HB-4989, As Passed Senate, December 17, 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.

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.

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.

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.

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.

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 policyoffered 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.