SB318 Alabama 2025 Session

Summary

Primary Sponsor

Bobby D. SingletonSenator

Democrat

Session

2025 Regular Session

Title

Service contracts; terms defined; certain disclosures in advertising required; disclosures of limitations of contracts further provided for

Summary

SB318 regulates consumer service contracts in Alabama by requiring clear disclosures, standardized contract content, and financial safeguards for providers, with new refund and cancellation protections for consumers, effective January 1, 2026.

What This Bill Does

If passed, the bill requires advertising of service contracts to disclose any right to a refund that may be less than the cost to repair or replace covered property; it also mandates detailed, bolded disclosures of limitations and exclusions in the contract content and communications. Service contracts would have to be written in eight-point type or larger and include key details like price, term, renewal provisions, and the steps to obtain service, including prior approval for third-party repairs and 24-hour emergency support. Providers must register with the state, pay a $200 annual fee, and meet financial stability requirements (through reimbursement insurance, funded reserves or security deposits, and/or a parent guarantee if needed), with a system to supervise and examine providers via a revolving fund. The bill also sets consumer refunds on cancellation or voiding, requires notices before cancellation, and provides pathways for direct claims against insurers if the provider fails to pay.

Who It Affects

• Consumers who buy service contracts in Alabama, who would receive clearer disclosures, defined refund rights, and stronger cancellation and refund protections.
• Service contract providers, administrators, and marketers, who would face registration, financial solvency requirements, advertising/contract disclosure mandates, and potential reimbursement or guarantee obligations.

Key Provisions

• Creates the framework for regulating consumer service contracts and lists exemptions (e.g., warranties, maintenance agreements, certain utility/service contracts) and states that service contracts are not insurance.
• Requires advertising disclosures: providers must clearly disclose any right to refund less than the provider's cost to repair or replace, shown in bold print.
• Mandates contract content in eight-point type or larger, including purchase price, term, renewal provisions, the services provided, limitations and exclusions, transferability, cancellation terms, and procedures to obtain service.
• Accommodates refunds and cancellations: if a contract is returned within specified timeframes, the provider must refund the full purchase price (including any applicable premium); if refunds are not paid within 45 days after return, a 10% per month penalty applies, and an administrative fee may be charged in certain cases.
• Establishes direct claim rights against a reimbursement insurance company if the provider fails to pay a claim within 60 days, and requires the contract to name the insurer and provide contact information.
• Implements financial stability standards: providers must either obtain reimbursement insurance or maintain reserve funds or security deposits, meet net worth requirements (100 million dollars), and/or have a parent company guarantee when necessary.
• Imposes registration requirements: providers must register with the Commissioner, pay a $200 annual fee, and operate under the Service Contract Revolving Fund for supervision and administration.
• Givesnotice and cancellation rules: providers must provide at least five days’ prior notice before cancellation (with exceptions for nonpayment or material misrepresentation) and must specify the cancellation date and reason.
• Clarifies that service contract fees are not subject to premium taxes, while premiums for reimbursement insurance are taxed, and lists other administrative rules and disclosures required in contracts.

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

Subjects

Consumer Protection