policies. A. As used in this section: 1. “Administrator” means a person, other than an insurer or creditor that performs administrative or operational functions pursuant to debt waiver programs; 2. “Borrower” means a debtor, retail buyer, or lessee, under a finance agreement; 3. “Creditor” means: a. the lender in a loan or credit transaction, b. the lessor in a lease transaction, c. any retail seller of motor vehicles, d. the seller in commercial retail installment transactions, or e. the assignees of any of the foregoing to whom the credit obligation is payable; and 4. “Debt waiver” includes, but is not limited to: a. “guaranteed asset protection waivers” or “GAP waivers” means a contractual agreement wherein a creditor agrees, with or without a separate charge, to cancel or waive all or part of amounts due on a borrower’s financial agreement in the event of a total physical damage loss or unrecovered theft of the motor vehicle, which an agreement shall be part of, or as a separate addendum to, the financial agreement. A GAP waiver may also provide, with or without a separate charge, a benefit that waives an amount or provides a borrower with a credit towards the purchase of a replacement motor vehicle, b. “excess wear and use waiver” means a contractual agreement wherein a creditor agrees, with or without a separate charge, to cancel or waive all or part of amounts that may become due under a borrower’s lease agreement as a result of excessive wear and use of a motor vehicle, which an agreement shall be part of, or as a separate addendum to, the lease agreement. Excess wear and use waivers may also cancel or waive amounts due for excess mileage, and c. other products as approved by the Insurance Commissioner. B. 1. No administrator or creditor operating as an administrator shall perform or engage in any administrative or operational functions of a debt waiver program without first registering with the Insurance Department. Registration shall be renewed annually by July 15 of each calendar year. All registrations shall be filed and fees shall be paid electronically in the manner and form prescribed by the Commissioner. 2. An administrator or a creditor operating as an administrator shall electronically file an updated registration within thirty (30) days of any change of name, address, or email address. 3. Every administrator or creditor, upon receipt of any inquiry from the Commissioner, shall furnish the Commissioner with an adequate response to the inquiry within twenty (20) days from the date of receipt of the inquiry. C. As required for offering debt waivers: 1. A retail seller shall insure its debt waiver obligations under a contractual liability or other insurance policy issued by an insurer. A creditor other than retail sellers may insure its debt waiver obligations under a contractual liability policy or other such policy issued by an insurer. Any such insurance policy may be directly obtained by a creditor or retail seller or may be obtained by an administrator to cover a creditor’s or retail seller’s obligations. However, retail sellers that are lessors on motor vehicles are not required to insure obligations related to debt waivers on such leased motor vehicles; 2. The debt waiver remains a part of the finance agreement upon the assignment, sale, or transfer of such finance agreement by the creditor; 3. Any creditor that offers a debt waiver shall report the sale of, and subsequently forward the funds due to, the designated party or parties; and 4. Funds received or held by a creditor or administrator that belong to an insurer, creditor, or administrator shall be held by such creditor or administrator in a fiduciary capacity. D. Contractual Liability or Other Insurance Policies. 1. Contractual liability or other insurance policies insuring debt waivers shall state the obligation of the insurer to reimburse or pay to the creditor any sums the creditor is legally obligated to waive under a debt waiver. 2. Coverage under a contractual liability or other insurance policy insuring a debt waiver shall also cover any subsequent assignee upon the assignment, sale, or transfer of the finance agreement. 3. Coverage under a contractual liability or other insurance policy insuring a debt waiver shall remain in effect unless canceled or terminated in compliance with applicable insurance laws of this state. 4. The cancelation or termination of a contractual liability or other insurance policy shall not reduce the insurer’s responsibility for debt waivers issued by the creditor prior to the date of cancelation or termination and for which the premium has been received by the insurer. E. Debt waivers shall disclose in writing and in clear, understandable language the following: 1. The name and address of the initial creditor and the borrower at the time of sale and identity of any administrator if different from the creditor; 2. The purchase price, if any, and the terms of the debt waiver including without limitation, the requirements of protection, conditions, or exclusions associated with the debt waiver; 3. That the borrower may cancel the debt waiver within a free look period, as specified in the debt waiver, and will be entitled to a full refund of the purchase price paid by the borrower, if any, as long as no benefits have been provided; 4. The procedures the borrower shall follow, if any, to obtain debt waiver benefits under the terms and conditions of the debt waiver including, if applicable, a telephone number or website and address where the borrower may apply for debt waiver benefits; 5. Whether or not the debt waiver may be canceled after the free look period and the conditions under which it may be canceled or terminated including the procedures for requesting any refund of amounts paid; 6. That in order to receive any refund due in the event of a borrower’s cancelation of the debt waiver, the borrower, in accordance with the term of the debt waiver, shall provide a written request to cancel to the creditor, administrator, or other such party. If the cancelation of a debt waiver is due to an early termination of the finance agreement and no benefit has been or will be provided, then the borrower, in accordance with the terms of the debt waiver, shall provide a written request to cancel to the creditor or administrator within ninety (90) days of the occurrence of the event terminating the finance agreement; 7. The methodology for calculating any refund of the unearned purchase price of the debt waiver, if any, shall be due in the event of cancelation of the debt waiver or early termination of a finance agreement; and 8. That neither the extension of credit, the terms of the credit, nor the terms of the related motor vehicle sale or lease, may be conditioned upon the borrower’s purchase of a debt waiver. F. Cancelation. 1. Debt waiver agreements may be cancelable or non-cancelable following the free look period. Debt waivers shall provide the borrower, if a borrower cancels a debt waiver within the free look period, a full refund of the amount the borrower paid, if any, as long as no benefits have been provided. 2. In the event of a borrower’s cancelation of the debt waiver or upon the early termination of the finance agreement after the debt waiver has been in effect beyond the free look period, the borrower may be entitled to a refund of the amount the borrower paid of the unearned portion of the purchase price, if any, minus a cancelation fee not to exceed Seventy-five Dollars ($75.00), if no benefit has been or will be provided. In order to receive any refund due in the event of a borrower’s cancellation of the debt waiver, the borrower shall provide a written request to cancel, in accordance with the terms of the debt waiver, to the creditor or administrator. If the cancelation is due to the early termination of the finance agreement, then the borrower, in accordance with the terms of the debt waiver, shall provide a written request to cancel to the creditor or administrator within ninety (90) days of the occurrence of the event terminating the finance agreement. 3. If the cancelation of a debt 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, unless the borrower can show that the finance agreement has been paid in full. G. Exempt Transactions. 1. Debt waivers offered by state or federal banks or credit unions in compliance with the applicable state or federal law are exempt from Section 140.2 et seq. of this title. 2. Subsection E of this section and Section 140.6 of this title shall not apply to debt waivers offered in connection with commercial transactions.
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