HB 2231

This bill prohibits a provider from offer ing a vehicle value protection agreement ("agreement"") unless the agreement meets th is bill's requirements. As used in this bill, a "" v ehicle value protection agreement"" means a contractual agreement between a provider and a contract holder that provides benefits applied toward either:  The value of the contract holder's covered vehicle upon the occurrence of an adverse event, including damage incurred and reported on a vehicle history report, causing the covered vehicle to decrease in value; the total loss or unrecovered theft of the covered vehicle that, at the time of the loss or theft, had decreased in value compared to the value of the vehicle at the time it was purchased; or events covered by a contractual agreement between a dealer and a contract holder that provide the contract holder a loyalty benefit when the contract holder returns to the dealer to purchase or lease a replacement vehicle after a total loss, unrecovered theft, or trade-in of the covered vehicle.  The finance agreement for or secure bill of sale on a replacement vehicle upon the occurrence of an event. This bill clarifies that the term specifically i ncludes a trade-in agreement, diminished value agreement, cash down payment protection agreement, or depreciation benefit agreement, but the term does not include a debt waiver or a service contract. REQUIREMENTS OF AN AGREEMENT This bill prohibits a provider from condition ing the extension of credit, the terms of credit, or the terms of the related vehicle sale or lease upon the purchase of an agreement. Additionally, an agreement must meet all of the following requirements:  Provide a benefit to the contract holder upon the trade-in, total loss, or unrecovered theft of a covered vehicle. The benefit may be a credit toward the purchase or lease of a subsequent or replacement vehicle; or an amount applied to the cash value of the covered vehicle at the time of trade-in.  Identify, in the contract, the administrator or provider, the dealer, the contract holder, and the terms of the sale.  Guarantee the provider's obligations by an insurance policy that complies; and conspicuously state that the provider's obligations are guaranteed by an insurance policy, issued by an insurer, that pays the contract holder if the provider fails to perform its obligations under the agreement.  Outline the terms, including the purchase price of the covered vehicle and any eligibility requirements, conditions of coverage, or exclusions, of the agreement.  Notify the contract holder of (i) whether the agreement is cancellable and the procedures for requesting any refund of the unearned purchase price of the agreement paid by the contract holder; (ii) the methodology for calculating any refund of the unearned purchase price of the agreement after the agreement is canceled; (iii) any procedures the contract holder must follow to obtain a benefit under the terms and conditions of the agreement and, if applicable, a telephone number, website, and address where the contract holder may apply for a benefit; and (iv) that neither the extension of credit, the terms of credit, nor the terms of the related vehicle sale or lease may be conditioned upon the purchase of the agreement.  State the terms, restrictions, and conditions governing cancellation of the agreement prior to the termination date of the agreement by either the provider or the contract holder. This bill authorizes a provider to perform as an administrator or retain the services of a third-party administrator. An administrator has the same powers and duties as a provider. This bill requires a provider to guarantee the provider's obligations by an insurance policy, issued by an insurer, that pays the contract holder if the provider fails to perform the obligations in accordance with the agreement. The insurance policy mus t provide that:  If the provider fails to perform its obligations under the agreement, the contractual liability insurer will pay all covered amounts that the provider is legally obligated to pay according to the agreement.  The contract holder may file directly with the insurer for reimbursement if the payment due under the terms of the agreement is not made by the provider within 60 days after proof of loss or trade-in of the covered vehicle has been filed in accordance with the terms of the agreement. This bill clarifies that an agreement that complies with this bill is not insurance and is exempt from regulation as insurance. REQUIREMENTS TO CANCEL A N AGREEMENT In order t o cancel a n agreement, this bill requires the provider to mail a written notice to the contract holder at the last-known address of the contract holder contained in the records of the provider at least five days prior to cancellation by the provider . The cancellation takes effect immediately upon the provider sending the notice to the contract holder if the reason for the cancellation is either nonpayment of any provider fee required to be paid by the contract holder, a material misrepresentatio n by the contract holder to the provider, or a substantial breach of duties by the contract holder relating to the covered vehicle or its use. The notice must state the effective date of the cancellation and the reason for the cancellation. If a n agreement is canceled by the provider for a reason other than nonpayment of the provider fee, then this bill requires the provider to refund to the contract holder, on a pro rata basis, any unearned provider fee paid by the contract holder . However, the provider may charge a reasonable administrative fee of up to $75. If coverage under the agreement continued after a benefit was paid under the agreement, then the provider may deduct the amount of the benefit paid from the refund to the contract hol der. RULEMAKING This bill authorizes the commissioner of commerce and insurance to promulgate rules to effectuate this bill. The rules must include:  Additional disclosures for the benefit of the warranty holder, in the discretion of the commissioner.  Record keeping requirements.  Registration fees.  Penalties for violating this bill.  Procedures for public complaints.  The conditions under which surplus lines insurers may be rejected for the purpose of underwriting agreements. APPLICABILITY This bill applies to agreements entered into, renewed, or amended on or after July 1, 2026."