HB215 Alabama 2023 Session

Summary

Primary Sponsor

Reed IngramRepresentative

Republican

Session

Regular Session 2023

Title

Relating to consumer credit financing in the sale or lease of motor vehicles; to amend Section 8-37A-4 of the Code of Alabama 1975, as added by Act 2022-179 of the 2022 Regular Session, relating to motor vehicle value protection agreements and the requirements of a provider of the agreements to insure performance of the obligations of the provider; to further clarify the requirements of an insurance policy maintained by the provider for this purpose.

Summary

HB215 would require motor vehicle value protection providers to have a qualifying insurance policy or other financial safeguards to cover obligations if the provider fails to perform, with strict financial standards for insurers and providers.

What This Bill Does

The bill clarifies that the insurance policy must pay or reimburse obligations under motor vehicle value protection agreements if the provider does not perform. It imposes specific financial requirements for insurers (minimum surpluses, capital, and reporting) and for providers (net worth of $100 million or a related parent guarantee), plus reserve and security deposit rules to protect contract holders. It also sets allowable forms of security deposits and requires periodic financial disclosures, with the Superintendent of Banks overseeing compliance; the act takes effect immediately after governor approval.

Who It Affects

• Motor vehicle value protection providers: must obtain an eligible insurance policy or meet reserve and security requirements and maintain $100 million net worth, with potential parent guarantees.
• Insurance companies (insurers offering MVVPA policies): must meet specified financial thresholds (surplus, capital, and solvency ratios) and file required financial documents to remain eligible to insure MVVPA obligations.
• Superintendent of Banks: will supervise reserve accounts and security deposits for MVVPA providers.
• Consumers with MVVPA: gain protection because insurers would cover obligations if providers fail to perform.

Key Provisions

• Insure all motor vehicle value protection agreements under an insurance policy that pays or reimburses obligations if the provider fails to perform, issued by an Alabama-licensed insurer meeting specified financial criteria.
• Insurer eligibility criteria: (a) surplus to policyholders and paid-in capital of at least $15,000,000, or (b) at least $10,000,000 with a net written premiums to surplus ratio not greater than 3:1, plus annual filings of audited statements, NAIC Annual Statement, and required actuarial certification.
• Reserve and security deposit requirements: maintain a funded reserve not less than 40% of gross consideration received minus claims paid for all in-force contracts; place a financial security deposit with the superintendent equal to at least 5% of gross consideration received minus claims paid (minimum $25,000) in eligible forms such as surety bonds, securities, cash, letters of credit, or other prescribed security.
• Net worth and parent guarantee: provider (or its parent) must maintain net worth or stockholders' equity of $100,000,000; on request, provide latest Form 10-K/20-F or audited financials; if using parent financials, the parent must guarantee the provider's obligations in this state.
• Effective date: the act becomes effective immediately following passage and governor 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 vehicle value protection agreements, insurance policy of provider required to insure payments of obligations of provider