Introduced

The act repeals the existing provisions relating to motor vehicle extended service contracts found in Chapter 407 and transplants the provisions into Chapter 385. With respect to motor vehicle extended service contracts, the act defines the term "fronting company" as a dealer that authorizes a third-party administrator or provider to use its name or business to evade or circumvent a sale, an offer for sale, or a solicitation of a sale of a service contract to a consumer. The act further prohibits an unlicensed motor vehicle or boat dealer from selling a motor vehicle service contract to a consumer and prohibits a dealer from acting as a fronting company. The act further creates similar provisions for service contracts, to wit, the act prohibits persons from issuing or selling service contracts without registering and paying applicable fees to the Department of Insurance; sets forth financial reserve requirements for service contract providers; and requires providers to furnish written statements to consumers outlining their obligations, conveying terms and restrictions.

The act requires service contract providers to maintain accurate records of every transaction for a period of at least three years after the specified period of coverage has expired. Records must be made available to the department upon request.

These provisions are similar to those contained in SS/SCS/SB 895, SB 991 and HB 1626 (2006).

STEPHEN WITTE