A vehicle value protection agreement (agreement) is a contract that provides benefits when an owner of a vehicle replaces the vehicle at trade-in, when the vehicle is stolen, or after an adverse event that lowers the value of the vehicle. An agreement that complies with the act is not insurance and is not subject to regulation as insurance.
A person who provides an agreement (provider) is prohibited from conditioning the extension of credit, the terms of credit, or the terms of a vehicle sale or lease upon the purchase of an agreement. To be issued, an agreement must:
- Provide a benefit to the consumer upon the trade-in, total loss, or unrecovered theft of a covered vehicle;
- Identify the administrator or provider, the seller, the consumer, and the terms of the sale;
- Guarantee the provider's obligations by an insurance policy; and
- Notify the consumer of the agreement's terms, including cancellation terms.
To cancel an agreement, the provider must mail a notice to the consumer at least 5 days prior to cancellation. However, if the reason for the cancellation is nonpayment, a material misrepresentation, or a substantial breach of duties by the consumer, the cancellation takes effect immediately upon transmission of the notice of cancellation. If an agreement is canceled by the provider for a reason other than nonpayment of the provider fee, the provider is required to make a refund minus actual paid benefits, but the provider may charge a reasonable administrative fee of up to $75.
The provider is required to guarantee the provider's obligations by an insurance policy, which must provide that:
- The insurer will pay all covered amounts if the provider fails to perform its obligations under the agreement; and
- The consumer may file a claim directly with the insurer for reimbursement.
APPROVED by Governor March 23, 2023
EFFECTIVE August 7, 2023
NOTE: This act was passed without a safety clause and takes effect 90 days after sine die.
(Note: This summary applies to this bill as enacted.)