SB15 Alabama 2023 Session

Summary

Primary Sponsor

Shay ShelnuttSenator

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 Co

Summary

SB15 tightens and clarifies Alabama rules for motor vehicle value protection agreements, requiring providers to have insured backing or other strong financial safeguards to cover obligations if they fail to perform.

What This Bill Does

It clarifies that the required insurance policy must pay or reimburse the provider's obligations under motor vehicle value protection agreements if the provider does not perform. It sets strict financial standards for insurers that issue these policies, including minimum surplus and filing requirements. It requires providers (or their parent companies) to maintain reserve funds and security deposits to cover obligations, and to maintain a high net worth with potential parent guarantees. The act becomes effective immediately after signing.

Who It Affects

• Motor vehicle value protection (MVVP) providers operating in Alabama and their parent companies, who must meet insurance, reserve, net worth, and possible parent-guarantee requirements.
• Insurance companies issuing MVVP policies and financial security providers (bond/legal deposits, letters of credit, etc.) in Alabama, who must meet solvency criteria, file annual financial statements, and comply with deposit requirements.

Key Provisions

• Require MVVP providers to insure all MVVP agreements under an insurance policy that pays or reimburses obligations if the provider fails to perform, with the insurer licensed in Alabama and meeting specified financial criteria.
• Insurer financial criteria include either: (a) surplus to policyholders and paid-in capital of at least $15,000,000; or (b) surplus of at least $10,000,000 with evidence that net written premiums to surplus ratio is not greater than 3 to 1; annual filing of audited statements, NAIC annual statement, and actuarial certification.
• Require a funded reserve account for all MVVP obligations in this state, not less than 40% of gross consideration received minus claims paid for all in-force contracts, subject to oversight by the Superintendent of Banks.
• Require a financial security deposit placed in trust with the superintendent, equal to at least 5% of gross consideration received minus claims paid, with a minimum of $25,000, and allow forms such as surety bonds, eligible securities, cash, letters of credit, or other regulated security.
• Require MVVP providers (or their parent companies) to maintain net worth or stockholders' equity of $100,000,000, and to provide the Superintendent with forms (Form 10-K/20-F or audited statements) showing this net worth upon request; if parent forms are used to meet the requirement, the parent must guarantee the provider's MVVP obligations.
• If the provider's parent company files the required financial forms to meet the requirement, the parent must agree to guarantee the provider's MVVP obligations in Alabama.

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