HB145 Alabama 2022 Session

Summary

Primary Sponsor

Reed IngramRepresentative

Republican

Session

Regular Session 2022

Title

Motor vehicle, financing and lease agreements, lease waiver agreements to pay deficiency balances at end of lease, motor vehicle value protection agreements to reduce deficiency balances, Secs. 8-37A-1 to 8-37A-6, inclusive, added; Sec. 8-37-2 am'd.

Summary

HB145 creates a regulatory framework for GAP waivers and introduces motor vehicle value protection agreements to help reduce deficiency balances in Alabama motor vehicle financing and leasing.

What This Bill Does

The bill expands GAP waiver language to include excess wear and use waivers in consumer leases and authorizes motor vehicle value protection agreements (MVVPA) aimed at reducing deficiency balances or aiding replacement. It adds Chapter 37A to regulate MVVPA, defines key terms, and sets disclosure and consumer protections. It also outlines financial-security options for MVVPA providers and enforcement by the Superintendent of Banks, while clarifying that MVVPA is not insurance and is not conditioned on loan terms.

Who It Affects

• Borrowers/contract holders of motor vehicle financing or leasing, who would receive defined MVVPA protections, written disclosures, a free-look period of at least 30 days, clearly described cancellation/refund rights, and protections against tying MVVPA purchases to credit terms.
• Providers, administrators, insurers, lenders, and lessors who offer GAP waivers or MVVPA, who must meet new financial-security requirements (insurance with specified financial strength, or funded reserves with security deposits, or high net worth with parent guarantees), and comply with disclosure and regulatory enforcement.

Key Provisions

• Expands the GAP WAIVER definition to include excess wear and use waivers in consumer lease agreements (8-37-2).
• Creates Chapter 37A to authorize motor vehicle value protection agreements (MVVPA) and regulate their sale to reduce deficiency balances or assist with replacement under financing contracts.
• Defines MVVPA as a contract that provides benefits to reduce deficiency balances or support replacement/related services due to loss, theft, damage, obsolescence, depreciation, or diminished value; MVVPA is not the same as a GAP waiver and may include related concepts like trade-in credits or depreciation benefits.
• Establishes a free look period not less than 30 days for MVVPA and GAP-related agreements, during which the contract holder can cancel without penalties in certain cases.
• Requires MVVPA disclosures to include provider/contract holder/administrator details, terms and pricing, eligibility, cancellation rules and refund calculations, and procedures to obtain benefits.
• Imposes three compliance options for MVVPA providers: (a) maintain insurance with specified financial strength and annual filings; (b) maintain a funded reserve account of at least 40% of gross consideration plus a 5% security deposit (minimum $25,000) in a trust or equivalent; (c) maintain net worth of $100 million with parent guarantees if applicable and provide annual financial disclosures.
• If using insurance option (a), the insurer must have at least $15 million surplus or $10 million surplus with a 3:1 premium-to-surplus ratio, and provide annual audited statements and related certifications to the state.
• If using reserve option (b), the provider’s reserves are subject to examination by the Superintendent of Banks, and the security deposit can be a surety bond, securities, cash, letter of credit, or other regulator-approved form.
• If using net worth option (c), the provider (and parent) must show $100 million net worth and may require the parent to guarantee obligations under MVVPA contracts in Alabama.
• Disclosures and cancellation provisions require clear notice of cancellation rights, refund calculations (including unearned fees and any limits), and prohibit conditioning credit or vehicle terms on MVVPA purchases.
• The Superintendent of Banks may enforce compliance with cease-and-desist orders and penalties up to $500 per violation and up to $10,000 total for similar violations; commercial transactions are excluded from certain provisions.
• The act would take effect January 1, 2023, after passage and approval.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Motor Vehicles