The first six months of 2024 saw heightened activity in the oversight of GAP waiver regulations in four states. During this time, several states have had legislation go into effect or passed bills that change or will change requirements for GAP waivers. These changes will inevitably increase compliance complexity and administrative load in an array of areas including records retention, ancillary products management, etc.
Colorado and Connecticut
Colorado House Bill 23-1181 that went into effect on January 1, 2024 overhauled the regulation of GAP waivers in the state, including fees that may be charged and refund requirements. The new statute applies to contracts dated Jan 1, 2024, and after.
In a significant development after the effective date, the Uniform Consumer Credit Code (UCCC) Administrator of Colorado issued an interpretive opinion providing clarity on the application of GAP refund notices and cancellation fees. This is in response to the bill’s implementation and aims to enhance transparency and fairness in automotive finance agreements.
The Colorado Attorney General’s office clarified that the existing UCCC Rule 8 still applies to “consumer credit sales and consumer loan transactions entered into before January 1, 2024.” More on the requirements and their impact on auto lenders can be found here.
In Connecticut, Section 7 of Senate Bill 1033 created a new law relating to GAP and Excess Wear and Usage (EWU) waivers that took effect on October 1, 2023. The law applies to GAP or EWU waiver contracts entered on or after January 1, 2024.
Missouri Law Takes Effect
Missouri Senate Bill 398 took effect on February 23, 2024, establishing a new law applicable to motor vehicle financial protection products, including GAP waivers, excess wear and use waivers, and vehicle value protection agreements. The act specifies several requirements, disclosures and terms, including those for insurance policies and cancellations.
Florida Makes (GAP) Waves
One of the biggest changes came from Florida. Senate Bill 902, effective October 1, 2024, creates the “Florida Vehicle Value Protection Agreements Act,” and makes requirement changes to existing GAP and Excess Wear and Use (EWU) waivers. SB 902 also will create a new area of law for Vehicle Value Protection Agreements (VVPAs), which are add-on products, similar to GAP waivers, covering a wider range of adverse occurrences and issued by third-party providers.
Florida is one of the early adopters of substantive requirements for stand-alone VVPAs. By modifying provisions in the Motor Vehicle Retail Sales Finance Act on GAP products, the bill expanded consumer protections for cancellation and refunds.
VVPAs represent yet another segment of ancillary products that auto finance companies will now need to manage and maintain compliance. Expanded consumer protections for GAP products mean cancellations and refunds will need to be handled as quickly as possible, creating more complicated compliance.
F&I Sentinel is the industry’s trusted provider of managed compliance solutions – from funding to servicing to refunds. With a repository of more than 120,000 F&I product forms, our tech-enabled Concierge Compliance Team helps auto lenders navigate the regulatory landscape surrounding the financing and resolution of voluntary protection products. Schedule a no-obligation meeting with a member of Concierge Compliance team today.
The information provided in this post does not, and is not intended to, constitute legal advice; instead, all information, content, and materials referenced are for general informational purposes only. Readers should contact their attorney to obtain advice with respect to any particular legal matter.
