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General Assembly Raised Bill No. 5385
February Session, 2022
LCO No. 1744
Referred to Committee on INSURANCE AND REAL ESTATE
Introduced by:
(INS)
AN ACT CONCERNING GUARANTEED ASSET PROTECTION
WAIVERS.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. (NEW) (Effective January 1, 2023) (a) For the purposes of this 1
section: 2
(1) "Administrator" means a person, other than an insurer or creditor, 3
who performs any administrative or operational function on behalf of a 4
creditor as part of the creditor's guaranteed asset protection waiver 5
program; 6
(2) "Borrower" means an individual in this state who is a debtor, retail 7
buyer or lessee under a finance agreement; 8
(3) "Commissioner" means the Commissioner of Consumer 9
Protection; 10
(4) "Creditor" means the lender in a credit or loan transaction 11
concerning a motor vehicle, the lessor in a motor vehicle lease 12
transaction, a motor vehicle dealer providing credit to an individual 13 Raised Bill No. 5385
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purchasing a motor vehicle from such dealer, the seller in a commercial 14
retail installment transaction and an assignee of any other person 15
described in this subdivision to whom a credit obligation created as part 16
of a transaction described in this subdivision is payable; 17
(5) "Finance agreement" means a loan, lease or retail installment sales 18
contract with a borrower for the lease or purchase of a motor vehicle; 19
(6) "Free look period" means the time period, beginning on the 20
effective date of a guaranteed asset protection waiver and ending not 21
sooner than thirty days after such effective date, during which time 22
period a borrower shall be entitled to cancel a guaranteed asset 23
protection waiver; 24
(7) "Guaranteed asset protection waiver" or "waiver" means a 25
contractual agreement forming part of a finance agreement, or included 26
as an addendum to a finance agreement, wherein a creditor agrees, for 27
a separate charge, to cancel or waive all or part of the amount due and 28
owing from a borrower pursuant to the finance agreement in the event 29
of a total physical damage loss or unrecovered theft of the motor vehicle 30
that is the subject of such finance agreement; 31
(8) "Insurer" has the same meaning as provided in section 38a-1 of the 32
general statutes; 33
(9) "Motor vehicle" means a self-propelled or towed vehicle designed 34
for commercial or personal use, including, but not limited to, an all-35
terrain vehicle, automobile, boat, camper, motorcycle, personal 36
watercraft, recreational vehicle, snowmobile or truck, or a trailer for a 37
boat, camper, motorcycle, personal watercraft or truck; 38
(10) "Motor vehicle dealer" means a motor vehicle dealer licensed in 39
accordance with section 14-52 of the general statutes; and 40
(11) "Person" means an individual, association, business trust, 41
company, corporation, organization, partnership or other legal entity. 42
(b) (1) Except as provided in subdivision (2) of this subsection: 43 Raised Bill No. 5385
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(A) No person shall market, offer, provide or sell a guaranteed asset 44
protection waiver in this state except in accordance with the provisions 45
of this section, and no such person shall be required to be licensed under 46
the insurance laws and regulations of this state to market, offer, provide 47
or sell such a waiver in this state if such person complies with the 48
provisions of this section; and 49
(B) No guaranteed asset protection waiver that is marketed, offered, 50
provided or sold in this state in accordance with the provisions of this 51
section shall be deemed to constitute insurance, or be subject to the 52
insurance laws and regulations of this state. 53
(2) The provisions of this section shall not apply to: 54
(A) An insurance policy delivered, issued for delivery, renewed, 55
amended or continued in this state; or 56
(B) A debt cancellation or debt suspension contract offered in 57
accordance with all applicable provisions of federal law, including, but 58
not limited to, 12 CFR Part 37, as amended from time to time, or 12 CFR 59
Part 721, as amended from time to time. 60
(c) (1) (A) Each guaranteed asset protection waiver marketed, offered, 61
provided or sold to a borrower or prospective borrower in this state 62
may, at the option of the creditor, be payable in a single payment or 63
multiple installment payments, and shall include a free look period 64
during which time period the borrower may cancel such waiver. Each 65
free look period shall begin on the effective date of the guaranteed asset 66
protection waiver and end not sooner than thirty days after such 67
effective date. If a borrower cancels a guaranteed asset protection 68
waiver during the free look period in accordance with the terms of the 69
waiver, the borrower shall be entitled to receive a refund for the 70
unearned portion of the purchase price for such waiver. 71
(B) Except as otherwise provided in the guaranteed asset protection 72
waiver, the borrower may cancel such waiver following expiration of 73
the free look period, and receive a refund for the unearned portion of 74 Raised Bill No. 5385
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the purchase price for such waiver if such borrower sends a written 75
notice, not later than ninety days after the effective date of such 76
cancellation or termination of the related finance agreement, to the 77
person designated in such waiver to receive such notice. If a guaranteed 78
asset protection waiver is cancelled due to a default under, or early 79
termination of, the related finance agreement or repossession of the 80
related motor vehicle, any refund due and owing to the borrower under 81
the waiver shall be paid to the creditor or administrator. A creditor may 82
deduct, from any refund due and owing to a borrower under a 83
guaranteed asset protection waiver pursuant to this subdivision, any 84
amount due and owing under the related finance agreement unless the 85
borrower can show that such agreement is paid in full. 86
(C) Notwithstanding any provision of the general statutes, any cost 87
to a borrower for a guaranteed asset protection waiver that is marketed, 88
offered, provided or sold to the borrower in accordance with the federal 89
Truth-in-Lending Act, 15 USC Section 1601 et seq., and the regulations 90
promulgated thereunder, as both may be amended from time to time, 91
shall be separately stated and not considered a finance charge or 92
interest, unless such waiver is marketed, offered, provided or sold in 93
connection with a lease or retail installment sale as part of a commercial 94
transaction. 95
(2) Each guaranteed asset protection waiver provided or sold to a 96
borrower in this state, other than a waiver provided or sold in 97
connection with a lease or retail installment sale as part of a commercial 98
transaction, shall disclose to the borrower, in easily readable and 99
understandable language: 100
(A) The name and address of each person who is a creditor, 101
administrator or borrower under such waiver on the date that such 102
waiver is first provided or sold to such borrower; 103
(B) The purchase price and terms of such waiver, including, but not 104
limited to, all conditions, exclusions and requirements for protection 105
under such waiver; 106 Raised Bill No. 5385
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(C) The manner in which a borrower applies for benefits under such 107
waiver, including all contact information concerning such application; 108
(D) That such borrower may cancel such waiver during the free look 109
period, whether such borrower may cancel such waiver following 110
expiration of such free look period, and the procedures a borrower 111
follows to receive any refund available to such borrower under such 112
waiver; 113
(E) The method used to calculate any refund available to such 114
borrower under such waiver; 115
(F) That such borrower shall not be required to purchase such waiver 116
as a precondition to receiving credit, or leasing or purchasing a motor 117
vehicle, from a creditor; and 118
(G) That no person shall make any credit term conditional upon the 119
purchase of such waiver. 120
(3) Each guaranteed asset protection waiver provided or sold to a 121
borrower in this state shall remain part of the related finance agreement 122
upon each assignment, sale or transfer of such agreement by a creditor. 123
(d) No borrower shall be required to purchase a guaranteed asset 124
protection waiver as a precondition to receiving credit, or leasing or 125
purchasing a motor vehicle, from a creditor, and no person shall make 126
any credit term conditional upon purchase of a waiver. 127
(e) Each creditor that provides or sells a guaranteed asset protection 128
waiver in this state shall report such provision or sale, and forward all 129
funds received pursuant to such waiver, to the person, if any, 130
designated in an administrative services agreement, insurance policy or 131
other guaranteed asset protection program document to receive such 132
report. Each creditor or administrator that, pursuant to a written 133
agreement, holds or receives funds belonging to an insurer or another 134
creditor or administrator shall be deemed to hold such funds as a 135
fiduciary for such insurer, creditor or administrator. 136 Raised Bill No. 5385
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(f) (1) (A) Each motor vehicle dealer that incurs an obligation 137
pursuant to a guaranteed asset protection waiver shall, either directly or 138
indirectly through an administrator acting on behalf of such dealer, 139
insure such obligation under an insurance policy issued by an insurer, 140
except that no such dealer shall be required to insure such obligation if 141
such waiver concerns a motor vehicle that such dealer has leased to a 142
borrower. 143
(B) Each creditor, other than a motor vehicle dealer, that incurs an 144
obligation pursuant to a guaranteed asset protection waiver may, either 145
directly or indirectly through an administrator acting on behalf of such 146
creditor, insure such obligation under an insurance policy issued by an 147
insurer. 148
(2) Each insurance policy insuring a guaranteed asset protection 149
waiver shall: 150
(A) Be subject to the insurance laws and regulations of this state; 151
(B) State the insurer's obligation to reimburse or pay, to the creditor 152
that provided or sold the insured waiver, any sums that such creditor is 153
legally required to waive pursuant to such waiver; 154
(C) Provide coverage to each assignee of the insured waiver upon 155
each assignment, sale or transfer of the related finance agreement; and 156
(D) Provide coverage that remains effective unless such coverage is 157
cancelled or terminated in accordance with all applicable insurance laws 158
and regulations of this state. Unless the insurer has not received 159
payment for such policy, such cancellation or termination shall not 160
reduce the liability of the insurer for a waiver provided or sold to a 161
borrower prior to the effective date of such cancellation or termination. 162
(g) The commissioner may, after providing notice and an opportunity 163
for a hearing in accordance with the provisions of chapter 54 of the 164
general statutes, enjoin any person who violates any provision of this 165
section from marketing, offering, providing or selling guaranteed asset 166 Raised Bill No. 5385
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protection waivers in this state, and impose a civil penalty on such 167
person in an amount not to exceed five hundred dollars for each 168
violation or ten thousand dollars in the aggregate for all violations that 169
are of a similar nature. For the purposes of this subsection, violations 170
are of a similar nature if such violations consist of the same or similar 171
actions, conduct or practices. 172
(h) The commissioner may adopt regulations, in accordance with the 173
provisions of chapter 54 of the general statutes, to implement the 174
provisions of this section. 175
This act shall take effect as follows and shall amend the following
sections:
Section 1 January 1, 2023 New section
Statement of Purpose:
To implement requirements regarding Guaranteed Asset Protection
Waivers.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
underlined.]