On May 6, 2024, Florida enacted SB 902, clearing the way for dealers to sell excess wear and use waivers on leases and vehicle value protection agreements. The bill, which will take effect on October 1, 2024, makes Florida one of the early state adopters of substantive requirements that allow for stand-alone vehicle value protection products, which may incentivize customers to return for their future vehicle needs. By modifying provisions in the Motor Vehicle Retail Sales Finance Act on guaranteed asset protection (GAP) products, the bill expanded consumer protections for cancellation and refunds.
What is a GAP Product?
The amendment expands the definition of what is considered a GAP product. An agreement to waive or cancel the consumer's liability may be considered a GAP product regardless of whether a separate fee is incurred for the benefit. A product that waives or cancels some or all of a consumer's liability in excess of the vehicle's value will be regulated as a GAP product even if the consumer is not charged a separate fee. SB 902 also amends the definition to specify that only those products that cancel or waive the liability in the event of total physical damage or if the vehicle is the subject of an unrecovered theft will be considered a GAP product. Finally, a GAP product now includes a benefit that waives a portion of, or provides a customer with a credit toward, the purchase of a replacement motor vehicle.
The Free-Look Period for GAP Product Buyers
SB 902 establishes a "free-look" period for the benefit of the buyer of the GAP product. "Free-look period" is defined as the period of time, commencing on the effective date of the contract, during which the buyer may cancel the contract for a full refund of the purchase price. This period may not be shorter than 30 days.
GAP Product Buyer's Right to a Refund and Cancellation Fee
If a contract for a GAP product is terminated, SB 902 requires the entity refund the buyer all unearned portions of the purchase price of the contract unless the contract provides otherwise. However, a refund is not due to a customer who receives a benefit under the GAP product.
In order to receive a refund, the buyer must notify the entity of the event terminating the contract and request a refund within 90 days after the occurrence of the event terminating the contract. An entity may offer a buyer a contract that does not provide for buyer cancellation and a refund after the free-look period only if the entity also offers the buyer a bona fide option to purchase a comparable contract that provides for a refund. After the free-look period, SB 902 adds authority for the entity to deduct up to $75 in administrative fees from a refund that is issued pursuant to Fla. Stat. 520.07(11)(g).
If the termination of the GAP product occurs because of a default under the retail installment contract, the repossession of the motor vehicle associated with the retail installment contract, or any other termination of the retail installment contract, the entity may pay any refund due directly to the holder or administrator and apply the refund as a reduction of the amount owed under the retail installment contract unless the buyer can show that the retail installment contract has been paid in full.
The Vehicle Value Protection Agreements Act
SB 902 also adds Sections 520.151 through 520.156 to Florida law, creating the "Vehicle Value Protection Agreements Act," permitting providers to offer or sell stand-alone vehicle value protection agreements to consumers that are not merely one of the benefits of a GAP product.
A "vehicle value protection agreement" is defined as a contractual agreement that provides a benefit toward either the reduction of some or all of the contract holder's current finance agreement deficiency balance or the purchase or lease of a replacement motor vehicle or motor vehicle services upon the occurrence of an adverse event to the motor vehicle, including, but not limited to, loss, theft, damage, obsolescence, diminished value, or depreciation.
Any amount charged or financed for a vehicle value protection agreement is not considered a finance charge or interest. The cost must be separately stated in the finance agreement and in the vehicle value protection agreement. The extension of credit, the terms of credit, or the terms of the related motor vehicle sale or lease may not be conditioned upon the consumer's payments for or financing of any charge for a vehicle value protection agreement. However, a vehicle value protection agreement may be discounted or given at no charge in connection with the purchase of other noncredit-related goods or services.
In an apparent effort to avoid duplicative coverage and emphasize consumer value, a vehicle value protection agreement cannot be sold if its coverage is duplicative of another vehicle value protection agreement sold to a person or is duplicative of a GAP product. A copy of such vehicle value protection must be provided to the buyer within a reasonable time after the agreement is sold.
Sections 520.153 and 520.154 of the Vehicle Value Protection Agreements Act further detail the requirements and prohibitions applicable to providers of vehicle value protection agreements as well as the information required to be disclosed in the agreements. SB 902 does not regulate the maximum amount that a provider may charge for a vehicle value protection agreement or expressly impose any loan-to-value requirements.
Florida joins Alabama, Colorado, Missouri, North Carolina, Oklahoma, Texas, and Utah to become the latest state to enact legislation specifically dealing with vehicle value protection products.
Excess Wear and Use Waivers
Lastly, SB 902 creates Section 520.157 governing "excess wear and use waivers," or contractual agreements. Similar to the treatment of a GAP product discussed above, Florida emphasizes the potential benefit to the consumer independent of whether a provider charges the consumer a separate fee. In this instance, a product may be regulated as an excess wear and use waiver regardless of whether it is subject to a separate fee if the product will cancel or waive all or part of amounts that may become due under a lease agreement as a result of the excess wear and use of a motor vehicle. An excess wear and use waiver must be part of, or a separate addendum to, the lease agreement. Such waivers may also cancel or waive amounts due for excess mileage.
Lease agreements that include an excess wear and use waiver must disclose the total charge for the waiver, any exclusions or limitations on the amount of excess wear and use that may be waived under the excess wear and use waiver, and the terms, restrictions, or conditions governing cancellation of the excess wear and use waiver before the termination or expiration of the waiver, which may include an administrative fee of not more than $75. There is no free-look period provided for in the excess wear and use statutes.
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