Pub. 14 2015-2016 Issue 2

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 19 new jersey auto retailer W W W . N J C A R . O R G called “Glass-Steagle,” which prohibited fi- nance sources from also selling insurance pol ic ies. Howeve r, Glass-Steagle was re- pealed by the Gramm- L e a c h - B l i l e y Ac t (“GLBA”) and New Jersey’s current regula- tions were adopted in response to the GLBA. There is such a thing as a true “waiver” which would not be consid- ered insurance even under the new regula- tions, but this would exist only when the lender agrees, within the finance document, to waive the balance of a loan (or lease) upon t he oc c u r r e nc e of some contingency. In contrast to this, when a third party (not a party to the loan or lease agreement itself) agrees to indemnify the customer by paying the lender in the event of a loss, the product is credit insurance re- gardless of what it is called. NJ CAR ha s con - tacted the DOBI in order to obtain clear guidance on this issue. In addition, NJ CAR is seeking to clarify longstanding questions about the nature of the training required for a DOBI limited lines license, including how proof of training should be provided. This sit uation with GAP products should serve as a reminder to dea lersh ips t hat they cannot always assume t hat t h i rd- party F&I providers are fully familiar or compliant with New Jersey law. New Jer- sey has relatively new laws regulating “etch” and extended service agreements. Most New Jersey dealerships are aware of them, but it seems that F&I provid- ers are sometimes not up to speed with New Jersey requirements. The sa le of a non- compliant product can constitute a Consumer Fraud Act violation, so dealerships should take care to ensure that the products they sell are compliant. The new law govern- ing extended service agreements took ef- fect in July of 2014. It governs automotive ex- tended service agree- ments (often inaccu- rately called “extended warranties”), as well as “motor vehicle ancil- lary protection prod- ucts” including tire & wheel/road hazard protection, paintless dent and scratch re- moval, and windshield protection products. Under the new law, all such products must be secured by one of the following three means: 1) re-insured by a policy issued by a New Jersey licensed insurance company; 2) a loss-reserve account funded by at least 40% of the gross price paid for the product; or 3) the obligor must be a company with a net worth or stockholders’ equity of not less than $100,000.000.00. The law also mandates that all contract documents set forth specified in- formation, including the name of the pro- vider and the admin- istrator, the full con- sideration paid, terms of cancellation, and other information. The law further provides that any person who sells, or any provider who issues, a service contract that is not in compliance with the law is deemed to be jointly and severally liable for all covered contractual obligations arising from the non- compliant contract. The law gover n i ng “etch” products refers to such products as “vehicle protection products” and defines them as any “device, system or service that: (a) is installed on or applied to a vehicle; (b) is designed to prevent loss or damage to a vehicle from a specific cause or to facilitate the recovery of the ve- hicle after it has been stolen; and (c) includes a written warranty by a warrantor that pro- vides if the vehicle pro- tection product fails to prevent loss or damage to a vehicle from a specif ic cause or to facilitate the recovery of the vehicle after it has been stolen, the warranty holder shall be paid specified in- cidental costs by the warrantor.” All “warrantors” must be registered with the New Jersey Division of Consumer Affairs (DCA), andmustmain- tain and file with the DCA a “warranty re- imbursement insurance policy” which guaran- tees the performance of the warrantor All “ve- hicle protection” prod- ucts sold must provide that if the payment due under the terms of the warranty is not pro- vided by the warran- tor within sixty days a f te r proof of loss has been f i led, t he warranty holder may f i le for reimbu r se - ment d i rec t ly wit h the company issuing the war rant y reim- bursement insurance policy. Patrick Cox is NJ CAR’s Director of Legal & Regulatory Affairs and can be reached at 609.883.5056, x350 or pcox@ njcar.org.