HB5 Alabama 2026 Session

Summary

Primary Sponsor

Artis McCampbellRepresentative

Democrat

Session

2026 Regular Session

Title

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

Summary

HB5 would regulate Alabama service contracts by mandating stronger disclosures, establishing financial oversight for providers, and clarifying consumer protections.

What This Bill Does

It requires ads for service contracts to disclose the provider's right to refund less than the repair or replacement cost, with that disclosure in bold. It also requires service contracts to clearly reveal limitations, exclusions, and other key details (including covered property, deductibles, transferability, and cancellation terms) in bold. The bill creates a registration and funding system for oversight (including a $200 annual fee and a Service Contract Revolving Fund) and sets financial safeguards to back contract obligations (such as insurance, reserves, or a high net worth, with possible parent guarantees). It also specifies how refunds and cancellations must work (including timeframes and penalties) and becomes effective January 1, 2027.

Who It Affects

• Consumers who buy service contracts: gain clearer advertising and contract disclosures, defined refund and cancellation rights, and clearer information about what is covered.
• Service contract providers and advertisers: must follow advertising and contract-disclosure rules, register with the state, meet financial solvency requirements, and maintain records for oversight.

Key Provisions

• Advertising disclosures: ads for service contracts must disclose the provider's right to refund a contract holder for an amount less than the cost to repair or replace, with the disclosure printed in bold.
• Contract disclosures: service contracts must clearly state coverage, limitations, exclusions, deductibles, transferability, cancellation terms, and whether non-original parts may be used, with key limitations/refunds in bold.
• Definitions and exemptions: clarifies who is exempt from certain rules (e.g., warranties, maintenance agreements, utilities, commercial transactions) and sets terms for what counts as a service contract.
• Registration and funding: providers must register with the Commissioner of Insurance, pay a $200 annual fee, and funds go into a Service Contract Revolving Fund for supervision and administration.
• Financial safeguards: providers must back obligations via reimbursement insurance or maintain reserves, a funded reserve account, or a minimum net worth (or a parent guarantee if net worth is not $100 million), with specific deposit requirements (as low as 5% of aggregate fees with a $25,000 minimum).
• Refunds and cancellations: if no claims exist, refunds must be paid within set timeframes (no less than 20 days after mailing or 10 days after delivery); refunds may be subject to a 10% monthly penalty if late; unearned portions must be refunded upon cancellation, with possible administrative fees up to $25 unless otherwise provided.
• Consumer protections and notices: contracts must provide a toll-free claim number, outline claim procedures, and require clear notice of cancellation and the reasons for cancellation when applicable.
• Effective date: the act becomes effective January 1, 2027.

AI-generated summary using openai/gpt-5-nano on Feb 12, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Consumer Protection