Guaranteed Asset Protection Agreements

The bill codifies and updates rules 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.

Section 2 of the bill permits a creditor to collect additional charges or fees for a GAP agreement as part of a consumer credit transaction.Section 3 :

• Sets conditions and provisions that must be a part of any GAP agreement in order for it to be valid and for a creditor to receive an additional charge or fee in relation to the GAP agreement;
• Establishes 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;
• Details when a consumer must submit the consumer's GAP agreement claim after a total loss;
• Establishes the maximum fee that may be charged for a GAP agreement, which must not exceed 5% of the amount financed in the consumer credit transaction; and
• Prohibits the sale of a GAP agreement in specified circumstances.
  (Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)