Colorado’s Changes to GAP Waiver Agreement Become Law
Jun 9, 2023 | Insights
New Refund Requirements for Lenders
Colorado Governor Jared Polis signed into law Colorado House Bill 23-1181 yesterday, June 8th, 2023. The bill, which codifies and updates various rules and requirements of GAP agreements – largely in favor of consumers – reached the Governor’s desk after passing the House on March 23, gaining Senate approval with amendments on May 1, and then receiving final House passage on May 7.
This new law’s most significant update now requires that if a finance agreement has been assigned, the assignee is required to send notice to the original creditor requesting, on behalf of the consumer, a refund of the unearned GAP fee. The original creditor must then make the appropriate refund to the consumer within 30 days of receiving notice. If the original creditor fails to provide the refund within 30 days, then the assignee must provide the refund to the consumer, and the original creditor or administrator shall reimburse the assignee no later than 45 days after the original creditor or administrator received notice from the assignee.
The codified new requirement detailed above is significant and will require implementation of new processes for a vast majority of those financial institutions engaged in automotive lending in Colorado.
Another notable new requirement of the bill is that the maximum fee of a GAP agreement is either 4% of the total amount financed or $600, whichever is greater.
Lastly, this new law also provides that a GAP waiver’s cancellation fee will be limited to $25, and that the post-full refund period must be pro rata, or any other refund approved by the regulator.
Through the series of amendments to the bill in the Senate and the House, the legislation contains numerous other new and updated rules and requirements pertaining to GAP agreements in Colorado.
The law is scheduled to take effect on January 1, 2024.
For lenders currently utilizing F&I Sentinel’s services, you will recall that we notified you immediately upon the initial GAP waiver Assurance of Discontinuance (AOD) being issued by the Colorado Attorney General, and responded on your behalf accordingly to ensure you were protected. House Bill 23-1181 essentially codifies many of the concepts announced in the AOD. F&I Sentinel will contact our current lenders individually to discuss charting a path forward for your company considering the legislation. If you are not currently an F&I Sentinel customer but are interested in discussing the amendments or other matters, please contact the F&I Sentinel team for additional information and discussion.
F&I Sentinel provides comprehensive compliance and regulatory risk mitigation services for the sale and financing of all automotive aftermarket products for any lender or dealer eager to achieve state and federal regulatory compliance amid an ever-changing landscape.