Full Text of HB5907 99th General Assembly
HB5907eng 99TH GENERAL ASSEMBLY |
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| 1 | | AN ACT concerning regulation.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 1. Short title. This Act may be cited as the | 5 | | Guaranteed Asset Protection Waiver Act. | 6 | | Section 5. Intent; scope; findings.
| 7 | | (a) The purpose of this Act is to provide a framework | 8 | | within which guaranteed asset protection waivers are defined | 9 | | and 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 | 20 | | this Act are not insurance and are exempt from the insurance | 21 | | laws of this State. Persons marketing, selling, or offering to | 22 | | sell guaranteed asset protection waivers to borrowers that | 23 | | comply with this Act are exempt from this State's insurance |
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| 1 | | licensing requirements.
| 2 | | (d) The legislature finds that guaranteed asset protection | 3 | | waivers are not insurance. All guaranteed asset protection | 4 | | waivers issued before or after the effective date of this Act | 5 | | shall not be construed as insurance.
| 6 | | Section 10. Definitions.
The following are terms defined | 7 | | for purposes of this Act and are not intended to provide actual | 8 | | terms required in guaranteed asset protection waivers:
| 9 | | "Administrator" means a person, other than an insurer or | 10 | | creditor, that performs administrative or operational | 11 | | functions pursuant to guaranteed asset protection waiver | 12 | | programs.
| 13 | | "Borrower" means a debtor, retail buyer, or lessee under a | 14 | | finance 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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| 1 | | installment sales contract for the purchase or lease of a motor | 2 | | vehicle.
| 3 | | "Free look period" means the period of time of at least 30 | 4 | | days from the effective date of the GAP waiver until the date | 5 | | the borrower may cancel the contract without penalty, fees, or | 6 | | costs to the borrower.
| 7 | | "Guaranteed asset protection waiver" or "GAP waiver" means | 8 | | a contractual agreement that is part of, or a separate addendum | 9 | | to, a finance agreement wherein a creditor agrees for a | 10 | | separate charge to cancel or waive all or part of amounts due | 11 | | on a borrower's finance agreement in the event of a total | 12 | | physical damage loss or unrecovered theft of the motor vehicle.
| 13 | | "Insurer" means an insurance company licensed, registered, | 14 | | or otherwise authorized to do business under the insurance laws | 15 | | of this State.
| 16 | | "Motor vehicle" means self-propelled or towed vehicles | 17 | | designed for personal or commercial use, including, but not | 18 | | limited to, automobiles, trucks, motorcycles, recreational | 19 | | vehicles, all terrain vehicles, snowmobiles, campers, boats, | 20 | | personal watercraft, and motorcycle, boat, camper, and | 21 | | personal watercraft trailers.
| 22 | | "Person" includes an individual, company, association, | 23 | | organization, partnership, business trust, and corporation and | 24 | | every form of legal entity.
| 25 | | Section 15. Requirements for offering guaranteed asset |
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| 1 | | protection waivers.
| 2 | | (a) GAP waivers may be offered, sold, or provided to | 3 | | borrowers in this State in compliance with this Act.
| 4 | | (b) GAP waivers may, at the option of the creditor, be sold | 5 | | for a single payment or may be offered with a monthly or | 6 | | periodic payment option.
| 7 | | (c) Notwithstanding any other provision of law, any cost to | 8 | | the borrower for a guaranteed asset protection waiver entered | 9 | | into in compliance with the federal Truth in Lending Act and | 10 | | its implementing regulations must be separately stated and is | 11 | | not to be considered a finance charge or interest.
| 12 | | (d) A retail seller must insure its GAP waiver obligations | 13 | | under a contractual liability or other insurance policy issued | 14 | | by an insurer. A creditor, other than a retail seller, may | 15 | | insure its GAP waiver obligations under a contractual liability | 16 | | policy or other such policy issued by an insurer. Any such | 17 | | insurance policy may be directly obtained by a creditor or | 18 | | retail seller or may be procured by an administrator to cover a | 19 | | creditor's or retail seller's obligations. Retail sellers that | 20 | | are lessors on motor vehicles are not required to insure | 21 | | obligations related to GAP waivers on such leased vehicles.
| 22 | | (e) The GAP waiver remains a part of the finance agreement | 23 | | upon the assignment, sale, or transfer of such finance | 24 | | agreement by the creditor.
| 25 | | (f) Neither the extension of credit, the term of credit, | 26 | | nor the term of the related motor vehicle sale or lease may be |
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| 1 | | conditioned upon the purchase of a GAP waiver.
| 2 | | (g) Any creditor that offers a GAP waiver must report the | 3 | | sale of and forward funds received on all such waivers to the | 4 | | designated party, if any, as prescribed in any applicable | 5 | | administrative services agreement, contractual liability | 6 | | policy, other insurance policy, or other specified program | 7 | | documents.
| 8 | | (h) Funds received or held by a creditor or administrator | 9 | | and belonging to an insurer, creditor, or administrator | 10 | | pursuant to the terms of a written agreement must be held by | 11 | | such creditor or administrator in a fiduciary capacity.
| 12 | | Section 20. Contractual liability or other insurance | 13 | | policies.
| 14 | | (a) Contractual liability or other insurance policies | 15 | | insuring GAP waivers must state the obligation of the insurer | 16 | | to reimburse or pay to the creditor any sums the creditor is | 17 | | legally obligated to waive under the GAP waivers issued by the | 18 | | creditor and purchased or held by the borrower.
| 19 | | (b) Coverage under a contractual liability or other | 20 | | insurance policy insuring a GAP waiver must also cover any | 21 | | subsequent assignee upon the assignment, sale, or transfer of | 22 | | the finance agreement.
| 23 | | (c) Coverage under a contractual liability or other | 24 | | insurance policy insuring a GAP waiver must remain in effect | 25 | | unless cancelled or terminated in compliance with the |
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| 1 | | applicable insurance laws of this State.
| 2 | | (d) The cancellation or termination of a contractual | 3 | | liability or other insurance policy must not reduce the | 4 | | insurer's responsibility for GAP waivers (i) issued by the | 5 | | creditor 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 | 8 | | applicable, in writing and in clear, understandable language | 9 | | that 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 | 25 | | non-cancellable after the free look period. GAP waivers must |
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| 1 | | provide that if a borrower cancels a waiver within the free | 2 | | look period, the borrower is entitled to a full refund of the | 3 | | purchase price, provided that no benefits have been provided.
| 4 | | (b) In the event of a borrower's cancellation of the GAP | 5 | | waiver or early termination of the finance agreement after the | 6 | | agreement has been in effect beyond the free look period, the | 7 | | borrower is entitled to a refund of any unearned portion of the | 8 | | purchase price of the waiver unless the waiver provides | 9 | | otherwise. In order to receive a refund, the borrower, in | 10 | | accordance with any applicable terms of the waiver, must | 11 | | provide a written request to the creditor, administrator, or | 12 | | other party. If cancelling due to early termination of the | 13 | | finance agreement, the written request to cancel must be made | 14 | | within 90 days of the event terminating the finance agreement.
| 15 | | (c) If the cancellation of a GAP waiver occurs as a result | 16 | | of a default under the finance agreement or the repossession of | 17 | | the motor vehicle associated with the finance agreement or any | 18 | | other termination of the finance agreement, any refund due may | 19 | | be paid directly to the creditor or administrator and applied | 20 | | as 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 | 23 | | reduction of the amount owed under the finance agreement, | 24 | | unless the borrower can show that the finance agreement has | 25 | | been paid in full.
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| 1 | | Section 35. Commercial transactions exempted. Section 25, | 2 | | Section 40, and subsection (c) of Section 15 do not apply to a | 3 | | GAP waiver offered in connection with a lease or retail | 4 | | installment sale associated with a commercial transaction. | 5 | | Section 40. Enforcement. The Secretary of Financial and | 6 | | Professional Regulation may take any action that is necessary | 7 | | or appropriate to enforce the provisions of this Act and to | 8 | | protect guaranteed asset protection waiver holders in this | 9 | | State. After proper notice and opportunity for hearing, the | 10 | | Secretary 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 | 24 | | severable under Section 1.31 of the Statute on Statutes. |
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| 1 | | Section 900. The Illinois Insurance Code is amended by | 2 | | changing 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
| 6 | | administration of the Drycleaner Environmental Response Trust | 7 | | Fund under the
Drycleaner Environmental Response Trust Fund | 8 | | Act.
| 9 | | (b) This Code shall not be construed to apply to guaranteed | 10 | | asset protection waivers regulated under the Guaranteed Asset | 11 | | Protection Waiver Act. | 12 | | (Source: P.A. 90-502, eff. 8-19-97.)
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