HB 504: Commerce and trade; procedures, conditions, and limitations relative to vehicle value protection agreements; provide

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 selling and other trade practices, so as to provide for procedures, conditions, and limitations relative to vehicle value protection agreements; to require providers of such agreements maintain certain security or liability insurance policies; to require certain disclosures; to provide for cancellation rights; to provide for refunds; to provide for enforcement; to provide for definitions; to provide for related matters; to repeal conflicting laws; and for other purposes.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:

SECTION 1.

Chapter 1 of Title 10 of the Official Code of Georgia Annotated, relating to selling and other trade practices, is amended by adding a new article to read as follows: "ARTICLE 38

10-1-970.

As used in this article, the term:

(1) 'Administrator' means the person delegated by a provider as responsible for the administrative or operational functions of a vehicle value protection agreement, including but not limited to, adjudication of claims or benefit requests by the consumer.

(2) 'Consumer' means a person who purchases or holds legal rights under a vehicle value protection agreement.

(3) 'Covered vehicle' means a motor vehicle that is covered under a vehicle value protection agreement.

(4) 'Finance agreement' means a loan, lease, or retail installment sales contract for the purchase or lease of a motor vehicle that is secured by the motor vehicle and with a term of at least 12 months.

(5) 'Free look period' means a time period that begins the day on which the vehicle value protection agreement becomes effective and ends the last day on which the consumer may cancel the vehicle value protection agreement with a full refund of the vehicle value protection agreement purchase price.

(6) 'Motor vehicle' shall have the same meaning as set forth in Code Section 40-1-1.

(7) 'Provider' means a person that is obligated to provide a benefit under a vehicle value protection agreement.

(8) 'Vehicle value protection agreement' means a contractual agreement for a separate charge between a provider and consumer under which the provider agrees, upon occurrence of an adverse event to the consumer's covered vehicle, to provide a benefit to the consumer that may be applied to the cash value of the covered vehicle when traded in for a replacement vehicle, the finance agreement for a replacement vehicle, or the purchase or lease price of a replacement vehicle. Such term shall include vehicle trade-in agreements, vehicle diminished value agreements, vehicle cash down payment protection agreements, and vehicle depreciation benefit agreements.

10-1-971.

(a) A provider shall be authorized to utilize an administrator for fulfillment of the terms of a vehicle value protection agreement.

(b) A vehicle value protection agreement shall conspicuously disclose:

(1) The name, address, and contact information of:

(A) The provider;

(B) An administrator, if any; and

(C) The consumer;

(2) The terms of the vehicle value protection agreement, including:

(A) The charges under the vehicle value protection agreement;

(B) The benefit eligibility requirements;

(C) The conditions imposed by the vehicle value protection agreement, including, but not limited to, any requirement that the consumer return to the dealer where the vehicle was purchased to obtain a benefit, if applicable, such term shall only be enforceable if it was agreed separately on a signed form laying out only such condition; and

(D) The procedure a consumer is required to follow to obtain the benefit; and

(3) The terms or restrictions governing cancellation of the vehicle value protection agreement, including:

(A) That the consumer shall be authorized to cancel the vehicle value protection agreement during the free look period;

(B) The length of the free look period;

(C) The consumer's right to a refund for cancellation under Code Section 10-1-973; and

(D) The methodology for calculating any refund owed the consumer upon cancellation.

(c) The disclosure required by subparagraph (b)(3)(A) of this Code section shall conspicuously state upon the first page of the vehicle value protection agreement: 'IN ACCORDANCE WITH GEORGIA CODE SECTION 10-1-973, YOU MAY CANCEL

THIS AGREEMENT AT ANY TIME BEFORE THE END OF THE FREE LOOK

PERIOD DESCRIBED IN THIS AGREEMENT.'

(d) No vehicle value protection agreement shall be sold unless the consumer has been or will be provided access to a copy of such vehicle value protection agreement.

(e) A finance agreement or vehicle purchase agreement shall not be conditioned on a consumer entering into a vehicle value protection agreement.

10-1-972.

No vehicle value protection agreement may be entered into with a consumer unless a provider:

(1)(A) Ensures each of its vehicle value protection agreements issued under an insurance policy are issued by an insurer licensed to transact business in this state that:

(i) Has on file with the Commissioner of Insurance evidence of possession and maintenance of unimpaired, paid-in capital and surplus of at least $15 million with annual filings of financial statements, its annual statements with the Securities Valuation Office of the National Association of Insurance Commissioners or an investment grade by a securities rating organization accepted by the National Association of Insurance Commissioners, and the actuarial certification required by and filed in the insurer's state of domicile; or

(ii) When an insurer has unimpaired, paid-in capital and surplus of at least $10 million, demonstrates to the satisfaction of the Commissioner of Insurance that the insurer maintains net written premiums to paid-in capital and surplus of not greater than a 3 to 1 ratio and files its annual statements with the Securities Valuation Office of the National Association of Insurance Commissioners or an investment grade by a securities rating organization accepted by the National Association of Insurance Commissioners, and the actuarial certification required by and filed in the provider's state of domicile;

(B) Requires the insurer to reimburse the consumer if the provider fails to perform the provider's obligations under a vehicle value protection agreement;

(C) Ensures such insurance covers any amount the provider is required to pay for failure to perform under a vehicle value protection agreement; and

(D) Allows a consumer to file with the insurer a claim for reimbursement under the vehicle value protection agreement if the provider does not pay the consumer within 60 days after the day on which proof of damage, total loss, or unrecovered theft of the covered vehicle is provided to the provider in accordance with the terms of the vehicle value protection agreement;

(2)(A) Maintains a funded reserve account to cover the provider's obligations under all vehicle value protection agreements the provider enters into that is equal to or greater than 40 percent of money received by, less claims paid to, the provider for the vehicle value protection agreements; and

(B) Places in a trust with the Commissioner of Insurance a security that is equal to at least 5 percent of money received by, less claims paid to, the provider for all vehicle value protection agreements the provider enters into and more than $25,000.00; or

(3) Maintains, or has a parent company that maintains, a net worth or stockholders' equity of at least $100 million and, upon any request by the Commissioner of Insurance, files a copy of its Form 10-K or Form 20-F disclosure statements, or, if it does not file with the United States Securities and Exchange Commission, a copy of its audited financial statements reported on generally accepted accounting principles, demonstrating net worth or stockholders' equity of at least $100 million. If the provider's financial statements are consolidated with those of its parent company, then the provider may comply with the provisions of this paragraph by filing the statements of its parent company.

10-1-973.

(a) A vehicle value protection agreement shall provide for a free look period of at least 30 days.

(b) If a consumer cancels a vehicle value protection agreement within the free look period, the consumer shall be entitled to a refund of the charges under the vehicle value protection agreement as follows:

(1) When benefits have not been provided under the vehicle value protection agreement, a full refund; or

(2) When benefits under the vehicle value protection agreement have been provided, a refund to the extent provided for in the vehicle value protection agreement. (c)(1) Except as otherwise provided for in paragraph (2) of this subsection, if a provider cancels a vehicle value protection agreement, the provider shall mail written notice to the consumer at least five days before the day on which the vehicle value protection agreement terminates.

(2) A provider shall be authorized to immediately cancel a vehicle value protection agreement when such cancellation is due to the consumer's failure to pay the provider's fee under the vehicle value protection agreement or a breach by the consumer of the consumer's duties relating to the covered vehicle. Any provider that cancels a vehicle value protection agreement pursuant to this paragraph shall send notice of such cancellation to the consumer, which shall include the effective date of the cancellation and the reason for the cancellation.

(d) If a provider cancels a vehicle value protection agreement for a reason other than the consumer's failure to pay the provider's fee under the vehicle value protection agreement, the provider:

(1) Shall refund the consumer any unearned provider fee under the vehicle value protection agreement;

(2) Shall be authorized to charge the consumer an administrative fee of up to $75.00; and

(3) Shall be authorized to deduct the amount of a benefit paid under the vehicle value protection agreement from the refund.

10-1-974.

(a) If the Attorney General has reason to believe that any provider or administrator has violated or is violating this article and such violation affects one or more residents of this state, the Attorney General shall be authorized to bring a civil action in any appropriate court to:

(1) Enjoin further such violation by the defendant;

(2) Enforce compliance with this article;

(3) Obtain damages, restitution, or other compensation on behalf of the residents of this state;

(4) Impose a civil penalty of up to $2,500.00 for each violation of this article; and

(5) Obtain other remedies permitted under state law.

(b) Any violation of this article shall additionally be a violation of Part 2 of Article 15 of this chapter, the 'Fair Business Practices Act of 1975'; provided, however, that only public remedies as administered by the Attorney General shall be available under such part for violations of this article.

(c) Nothing in this article shall be construed to prohibit any district attorney, law enforcement officer, official, or agency of this state from initiating or continuing any proceeding in a court against a provider or administrator for a violation of any other civil law or a criminal law of this state."

SECTION 2.

All laws and parts of laws in conflict with this Act are repealed.