The act establishes requirements regarding guaranteed asset protection agreements (GAP agreement). A GAP agreement relieves a consumer of liability for all or part of the deficiency balance remaining after the payment of all insurance proceeds upon the total loss of the consumer's motor vehicle.
The act permits a creditor to collect additional charges for a GAP agreement as part of a consumer credit transaction.
The act sets forth requirements related to GAP agreements, including:
- Setting conditions and provisions that must be a part of any GAP agreement in order for it to be valid;
- Establishing the method by which the deficiency balance is calculated and what the consumer will be owed pursuant to the GAP agreement in the event of a total loss;
- Detailing procedures for when a consumer files a claim under the consumer's GAP agreement after a total loss;
- Establishing procedures and methods for the cancellation or assignment of a GAP agreement;
- Establishing the maximum fee that may be charged for a GAP agreement, which must not exceed 4% of the total amount financed in the consumer credit transaction or $600, whichever amount is greater; and
- Prohibiting the sale of a GAP agreement in specified circumstances, such as when the loan to value ratio in the GAP agreement exceeds 150%.
APPROVED by Governor June 7, 2023
EFFECTIVE January 1, 2024
NOTE: This act was passed without a safety clause.
(Note: This summary applies to this bill as enacted.)