InfoBytes Blog
Multiple states pass bills addressing GAP waiver framework
On March 28, HB 4186, which amends the Code of West Virginia by adding a section related to guaranteed asset protection waivers (GAP waivers), became law without the governor’s signature. Among other things, HB 4186 clarifies that GAP waivers are not insurance, and that GAP waivers issued after the bill’s effective date are exempt from West Virginia insurance laws. The bill also (i) specifies terms and conditions when offering GAP waivers; (ii) provides requirements for offering GAP waivers, including “contractual liability” obligations, certain disclosures, and cancellation/non-cancellation terms; and (iii) outlines exemptions, such as commercial transactions and GAP waivers sold or issued by federally regulated depository institutions. Additionally, HB 4186 clarifies the procedures a borrower must follow to activate benefits under a GAP waiver. The bill will apply to all GAP waivers in effect on or after July 1.
On March 28, the Wisconsin governor signed Assembly Bill 663 (AB 663), which amends statutes related to GAP waivers sold in connection with the credit sale or lease of a vehicle. Among other things, AB 663 prohibits creditors from requiring borrowers to purchase GAP waivers and requires creditors to provide written disclosures to borrowers prior to, or at the time of execution, which include that (i) the purchase of a GAP waiver is optional; (iii) outlines the costs and terms; and (iii) specifies procedures borrowers are required to follow to receive GAP waiver benefits. AB 663 also addresses cancellation provisions for borrowers. Furthermore, the bill clarifies that GAP waivers are not insurance and that any cost to a borrower must be separately stated as part of the finance agreement and cannot be considered a finance charge or interest. AB 663 becomes effective September 1.
Finally, on March 26, the Mississippi governor signed SB 2929, which clarifies that GAP waivers are not insurance and are therefore exempt from Mississippi insurance laws. Provisions promulgated under SB 2929 provide a framework for which GAP waivers may be offered to borrowers in the state and include (i) requirements for contractual liability and other policies to insure a GAP waiver; (ii) disclosure requirements; and (iii) cancellation policies for GAP waivers and procedures for borrowers to obtain a refund in the instance of cancellation or early termination. Similar to Wisconsin AB 663, any cost to a borrower associated with a GAP waiver must be separately stated as part of the finance agreement and cannot be considered a finance charge or interest. The act takes effect July 1.