HB215INTRODUCED
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JPCWFN-1
By Representative Ingram
RFD: Insurance
First Read: 23-Mar-23
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5 JPCWFN-1 01/09/2023 FC (L) ma 2022-5207
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SYNOPSIS:
Under existing law, motor vehicle value
protection agreements are authorized in motor vehicle
consumer credit financing transactions to pay
deficiency balances due under certain conditions.
Under existing law, the provider of a motor
vehicle value protection agreement is required to
insure its agreement under an insurance policy or meet
certain other financial requirements.
This bill would clarify that the insurance
policy would be for the purpose of paying or
reimbursing obligations under a motor vehicle value
protection agreement in the event the provider fails to
perform the obligations.
A BILL
TO BE ENTITLED
AN ACT
Relating to consumer credit financing in the sale or
lease of motor vehicles; to amend Section 8-37A-4 of the Code
of Alabama 1975, as added by Act 2022-179 of the 2022 Regular
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Session, relating to motor vehicle value protection agreements
and the requirements of a provider of the agreements to insure
performance of the obligations of the provider; to further
clarify the requirements of an insurance policy maintained by
the provider for this purpose.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Section 8-37A-4 of the Code of Alabama
1975, as added by Act 2022-179 of the 2022 Regular Session, is
amended to read as follows:
"ยง8-37A-4
In order to assure the faithful performance of the
obligations of a provider to its contract holders, the
provider shall comply with one of the following:
(1)a. Insure all of its motor vehicle value protection
agreements under an insurance policy that pays or reimburses
the obligations of a provider under any motor vehicle value
protection agreements of the provider in the event the
provider fails to perform its obligations. The insurance
policy shall be issued by an insurer licensed, registered, or
otherwise authorized to do business in this state at the time
the policy is filed with the Commissioner of Insurance and
continuously thereafter, that meets one of the following
criteria:
1. Has a surplus as to policyholders and paid-in
capital of at least fifteen million dollars ($15,000,000).
2. Has a surplus as to policyholders and paid-in
capital of not less than ten million dollars ($10,000,000),
and evidence to the satisfaction of the commissioner that the
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company maintains a ratio of net written premiums, wherever
written, to surplus as to policyholders and paid-in capital of
not greater than three to one.
b. In addition, the insurer shall annually file with
the commissioner copies of the insurer's audited financial
statements, its NAIC Annual Statement, and the actuarial
certification required by and filed in the insurer's state of
domicile.
(2)a. Maintain a funded reserve account for its
obligations under its contracts issued and outstanding in this
state. The reserves shall not be less than 40 percent of gross
consideration received, less claims paid, on the sale of the
motor vehicle value protection agreement for all in-force
contracts. The reserve account shall be subject to examination
and review by the Superintendent of Banks; and
b. Place in trust with the superintendent a financial
security deposit, having a value of not less than five percent
of the gross consideration received, less claims paid, on the
sale of the motor vehicle value protection agreements for all
agreements issued and in force, but not less than twenty-five
thousand dollars ($25,000) consisting of one of the following:
1. A surety bond issued by an authorized surety.
2. Securities of the type eligible for deposit by
authorized insurers in this state.
3. Cash.
4. A letter of credit issued by a qualified financial
institution.
5. Another form of security prescribed by regulations
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issued by the superintendent.
(3)a. Maintain, or together with its parent company
maintain, a net worth or stockholders' equity of one hundred
million dollars ($100,000,000); and
b. Upon request, provide the Superintendent of Banks
with a copy of the provider's or the provider's parent
company's most recent Form 10-K or Form 20-F filed with the
Securities and Exchange Commission (SEC) within the last
calendar year, or if the company does not file with the SEC, a
copy of the company's audited financial statements that shows
a net worth of the provider or its parent company of at least
one hundred million dollars ($100,000,000). If the provider's
parent company's Form 10-K, Form 20-F, or financial statements
are filed to meet the provider's financial security
requirement, then the parent company shall agree to guarantee
the obligations of the provider relating to motor vehicle
value protection agreements sold by the provider in this
state."
Section 2. This act shall become effective immediately
following its passage and approval by the Governor, or its
otherwise becoming law.
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