Alabama lawmakers introduced House Bill 466, a bill that would significantly tighten oversight of vehicle service contract providers operating in the state. The proposed legislation aims to enhance consumer protection by mandating specific refund limitation disclosures in the advertisement of service contracts and in the terms of the service contracts themselves, particularly regarding limitations, exceptions, and exclusions. Alabama House Bill 466 further mandates the use of boldface print for the disclosures.
Alabama House Bill 466 Highlights
- Mandatory Advertising Disclosure: Providers must disclose any right to refund a contract holder an amount less than the provider’s cost to repair or replace covered property.
- Enhanced Disclosure within Contracts: Providers must describe the property, the services provided and the terms, limitations, exclusions or exceptions to the services, including the use of non-original manufacturer’s parts and the transferability of the service contract.
- Cancellations. Service contracts must also state restrictions, or conditions governing cancellation of the service contract by either the provider or the service contract holder, including the requirement for the provider to mail a written notice at least five days prior to cancellation, except in cases of nonpayment or material misrepresentation. The notice must include the effective date and reason for cancellation.
- Refunds and Claims. Providers must also describe the obligations and duties of the service contract holder related to the covered property including procedures that must be followed to receive repair services, replacement parts or request a refund.
- Filing & Eligibility Requirements: Service contract providers would need to file with the Insurance Commissioner and pay a $200 annual fee. Providers must also meet one of three financial stability tests—insurance backing, reserve funding with security deposits, or a $100 million net worth.
What This Means
HB466, as currently proposed, outlines clear consumer rights, including a full refund if the contract is canceled within a set period and no claims have been filed. It also introduces new provider registration and financial stability requirements.
Viewed more broadly, the bill is an indication that states like Alabama are stepping up to fill potential gaps in consumer protection left by scaled-back federal initiatives. The bill strengthens consumer protections by standardizing refund policies, requiring prompt full refunds under certain conditions, and outlining cancellation terms. It also clarifies that service contracts—covering items like tire repairs, windshield damage, and lost key fobs—are not considered insurance under Alabama law.
The bill has been assigned to the House of Representative’s Commerce and Small Businesses Committee. If passed, HB466 would take effect October 1, 2025.
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