An Act
ENROLLED SENATE
BILL NO. 1743 By: Leewright of the Senate
and
Bashore of the House
An Act relating to financial protection pr oducts;
defining terms; allowing for the issuance of motor
vehicle financial protection pr oducts; requiring the
issuance of the protection product to be a separate
charge; prohibiting the requirement of a protection
product as a term for sale o r lease; allowing for the
use of debt waivers; providing the conditions for a
retail seller or creditor to offer debt waivers;
providing the contractual liabilities of a creditor
issuing a debt waiver; providing for the cancelation
or termination of debt waivers under certain
conditions; providing the procedures the borrower
shall follow to obtain a debt waiver ben efit;
authorizing refund in the event of a cancelation of a
debt waiver under certain conditions; providing
exemptions for certain offers of debt waivers;
providing requirements for offering vehicle value
protection agreements; requiring a contract holder of
a vehicle value protection agreement to provide copy
of agreement; requiring contract holders to follow
certain fiduciary requirements to ensure faithful
performance; requiring agreements to disclose certain
information; providing for promulgation of rules;
providing penalties for certain violations;
establishing that motor vehicle financial protection
products shall not be insurance ; providing for
codification; and providing an effective date.
SUBJECT: Financial protection products
ENR. S. B. NO. 1743 Page 2
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 140.2 of Title 15, unless there
is created a duplication in numbering, reads as follows:
As used in this act:
1. "Commercial" means a transaction wherein the motor vehicle
will primarily be used for business purposes rather than per sonal;
2. "Commissioner" means the Insurance Commissioner;
3. "Consumer" means an individual purchaser of a motor vehicle
or borrower under a finance agreement, and includes a borrower or
contract holder as herein defined as applicable;
4. "Finance agreement" means a loan, retail installment sales
contract, or lease for the purchase, refinancing , or lease of a
motor vehicle;
5. "Free look period" means the period of time from the
effective date of the motor vehicle financial protection product
until the date the motor vehicle financial protection product may be
canceled without penalty, fees, or costs. This period of time shall
not be shorter than thirty (30) days;
6. "Insurer" means an insurance company licensed, registered,
or otherwise authorized to issue contractual liability insurance
under the insurance laws of t his state;
7. "Motor vehicle" means self-propelled or towed vehicles
designed for personal or commercial use including, but not limited
to, automobiles, trucks, motorcycles, recreational ve hicles, all-
terrain vehicles, snowmobiles, campers, boards, person al watercraft,
and related trailers;
8. "Motor vehicle financial protection product" means an
agreement defined herein that protects a consumer's financial
interest in his or her current or future motor vehicle and includes,
but is not limited to, debt waiver and vehicle value prote ction
ENR. S. B. NO. 1743 Page 3
agreements. A motor vehicle financ ial protection product shall not
mean a service warranty or vehicle protection product warranty ; and
9. "Person" means an individual, company , association,
organization, partnersh ip, business trust, corporation, and every
form of legal entity.
SECTION 2. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 140.3 of Title 15, unless there
is created a duplication in numbering, reads as follows:
A. Motor vehicle financial protection products may be offer ed,
sold, or given to consumers in this state in compliance with this
act.
B. Notwithstanding any other provision of law, any amoun t
charged or financed for a motor vehicle fi nancial protection product
is an authorized charge that must be separately stated and not be
considered a financial charge or interest.
C. Neither the extension of credit, the terms of credit, nor
the terms of the related mo tor vehicle sale or lease shall be
conditioned upon the consumer's payment for or financing of any
charge for a motor vehicle financial protection product. However,
motor vehicle financial protection products may be discounted or
given at no charge in connection with the purchase of other non -
credit related goods or services.
SECTION 3. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 140.4 of Title 15, unless there
is created a duplication in numberin g, reads as follows:
A. As used in this section:
1. "Administrator" means a person, other than an insurer or
creditor that performs administrative or operational functions
pursuant to debt waiver programs;
2. "Borrower" means a debtor, retail buyer, or lessee, under a
finance agreement;
3. "Creditor" means:
ENR. S. B. NO. 1743 Page 4
a. the lender in a loan or credit transaction,
b. the lessor in a lease transaction,
c. any retail seller of motor vehicles,
d. the seller in commercial retail installment
transactions, or
e. the assignees of any of the foregoing to whom the
credit obligation is payable; and
4. "Debt waiver" includes, but is not limited to:
a. "guaranteed asset protection waivers" or "GAP waivers"
means a contractual agre ement wherein a creditor
agrees, with or without a separate charge, to cancel
or waive all or part of amounts due on a borrowe r's
financial agreement in the event of a tota l physical
damage loss or unrecovered theft of the motor vehicle,
which an agreement shall be part of, or as a separate
addendum to, the financial agreement. A G AP waiver
may also provide, with or without a separate charge, a
benefit that waives an amount or provides a borrower
with a credit towards the purchase of a replacement
motor vehicle,
b. "excess wear and use waiver" means a contractual
agreement wherein a creditor agrees, with or without a
separate charge, to cancel or waive all or part of
amounts that may become due under a borrower's lease
agreement as a result of excessive wear and use of a
motor vehicle, which an agreement shall be part of, or
as a separate addendum to, the lease agreement.
Excess wear and use waivers may also cancel or waive
amounts due for excess mileage, and
c. other products as approved by the Insurance
Commissioner.
B. As required for offering debt waivers:
ENR. S. B. NO. 1743 Page 5
1. A retail seller shall insure its debt wa iver obligations
under a contractual liability or other insurance p olicy issued by an
insurer. A creditor other than retail sellers may insure its debt
waiver obligations under a contractual liability policy or other
such policy issued by an insurer. A ny such insurance policy may be
directly obtained by a creditor or retail seller or may be obtained
by an administrator to cover a creditor's or retail seller's
obligations. However, retail sellers that are lessors on motor
vehicles are not required to insure obligations related to debt
waivers on such leased motor vehicles;
2. The debt waiver remains a part of the finance agreement upon
the assignment, sale, or transfer of such finance agreement by the
creditor;
3. Any creditor that offers a debt waiver shall report the sale
of, and subsequently forward the funds due to, the designated party
or parties; and
4. Funds received or held by a credito r or administrator that
belong to an insurer, creditor, or administrator shall be held by
such creditor or administrator in a fiduciary capacity.
C. Contractual Liability or Other Insurance Policies.
1. Contractual liability or other insurance policies insuring
debt waivers shall state the obligation of the insurer to reimburse
or pay to the creditor any sum s the creditor is legally obligated to
waive under a debt waiver.
2. Coverage under a contr actual liability or other insurance
policy insuring a debt waiver shall also cover any subsequent
assignee upon the assignment, sale, or transfer of the finance
agreement.
3. Coverage under a contractu al liability or other insurance
policy insuring a debt waiver shall remain in effect unless canceled
or terminated in compliance with applicable insurance laws of this
state.
ENR. S. B. NO. 1743 Page 6
4. The cancelation or termination of a contractu al liability or
other insurance policy shall not reduce the insurer's responsibility
for debt waivers issued by the creditor prior to the date of
cancelation or termination and for which the premium has been
received by the insurer.
D. Debt waivers shall disclose in writing and in cle ar,
understandable language the following:
1. The name and add ress of the initial creditor and the
borrower at the time of sa le and identity of any administrator if
different from the creditor;
2. The purchase price , if any, and the terms of the debt waiver
including without limitation, the requirements of protectio n,
conditions, or exclusions associated with the debt waiver;
3. That the borrower may cancel the debt waive r within a free
look period, as specified in the debt waiver, and will be entitled
to a full refund of the purchase price paid by the borrower, if any,
as long as no benefits have been provided ;
4. The procedures the borrower shall follow, if any, t o obtain
debt waiver benefits under the terms and cond itions of the debt
waiver including, if applicable, a telephone number or website and
address where the borrower may apply for debt waiver benefits;
5. Whether or not the debt waiver may be canceled after the
free look period and the conditions under whic h it may be canceled
or terminated including the procedures for requesting any refund of
amounts paid;
6. That in order to receive any refund due in the event of a
borrower's cancelation of the debt waiver, the borrower, in
accordance with the term of the debt waiver, shall provide a written
request to cancel to the creditor, administ rator, or other such
party. If the cancelation of a debt waiver is due to an early
termination of the finance agreement and no benefit has been or will
be provided, then the borrower, in accordance with the terms of the
debt waiver, shall provide a written request to c ancel to the
creditor or administrator within ninety (90) days of t he occurrence
of the event terminating the finance agreement;
ENR. S. B. NO. 1743 Page 7
7. The methodology for calculating any refund of the unearned
purchase price of the debt waiver, if any, shall be due in the event
of cancelation of the debt waiver or early termination of a fi nance
agreement; and
8. That neither the extension of credit, the terms of the
credit, nor the terms of the related motor vehicle sale or lease,
may be conditioned upon the borrower 's purchase of a debt waiver.
E. Cancelation.
1. Debt waiver agreements may be cancelable or non-cancelable
following the free look period. Debt waivers shal l provide the
borrower, if a borrower cancels a debt waiver within the free look
period, a full refund of the amount the borrower paid, if any, as
long as no benefits hav e been provided.
2. In the event of a borrowe r's cancelation of the debt waiver
or upon the early termination of the finance agreement after the
debt waiver has been in effect beyond the free look period, the
borrower may be entitled to a refund of the amount the borrower paid
of the unearned portion of the purchase price, if any, minus a
cancelation fee not to exceed Seventy-five Dollars ($75.00), if no
benefit has been or will be provided. I n order to receive any
refund due in the event of a borrower 's cancellation of the debt
waiver, the borrower shall provide a written request to cancel , in
accordance with the terms of the debt waiver, to the creditor or
administrator. If the cancelation i s due to the early termination
of the finance agreement, then the borrower, in accordance with the
terms of the debt waiver, shall provide a written request to ca ncel
to the creditor or administrator within ninety (90) days of the
occurrence of the event terminating the finance agreement.
3. If the cancelation of a debt waiver occurs as a result of a
default under the finance agreement or the repo ssession of the motor
vehicle associated with the finance agreement, or any other
termination of the finance agreement, any refund due may be paid
directly to the creditor or administrator, unless the borrower can
show that the finance agreement has been paid in full.
F. Exempt Transactions.
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1. Debt waivers offered by state or federal banks or credit
unions in compliance with the applicable state or federal law are
exempt from this act.
2. Subsection D of this section and Section 5 of this act shall
not apply to debt waivers offered in connection with commercial
transactions.
SECTION 4. NEW LAW A new section of law to be codified
in the Oklahoma Statu tes as Section 140.5 of Title 15, unless there
is created a duplication in numbering, reads as foll ows:
A. As used in this section:
1. "Administrator" means the person who may be responsible for
the administrative or operational function of vehicle value
protection agreements including, but not limited to, the
adjudication of claims or benefits requested by contract holders;
2. "Contract holder" means a person who is the purchase r or
holder of a vehicle value protection agreement;
3. "Provider" means a person that is obligated to provide a
benefit under a vehicle value protection agreement. A provid er may
perform as an administrator or retain the services of a third-party
administrator; and
4. "Vehicle value protection agreement " means a contractual
agreement that provides a benefit towards either the reduction of
some or all of the contract holder 's current finance agreement
deficiency balance, or towards the purchase o r lease of a
replacement motor vehicle or motor vehicle services, upon the
occurrence of an adverse event to the motor vehicle inc luding, but
not limited to, loss, theft, damage, obsolescence, diminished value,
or depreciation. These agreements do not include debt waivers.
These agreements may include, but not be limited to, trade-in-credit
agreements, diminished value agreements, depreciation benefit
agreements, or other similarly named agreements.
B. Requirements for offering vehicle value protection
agreements:
ENR. S. B. NO. 1743 Page 9
1. A provider may utilize an administrator or other designee to
be responsible for any and all of the adm inistration of vehicle
value protection agreemen ts in compliance with this act;
2. Vehicle value protection agreements shall not be sold un less
the contract holder has been or will be provided access to a copy of
that vehicle value protection agreement;
3. In order to assure the faithful performance o f the
provider's obligations to its contract holders, each provider shall
be responsible for complying with the requirements of one of the
following:
a. insure all of its vehicle value protection agreements
under an insurance policy issued by an insurer
licensed, registered, or otherwise authorized to do
business in this state either:
(1) at the time the policy is filed with the
Insurance Commissioner, and con tinuously
thereafter, (i) maintain surplus as to
policyholders and paid-in capital no less than
Fifteen Million Dollars ($15,000,000.00) and (i i)
annually file copies of the insurer 's financial
statements, its National Association of Insurance
Commissioners (NAIC) Annual Statement, and the
actuarial certification required by and filed in
the insurer's state of domicile, or
(2) at the time the policy is filed with the
Commissioner, and continuously thereafter, (i)
maintain surplus as to policyholders and pai d-in
capital of less than Fifteen Million Dollars
($15,000,000.00) but at least equal to Ten
Million Dollars ($10,000,000.00), (ii)
demonstrate to the satisfaction of the
Commissioner that the company maintains a ratio
of net written premiums, wherever written, to
surplus as to policyholders and paid-in capital
of not greater than 3 to 1, and (iii) annually
file copies of the insurer's audited financial
ENR. S. B. NO. 1743 Page 10
statements, its NAIC Annual Statement, and the
actuarial certification required by and filed in
the insurer's state of domicile,
b. (1) maintain a funded reserve account for its
obligations under its contracts issu ed and
outstanding in this state. The reserves shall
not be less than forty p ercent (40%) of gross
considerations received, less claims paid, on t he
sale of the vehicle value protection agreement
for all in-force contracts. The rese rve account
shall be subject to examination and review by the
Commissioner,
(2) place in trust with the Commissioner a financial
security deposit, having a value not less than
five percent (5%) of the gross consideration
received, less claims paid, on the sale of the
vehicle value protection agreements for all
vehicle value protection agreements issued and in
force, but not less than Twenty-five Thousand
Dollars ($25,000.00), consisting of the
following:
(a) a surety bond issued by an authorized
surety,
(b) securities of the ty pe eligible for deposit
by authorized insurers in this state,
(c) cash,
(d) a letter of credit issued by a qualified
financial institution, or
(e) another form of security prescribed by
regulations issued by the Commissioner, or
c. (1) maintain, or together with its parent company
maintain, a net worth or stockholders' equity of
One Hundred Million Dollars ($100,000,000.00), or
ENR. S. B. NO. 1743 Page 11
(2) upon request, provide the Commissioner 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, which
shows a net worth of the provider or its parent
company of at least One Hundred Million Dollars
($100,000,000.00). 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, t hen the parent
company shall agree to guaran tee the obligations
of the provider relating to the vehicle value
protection agreements sold by t he provider in
this state; and
4. Except for the requirements in paragraph 3 of subsection B
of this section, no o ther financial security requirements shall be
required for vehicle value protection agreement providers.
C. Vehicle value protection agreeme nts shall disclose in
writing and in clear, understandable language the following:
1. The name and address of the provider, contract holder, and
administrator, if any;
2. The terms of the vehicle value protection agreement
including without limitation, the purchase price to be paid by the
contract holder, the requirements for eligibility, conditions of
coverage, or exclusions;
3. That the vehicle value protection agreement may be canceled
by the contract holder within a free look period as specified in the
vehicle value protection agreement, and in such an event, the
contract holder shall be entitled to a full refund of the purchase
price paid by the contract holder, if any, as long as no benefits
have been provided;
4. The procedure the contract holder shall follow, if any, to
obtain a benefit under the terms and conditions of the vehicle value
ENR. S. B. NO. 1743 Page 12
protection agreement including, if applicable, a telephone number or
website and address where the contract holder may apply for a
benefit;
5. Whether or not the vehicle value protection agreement is
cancelable after the free look period and the conditions under which
it may be canceled including the procedures for requesting any
refund of the unearned purchase price paid by the contract holder;
6. In the event of cancelation, the methodology for calculating
any refund of the unearned purchase price of the vehicle value
protection agreement due;
7. That neither the extension of credit, the terms of the
credit, nor the terms of the related motor vehicle sale or lease may
be conditioned upon the purchase of the vehicle value protection
agreement; and
8. Vehicle value protectio n agreements shall state the terms
and restrictions, or conditions governing cancelation of the vehicle
value protection agreement prior to the termination or expiration
date of the vehicle va lue protection agreement by either the
provider or the contract holder. The provider of the vehicle value
protection agreement shall mail a written notice to the contract
holder at the last known address of the contract holder contained in
the records of the provider at least five (5) days prior to
cancelation by the provider. Prior notice shall not be required if
the reason for cancelation is nonpayment of the provider fee, a
material misrepresentation by the contract holder to the provider or
administrator, or a substantial breach of duties by the contract
holder relating to the covered product or its use. The notice shall
state the effective date of cancelation and the reason for the
cancelation. If a vehicle value protection agreement is canceled by
the provider for a reason other than nonpayment of the provider fee,
the provider shall refund the co ntract holder one hundred percent
(100%) of the unearned pro rata provider fee paid by the contract
holder, if any. If coverage under the vehicle value pr otection
agreement continues after a claim, then any refund may deduct claims
paid. A reasonable administrative fee may be charged by the
provider not to exceed Seventy-five Dollars ($75.00).
ENR. S. B. NO. 1743 Page 13
D. Subsection C of this section and Section 5 of this act shal l
not apply to vehicle value protection agreements offered in
connection with a commercial transaction.
SECTION 5. NEW LAW A new section of law to be codified
in the Oklahoma Statutes a s Section 140.6 of Title 15, unless there
is created a duplication in numbering, reads as follows:
The Insurance Commissioner shall promulgate rules necessary to
enforce the provisions of this act. After proper notice and
opportunity for hearing the Commissioner may:
1. Order the creditor, provider, administrator, or any other
person not in compliance with this act to cease and desist from
product related operations which are in violation of this act; and
2. Impose a penalty not to exceed Five Hundred Dollars
($500.00) per violation and no more than Ten Thousand Dollars
($10,000.00) for aggregated violations of a similar nature. For
purposes of this section, "violations of a similar nature" means the
violation consisted of the same or similar course of conduct,
action, or practice, irrespecti ve of the number of times the action,
conduct, or practice which is determined to be a violation of this
act occurred.
SECTION 6. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 140.7 of Title 15, unless there
is created a duplication in numbering, reads as follows:
The Legislature finds that motor vehicle financial protection
products shall not be insurance. All motor vehicle financial
protection products issued prior to and after the effective date of
this act shall not be construed as insurance.
SECTION 7. This act shall become ef fective November 1, 2022.
ENR. S. B. NO. 1743 Page 14
Passed the Senate the 8th day of March, 2022.
Presiding Officer of the Senate
Passed the House of Representatives the 13th day of April, 2022.
Presiding Officer of the House
of Representatives
OFFICE OF THE GOVERNOR
Received by the Office of the Governor this _______ _____________
day of _________________ __, 20_______, at _______ o'clock _______ M.
By: _______________________________ __
Approved by the Governor of the State of Oklahoma this _____ ____
day of ___________________, 20_______, at _____ __ o'clock _______ M.
_________________________________
Governor of the State of Oklahoma
OFFICE OF THE SECRETARY OF STATE
Received by the Office of the Secretary of State this _______ ___
day of __________________, 20 _______, at _______ o'clock _____ __ M.
By: _______________________________ __