HB504: HB504 Commerce and trade; procedures, conditions, and limitations relative to vehicle value protection agreements; provide

26 LC 56 0567S The House Committee on Regulated Industries offers the following substitute to HB 504: A BILL TO BE ENTITLED AN ACT To amend Chapter 1 of Title 10 of the Official Code of Georgia Annotated, relating to selling1 and other trade practices, so as to provide for procedures, conditions, and limitations relative2 to vehicle value protection agreements; to require providers of such agreements maintain3 certain security or liability insurance policies; to require certain disclosures; to provide for4 cancellation rights; to provide for refunds; to provide for enf orcement; to provide for5 definitions; to provide for related matters; to repeal conflicting laws; and for other purposes.6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:7 SECTION 1.8 Chapter 1 of Title 10 of the Official Code of Georgia Annotated, relating to selling and other9 trade practices, is amended by adding a new article to read as follows:10 "ARTICLE 3811 10-1-970.12 As used in this article, the term:13 H. B. 504 (SUB) - 1 - 26 LC 56 0567S (1) 'Administrator' means the person delegated by a provider a s responsible for the14 administrative or operational functions of a vehicle value prot ection agreement, 15 including but not limited to, adjudication of claims or benefit requests by the consumer.16 (2) 'Consumer' means a person who purchases or holds legal rights under a vehicle value17 protection agreement.18 (3) 'Covered vehicle' means a motor vehicle that is covered un der a vehicle value19 protection agreement.20 (4) 'Finance agreement' means a loan, lease, or retail install ment sales contract for the21 purchase or lease of a motor vehicle that is secured by the motor vehicle and with a term22 of at least 12 months.23 (5) 'Free look period' means a time period that begins the day on which the vehicle value24 protection agreement becomes effective and ends the last day on which the consumer25 may cancel the vehicle value protection agreement with a full refund of the vehicle value26 protection agreement purchase price.27 (6) 'Motor vehicle' shall have the same meaning as set forth in Code Section 40-1-1.28 (7) 'Provider' means a person that is obligated to provide a benefit under a vehicle value29 protection agreement.30 (8) 'Vehicle value protection agreement' means a contractual a greement for a separate31 charge between a provider and consumer under which the provider agrees, upon 32 occurrence of an adverse event to the consumer's covered vehicle, to provide a benefit to33 the consumer that may be applied to the cash value of the covered vehicle when traded34 in for a replacement vehicle, the finance agreement for a repla cement vehicle, or the35 purchase or lease price of a replacement vehicle. Such term shall include vehicle trade-in36 agreements, vehicle diminished value agreements, vehicle cash down payment protection37 agreements, and vehicle depreciation benefit agreements.38 H. B. 504 (SUB) - 2 - 26 LC 56 0567S 10-1-971.39 (a) A provider shall be authorized to utilize an administrator for fulfillment of the terms40 of a vehicle value protection agreement.41 (b) A vehicle value protection agreement shall conspicuously disclose:42 (1) The name, address, and contact information of:43 (A) The provider;44 (B) An administrator, if any; and45 (C) The consumer;46 (2) The terms of the vehicle value protection agreement, including:47 (A) The charges under the vehicle value protection agreement;48 (B) The benefit eligibility requirements;49 (C) The conditions imposed by the vehicle value protection agreement, including, but50 not limited to, any requirement that the consumer return to the dealer where the vehicle51 was purchased to obtain a benefit, if applicable, such term shall only be enforceable if52 it was agreed separately on a signed form laying out only such condition; and53 (D) The procedure a consumer is required to follow to obtain the benefit; and54 (3) The terms or restrictions governing cancellation of the ve hicle value protection55 agreement, including:56 (A) That the consumer shall be authorized to cancel the vehicl e value protection57 agreement during the free look period;58 (B) The length of the free look period;59 (C) The consumer's right to a refund for cancellation under Co de Section 10-1-973;60 and61 (D) The methodology for calculating any refund owed the consumer upon cancellation.62 (c) The disclosure required by subparagraph (b)(3)(A) of this Code section shall63 conspicuously state upon the first page of the vehicle value pr otection agreement: 'IN64 ACCORDANCE WITH GEORGIA CODE SECTION 10-1-973, YOU MAY CANCEL65 H. B. 504 (SUB) - 3 - 26 LC 56 0567S THIS AGREEMENT AT ANY TIME BEFORE THE END OF THE FREE LOOK66 PERIOD DESCRIBED IN THIS AGREEMENT.'67 (d) No vehicle value protection agreement shall be sold unless the consumer has been or68 will be provided access to a copy of such vehicle value protection agreement.69 (e) A finance agreement or vehicle purchase agreement shall no t be conditioned on a70 consumer entering into a vehicle value protection agreement.71 10-1-972.72 No vehicle value protection agreement may be entered into with a consumer unless a73 provider:74 (1)(A) Ensures each of its vehicle value protection agreements issued under an75 insurance policy are issued by an insurer licensed to transact business in this state that:76 (i) Has on file with the Commissioner of Insurance evidence of possession and77 maintenance of unimpaired, paid-in capital and surplus of at le ast $15 million with78 annual filings of financial statements, its annual statements w ith the Securities79 Valuation Office of the National Association of Insurance Commi ssioners or an80 investment grade by a securities rating organization accepted b y the National81 Association of Insurance Commissioners, and the actuarial certification required by82 and filed in the insurer's state of domicile; or83 (ii) When an insurer has unimpaired, paid-in capital and surpl us of at least84 $10 million, demonstrates to the satisfaction of the Commissioner of Insurance that85 the insurer maintains net written premiums to paid-in capital a nd surplus of not86 greater than a 3 to 1 ratio and files its annual statements with the Securities Valuation87 Office of the National Association of Insurance Commissioners o r an investment88 grade by a securities rating organization accepted by the Natio nal Association of89 Insurance Commissioners, and the actuarial certification required by and filed in the90 provider's state of domicile;91 H. B. 504 (SUB) - 4 - 26 LC 56 0567S (B) Requires the insurer to reimburse the consumer if the provider fails to perform the92 provider's obligations under a vehicle value protection agreement;93 (C) Ensures such insurance covers any amount the provider is r equired to pay for94 failure to perform under a vehicle value protection agreement; and95 (D) Allows a consumer to file with the insurer a claim for rei mbursement under the96 vehicle value protection agreement if the provider does not pay the consumer within 6097 days after the day on which proof of damage, total loss, or unr ecovered theft of the98 covered vehicle is provided to the provider in accordance with the terms of the vehicle99 value protection agreement;100 (2)(A) Maintains a funded reserve account to cover the provider's obligations under all101 vehicle value protection agreements the provider enters into that is equal to or greater102 than 40 percent of money received by, less claims paid to, the provider for the vehicle103 value protection agreements; and104 (B) Places in a trust with the Commissioner of Insurance a security that is equal to at105 least 5 percent of money received by, less claims paid to, the provider for all vehicle106 value protection agreements the provider enters into and more than $25,000.00; or107 (3) Maintains, or has a parent company that maintains, a net w orth or stockholders'108 equity of at least $100 million and, upon any request by the Commissioner of Insurance,109 files a copy of its Form 10-K or Form 20-F disclosure statement s, or, if it does not file110 with the United States Securities and Exchange Commission, a co py of its audited111 financial statements reported on generally accepted accounting principles, demonstrating112 net worth or stockholders' equity of at least $100 million. If the provider's financial113 statements are consolidated with those of its parent company, t hen the provider may114 comply with the provisions of this paragraph by filing the stat ements of its parent115 company.116 H. B. 504 (SUB) - 5 - 26 LC 56 0567S 10-1-973.117 (a) A vehicle value protection agreement shall provide for a free look period of at least 30118 days.119 (b) If a consumer cancels a vehicle value protection agreement within the free look period,120 the consumer shall be entitled to a refund of the charges under the vehicle value protection121 agreement as follows:122 (1) When benefits have not been provided under the vehicle value protection agreement,123 a full refund; or124 (2) When benefits under the vehicle value protection agreement have been provided, a125 refund to the extent provided for in the vehicle value protection agreement.126 (c)(1) Except as otherwise provided for in paragraph (2) of this subsection, if a provider127 cancels a vehicle value protection agreement, the provider shall mail written notice to the128 consumer at least five days before the day on which the vehicle v a l u e p r o t e c t i o n129 agreement terminates.130 (2) A provider shall be authorized to immediately cancel a veh icle value protection131 agreement when such cancellation is due to the consumer's failure to pay the provider's132 fee under the vehicle value protection agreement or a breach by the consumer of the133 consumer's duties relating to the covered vehicle. Any provide r that cancels a vehicle134 value protection agreement pursuant to this paragraph shall sen d notice of such135 cancellation to the consumer, which shall include the effective date of the cancellation136 and the reason for the cancellation.137 (d) If a provider cancels a vehicle value protection agreement for a reason other than the138 consumer's failure to pay the provider's fee under the vehicle value protection agreement,139 the provider:140 (1) Shall refund the consumer any unearned provider fee under the vehicle value141 protection agreement;142 (2) Shall be authorized to charge the consumer an administrative fee of up to $75.00; and143 H. B. 504 (SUB) - 6 - 26 LC 56 0567S (3) Shall be authorized to deduct the amount of a benefit paid under the vehicle value144 protection agreement from the refund.145 10-1-974.146 (a) If the Attorney General has reason to believe that any pro vider or administrator has147 violated or is violating this article and such violation affects one or more residents of this148 state, the Attorney General shall be authorized to bring a civi l action in any appropriate149 court to:150 (1) Enjoin further such violation by the defendant;151 (2) Enforce compliance with this article;152 (3) Obtain damages, restitution, or other compensation on behalf of the residents of this153 state;154 (4) Impose a civil penalty of up to $2,500.00 for each violation of this article; and155 (5) Obtain other remedies permitted under state law.156 (b) Any violation of this article shall additionally be a violation of Part 2 of Article 15 of157 this chapter, the 'Fair Business Practices Act of 1975'; provided, however, that only public158 remedies as administered by the Attorney General shall be avail able under such part for159 violations of this article.160 (c) Nothing in this article shall be construed to prohibit any district attorney, law161 enforcement officer, official, or agency of this state from ini tiating or continuing any162 proceeding in a court against a provider or administrator for a violation of any other civil163 law or a criminal law of this state."164 SECTION 2.165 All laws and parts of laws in conflict with this Act are repealed.166 H. B. 504 (SUB) - 7 -