Feb 14, 2017

GAP waiver bill passed by state Senate

A bill (A-3601/S-2209) that would provide a regulatory framework within which guaranteed asset-protection waivers may be offered in New Jersey unanimously passed the state Senate Feb. 13.

"GAP waivers," are contractual agreements entered into directly between a borrower and a finance company, and commonly used in the motor vehicle industry. GAP waivers are classified as addenda to traditional finance contracts, and are meant to protect borrowers from having to make a large lump-sum payment to the lender if their vehicles are deemed a total loss and there is a gap between the amount of money owed to the lender and the amount of money at which the insurance adjuster values the "totaled" vehicle. In the event of a total loss, insurance companies only compensate the insured for the market value of the vehicle.

A-3601/S-2209 clarifies that the "GAP waivers" are not considered insurance policies and are exempt from the insurance laws of New Jersey. Under the bill, GAP waiver agreements must disclose the name and address of the initial creditor and borrower; the purchase price and terms of the GAP waiver; that the borrower may cancel the GAP waiver during the "free-look" period; the procedure for receiving GAP waiver benefits; whether the GAP waiver may be canceled after the "free-look" period ends; that in order to receive a refund for a canceled GAP waiver, the borrower must submit a written request to the lender within 90 days of the event terminating the finance agreement; the methodology for calculating any refund of the unearned purchase price of the waiver; and that the extension of credit, finance, sale or lease may not be conditioned upon the purchase of the GAP waiver.

The goal of the bill is provide the framework for which GAP waivers can be offered in the state and it specifically differentiates waivers from the "GAP insurance" offered by insurance carriers. To that end the bill specifically states that the act does not apply to an insurance policy offered by an insurer under the insurance laws of New Jersey.

The bill passed the State Assembly78-0 in June of this year. The bill will now be sent to Gov. Chris Christie for his consideration.