45	+	12 "e. The assignees of any of the foregoing to whom
	46	+	13 the credit or lease obligation is payable.
	47	+	14 "(4) FINANCE AGREEMENT. A loan, lease, or retail
	48	+	15 installment sales contract for the purchase or lease of a
	49	+	16 motor vehicle.
	50	+	17 "(5) FREE LOOK PERIOD. The period of time from the
	51	+	18 effective date of the GAP waiver until the date the borrower
	52	+	19 may cancel the GAP waiver without penalty, fees, or costs to
	53	+	20 the borrower. This period of time shall not be shorter than 30
	54	+	21 days.
	55	+	22 "(6) GUARANTEED ASSET PROTECTION WAIVER or GAP
	56	+	23 WAIVER. A contractual agreement in which a creditor agrees
	57	+	24 for, with or without a separate charge, to cancel or waive all
	58	+	25 or part of amounts due on a borrower's finance agreement in
	59	+	26 the event of a total physical damage loss or unrecovered theft
	60	+	27 of the motor vehicle, which agreement shall be part of, or a
	61	+	Page 2 1 separate addendum to, the finance agreement. A GAP waiver may
	62	+	2 also provide, with or without a separate charge, a benefit
	63	+	3 that waives an amount or provides a borrower with a credit
	64	+	4 towards the purchase of a replacement motor vehicle. The term
	65	+	5 also includes an excess wear and use waiver contractual
	66	+	6 agreement in which a creditor agrees, with or without a
	67	+	7 separate charge, to cancel or waive all or part of amounts
	68	+	8 that may become due under a motor vehicle lease agreement of a
	69	+	9 borrower as a result of excessive wear and use of a leased
	70	+	10 motor vehicle, including excess mileage, which agreement shall
	71	+	11 be part of, or a separate addendum to, the lease agreement.
	72	+	12 "(7) INSURER. An insurance company licensed,
	73	+	13 registered, or otherwise authorized to do business under the
	74	+	14 insurance laws of this state.
	75	+	15 "(8) MOTOR VEHICLE. Self-propelled or towed vehicles
	76	+	16 designed for personal or commercial use, including, but not
	77	+	17 limited to, automobiles, trucks, motorcycles, recreational
	78	+	18 vehicles, all terrain vehicles, snowmobiles, campers, boats,
	79	+	19 personal watercraft, and motorcycle, and boat, camper, and
	80	+	20 personal watercraft trailers.
	81	+	21 "(9) PERSON. An individual, company, association,
	82	+	22 organization, partnership, business trust, corporation, and
	83	+	23 every form of legal entity."
	84	+	24 Section 2. Chapter 37A is added to Title 8 of the
	85	+	25 Code of Alabama 1975, to read as follows:
	86	+	26 Chapter 37A
	87	+	27 §8-37A-1.
	88	+	Page 3 1 (a) The purpose of this chapter is to define motor
87	89		2 vehicle value protection agreements and to authorize the
88	90		3 agreements to be offered within this state.
89	91		4 (b) This chapter does not apply to either of the
90	92		5 following:
91	93		6 (1) An insurance policy offered by an insurer under
92	94		7 the insurance laws of this state.
93	95		8 (2) A debt cancellation or debt suspension contract
94	96		9 being offered by a federally regulated financial institution
95	97		10 operating under 12 C.F.R. Part 37 or a credit union operating
96	98		11 under 12 C.F.R. Part 721 or other federal law; or a debt
97	99		12 cancellation or debt suspension contract being offered by a
98	100		13 state chartered bank or credit union.
99	101		14 (c) Except as provided in this chapter, motor
100	102		15 vehicle value protection agreements governed under this
101	103		16 chapter are not insurance and are exempt from the insurance
102	104		17 laws of this state. Persons marketing, selling, or offering to
103	105		18 sell motor vehicle value protection agreements to borrowers
104	106		19 that comply with this chapter are exempt from insurance
105	107		20 licensing and insurance regulation requirements of this state.
106	108		21 (d) This chapter applies only to motor vehicle
107	109		22 protection agreements for financing of motor vehicles as
108	110		23 defined in this chapter. This chapter does not affect the
109	111		24 validity or enforcement of other asset protection waivers,
110	112		25 debt cancellation contracts, or debt suspension agreements.
111		-	Page 4 SB48
112		-	1 §8-37A-2. Definitions.
113		-	2 For the purposes of this chapter, the following
114		-	3 words shall have the following meanings:
115		-	4 (1) ADMINISTRATOR. The person who may be responsible
116		-	5 for the administrative or operational function of motor
117		-	6 vehicle value protection agreements including, but not limited
118		-	7 to, the adjudication of claims or benefit requests by contract
119		-	8 holders.
120		-	9 (2) CONTRACT HOLDER. A person who is the purchaser
121		-	10 or holder of a motor vehicle value protection agreement.
122		-	11 (3) FREE LOOK PERIOD. The period of time not less
123		-	12 than 30 days from the effective date of a motor vehicle value
124		-	13 protection agreement until the date the borrower may cancel
125		-	14 the agreement without penalty, fees, or costs to the borrower.
126		-	15 (4) MOTOR VEHICLE VALUE PROTECTION AGREEMENT. A
127		-	16 contractual agreement that provides a benefit towards either
128		-	17 the reduction of all or part of the contract holder's current
129		-	18 finance agreement deficiency balance, or towards the purchase
130		-	19 or lease of a replacement motor vehicle or motor vehicle
131		-	20 services, based on the occurrence of an adverse event to the
132		-	21 motor vehicle including, but not limited to, loss, theft,
133		-	22 damage, obsolescence, diminished value, or depreciation. A
134		-	23 motor vehicle value protection agreement does not include a
135		-	24 GAP waiver, as defined in Chapter 37 of this title, but may
136		-	25 include similar agreements including, but not limited to,
137		-	Page 5 SB48
138		-	1 trade-in-credit agreements, diminished value agreements, or
139		-	2 depreciation benefit agreements.
140		-	3 (5) PROVIDER. A person that is obligated to provide
141		-	4 a benefit under a motor vehicle value protection agreement.
142		-	5 §8-37A-3.
143		-	6 (a) A motor vehicle value protection agreement may
144		-	7 be offered, sold, or provided to a borrower or lessor under
145		-	8 this chapter.
146		-	9 (b) A provider may use an administrator or other
147		-	10 designee to be responsible for all or part of the
148		-	11 administration of motor vehicle value protection agreements in
149		-	12 compliance with this chapter. A provider may act as an
150		-	13 administrator or retain the services of a third-party
151		-	14 administrator.
152		-	15 (c) A motor vehicle value protection agreement shall
153		-	16 not be sold unless the contract holder is provided a copy of
154		-	17 the agreement.
155		-	18 §8-37A-4.
156		-	19 In order to assure the faithful performance of the
157		-	20 obligations of a provider to its contract holders, the
158		-	21 provider shall comply with one of the following:
159		-	22 (1) a. Insure all of its motor vehicle value
160		-	23 protection agreements under an insurance policy issued by an
161		-	24 insurer licensed, registered, or otherwise authorized to do
162		-	25 business in this state at the time the policy is filed with
163		-	Page 6 SB48
164		-	1 the Commissioner of Insurance and continuously thereafter,
165		-	2 that meets one of the following criteria:
166		-	3 1. Has a surplus as to policyholders and paid-in
167		-	4 capital of at least fifteen million dollars ($15,000,000).
168		-	5 2. Has a surplus as to policyholders and paid-in
169		-	6 capital of not less than ten million dollars ($10,000,000),
170		-	7 and evidence to the satisfaction of the commissioner that the
171		-	8 company maintains a ratio of net written premiums, wherever
172		-	9 written, to surplus as to policyholders and paid-in capital of
173		-	10 not greater than three to one.
174		-	11 b. In addition, the insurer shall annually file with
175		-	12 the commissioner copies of the insurer's audited financial
176		-	13 statements, its NAIC Annual Statement, and the actuarial
177		-	14 certification required by and filed in the insurer's state of
178		-	15 domicile.
179		-	16 (2) a. Maintain a funded reserve account for its
180		-	17 obligations under its contracts issued and outstanding in this
181		-	18 state. The reserves shall not be less than 40 percent of gross
182		-	19 consideration received, less claims paid, on the sale of the
183		-	20 motor vehicle value protection agreement for all in-force
184		-	21 contracts. The reserve account shall be subject to examination
185		-	22 and review by the Superintendent of Banks; and
186		-	23 b. Place in trust with the superintendent a
187		-	24 financial security deposit, having a value of not less than
188		-	25 five percent of the gross consideration received, less claims
189		-	Page 7 SB48
190		-	1 paid, on the sale of the motor vehicle value protection
191		-	2 agreements for all agreements issued and in force, but not
192		-	3 less than twenty-five thousand dollars ($25,000) consisting of
193		-	4 one of the following:
194		-	5 1. A surety bond issued by an authorized surety.
195		-	6 2. Securities of the type eligible for deposit by
196		-	7 authorized insurers in this state.
197		-	8 3. Cash.
198		-	9 4. A letter of credit issued by a qualified
199		-	10 financial institution.
200		-	11 5. Another form of security prescribed by
201		-	12 regulations issued by the superintendent.
202		-	13 (3) a. Maintain, or together with its parent company
203		-	14 maintain, a net worth or stockholders' equity of one hundred
204		-	15 million dollars ($100,000,000); and
205		-	16 b. Upon request, provide the Superintendent of Banks
206		-	17 with a copy of the provider's or the provider's parent
207		-	18 company's most recent Form 10-K or Form 20-F filed with the
208		-	19 Securities and Exchange Commission (SEC) within the last
209		-	20 calendar year, or if the company does not file with the SEC, a
210		-	21 copy of the company's audited financial statements, which
211		-	22 shows a net worth of the provider or its parent company of at
212		-	23 least one hundred million dollars ($100,000,000). If the
213		-	24 provider's parent company's Form 10-K, Form 20-F, or financial
214		-	25 statements are filed to meet the provider's financial security
215		-	Page 8 SB48
216		-	1 requirement, then the parent company shall agree to guarantee
217		-	2 the obligations of the provider relating to motor vehicle
218		-	3 value protection agreements sold by the provider in this
219		-	4 state.
220		-	5 §8-37A-5.
221		-	6 (a) A motor vehicle value protection agreement shall
222		-	7 disclose in writing and in clear, understandable language that
223		-	8 is easy to read all of the following:
224		-	9 (1) The name and address of the provider, contract
225		-	10 holder, and administrator, if any.
226		-	11 (2) The terms of the agreement including, without
227		-	12 limitation, the purchase price to be paid by the contract
228		-	13 holder, if any, and the requirements for eligibility,
229		-	14 conditions of coverage, or exclusions.
230		-	15 (3) A provision that the agreement may be cancelled
231		-	16 by the contract holder within a free look period as specified
232		-	17 in the agreement, and that in the event the contract holder
233		-	18 will be entitled to a full refund of the purchase price paid
234		-	19 by the contract holder, if any, so long as no benefits have
235		-	20 been provided.
236		-	21 (4) The procedure the contract holder must follow,
237		-	22 if any, to obtain a benefit under the terms and conditions of
238		-	23 the agreement including, if applicable, a telephone number or
239		-	24 website and address where the contract holder may apply for a
240		-	25 benefit.
241		-	Page 9 SB48
242		-	1 (5) A provision indicating whether or not the
243		-	2 agreement is cancellable after the free look period and the
244		-	3 conditions under which it may be cancelled, including the
245		-	4 procedures for requesting any refund of the unearned purchase
246		-	5 price paid by the contract holder.
247		-	6 (6) In the event of cancellation, the methodology
248		-	7 for calculating any refund of the unearned purchase price of
249		-	8 the agreement due.
250		-	9 (7) A provision specifying that neither the
251		-	10 extension of credit, the terms of the credit, nor the terms of
252		-	11 the related motor vehicle sale or lease, may be conditioned
253		-	12 upon the purchase of the agreement.
254		-	13 (8) The terms, restrictions, or conditions governing
255		-	14 cancellation of the agreement prior to the termination or
256		-	15 expiration date of the agreement by either the provider or the
257		-	16 contract holder. The provider shall mail a written notice to
258		-	17 the contract holder at the last known address of the contract
259		-	18 holder contained in the records of the provider at least five
260		-	19 days prior to cancellation by the provider. Prior notice is
261		-	20 not required if the reason for cancellation is nonpayment of
262		-	21 the provider fee, a material misrepresentation by the contract
263		-	22 holder to the provider or administrator, or a substantial
264		-	23 breach of duties by the contract holder relating to the
265		-	24 covered product or its use. The notice shall state the
266		-	25 effective date of the cancellation and the reason for the
267		-	Page 10 SB48
268		-	1 cancellation. If an agreement is cancelled by the provider for
269		-	2 a reason other than nonpayment of the provider fee, the
270		-	3 provider shall refund to the contract holder all of the
271		-	4 unearned pro rata provider fee paid by the contract holder, if
272		-	5 any. If coverage under the agreement continues after a claim,
273		-	6 any refund may deduct claims paid and a reasonable
274		-	7 administrative fee not to exceed seventy-five dollars ($75).
275		-	8 (b) This section shall not apply to commercial
276		-	9 transactions.
277		-	10 §8-37A-6.
278		-	11 (a) The Superintendent of Banks may take action
279		-	12 which is necessary or appropriate to enforce this chapter and
280		-	13 to protect motor vehicle value protection contract holders in
281		-	14 this state. After notice and a hearing, the superintendent may
282		-	15 do both of the following:
283		-	16 (1) Order the provider, administrator, or any other
284		-	17 person not in compliance with this chapter to cease and desist
285		-	18 from further actions related to motor vehicle value protection
286		-	19 agreements which are in violation of this chapter.
287		-	20 (2) Impose a penalty of not more than five hundred
288		-	21 dollars ($500) per violation and no more than ten thousand
289		-	22 dollars ($10,000) in the aggregate for all violations of
290		-	23 similar nature. For purposes of this chapter, a violation
291		-	24 shall be considered to be of a similar nature if the violation
292		-	25 consists of the same or similar course of conduct, action, or
293		-	Page 11 SB48
294		-	1 practice, irrespective of the number of times the action,
295		-	2 conduct, or practice which is determined to be a violation of
296		-	3 the chapter occurred.
297		-	4 (b) This section shall not apply to motor vehicle
298		-	5 value protection agreements offered in connection with a
299		-	6 commercial transaction.
300		-	7 Section 3. This act shall become effective January
301		-	8 1, 2023, following its passage and approval by the Governor,
302		-	9 or its otherwise becoming law.
303		-	Page 12 SB48
304		-	1
	113	+	26 §8-37A-2. Definitions.
	114	+	Page 4 1 For the purposes of this chapter, the following
	115	+	2 words shall have the following meanings:
	116	+	3 (1) ADMINISTRATOR. The person who may be responsible
	117	+	4 for the administrative or operational function of motor
	118	+	5 vehicle value protection agreements including, but not limited
	119	+	6 to, the adjudication of claims or benefit requests by contract
	120	+	7 holders.
	121	+	8 (2) CONTRACT HOLDER. A person who is the purchaser
	122	+	9 or holder of a motor vehicle value protection agreement.
	123	+	10 (3) FREE LOOK PERIOD. The period of time not less
	124	+	11 than 30 days from the effective date of a motor vehicle value
	125	+	12 protection agreement until the date the borrower may cancel
	126	+	13 the agreement without penalty, fees, or costs to the borrower.
	127	+	14 (4) MOTOR VEHICLE VALUE PROTECTION AGREEMENT. A
	128	+	15 contractual agreement that provides a benefit towards either
	129	+	16 the reduction of all or part of the contract holder's current
	130	+	17 finance agreement deficiency balance, or towards the purchase
	131	+	18 or lease of a replacement motor vehicle or motor vehicle
	132	+	19 services, based on the occurrence of an adverse event to the
	133	+	20 motor vehicle including, but not limited to, loss, theft,
	134	+	21 damage, obsolescence, diminished value, or depreciation. A
	135	+	22 motor vehicle value protection agreement does not include a
	136	+	23 GAP waiver, as defined in Chapter 37 of this title, but may
	137	+	24 include similar agreements including, but not limited to,
	138	+	25 trade-in-credit agreements, diminished value agreements, or
	139	+	26 depreciation benefit agreements.
	140	+	Page 5 1 (5) PROVIDER. A person that is obligated to provide
	141	+	2 a benefit under a motor vehicle value protection agreement.
	142	+	3 §8-37A-3.
	143	+	4 (a) A motor vehicle value protection agreement may
	144	+	5 be offered, sold, or provided to a borrower or lessor under
	145	+	6 this chapter.
	146	+	7 (b) A provider may use an administrator or other
	147	+	8 designee to be responsible for all or part of the
	148	+	9 administration of motor vehicle value protection agreements in
	149	+	10 compliance with this chapter. A provider may act as an
	150	+	11 administrator or retain the services of a third-party
	151	+	12 administrator.
	152	+	13 (c) A motor vehicle value protection agreement shall
	153	+	14 not be sold unless the contract holder is provided a copy of
	154	+	15 the agreement.
	155	+	16 §8-37A-4.
	156	+	17 In order to assure the faithful performance of the
	157	+	18 obligations of a provider to its contract holders, the
	158	+	19 provider shall comply with one of the following:
	159	+	20 (1) a. Insure all of its motor vehicle value
	160	+	21 protection agreements under an insurance policy issued by an
	161	+	22 insurer licensed, registered, or otherwise authorized to do
	162	+	23 business in this state at the time the policy is filed with
	163	+	24 the Commissioner of Insurance and continuously thereafter,
	164	+	25 that meets one of the following criteria:
	165	+	26 1. Has a surplus as to policyholders and paid-in
	166	+	27 capital of at least fifteen million dollars ($15,000,000).
	167	+	Page 6 1 2. Has a surplus as to policyholders and paid-in
	168	+	2 capital of not less than ten million dollars ($10,000,000),
	169	+	3 and evidence to the satisfaction of the commissioner that the
	170	+	4 company maintains a ratio of net written premiums, wherever
	171	+	5 written, to surplus as to policyholders and paid-in capital of
	172	+	6 not greater than three to one.
	173	+	7 b. In addition, the insurer shall annually file with
	174	+	8 the commissioner copies of the insurer's audited financial
	175	+	9 statements, its NAIC Annual Statement, and the actuarial
	176	+	10 certification required by and filed in the insurer's state of
	177	+	11 domicile.
	178	+	12 (2) a. Maintain a funded reserve account for its
	179	+	13 obligations under its contracts issued and outstanding in this
	180	+	14 state. The reserves shall not be less than 40 percent of gross
	181	+	15 consideration received, less claims paid, on the sale of the
	182	+	16 motor vehicle value protection agreement for all in-force
	183	+	17 contracts. The reserve account shall be subject to examination
	184	+	18 and review by the Superintendent of Banks; and
	185	+	19 b. Place in trust with the superintendent a
	186	+	20 financial security deposit, having a value of not less than
	187	+	21 five percent of the gross consideration received, less claims
	188	+	22 paid, on the sale of the motor vehicle value protection
	189	+	23 agreements for all agreements issued and in force, but not
	190	+	24 less than twenty-five thousand dollars ($25,000) consisting of
	191	+	25 one of the following:
	192	+	26 1. A surety bond issued by an authorized surety.
	193	+	Page 7 1 2. Securities of the type eligible for deposit by
	194	+	2 authorized insurers in this state.
	195	+	3 3. Cash.
	196	+	4 4. A letter of credit issued by a qualified
	197	+	5 financial institution.
	198	+	6 5. Another form of security prescribed by
	199	+	7 regulations issued by the superintendent.
	200	+	8 (3) a. Maintain, or together with its parent company
	201	+	9 maintain, a net worth or stockholders' equity of one hundred
	202	+	10 million dollars ($100,000,000); and
	203	+	11 b. Upon request, provide the Superintendent of Banks
	204	+	12 with a copy of the provider's or the provider's parent
	205	+	13 company's most recent Form 10-K or Form 20-F filed with the
	206	+	14 Securities and Exchange Commission (SEC) within the last
	207	+	15 calendar year, or if the company does not file with the SEC, a
	208	+	16 copy of the company's audited financial statements, which
	209	+	17 shows a net worth of the provider or its parent company of at
	210	+	18 least one hundred million dollars ($100,000,000). If the
	211	+	19 provider's parent company's Form 10-K, Form 20-F, or financial
	212	+	20 statements are filed to meet the provider's financial security
	213	+	21 requirement, then the parent company shall agree to guarantee
	214	+	22 the obligations of the provider relating to motor vehicle
	215	+	23 value protection agreements sold by the provider in this
	216	+	24 state.
	217	+	25 §8-37A-5.
	218	+	Page 8 1 (a) A motor vehicle value protection agreement shall
	219	+	2 disclose in writing and in clear, understandable language that
	220	+	3 is easy to read all of the following:
	221	+	4 (1) The name and address of the provider, contract
	222	+	5 holder, and administrator, if any.
	223	+	6 (2) The terms of the agreement including, without
	224	+	7 limitation, the purchase price to be paid by the contract
	225	+	8 holder, if any, and the requirements for eligibility,
	226	+	9 conditions of coverage, or exclusions.
	227	+	10 (3) A provision that the agreement may be cancelled
	228	+	11 by the contract holder within a free look period as specified
	229	+	12 in the agreement, and that in the event the contract holder
	230	+	13 will be entitled to a full refund of the purchase price paid
	231	+	14 by the contract holder, if any, so long as no benefits have
	232	+	15 been provided.
	233	+	16 (4) The procedure the contract holder must follow,
	234	+	17 if any, to obtain a benefit under the terms and conditions of
	235	+	18 the agreement including, if applicable, a telephone number or
	236	+	19 website and address where the contract holder may apply for a
	237	+	20 benefit.
	238	+	21 (5) A provision indicating whether or not the
	239	+	22 agreement is cancellable after the free look period and the
	240	+	23 conditions under which it may be cancelled, including the
	241	+	24 procedures for requesting any refund of the unearned purchase
	242	+	25 price paid by the contract holder.
	243	+	Page 9 1 (6) In the event of cancellation, the methodology
	244	+	2 for calculating any refund of the unearned purchase price of
	245	+	3 the agreement due.
	246	+	4 (7) A provision specifying that neither the
	247	+	5 extension of credit, the terms of the credit, nor the terms of
	248	+	6 the related motor vehicle sale or lease, may be conditioned
	249	+	7 upon the purchase of the agreement.
	250	+	8 (8) The terms, restrictions, or conditions governing
	251	+	9 cancellation of the agreement prior to the termination or
	252	+	10 expiration date of the agreement by either the provider or the
	253	+	11 contract holder. The provider shall mail a written notice to
	254	+	12 the contract holder at the last known address of the contract
	255	+	13 holder contained in the records of the provider at least five
	256	+	14 days prior to cancellation by the provider. Prior notice is
	257	+	15 not required if the reason for cancellation is nonpayment of
	258	+	16 the provider fee, a material misrepresentation by the contract
	259	+	17 holder to the provider or administrator, or a substantial
	260	+	18 breach of duties by the contract holder relating to the
	261	+	19 covered product or its use. The notice shall state the
	262	+	20 effective date of the cancellation and the reason for the
	263	+	21 cancellation. If an agreement is cancelled by the provider for
	264	+	22 a reason other than nonpayment of the provider fee, the
	265	+	23 provider shall refund to the contract holder all of the
	266	+	24 unearned pro rata provider fee paid by the contract holder, if
	267	+	25 any. If coverage under the agreement continues after a claim,
	268	+	26 any refund may deduct claims paid and a reasonable
	269	+	27 administrative fee not to exceed seventy-five dollars ($75).
	270	+	Page 10 1 (b) This section shall not apply to commercial
	271	+	2 transactions.
	272	+	3 §8-37A-6.
	273	+	4 (a) The Superintendent of Banks may take action
	274	+	5 which is necessary or appropriate to enforce this chapter and
	275	+	6 to protect motor vehicle value protection contract holders in
	276	+	7 this state. After notice and a hearing, the superintendent may
	277	+	8 do both of the following:
	278	+	9 (1) Order the provider, administrator, or any other
	279	+	10 person not in compliance with this chapter to cease and desist
	280	+	11 from further actions related to motor vehicle value protection
	281	+	12 agreements which are in violation of this chapter.
	282	+	13 (2) Impose a penalty of not more than five hundred
	283	+	14 dollars ($500) per violation and no more than ten thousand
	284	+	15 dollars ($10,000) in the aggregate for all violations of
	285	+	16 similar nature. For purposes of this chapter, a violation
	286	+	17 shall be considered to be of a similar nature if the violation
	287	+	18 consists of the same or similar course of conduct, action, or
	288	+	19 practice, irrespective of the number of times the action,
	289	+	20 conduct, or practice which is determined to be a violation of
	290	+	21 the chapter occurred.
	291	+	22 (b) This section shall not apply to motor vehicle
	292	+	23 value protection agreements offered in connection with a
	293	+	24 commercial transaction.
	294	+	25 Section 3. This act shall become effective January
	295	+	26 1, 2023, following its passage and approval by the Governor,
	296	+	27 or its otherwise becoming law.
	297	+	Page 11 1
305	298		2
306		-	3
307		-	4
308		-	President and Presiding Officer of the Senate
309		-
310		-	5
311		-	6 Speaker of the House of Representatives
312		-	SB487
313		-	8 Senate 01-FEB-22
314		-	9 I hereby certify that the within Act originated in and passed
315		-	10 the Senate, as amended.
316		-	11
317		-	12 Patrick Harris,
318		-	13 Secretary.
	299	+	3 Senate
	300	+	Read for the first time and referred to4
	301	+	the Senate committee on Judiciary.................5 1.1-JAN-22
	302	+	6
	303	+	Read for the second time and placed on7
	304	+	the calendar......................................8 1.8-JAN-22
	305	+	9
	306	+	Read for the third time and passed as10
	307	+	amended ..........................................11 0.1-FEB-22
	308	+	Yeas 3212
	309	+	13 Nays 0
319	310		14
320	311		15
321		-	16
322		-	17 House of Representatives
323		-	18 Passed: 15-MAR-22
324		-	19
325		-	20
326		-	21 By: Senator Whatley
327		-	Page 13
	312	+	16 Patrick Harris,
	313	+	17 Secretary.
	314	+	18
	315	+	Page 12