HB-4989, As Passed House, October 7, 2009

 

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 4989

 

 

 

 

 

 

 

 

 

 

 

 

 

     A bill to regulate guaranteed asset protection waivers offered

 

or provided in connection with finance agreements for certain motor

 

vehicles; to provide for the powers and duties of certain state

 

governmental officers and entities; and to provide remedies.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 1. This act shall be known and may be cited as the

 

"guaranteed asset protection waiver act".

 

     Sec. 3. As used in this act:

 

     (a) "Administrator" means a person, other than a creditor or

 

insurer, that performs administrative or operational functions in

 

connection with a guaranteed asset protection waiver program.

 

     (b) "Borrower" means a person that purchases, agrees to

 

purchase, leases, or agrees to lease a motor vehicle. The term


House Bill No. 4989 (H-2) as amended October 7, 2009

includes, but is not limited to, an installment buyer or a retail

 

buyer.

 

     (c) "Commissioner" means the commissioner of the office of

 

financial and insurance regulation in the department of energy,

 

labor, and economic growth.

 

     (d) "Creditor" means a person that extends credit to a

 

borrower in connection with the purchase of a motor vehicle; an

 

assignee of that person; a lessor of a motor vehicle; or an

 

assignee of that lessor. The term includes, but is not limited to,

 

any of the following:

 

     (i) An installment seller that extends credit to an installment

 

buyer and any assignee to which that credit obligation is payable.

 

     (ii) An installment seller that leases a motor vehicle to an

 

installment buyer and any assignee to which the lease payments are

 

payable.

 

     (iii) A sales finance company that extends credit to an

 

installment buyer and any assignee to which that credit obligation

 

is payable.

 

     (iv) A retail seller that extends credit to a retail buyer and

 

any assignee to which that credit obligation is payable.

 

     (v) A retail seller that leases a motor vehicle to a retail

 

buyer and any assignee to which the lease payments are payable.

 

     (e) "Finance agreement" means a loan, lease, or installment

 

sale agreement for a motor vehicle. The term includes, but is not

 

limited to, an installment sale contract, a retail installment

 

contract, or a retail charge agreement.

 

     [(f) "Free look period" means the period of time during which a


House Bill No. 4989 (H-2) as amended October 7, 2009

borrower may cancel a guaranteed asset protection waiver without penalty,

 

fees, or costs to the borrower. A free look period must begin on the

 

effective date of the guaranteed asset protection waiver, and the term of

a free look period must be at least 30 days.]

     (g) "Guaranteed asset protection waiver" means a contractual

 

agreement in which a creditor agrees for a separate charge to

 

cancel or waive all or part of amounts due on a borrower's finance

 

agreement in the event of a total physical damage loss or

 

unrecovered theft of a motor vehicle.

 

     (h) "Installment buyer" means that term as defined in section

 

2 of the motor vehicle sales finance act, MCL 492.102.

 

     (i) "Installment sale contract" means that term as defined in

 

section 2 of the motor vehicle sales finance act, MCL 492.102.

 

     (j) "Installment seller" means that term as defined in section

 

2 of the motor vehicle sales finance act, MCL 492.102.

 

     (k) "Insurer" means an authorized insurer as defined in

 

section 108 of the insurance code of 1956, 1956 PA 218, MCL

 

500.108.

 

     (l) "Motor vehicle" means a self-propelled or towed device that

 

transports people or property for personal or commercial use. The

 

term includes, but is not limited to, an automobile, truck,

 

motorcycle, recreational vehicle, all-terrain vehicle, camper,

 

boat, or personal watercraft or a motorcycle, boat, camper, or

 

personal watercraft trailer. The term does not include a device

 

that moves on or is guided by a track or travels through the air.

 

     (m) "Motor vehicle sales finance act" means the motor vehicle

 

sales finance act, 1950 (Ex Sess) PA 27, MCL 492.101 to 492.141.

 

     (n) "Person" means an individual, limited liability company,


 

partnership, association, corporation, governmental entity, or any

 

other legal entity.

 

     (o) "Retail buyer" means that term as defined in section 2 of

 

the retail installment sales act, MCL 445.852.

 

     (p) "Retail charge agreement" means that term as defined in

 

section 2 of the retail installment sales act, MCL 445.852.

 

     (q) "Retail installment contract" means that term as defined

 

in section 2 of the retail installment sales act, MCL 445.852.

 

     (r) "Retail installment sales act" means the retail

 

installment sales act, 1966 PA 224, MCL 445.851 to 445.873.

 

     (s) "Retail seller" means that term as defined in section 2 of

 

the retail installment sales act, MCL 445.852.

 

     (t) "Sales finance company" means that term as defined in

 

section 2 of the motor vehicle sales finance act, MCL 492.102.

 

     Sec. 5. (1) All of the following apply to offering, selling,

 

or providing a guaranteed asset protection waiver to a borrower in

 

this state:

 

     (a) Beginning 180 days after the effective date of this act, a

 

creditor that offers, sells, or provides a guaranteed asset

 

protection waiver in this state must comply with this act.

 

     (b) A guaranteed asset protection waiver must be part of, or a

 

separate addendum to, the finance agreement for the motor vehicle.

 

     (c) At the option of the creditor, a creditor may sell a

 

guaranteed asset protection waiver for a single payment or may

 

offer a monthly or periodic payment option for a guaranteed asset

 

protection waiver.

 

     (d) Any cost to a borrower for a guaranteed asset protection


 

waiver entered into in compliance with the truth in lending act, 15

 

USC 1601 to 1667f, and the regulations promulgated under that act,

 

12 CFR part 226, must be separately stated and is not considered a

 

finance charge or interest.

 

     (e) Except as provided in subdivision (f), an installment

 

seller or retail seller must insure its guaranteed asset protection

 

waiver obligations under a contractual liability or other insurance

 

policy issued by an insurer. A creditor that is not an installment

 

seller or retail seller may insure its guaranteed asset protection

 

waiver obligations under a contractual liability policy or other

 

insurance policy issued by an insurer. Any creditor may obtain an

 

insurance policy described in this subdivision directly, or an

 

administrator may obtain that policy on behalf of that creditor.

 

     (f) An installment seller or retail seller that is a lessor of

 

a motor vehicle is not required to insure its guaranteed asset

 

protection waiver obligation on the leased vehicle under

 

subdivision (e).

 

     (g) A guaranteed asset protection waiver contained in a

 

finance agreement remains a part of that contract if the creditor

 

assigns, sells, or transfers that contract.

 

     (h) A creditor shall not condition an extension of credit, the

 

term of credit, or the term of a related motor vehicle sale or

 

lease on the purchase of a guaranteed asset protection waiver.

 

     (i) Any creditor that offers guaranteed asset protection

 

waivers must report all sales of those waivers, and forward any

 

payments received on those sales, to the designated party, if any,

 

prescribed in any applicable administrative services agreement,


 

contractual liability policy, other insurance policy, or other

 

specified program documents.

 

     (j) A creditor or administrator that receives or holds money

 

that belongs to an insurer under the terms of a written agreement

 

for insurance described in subdivision (e) must hold that money in

 

a fiduciary capacity.

 

     (2) All of the following apply to a contractual liability or

 

other insurance policy described in subsection (1)(e):

 

     (a) A contractual liability or other insurance policy insuring

 

a guaranteed asset protection waiver must state the obligation of

 

the insurer to reimburse or pay to the creditor any amount the

 

creditor is legally obligated to waive under the guaranteed asset

 

protection waiver issued by the creditor and purchased or held by

 

the borrower.

 

     (b) Coverage under a contractual liability or other insurance

 

policy insuring a guaranteed asset protection waiver must also

 

cover any subsequent assignee if the finance agreement is assigned,

 

sold, or transferred.

 

     (c) Coverage under a contractual liability or other insurance

 

policy insuring a guaranteed asset protection waiver must remain in

 

effect unless canceled or terminated in compliance with the

 

insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.

 

     (d) The cancellation or termination of a contractual liability

 

or other insurance policy must not reduce the insurer's

 

responsibility for guaranteed asset protection waivers issued by

 

the creditor before the date of cancellation or termination and for

 

which the insurer has received premiums.


 

     Sec. 7. A guaranteed asset protection waiver must disclose, in

 

writing and in clear, understandable language that is easy to read,

 

all of the following, if applicable:

 

     (a) The name and address of the initial creditor and the

 

borrower at the time of sale, and the identity of any administrator

 

if different from the creditor.

 

     (b) The purchase price and the terms of the guaranteed asset

 

protection waiver, including, but not limited to, the requirements

 

for protection, conditions, or exclusions associated with the

 

guaranteed asset protection waiver.

 

     (c) That the borrower may cancel the guaranteed asset

 

protection waiver during the free look period specified in the

 

waiver; and is entitled to a full refund of the purchase price if

 

the borrower has not received benefits under the waiver, or to any

 

full or partial refund included in the waiver if the borrower has

 

received benefits under the waiver.

 

     (d) The procedure the borrower must follow, if any, to obtain

 

guaranteed asset protection waiver benefits under the terms and

 

conditions of the waiver, and a telephone number and address where

 

the borrower may apply for waiver benefits.

 

     (e) Whether or not the borrower may cancel the guaranteed

 

asset protection waiver after the free look period; if so, the

 

conditions under which the borrower may cancel or terminate that

 

waiver; and the procedure the borrower must follow to request any

 

refund due.

 

     (f) That in order to receive any refund due for the

 

cancellation of the guaranteed asset protection waiver, or the


 

early termination of the finance agreement after the free look

 

period, the borrower must provide a written request for a refund to

 

the creditor, administrator, or other party named in the waiver

 

within 90 days after the cancellation of the guaranteed asset

 

protection waiver or the occurrence of the event terminating the

 

finance agreement.

 

     (g) The methodology for calculating any refund of the unearned

 

purchase price of a guaranteed asset protection waiver due to a

 

borrower for the cancellation of a guaranteed asset protection

 

waiver or early termination of the finance agreement.

 

     (h) That a creditor may not condition an extension of credit,

 

the terms of that credit, or the terms of the related finance

 

agreement on the purchase of a guaranteed asset protection waiver.

 

     Sec. 9. All of the following apply concerning the cancellation

 

of guaranteed asset protection waivers:

 

     (a) A creditor may offer a guaranteed asset protection waiver

 

agreement that is cancelable or not cancelable after the free look

 

period. A guaranteed asset protection waiver must provide that if a

 

borrower cancels the waiver during the free look period, the

 

borrower is entitled to a full refund of the purchase price if the

 

borrower has not received benefits under the waiver, or to any full

 

or partial refund included in the waiver if the borrower has

 

received benefits under the waiver.

 

     (b) If a borrower cancels the guaranteed asset protection

 

waiver, or the finance agreement is terminated, after the free look

 

period, the borrower may be entitled to a refund of any unearned

 

portion of the purchase price of the waiver unless the waiver


 

provides otherwise. In order to receive a refund, the borrower,

 

must provide a written request to the creditor, administrator, or

 

other party, within 90 days after the cancellation of the waiver or

 

the occurrence of the event terminating the finance agreement, that

 

meets any applicable notice provisions of the waiver.

 

     (c) If the cancellation of a guaranteed asset protection

 

waiver occurs as a result of a default under a finance agreement,

 

the repossession of the motor vehicle associated with the finance

 

agreement, or any other termination of the finance agreement, any

 

refund due may be paid directly to the creditor or administrator

 

and applied as set forth in subdivision (d).

 

     (d) A creditor may apply any cancellation refund received

 

under subdivision (a), (b), or (c) as a reduction of the amount

 

owed under the finance agreement, unless the borrower can show that

 

the finance agreement has been paid in full.

 

     Sec. 11. The commissioner may take any action he or she

 

determines is necessary or appropriate to enforce this act and to

 

protect guaranteed asset protection waiver holders in this state,

 

including, but not limited to, doing any of the following after

 

proper notice and an opportunity for hearing under the

 

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

 

24.328:

 

     (a) Order a creditor, administrator, or any other person that

 

does not comply with this act to cease and desist from further

 

guaranteed asset protection waiver-related operations that violate

 

this act.

 

     (b) Assess an administrative fine of not more than $500.00


 

against a person for a violation of this act. However, the

 

commissioner may not assess administrative fines under this act

 

against any person that in the aggregate are more than $20,000.00

 

for multiple violations of a similar nature. For purposes of this

 

subdivision, "similar nature" means that the violations consist of

 

the same or a similar course of conduct, action, or practice,

 

regardless of the number of times that action, conduct, or practice

 

occurs.

 

     Sec. 13. (1) This act does not apply to any of the following:

 

     (a) An insurance policy offered by an insurer under the

 

insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.

 

     (b) An offer of a debt cancellation or debt suspension

 

contract that complies with 12 CFR part 37, 12 CFR part 721, or

 

other federal law.

 

     (2) Section 5(1)(d) does not apply to a guaranteed asset

 

protection waiver offered in connection with a lease or retail

 

installment sale associated with a commercial transaction.

 

     Enacting section 1. This act takes effect 180 days after the

 

date this act is enacted into law.

 

     Enacting section 2. This act does not take effect unless all

 

of the following bills of the 95th Legislature are enacted into

 

law:

 

     (a) House Bill No. 4990.

 

     (b) House Bill No. 4991.

 

     (c) House Bill No. 4992.