Bill Text: IL HB5907 | 2015-2016 | 99th General Assembly | Engrossed

Bill Title: Creates the Guaranteed Asset Protection Waiver Act. Establishes standards to regulate persons offering guaranteed asset protection waivers. Provides for a period of time of at least 30 days from the effective date of the guaranteed asset protection waiver until the date the borrower may cancel the contract without penalty, fees, or costs to the borrower. Amends the Illinois Insurance Code to exempt guaranteed asset protection waivers from regulation as insurance.

Spectrum: Slight Partisan Bill (Democrat 4-2)

Status: (Engrossed - Dead) 2017-01-10 - Senate Floor Amendment No. 1 Postponed - State Government and Veterans Affairs [HB5907 Detail]

Download: Illinois-2015-HB5907-Engrossed.html

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1 AN ACT concerning regulation.
2 Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4 Section 1. Short title. This Act may be cited as the
5Guaranteed Asset Protection Waiver Act.
6 Section 5. Intent; scope; findings.
7 (a) The purpose of this Act is to provide a framework
8within which guaranteed asset protection waivers are defined
9and may be offered within this State.
10 (b) This Act does not apply to:
11 (1) an insurance policy offered by an insurer under the
12 insurance laws of this State; or
13 (2) a debt cancellation or debt suspension contract
14 being offered in compliance with 12 CFR Part 37 or 12 CFR
15 Part 721 or other federal law by a bank holding company,
16 financial holding company, bank, savings bank, credit
17 union, or trust company that is authorized to do business
18 under the laws of this State or of the United States.
19 (c) Guaranteed asset protection waivers governed under
20this Act are not insurance and are exempt from the insurance
21laws of this State. Persons marketing, selling, or offering to
22sell guaranteed asset protection waivers to borrowers that
23comply with this Act are exempt from this State's insurance

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1licensing requirements.
2 (d) The legislature finds that guaranteed asset protection
3waivers are not insurance. All guaranteed asset protection
4waivers issued before or after the effective date of this Act
5shall not be construed as insurance.
6 Section 10. Definitions. The following are terms defined
7for purposes of this Act and are not intended to provide actual
8terms required in guaranteed asset protection waivers:
9 "Administrator" means a person, other than an insurer or
10creditor, that performs administrative or operational
11functions pursuant to guaranteed asset protection waiver
13 "Borrower" means a debtor, retail buyer, or lessee under a
14finance agreement.
15 "Creditor" means:
16 (i) the lender in a loan or credit transaction;
17 (ii) the lessor in a lease transaction;
18 (iii) any dealer of motor vehicles that provides credit
19 to retail buyers of such motor vehicles, provided that such
20 entities comply with the provisions of this Act;
21 (iv) the seller in commercial retail installment
22 transactions; or
23 (v) the assignees of any of the foregoing to whom the
24 credit obligation is payable.
25 "Finance agreement" means a loan, lease, or retail

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1installment sales contract for the purchase or lease of a motor
3 "Free look period" means the period of time of at least 30
4days from the effective date of the GAP waiver until the date
5the borrower may cancel the contract without penalty, fees, or
6costs to the borrower.
7 "Guaranteed asset protection waiver" or "GAP waiver" means
8a contractual agreement that is part of, or a separate addendum
9to, a finance agreement wherein a creditor agrees for a
10separate charge to cancel or waive all or part of amounts due
11on a borrower's finance agreement in the event of a total
12physical damage loss or unrecovered theft of the motor vehicle.
13 "Insurer" means an insurance company licensed, registered,
14or otherwise authorized to do business under the insurance laws
15of this State.
16 "Motor vehicle" means self-propelled or towed vehicles
17designed for personal or commercial use, including, but not
18limited to, automobiles, trucks, motorcycles, recreational
19vehicles, all terrain vehicles, snowmobiles, campers, boats,
20personal watercraft, and motorcycle, boat, camper, and
21personal watercraft trailers.
22 "Person" includes an individual, company, association,
23organization, partnership, business trust, and corporation and
24every form of legal entity.
25 Section 15. Requirements for offering guaranteed asset

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1protection waivers.
2 (a) GAP waivers may be offered, sold, or provided to
3borrowers in this State in compliance with this Act.
4 (b) GAP waivers may, at the option of the creditor, be sold
5for a single payment or may be offered with a monthly or
6periodic payment option.
7 (c) Notwithstanding any other provision of law, any cost to
8the borrower for a guaranteed asset protection waiver entered
9into in compliance with the federal Truth in Lending Act and
10its implementing regulations must be separately stated and is
11not to be considered a finance charge or interest.
12 (d) A retail seller must insure its GAP waiver obligations
13under a contractual liability or other insurance policy issued
14by an insurer. A creditor, other than a retail seller, may
15insure its GAP waiver obligations under a contractual liability
16policy or other such policy issued by an insurer. Any such
17insurance policy may be directly obtained by a creditor or
18retail seller or may be procured by an administrator to cover a
19creditor's or retail seller's obligations. Retail sellers that
20are lessors on motor vehicles are not required to insure
21obligations related to GAP waivers on such leased vehicles.
22 (e) The GAP waiver remains a part of the finance agreement
23upon the assignment, sale, or transfer of such finance
24agreement by the creditor.
25 (f) Neither the extension of credit, the term of credit,
26nor the term of the related motor vehicle sale or lease may be

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1conditioned upon the purchase of a GAP waiver.
2 (g) Any creditor that offers a GAP waiver must report the
3sale of and forward funds received on all such waivers to the
4designated party, if any, as prescribed in any applicable
5administrative services agreement, contractual liability
6policy, other insurance policy, or other specified program
8 (h) Funds received or held by a creditor or administrator
9and belonging to an insurer, creditor, or administrator
10pursuant to the terms of a written agreement must be held by
11such creditor or administrator in a fiduciary capacity.
12 Section 20. Contractual liability or other insurance
14 (a) Contractual liability or other insurance policies
15insuring GAP waivers must state the obligation of the insurer
16to reimburse or pay to the creditor any sums the creditor is
17legally obligated to waive under the GAP waivers issued by the
18creditor and purchased or held by the borrower.
19 (b) Coverage under a contractual liability or other
20insurance policy insuring a GAP waiver must also cover any
21subsequent assignee upon the assignment, sale, or transfer of
22the finance agreement.
23 (c) Coverage under a contractual liability or other
24insurance policy insuring a GAP waiver must remain in effect
25unless cancelled or terminated in compliance with the

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1applicable insurance laws of this State.
2 (d) The cancellation or termination of a contractual
3liability or other insurance policy must not reduce the
4insurer's responsibility for GAP waivers (i) issued by the
5creditor prior to the date of cancellation or termination and
6(ii) for which a premium has been received by the insurer.
7 Section 25. Disclosures. GAP waivers must disclose, as
8applicable, in writing and in clear, understandable language
9that is easy to read, the following:
10 (1) The name and address of the initial creditor and
11 the borrower at the time of sale and the identity of any
12 administrator, if different from the creditor.
13 (2) The purchase price and the terms of the GAP waiver,
14 including, without limitation, the requirements for
15 protection, conditions, or exclusions associated with the
16 GAP waiver.
17 (3) That the borrower may cancel the GAP waiver within
18 a free look period of at least 30 days as specified in the
19 waiver and will be entitled to a full refund of the
20 purchase price provided that no benefits have been
21 provided.
22 (4) The procedure the borrower must follow, if any, to
23 obtain GAP waiver benefits under the terms and conditions
24 of the waiver, including a telephone number and address
25 where the borrower may apply for waiver benefits.

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1 (5) Whether or not the GAP waiver is cancellable after
2 the free look period and the conditions under which it may
3 be cancelled or terminated, including the procedures for
4 requesting any refund due.
5 (6) That in order to receive any refund due in the
6 event of a borrower's cancellation of the GAP waiver
7 agreement or early termination of the finance agreement
8 after the free look period of the GAP waiver, the borrower,
9 in accordance with terms of the waiver, must provide a
10 written request to cancel to the creditor, the
11 administrator, or any other party. If cancelling due to
12 early termination of the finance agreement, the written
13 request to cancel must be made within 90 days of the
14 occurrence of the event terminating the finance agreement.
15 (7) The methodology for calculating any refund of the
16 unearned purchase price of the GAP waiver due in the event
17 of cancellation of the GAP waiver or early termination of
18 the finance agreement.
19 (8) None of the following may be conditioned upon the
20 purchase of the GAP waiver: the extension of credit; the
21 terms of the credit; or the terms of the related motor
22 vehicle sale or lease.
23 Section 30. Cancellation.
24 (a) GAP waiver agreements may be cancellable or
25non-cancellable after the free look period. GAP waivers must

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1provide that if a borrower cancels a waiver within the free
2look period, the borrower is entitled to a full refund of the
3purchase price, provided that no benefits have been provided.
4 (b) In the event of a borrower's cancellation of the GAP
5waiver or early termination of the finance agreement after the
6agreement has been in effect beyond the free look period, the
7borrower is entitled to a refund of any unearned portion of the
8purchase price of the waiver unless the waiver provides
9otherwise. In order to receive a refund, the borrower, in
10accordance with any applicable terms of the waiver, must
11provide a written request to the creditor, administrator, or
12other party. If cancelling due to early termination of the
13finance agreement, the written request to cancel must be made
14within 90 days of the event terminating the finance agreement.
15 (c) If the cancellation of a GAP waiver occurs as a result
16of a default under the finance agreement or the repossession of
17the motor vehicle associated with the finance agreement or any
18other termination of the finance agreement, any refund due may
19be paid directly to the creditor or administrator and applied
20as set forth in subsection (d) of this Section.
21 (d) Any cancellation refund under subsections (a), (b), or
22(c) of this Section may be applied by the creditor as a
23reduction of the amount owed under the finance agreement,
24unless the borrower can show that the finance agreement has
25been paid in full.

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1 Section 35. Commercial transactions exempted. Section 25,
2Section 40, and subsection (c) of Section 15 do not apply to a
3GAP waiver offered in connection with a lease or retail
4installment sale associated with a commercial transaction.
5 Section 40. Enforcement. The Secretary of Financial and
6Professional Regulation may take any action that is necessary
7or appropriate to enforce the provisions of this Act and to
8protect guaranteed asset protection waiver holders in this
9State. After proper notice and opportunity for hearing, the
10Secretary may:
11 (1) order the creditor, administrator, or any other
12 person not in compliance with this Act to cease and desist
13 from further guaranteed asset protection waiver-related
14 operations that are in violation of this Act; and
15 (2) impose a penalty of not more than $500 per
16 violation and no more than $10,000 in the aggregate for all
17 violations of similar nature; for purposes of this Act,
18 violations are of a similar nature if the violation
19 consists of the same or similar course of conduct, action,
20 or practice, irrespective of the number of times the
21 conduct, action, or practice that is determined to be a
22 violation of the Act occurred.
23 Section 97. Severability. The provisions of this Act are
24severable under Section 1.31 of the Statute on Statutes.

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1 Section 900. The Illinois Insurance Code is amended by
2changing Section 2.5 as follows:
3 (215 ILCS 5/2.5)
4 Sec. 2.5. Exemptions Exemption.
5 (a) This Code shall not be construed to apply to the
6administration of the Drycleaner Environmental Response Trust
7Fund under the Drycleaner Environmental Response Trust Fund
9 (b) This Code shall not be construed to apply to guaranteed
10asset protection waivers regulated under the Guaranteed Asset
11Protection Waiver Act.
12(Source: P.A. 90-502, eff. 8-19-97.)