Bill Text: MI SB0343 | 2023-2024 | 102nd Legislature | Introduced
Bill Title: Consumer protection: other; guaranteed asset protection waiver act; modify and update to the motor vehicle financial protection products act. Amends title & secs. 1, 3, 5, 7, 9 & 11 of 2009 PA 229 (MCL 492.21 et seq.); adds secs. 3a, 4 & 9a & pts. 5 & 9; designates sec. 1 as pt. 1, sec. 3 as pt. 2, sec. 3a as pt. 3, secs. 4, 5, 7, 9 & 9a as pt. 4 & sec. 11 as pt. 6 & repeals sec. 13 of 2009 PA 229 (MCL 492.33). TIE BAR WITH: SB 0344'23, SB 0345'23, SB 0346'23, SB 0347'23
Spectrum: Slight Partisan Bill (Democrat 4-2)
Status: (Introduced) 2023-05-23 - Referred To Committee On Regulatory Affairs [SB0343 Detail]
Download: Michigan-2023-SB0343-Introduced.html
SENATE BILL NO. 343
A bill to amend 2009 PA 229, entitled
"Guaranteed asset protection waiver act,"
by amending the title and sections 1, 3, 5, 7, 9, and 11 (MCL 492.21, 492.23, 492.25, 492.27, 492.29, and 492.31), by adding sections 3a, 4, and 9a and parts 5 and 9, and by designating section 1 as part 1, section 3 as part 2, section 3a as part 3, sections 4, 5, 7, 9, and 9a as part 4, and section 11 as part 6; and to repeal acts and parts of acts.
the people of the state of michigan enact:
An act to allow and to regulate guaranteed asset the offering of motor vehicle financial protection waivers offered or provided in connection with finance agreements for certain motor vehicles; products; to provide for the powers and duties of certain state governmental officers and entities; and to provide remedies.
PART 1
SHORT TITLE
Sec. 1. This act shall be known and may be cited as the "guaranteed asset "motor vehicle financial protection waiver products act".
PART 2
DEFINITIONS APPLICABLE TO MOTOR VEHICLE FINANCIAL PROTECTION PRODUCTS
(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.
(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.
(a) "Commercial retail installment transaction" or "commercial transaction" means that the motor vehicle that is the subject of the transaction will primarily be used for business purposes, rather than personal purposes.
(b) "Consumer" means an individual purchaser of a motor vehicle. Consumer includes any of the following, as applicable:
(i) A borrower, as that term is defined in section 4.
(ii) A contract owner, as that term is defined in section 10.
(c) "Department" means the department of attorney general.
(d) (e) "Finance agreement" means a loan, lease, or installment sale agreement for a motor vehicle. The term Finance agreement includes, but is not limited to, an installment sale contract, a retail installment contract, or a retail charge agreement.
(e) (f) "Free look period" means the period of time during which a borrower may cancel a guaranteed asset motor vehicle financial protection waiver product without penalty, fees, or costs to the borrower. A free look period must begin begins on the effective date of the guaranteed asset motor vehicle financial protection waiver, and the term of a free look period product and 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.
(f) (i) "Installment sale contract" means that term as defined in section 2 of the motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL 492.102.
(j) "Installment seller" means that term as defined in section 2 of the motor vehicle sales finance act, MCL 492.102.
(g) (k) "Insurer" means an authorized insurer as defined in section 108 of the insurance code of 1956, 1956 PA 218, MCL 500.108.
(h) (l) "Motor vehicle" means a self-propelled or towed device that transports people or property vehicle that is designed for personal or commercial use. The term Motor vehicle includes, but is not limited to, an automobile, truck, motorcycle, recreational vehicle, all-terrain vehicle, snowmobile, camper, boat, or personal watercraft, or a motorcycle, boat, camper, or personal watercraft and any trailer related to those motor vehicles. 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.
(i) "Motor vehicle financial protection product" means an agreement that protects a consumer's financial interest in the consumer's current or future motor vehicle. Motor vehicle financial protection product includes, but is not limited to, any of the following:
(i) A debt waiver, as that term is defined in section 4.
(ii) A vehicle value protection agreement, as that term is defined in section 10.
(j) (n) "Person" means an individual, limited liability company, partnership, association, corporation, governmental entity, or any other legal entity.
(k) (o) "Retail buyer" means that term as defined in section 2 of the retail installment sales act, 1966 PA 224, MCL 445.852.
(l) (p) "Retail charge agreement" means that term as defined in section 2 of the retail installment sales act, 1966 PA 224, MCL 445.852.
(m) (q) "Retail installment contract" means that term as defined in section 2 of the retail installment sales act, 1966 PA 224, MCL 445.852.
(r) "Retail installment sales act" means the retail installment sales act, 1966 PA 224, MCL 445.851 to 445.873.
(n) (s) "Retail seller" means that term as defined in section 2 of the retail installment sales act, 1966 PA 224, 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.
PART 3
REQUIREMENTS FOR OFFERING MOTOR VEHICLE FINANCIAL PROTECTION PRODUCTS
Sec. 3a. (1) A motor vehicle financial protection product may be offered, sold, or given to a consumer in this state in accordance with this act.
(2) Notwithstanding any other provision of law, any amount charged or financed for a motor vehicle financial protection product is an authorized charge that must be separately stated and is not a finance charge or interest.
(3) The extension of credit, the terms of credit, and the terms of the related motor vehicle sale or lease must not be conditioned on the consumer's payment for or financing of any charge for a motor vehicle financial protection product. However, a motor vehicle financial protection product may be discounted or given at no charge in connection with the purchase of other noncredit-related goods or services.
PART 4
DEBT WAIVERS
(a) "Administrator" means a person, other than a creditor or insurer, that performs administrative or operational functions in connection with a debt waiver program.
(b) "Borrower" means a debtor, retail buyer, or lessee, under a finance agreement.
(c) "Creditor" means a person that is any of the following:
(i) The lender in a loan or credit transaction.
(ii) The lessor in a lease transaction.
(iii) A retail seller of motor vehicles.
(iv) The seller in a commercial retail installment transaction.
(v) An assignee of a person described in subparagraphs (i) to (iv) to whom the credit obligation is payable.
(d) "Debt waiver", except as otherwise provided in section 9a, includes, but is not limited to, a guaranteed asset protection waiver, an excess wear and use waiver, and other products as approved by the department. As used in this subdivision:
(i) "Guaranteed asset protection waiver" means a contractual agreement in which a creditor agrees, with or without a separate charge, to cancel or waive all or part of amounts due on a borrower's finance agreement if there is a total physical damage loss or unrecovered theft of a motor vehicle. A guaranteed asset protection waiver may provide, with or without a separate charge, a benefit that waives an amount or that provides a borrower with a credit toward the purchase of a replacement motor vehicle.
(ii) "Excess wear and use waiver" means a contractual agreement in which a creditor agrees, with or without a separate charge, to cancel or waive all or part of amounts that may become due under a borrower's lease agreement as a result of excessive wear and use of a motor vehicle. An excess wear and use waiver may cancel or waive amounts due for excess mileage.
Sec. 5. (1) All of the following apply to offering , selling, or providing a guaranteed asset protection debt 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
(a) A debt 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.
(b) (e) Except as provided in subdivision (f), an installment seller or (c), a retail seller must insure its guaranteed asset protection debt waiver obligations under a contractual liability or other insurance policy issued by an insurer. A creditor that is not an installment seller or a retail seller may insure its guaranteed asset protection debt 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 to cover the creditor's or a retail seller's obligations.
(c) (f) An installment seller or A retail seller that is a lessor of a motor vehicle is not required to insure its guaranteed asset protection debt waiver obligation on the leased vehicle under subdivision (e).(b).
(g) A guaranteed asset protection
(d) A debt waiver contained in a finance agreement remains a part of that contract the finance agreement if the creditor assigns, sells, or transfers that contract.the finance agreement.
(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.
(e) (i) Any A creditor that offers guaranteed asset protection waivers a debt waiver must report all sales to a designated person a sale of those waivers, the waiver, 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.person any money due to the designated person.
(f) (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):(1)(b):
(a) A contractual liability or other insurance policy insuring a guaranteed asset protection debt 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 debt 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 debt 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 debt 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 debt 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 Except as otherwise provided in section 9a, a debt 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, if any, and the terms of the guaranteed asset protection debt waiver, including, but not limited to, the requirements for protection, conditions, or exclusions associated with the guaranteed asset protection debt waiver.
(c) That the borrower may cancel the guaranteed asset protection debt waiver during the free look period specified in the debt waiver, ; and is entitled to a full refund of the purchase price paid by the borrower, if any, 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 debt waiver benefits under the terms and conditions of the debt waiver, and including, if applicable, a telephone number or website and address where the borrower may apply for debt waiver benefits.
(e) Whether or not the borrower may cancel the guaranteed asset protection debt waiver after the free look period ; and, if so, the conditions under which the borrower may cancel or terminate that the waiver, ; and including the procedure the borrower must follow to request any refund due.of amounts paid.
(f) That in order to receive any refund due for the cancellation of the guaranteed asset protection debt waiver, or the early termination of the finance agreement after the free look period, the borrower, in accordance with the terms of the debt waiver, must provide a written request for a refund to cancel 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.If the cancellation of the debt waiver is because of the early termination of the finance agreement and no benefit has been or will be provided, the borrower, in accordance with the terms of the debt waiver, must provide a written request to cancel to the creditor, administrator, or other party named in the waiver not later than 90 days after 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 the debt waiver, if any, that will be due to a borrower for the cancellation of a guaranteed asset protection if the debt waiver is canceled or early termination of the finance agreement is terminated early.
(h) That a creditor may not condition an extension of credit, the terms of that credit, or the terms of the related finance agreement motor vehicle sale or lease on the purchase of a guaranteed asset protection debt waiver.
Sec. 9. All of the following apply concerning to the cancellation of guaranteed asset protection debt waivers:
(a) A creditor may offer a guaranteed asset protection debt waiver agreement that is cancelable or not cancelable after the free look period. A guaranteed asset protection debt waiver must provide that if a borrower cancels the debt waiver during the free look period, the borrower is entitled to a full refund of the purchase price amount the borrower paid, if any, 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 debt waiver, or if the finance agreement is terminated early, 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 if any, less a cancellation fee of up to $75.00, if no benefit has been or will be provided. To receive a refund due because of the borrower's cancellation of the debt waiver, the borrower , must provide a written request to cancel, in accordance with the terms of the debt waiver, to the creditor , or administrator. , or other party, If the cancellation is because of the early termination of the finance agreement, the borrower, in accordance with the debt waiver agreement, must provide a written request to cancel to the creditor or administrator 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 debt waiver occurs as a result of a default under a the 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. 9a. (1) This act does not apply to a debt waiver offered by a state or federal bank, savings bank, or credit union in accordance with the applicable state or federal law.
(2) Section 7 and part 6 do not apply to a debt waiver offered in connection with a commercial transaction.
PART 5
VEHICLE VALUE PROTECTION AGREEMENTS
Sec. 10. As used in this part:
(a) "Administrator" means the person that may be responsible for the administrative or operational function of vehicle value protection agreements, including, but not limited to, the adjudication of claims or benefit requests by contract owners.
(b) "Contract owner" means either of the following:
(i) The purchaser of a vehicle value protection agreement.
(ii) A person that has access to benefits under the terms and conditions of a vehicle value protection agreement.
(c) "Provider" means a person that is obligated to provide a benefit under a vehicle value protection agreement. A provider may perform as an administrator or retain the services of a third-party administrator.
(d) "Vehicle value protection agreement" includes a contractual agreement that provides a benefit toward either the reduction of some or all of the contract owner's current finance agreement deficiency balance, or toward the purchase or lease of a replacement motor vehicle or motor vehicle services, on the occurrence of an adverse event to the motor vehicle, including, but not limited to, loss, theft, damage, obsolescence, diminished value, or depreciation. Vehicle value protection agreement may include an agreement such as a trade-in-credit agreement, diminished value agreement, depreciation benefit agreement, or other similarly named agreement. Vehicle value protection agreement does not include a debt waiver.
Sec. 10a. All of the following are requirements for offering vehicle value protection agreements:
(a) A provider may, but is not required to, use an administrator or other designee to be responsible for all of the administration of vehicle value protection agreements in accordance with this act.
(b) A vehicle value protection agreement must not be sold unless the contract owner has been or will be provided access to a copy of the vehicle value protection agreement.
(c) To assure the faithful performance of the provider's obligations to its contract owners, the provider is responsible for complying with 1 of the following:
(i) Insuring all of its vehicle value protection agreements under a reimbursement insurance policy that pays or reimburses in the event that the provider fails to perform the provider's obligations under the vehicle value protection agreement and that is issued by an insurer at the time the policy is filed with the department, and continuously after the time that the policy is filed, and complying with either of the following:
(A) Doing all of the following:
(I) Maintaining surplus as to policyholders and paid-in capital of $15,000,000.00 or more.
(II) Annually filing copies of the insurer's financial statements and National Association of Insurance Commissioners annual statements and of the actuarial certification required by and filed in the insurer's state of domicile.
(B) Doing all of the following:
(I) Maintaining surplus as to policyholders and paid-in capital of less than $15,000,000.00 but not less than $10,000,000.00.
(II) Demonstrating to the satisfaction of the department that the insurer maintains a ratio of net written premiums, wherever written, to surplus as to policyholders and paid-in capital of not greater than 3 to 1.
(III) Annually filing copies of the insurer's audited financial statements and National Association of Insurance Commissioners annual statements and the actuarial certification required by and filed in the insurer's state of domicile.
(ii) Doing both of the following:
(A) Maintaining a funded reserve account for its obligations under its contracts issued and outstanding in this state. The reserves must not be less than 40% of gross consideration received, less claims paid, on the sale of the vehicle value protection agreements for all in-force contracts. The reserve account is subject to examination and review by the department.
(B) Placing in trust with the department a financial security deposit that has a value of 5% or more of the gross consideration received, less claims paid, on the sale of the vehicle value protection agreements for all vehicle value protection agreements issued and in force, but not less than $25,000.00, consisting of 1 of the following:
(I) A surety bond issued by an authorized surety.
(II) Securities of the type eligible for deposit by insurers.
(III) Cash.
(IV) A letter of credit issued by a qualified financial institution.
(V) Another form of security prescribed by rules promulgated by the department in accordance with the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328.
(iii) Doing both of the following:
(A) Maintaining, alone or with the provider's parent company, a net worth or stockholders' equity of $100,000,000.00.
(B) On request, providing the department with a copy of the provider's or the provider's parent company's most recent Form 10-K or Form 20-F filed with the Securities and Exchange Commission within the most recent calendar year before the request or, if the company does not file with the Securities and Exchange Commission, a copy of the provider's or the provider's parent company's audited financial statements that show a net worth of the provider or the provider's parent company of at least $100,000,000.00. If the provider's parent company's Form 10-K, Form 20-F, or financial statements are filed to meet the provider's financial security requirement, the parent company must agree to guarantee the obligations of the provider relating to vehicle value protection agreements sold by the provider in this state.
(d) Except for the requirements in subdivision (c), no other financial security requirements are required for vehicle value protection agreement providers.
Sec. 10b. Except as otherwise provided in section 10c, a vehicle value protection agreement must disclose in writing and in clear, understandable language that is easy to read, all of the following:
(a) The name and address of the provider, contract owner, and administrator, if any.
(b) The terms of the vehicle value protection agreement, including, but not limited to, the purchase price to be paid by the contract owner, if any, the requirements for eligibility, conditions of coverage, or exclusions.
(c) That the vehicle value protection agreement may be canceled by the contract owner during a free look period as specified in the vehicle value protection agreement, and if the agreement is so canceled, the contract owner is entitled to a full refund of the purchase price paid by the contract owner, if any, if no benefits have been provided.
(d) The procedure the contract owner must follow, if any, to obtain a benefit under the terms and conditions of the vehicle value protection agreement, including, if applicable, a telephone number or website and address where the contract owner may apply for a benefit.
(e) Whether the vehicle value protection agreement is cancellable after the free look period and the conditions under which it may be canceled, including, the procedures for requesting any refund of the unearned purchase price paid by the contract owner.
(f) If the vehicle value protection agreement is canceled, the methodology for calculating any refund of the unearned purchase price of the vehicle value protection agreement that is due.
(g) That the extension of credit, the terms of the credit, and the terms of the related motor vehicle sale or lease may not be conditioned on the purchase of the vehicle value protection agreement.
(h) The terms, restrictions, or conditions governing cancellation of the vehicle value protection agreement before the termination or expiration date of the vehicle value protection agreement by either the provider or the contract owner. The provider of the vehicle value protection agreement shall mail a written notice to the contract owner at the last known address of the contract owner contained in the records of the provider not less than 5 days before cancellation by the provider. Prior notice is not required if the reason for cancellation is nonpayment of the provider fee, a material misrepresentation by the contract owner to the provider or administrator, or a substantial breach of duties by the contract owner relating to any underlying finance agreement or the covered product or its use. The notice must state the effective date of the cancellation and the reason for the cancellation. If a vehicle value protection agreement is canceled by the provider for a reason other than nonpayment of the provider fee, the provider must refund to the contract owner 100% of the unearned pro rata provider fee paid by the contract owner, if any. If coverage under the vehicle value protection agreement continues after a claim, claims paid may be deducted from any refund. A reasonable administrative fee may be charged by the provider up to $75.00.
Sec. 10c. Section 10b and part 6 do not apply to a vehicle value protection agreement offered in connection with a commercial transaction.
PART 6
ENFORCEMENT
Sec. 11. The commissioner Except as otherwise provided in sections 9a and 10c, the department may take any action he or she it determines is necessary or appropriate to enforce this act and to protect guaranteed asset motor vehicle financial protection waiver holders product consumers 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.as provided under the Michigan consumer protection act, 1976 PA 331, MCL 445.901 to 445.922.
PART 9
APPLICABILITY
Sec. 14. (1) This act, as amended by the amendatory act that added this section, applies to a motor vehicle financial protection product that becomes effective on or after 180 days after the effective date of the amendatory act that added this section.
(2) This act, as amended by the amendatory act that added this section, does not require any change to a debt waiver or vehicle value protection agreement that is effective before the date described in subsection (1).
Enacting section 1. Section 13 of the guaranteed asset protection waiver act, 2009 PA 229, MCL 492.33, is repealed.
Enacting section 2. This amendatory act does not take effect unless all of the following bills of the 102nd Legislature are enacted into law:
(a) Senate Bill No. 344.
(b) Senate Bill No. 345.
(c) Senate Bill No. 346.
(d) Senate Bill No. 347.
