A. In order to ensure the faithful performance of a third party obligor‘s obligations to its contract holders, each third party obligor shall furnish proof of its financial stability by complying with either of the following:
Terms Used In Virginia Code 59.1-437
- Commissioner: means the Commissioner of the Department of Agriculture and Consumer Services or his designee. See Virginia Code 59.1-435
- Complaint: A written statement by the plaintiff stating the wrongs allegedly committed by the defendant.
- contract: means a written contract or agreement for a specific duration in return for the payment of a segregated charge by the purchaser to perform the repair or replacement of any consumer product, including a motor vehicle, or indemnification for repair or replacement, for the operational or structural failure of any consumer product, including a motor vehicle, due to a defect in materials, workmanship, inherent defect, or normal wear and tear, with or without additional provisions for incidental payment of indemnity under limited circumstances, including, but not limited to, towing, rental, and emergency road service and road hazard protection. See Virginia Code 59.1-435
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Obligor: means the person who is contractually obligated to the purchaser to provide services under the extended service contract and who is (i) the original manufacturer or seller of the merchandise covered by the extended service contract, (ii) acting through or with the written consent of the original manufacturer, seller or purchaser of the merchandise covered by the extended service contract, or (iii) acting through or with the written consent of a manufacturer or seller of merchandise similar to the merchandise covered by the extended service contract. See Virginia Code 59.1-435
- Purchaser: means a person who enters into an extended service contract with an extended service contract provider. See Virginia Code 59.1-435
- State: when applied to a part of the United States, includes any of the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, and the United States Virgin Islands. See Virginia Code 1-245
1. The third party obligor shall show that it has a net worth of at least $100 million by providing the Commissioner with a copy of the third party obligor’s most recent annual audited financial statement; or
2. The third party obligor shall show a net worth of the third party obligor or its parent company of at least $100 million by providing the Commissioner with a copy of the third party obligor’s, or if the third party obligor’s financial statements are consolidated with those of its parent company, the third party obligor’s parent company’s, most recent Form 10-K or Form 20-F filed with the Securities and Exchange Commission, provided the Form 10-K or Form 20-F was filed with the Securities and Exchange Commission within the last calendar year. If the third party obligor’s parent company’s Form 10-K or Form 20-F is filed to meet the third party obligor’s financial stability requirement, then the parent company shall agree to guarantee the obligations of the third party obligor relating to service contracts sold by the third party obligor in this Commonwealth.
B. In lieu of compliance with subsection A, a third party obligor may demonstrate financial responsibility by filing with the Commissioner a copy of a liability insurance policy issued by an insurer authorized to transact business in this Commonwealth and which covers 100 percent of the obligor’s service contract liabilities, including the administration of claims and the cost for such administration. Reimbursement insurance policies filed pursuant to this section may not be cancelled by either the third party obligor or the issuing insurer without providing 60 days’ notice to the Commissioner.
C. Each service contract shall include a disclosure in substantially the form as follows or in such other form as the Commissioner directs:
“If any promise made in the contract has been denied or has not been honored within 60 days after your request, you may contact the Virginia Department of Agriculture and Consumer Services, Office of Charitable and Regulatory Programs to file a complaint.”
D. Upon receipt of a complaint by a purchaser against an obligor asserting that a promise made in a contract has been denied or has not been honored within 60 days after the purchaser’s request, the Commissioner may conduct an investigation as authorized by § 59.1-439 to determine if the obligor or its insurance company, if complying with subsection B, has improperly denied or failed to honor a purchaser’s request. If the Commissioner determines that a purchaser’s request was improperly denied or failed to be honored by an obligor or its insurance company, if complying with subsection B, the Commissioner may issue an order requiring the obligor to rectify or justify the denial or failure. In addition to the penalties provided in § 59.1-441, if the denial or failure is not rectified or sufficiently justified by the obligor, the Commissioner may (i) issue a cease and desist order requiring the obligor to cease operations in the Commonwealth until the denial or failure has been rectified; (ii) deny, suspend, or revoke the obligor’s registration; or (iii) assess a civil penalty of up to $1,000 per violation not to exceed $10,000 in the aggregate for all similar violations. Any civil penalties collected pursuant to this subsection shall be payable to the State Treasurer for deposit to the general fund. If the Commissioner elects to assess such a civil penalty and an obligor does not pay the civil penalty within 60 days of its assessment, the Commissioner may (a) issue a cease and desist order requiring the obligor to cease operations in the Commonwealth until the civil penalty has been paid or (b) deny, suspend, or revoke the obligor’s registration.