House passes Kennedy legislation authorizing guaranteed asset protection waivers for car dealers
STATE HOUSE — The House of Representatives today passed legislation introduced by Rep. Brian Patrick Kennedy (D-Dist. 38, Hopkinton, Westerly) that would authorize motor vehicle dealers to issue guaranteed asset protection waivers to consumers while providing consumer protections for guaranteed asset protection waivers.
A GAP waiver is a contractual agreement wherein a creditor agrees to 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 the motor vehicle. The legislation (2016-H 7712A) would clarify that GAP waivers are not insurance and are exempt from the insurance laws of the state.
“This bill makes it clear that car dealers are allowed to sell cars with a debt cancelation provision,” said Representative Kennedy, chairman of the House Corporations Committee. “State-chartered banks and credit unions are already allowed to offer GAP waivers when financing automobiles. This legislation will extend that to auto dealers. That’s important because many car loans are issued directly by the dealer.”
The legislation also contains language codifying consumer protections to those who buy GAP waivers, including regulations governing their sale and management, including the requirement that the waiver remains a part of the finance agreement upon the assignment, sale or transfer of such finance agreement by the creditor.
The bill would also mandate a period of time — not less than 30 days — where the consumer can opt out of the contract without incurring any penalties, fees or costs to the borrower. During this window, called a “free look period,” the borrower would be entitled to a full refund of the purchase price, so long as no benefits have been provided.
The legislation is supported by the Rhode Island Department of Business Regulation, which offered several amendments to the bill, all of which were written into the legislation before it was approved by the House Corporations Committee.
The measure now heads to the Senate, where similar legislation (2016-S 2424) has been introduced by Sen. Roger A. Picard (D-Dist. 20, Woonsocket, Cumberland).
For more information, contact:
Daniel Trafford, Publicist
State House Room 20
Providence, RI 02903