SB327 Alabama 2017 Session

Summary

Primary Sponsor

Clyde ChamblissSenator

Republican

Session

Regular Session 2017

Title

Motor vehicles, sales and loan transactions, guaranteed asset protection waivers authorized, coverage of loan balance if vehicle a total loss or stolen, Superintendent of Banks authorized to assess penalties, Secs. 8-37-1 to 8-37-9, inclusive, added

Summary

SB327 would authorize, regulate, and enforce guaranteed asset protection (GAP) waivers for motor vehicle loans, with penalties for violations.

What This Bill Does

The bill creates a new Chapter 37 in Title 8 to define GAP waivers, regulate their sale, and establish enforcement by the Superintendent of Banks. GAP waivers may be offered for motor vehicle financing and can be sold as a single payment or periodic payments, with costs separately disclosed and not counted as a finance charge if handled properly. Borrowers have a Free Look period (at least 30 days), and refunds are available if they cancel (full refund during the Free Look period; pro rata refunds minus a small fee afterward); the purchase cannot be required as a condition of credit or the vehicle sale. GAP waivers are not insurance, but insurance policies may cover the waiver obligations; there are recordkeeping, reporting, and refund rules, and penalties for violations, with an effective date of January 1, 2018 and certain pre-existing waivers exempt from the act.

Who It Affects

• Borrowers/consumers who finance motor vehicles: gain defined GAP waiver options with disclosures, refunds, and protections around cancellation and cancellation fees.
• Creditors, retail sellers, administrators, and affiliated assignees offering or managing GAP waivers: must comply with new definitions, disclosure and recordkeeping requirements, insurance arrangements, and enforcement rules; face penalties for violations.

Key Provisions

• Creates Chapter 37 in Title 8 to authorize and regulate GAP waivers for motor vehicle financing and clarifies GAP waivers are not insurance.
• GAP waivers may be sold as a single payment or with monthly/periodic payments; costs must be separately stated and not counted as a finance charge if compliant with Truth in Lending Act.
• GAP waivers are not insurance; gaps can be insured under separate policies, with requirements for retail sellers and creditors to obtain and maintain insurance and to insure obligations; exemptions exist for certain entities and arrangements.
• Maintains GAP waivers as part of the finance agreement upon assignment; requires three years of records and notice to the Superintendent; waivers must be disclosed to borrowers with specific information and refund/cancellation procedures.
• Free Look Period of at least 30 days; refunds: full refund if canceled during Free Look with no benefits; pro rata refund minus up to $50 after Free Look if no benefits provided; refunds may reduce the amount owed on the finance agreement.
• Credit terms or vehicle sale/lease cannot be conditioned on purchasing a GAP waiver; creditors must report sales and forward funds as specified; funds held in fiduciary capacity.
• Superintendent of Banks may order cease and desist, and may impose penalties up to $500 per violation and up to $10,000 in aggregate; may adjust requirements for certain affiliated arrangements.
• Effective date is January 1, 2018; waivers entered before the effective date are not covered by the act.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Motor Vehicles