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SF 1051

1st Engrossment - 89th Legislature (2015 - 2016) Posted on 08/31/2015 03:45pm

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to commerce; regulating guaranteed asset protection waivers; proposing
coding for new law as Minnesota Statutes, chapter 59D.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [59D.01] APPLICATION.
new text end

new text begin (a) This chapter does not apply to:
new text end

new text begin (1) a policy of insurance offered in compliance with chapters 60A to 79A;
new text end

new text begin (2) a debt cancellation or debt suspension contract, including a guaranteed asset
protection waiver, being offered by a banking institution or credit union in compliance
with chapter 48 or 52; and
new text end

new text begin (3) a debt cancellation or debt suspension contract being offered in compliance with
Code of Federal Regulations, title 12, parts 37, 721, or other federal law.
new text end

new text begin (b) Guaranteed asset protection waivers regulated under this chapter are not
insurance and are not subject to chapters 60A to 79A. Persons selling, soliciting, or
negotiating guaranteed asset protection waivers to borrowers in compliance with this
chapter are exempt for chapter 60K.
new text end

Sec. 2.

new text begin [59D.02] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Terms. new text end

new text begin For purposes of this chapter, the terms defined in subdivisions
2 to 10 have the meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin Administrator. new text end

new text begin "Administrator" means a person, other than an insurer
or creditor who performs administrative or operational functions pursuant to guaranteed
asset protection waiver programs.
new text end

new text begin Subd. 3. new text end

new text begin Borrower. new text end

new text begin "Borrower" means a debtor, retail buyer, or lessee under a
finance agreement.
new text end

new text begin Subd. 4. new text end

new text begin Creditor. new text end

new text begin "Creditor" means:
new text end

new text begin (1) the lender in a loan or credit transaction;
new text end

new text begin (2) the lessor in a lease transaction;
new text end

new text begin (3) a dealer or seller of motor vehicles that provides credit to purchasers of the motor
vehicles provided that the entities comply with this section;
new text end

new text begin (4) the seller in commercial retail installment transactions; or
new text end

new text begin (5) the assignees of any of the forgoing to whom the credit obligation is payable.
new text end

new text begin Subd. 5. new text end

new text begin Finance agreement. new text end

new text begin "Finance agreement" means a loan, lease, or retail
installment sales contract for the purchase or lease of a motor vehicle.
new text end

new text begin Subd. 6. new text end

new text begin Free look period. new text end

new text begin "Free look period" means the period of time from the
effective date of the GAP waiver until the date the borrower may cancel the contract without
penalty, fees, or costs to the borrower. This period of time must not be shorter than 30 days.
new text end

new text begin Subd. 7. new text end

new text begin Guaranteed asset protection waiver. new text end

new text begin "Guaranteed asset protection waiver"
or "GAP waiver" means a contractual agreement wherein a creditor agrees for a separate
charge to cancel or waive all or part of amounts due on a borrower's finance agreement in
the event of a total physical damage loss or unrecovered theft of the motor vehicle.
new text end

new text begin Subd. 8. new text end

new text begin Insurer. new text end

new text begin "Insurer" means an insurance company licensed, registered, or
otherwise authorized to do business under Minnesota law.
new text end

new text begin Subd. 9. new text end

new text begin Motor vehicle. new text end

new text begin "Motor vehicle" means self-propelled or towed vehicles
designed for personal or commercial use, including, but not limited to, automobiles;
trucks; motorcycles; recreational vehicles; all-terrain vehicles; snowmobiles; campers;
boats; personal watercraft; and motorcycle, boat, camper, and personal watercraft trailers.
new text end

new text begin Subd. 10. new text end

new text begin Person. new text end

new text begin "Person" includes an individual, company, association,
organization, partnership, business trust, corporation, and every form of legal entity.
new text end

Sec. 3.

new text begin [59D.03] COMMERCIAL TRANSACTIONS EXEMPTED.
new text end

new text begin Sections 59D.04, subdivision 3, and 59D.06 do not apply to a guaranteed asset
protection waiver offered in connection with a lease or retail installment sale associated
with any transaction not for personal, family, or household purposes.
new text end

Sec. 4.

new text begin [59D.04] GUARANTEED ASSET PROTECTION WAIVER
REQUIREMENTS.
new text end

new text begin Subdivision 1. new text end

new text begin Authorization. new text end

new text begin GAP waivers may be offered, sold, or provided to
borrowers in Minnesota in compliance with this chapter.
new text end

new text begin Subd. 2. new text end

new text begin Payment options. new text end

new text begin GAP waivers may, at the option of the creditor, be sold
for a single payment or may be offered with a monthly or periodic payment option.
new text end

new text begin Subd. 3. new text end

new text begin Certain costs not considered finance charge or interest. new text end

new text begin Notwithstanding
any other provision of law, any cost to the borrower for a guaranteed asset protection
waiver entered into in compliance with United States Code, title 15, sections 1601 to
1667F, and its implementing regulations under Code of Federal Regulations, title 12, part
226, as they may be amended from time to time, must be separately stated and is not to
be considered a finance charge or interest.
new text end

new text begin Subd. 4. new text end

new text begin Insurance. new text end

new text begin A retail seller must insure its GAP waiver obligations under a
contractual liability or other insurance policy issued by an insurer. A creditor, other than a
retail seller, may insure its GAP waiver obligations under a contractual liability policy or
other such policy issued by an insurer. The insurance policy may be directly obtained by a
creditor or retail seller, or may be procured by an administrator to cover a creditor's or
retail seller's obligations. Retail sellers that are lessors on motor vehicles are not required
to insure obligations related to GAP waivers on leased vehicles.
new text end

new text begin Subd. 5. new text end

new text begin Financing agreement. new text end

new text begin The GAP waiver must be part of, or a separate
addendum to, the finance agreement and must remain a part of the finance agreement upon
the assignment, sale, or transfer of the finance agreement by the creditor.
new text end

new text begin Subd. 6. new text end

new text begin Purchase restriction. new text end

new text begin The extension of credit, the term of credit, or the
term of the related motor vehicle sale or lease must not be conditioned upon the purchase
of a GAP waiver.
new text end

new text begin Subd. 7. new text end

new text begin Reporting. new text end

new text begin A creditor that offers a GAP waiver must report the sale of, and
forward funds received on, all such waivers to the designated party, if any, as prescribed
in any applicable administrative services agreement, contractual liability policy, other
insurance policy, or other specified program documents.
new text end

new text begin Subd. 8. new text end

new text begin Fiduciary responsibilities. new text end

new text begin Funds received or held by a creditor or
administrator and belonging to an insurer, creditor, or administrator, pursuant to the terms
of a written agreement, must be held by the creditor or administrator in a fiduciary capacity.
new text end

new text begin Subd. 9. new text end

new text begin Defined terms. new text end

new text begin The terms defined in section 59D.01 are not intended to
provide actual terms that are required in guaranteed asset protection waivers.
new text end

Sec. 5.

new text begin [59D.05] CONTRACTUAL LIABILITY OR OTHER INSURANCE
POLICIES.
new text end

new text begin Subdivision 1. new text end

new text begin Reimbursement or payment statement. new text end

new text begin Contractual liability or
other insurance policies insuring GAP waivers must state the obligation of the insurer to
reimburse or pay to the creditor any sums the creditor is legally obligated to waive under
the GAP waivers issued by the creditor and purchased or held by the borrower.
new text end

new text begin Subd. 2. new text end

new text begin Coverage of assignee. new text end

new text begin Coverage under a contractual liability or other
insurance policy insuring a GAP waiver must also cover a subsequent assignee upon the
assignment, sale, or transfer of the finance agreement.
new text end

new text begin Subd. 3. new text end

new text begin Term. new text end

new text begin Coverage under a contractual liability or other insurance policy
insuring a GAP waiver must remain in effect unless canceled or terminated in compliance
with applicable laws.
new text end

new text begin Subd. 4. new text end

new text begin Effect of cancellation or termination. new text end

new text begin The cancellation or termination of
a contractual liability or other insurance policy must not reduce the insurer's responsibility
for GAP waivers issued by the creditor before the date of cancellation or termination and
for which a premium has been received by the insurer.
new text end

Sec. 6.

new text begin [59D.06] DISCLOSURES.
new text end

new text begin Guaranteed asset protection waivers must disclose, as applicable, in writing and in
clear, understandable language that is easy to read, the following:
new text end

new text begin (1) the name and address of the initial creditor and the borrower at the time of sale,
and the identity of any administrator if different from the creditor;
new text end

new text begin (2) the purchase price and the terms of the GAP waiver, including without limitation,
the requirements for protection, conditions, or exclusions associated with the GAP waiver;
new text end

new text begin (3) that the borrower may cancel the GAP waiver within a free look period as
specified in the waiver, and will be entitled to a full refund of the purchase price, so
long as no benefits have been provided;
new text end

new text begin (4) the procedure the borrower must follow, if any, to obtain GAP waiver benefits
under the terms and conditions of the waiver, including a telephone number and address
where the borrower may apply for waiver benefits;
new text end

new text begin (5) whether or not the GAP waiver is cancelable after the free look period and the
conditions under which it may be canceled or terminated including the procedures for
requesting a refund due;
new text end

new text begin (6) that in order to receive a refund due in the event of a borrower's cancellation of
the GAP waiver agreement or early termination of the finance agreement after the free
look period of the GAP waiver, the borrower, in accordance with the terms of the waiver,
must provide a written cancellation request to the creditor, administrator, or other party.
If such a request is being made because of the termination of the finance agreement,
notice must be provided to the creditor, administrator, or other party within 90 days of the
occurrence of the event terminating the finance agreement;
new text end

new text begin (7) the methodology for calculating a refund of the unearned purchase price of the
GAP waiver due in the event of cancellation of the GAP waiver or early termination of the
finance agreement; and
new text end

new text begin (8) that the extension of credit, the terms of the credit, or the terms of the related
motor vehicle sale or lease are not conditioned upon the purchase of the GAP waiver.
new text end

Sec. 7.

new text begin [59D.07] CANCELLATION; REFUNDS.
new text end

new text begin Subdivision 1. new text end

new text begin Refund requirements during free look period. new text end

new text begin A GAP waiver must
provide that, if a borrower cancels a waiver within the free look period, the borrower will
be entitled to a full refund of the purchase price, so long as no benefits have been provided.
new text end

new text begin Subd. 2. new text end

new text begin Refund requirements after free look period. new text end

new text begin (a) Guaranteed asset
protection waivers may be cancelable or noncancelable after the free look period.
new text end

new text begin (b) In the event of a borrower's cancellation of the GAP waiver or early termination
of the finance agreement, after the agreement has been in effect beyond the free look
period, the borrower may be entitled to a refund of any unearned portion of the purchase
price of the waiver unless the waiver provides otherwise. In order to receive a refund,
the borrower, in accordance with any applicable terms of the waiver, must provide a
written request to the creditor, administrator, or other party. If such a request is being
made because of the termination of the finance agreement, notice must be provided to
the creditor, administrator, or other party within 90 days of the occurrence of the event
terminating the finance agreement.
new text end

new text begin (c) If the cancellation of a GAP waiver occurs as a result of a default under the
finance agreement or the repossession of the motor vehicle associated with the finance
agreement, or any other termination of the finance agreement, any refund due may be paid
directly to the creditor or administrator and applied as set forth in subdivision 3.
new text end

new text begin Subd. 3. new text end

new text begin How applied. new text end

new text begin A refund under subdivision 1 or 2 may be applied by the
creditor as a reduction of the amount owed under the finance agreement, unless the
borrower can show that the finance agreement has been paid in full.
new text end