BILL NUMBER: S3597

SPONSOR: BRESLIN
 
TITLE OF BILL:

An act to amend the insurance law and the personal property law, in
relation to authorizing service charges for gap waivers

 
PURPOSE:

Authorize service charges for gap waivers

 
SUMMARY OF PROVISIONS:

Insurance Law § 1101(b)(3): Notwithstanding the foregoing, the making of
an agreement pursuant to which a lessor of personal property, a creditor
making a loan or other credit transaction on personal property or, in
the absence of a waiver by the lessor or creditor, the lessor& 39;s or
creditor& 39;s assignee waives the obligation of the lessee or debtor
for the gap amount, as such term is defined in paragraph fifty-two of
subsection (a) of section one hundred seven of this chapter, shall not
constitute, or be deemed to constitute, the doing of an insurance busi-
              

ness if:

(i) the lessor or creditor or, in the creditor, the assignee waives any
and for the gap amount and the lessee or debtor is discharged from any
and all amount;absence of a waiver by the lessor or all obligations of
the lessee or debtor further obligation to pay the gap

(ii) the waiver applies only in the event of a total loss of the
personal property occasioned by its theft or physical damage;

(iii) in the event the lessor, creditor or assignee purchases lessor or
creditor gap insurance,the charge to the lessee or debtor for the waiver
does not exceed the cost of the lessor or creditor gap insurance cover-
age plus any permitted service charge; provided, however, that nothing
contained herein shall be construed to prohibit (A) the creditor or
assignee from including the charge for the waiver plus any permitted
service charge in its calculation of payments due under a retail instal-
ment contract; or (B) the lessor or assignee from including the charge
for the waiver in the capitalized cost as that term is defined in subdi-
vision eleven of section three hundred thirty-one of the personal prop-
erty law.

For purposes of this section 1101(b)(3)(iii), in the case of a new or
used motor vehicle which is subject to a retail instalment contract,
such permitted service charge may be paid to the creditor or assignee,
or to a motor vehicle dealer registered in this state pursuant to the
applicable provisions of the vehicle and traffic law.

Personal Property Law § 302A.2: If the retail instalment contract
provides that the buyer shall be responsible upon a total loss of the
vehicle occasioned by its theft or physical damage for the gap amount,
the holder, prior to the execution of the agreement, shall offer to
waive its contractual right to hold the buyer liable for the gap amount
in the event of a total loss of the vehicle occasioned by its theft or
physical damage, only if motor vehicle creditor gap insurance coverage
is available to the holder and such coverage is obtained from a
property/casualty insurance company, which has been licensed by the
superintendent of financial services of this state to write motor vehi-
cle creditor gap insurance in this state. This offer may be made contin-
gent upon the payment by the buyer of a separate charge that shall not
exceed the cost of motor vehicle creditor gap insurance covering the
retail instalment contract plus a service charge not to exceed seven
hundred fifty dollars. Nothing contained in this section shall be
construed to authorize a waiver, in connection with a transaction with
respect to which motor vehicle creditor gap insurance has not been
obtained, of a contractual right to hold the buyer liable for the gap
amount in the event of a total loss of the vehicle occasioned by its
theft or physical damage.

 
JUSTIFICATION:

NY dealers cannot offer GAP without an insurance license and pricing
restrictions. Under the current statutory scheme in New York, it is not
economical for lenders to provide gap waivers if, after a total loss of
a vehicle, the outstanding balance owed by the consumer exceeds the
value of the vehicle. This is because dealers can only charge their cost
of insurance to the consumer. This makes GAP incredibly difficult to
obtain for NY consumers. This is a problem now more than ever because
used car prices have uncharacteristically increased over 31% from 2020
to 2021, due to the current supply crisis and inflation. Based on
economic trends, prices are predicted to return to normal levels, caus-
ing the future value of today's cars to decrease dramatically. This may
cause consumers potential unforeseen financial losses in the event of a
total loss, and they do not have GAP protection for the difference. This
is extremely concerning to our New York consumers and their families. NY
is the national leader in consumer protection in almost every area
except GAP. Unlike NY, the other 49 states do not have any limitations
on dealers offering GAP. Consumers are much more protected in these
states.

 
LEGISLATIVE HISTORY:

New Bill

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect on the thirtieth day after it shall have
become a law.