Michigan Laws 492.25 – Offering, selling, or providing guaranteed asset protection waiver; requirements; contractual liability or other insurance policy
Current as of: 2023 | Check for updates
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Terms Used In Michigan Laws 492.25
- Administrator: means a person, other than a creditor or insurer, that performs administrative or operational functions in connection with a guaranteed asset protection waiver program. See Michigan Laws 492.23
- Borrower: means a person that purchases, agrees to purchase, leases, or agrees to lease a motor vehicle. See Michigan Laws 492.23
- Contract: A legal written agreement that becomes binding when signed.
- Creditor: means a person that extends credit to a borrower in connection with the purchase of a motor vehicle; an assignee of that person; a lessor of a motor vehicle; or an assignee of that lessor. See Michigan Laws 492.23
- Fiduciary: A trustee, executor, or administrator.
- Finance agreement: means a loan, lease, or installment sale agreement for a motor vehicle. See Michigan Laws 492.23
- Finance charge: The total cost of credit a customer must pay on a consumer loan, including interest. The Truth in Lending Act requires disclosure of the finance charge. Source: OCC
- Guaranteed asset protection waiver: means a contractual agreement in which a creditor agrees for a separate charge to cancel or waive all or part of amounts due on a borrower's finance agreement in the event of a total physical damage loss or unrecovered theft of a motor vehicle. See Michigan Laws 492.23
- Installment seller: means that term as defined in section 2 of the motor vehicle sales finance act, MCL 492. See Michigan Laws 492.23
- Insurer: means an authorized insurer as defined in section 108 of the insurance code of 1956, 1956 PA 218, MCL 500. See Michigan Laws 492.23
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Motor vehicle: means a self-propelled or towed device that transports people or property for personal or commercial use. See Michigan Laws 492.23
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Retail seller: means that term as defined in section 2 of the retail installment sales act, MCL 445. See Michigan Laws 492.23
- state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories belonging to the United States; and the words "United States" shall be construed to include the district and territories. See Michigan Laws 8.3o
- Truth in Lending Act: The Truth in Lending Act is a federal law that requires lenders to provide standardized information so that borrowers can compare loan terms. In general, lenders must provide information on Source: OCC
(1) All of the following apply to offering, selling, or providing a guaranteed asset protection waiver to a borrower in this state:
(a) Beginning 180 days after the effective date of this act, a creditor that offers, sells, or provides a guaranteed asset protection waiver in this state must comply with this act.
(b) A guaranteed asset protection waiver must be part of, or a separate addendum to, the finance agreement for the motor vehicle.
(c) At the option of the creditor, a creditor may sell a guaranteed asset protection waiver for a single payment or may offer a monthly or periodic payment option for a guaranteed asset protection waiver.
(d) Any cost to a borrower for a guaranteed asset protection waiver entered into in compliance with the truth in lending act, 15 USC 1601 to 1667f, and the regulations promulgated under that act, 12 C.F.R. part 226, must be separately stated and is not considered a finance charge or interest.
(e) Except as provided in subdivision (f), an installment seller or retail seller must insure its guaranteed asset protection waiver obligations under a contractual liability or other insurance policy issued by an insurer. A creditor that is not an installment seller or retail seller may insure its guaranteed asset protection waiver obligations under a contractual liability policy or other insurance policy issued by an insurer. Any creditor may obtain an insurance policy described in this subdivision directly, or an administrator may obtain that policy on behalf of that creditor.
(f) An installment seller or retail seller that is a lessor of a motor vehicle is not required to insure its guaranteed asset protection waiver obligation on the leased vehicle under subdivision (e).
(g) A guaranteed asset protection waiver contained in a finance agreement remains a part of that contract if the creditor assigns, sells, or transfers that contract.
(h) A creditor shall not condition an extension of credit, the term of credit, or the term of a related motor vehicle sale or lease on the purchase of a guaranteed asset protection waiver.
(i) Any creditor that offers guaranteed asset protection waivers must report all sales of those waivers, and forward any payments received on those sales, to the designated party, if any, prescribed in any applicable administrative services agreement, contractual liability policy, other insurance policy, or other specified program documents.
(j) A creditor or administrator that receives or holds money that belongs to an insurer under the terms of a written agreement for insurance described in subdivision (e) must hold that money in a fiduciary capacity.
(2) All of the following apply to a contractual liability or other insurance policy described in subsection (1)(e):
(a) A contractual liability or other insurance policy insuring a guaranteed asset protection waiver must state the obligation of the insurer to reimburse or pay to the creditor any amount the creditor is legally obligated to waive under the guaranteed asset protection waiver issued by the creditor and purchased or held by the borrower.
(b) Coverage under a contractual liability or other insurance policy insuring a guaranteed asset protection waiver must also cover any subsequent assignee if the finance agreement is assigned, sold, or transferred.
(c) Coverage under a contractual liability or other insurance policy insuring a guaranteed asset protection waiver must remain in effect unless canceled or terminated in compliance with the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.
(d) The cancellation or termination of a contractual liability or other insurance policy must not reduce the insurer’s responsibility for guaranteed asset protection waivers issued by the creditor before the date of cancellation or termination and for which the insurer has received premiums.