On March 21, the Virginia governor signed SB 1325, which provides a framework within which guaranteed asset protection (GAP) waivers may be offered in the state. Among other provisions, the act (i) clarifies that any cost to the borrower for the sale of a GAP waiver, in compliance with TILA, should not be considered a finance charge or interest; (ii) states that neither the extension of credit nor the sale or lease of a motor vehicle “may be conditioned upon the purchase of a GAP waiver;” (iii) requires creditors to comply with GAP waiver obligations; (iv) requires a GAP waiver to include disclosures regarding the cancellation of the GAP waiver during a free look period; and (v) establishes requirements and restrictions for GAP waiver cancellations, including refund provisions. The act also provides that GAP waivers are not insurance and are exempt from Virginia's licensing requirements. The act is effective July 1.
Separately, on March 20, the North Dakota governor signed HB 1181, which clarifies that GAP waivers effective on or after August 1 are not insurance and are exempt from the state’s insurance laws. Among other things, the act also (i) clarifies contractual liability coverage; (ii) outlines required disclosures that must be stipulated with the sale of a GAP waiver; and (iii) specifies GAP waiver cancellation conditions and refund provisions.