LRB-4609/1
ARG:ahe
2017 - 2018 LEGISLATURE
November 22, 2017 - Introduced by Representatives Petersen, Kuglitsch and
Katsma, cosponsored by Senator Craig. Referred to Committee on Financial
Institutions.
AB663,1,7 1An Act to repeal 429.104 (13) (a) and 429.204 (2) and (3); to renumber and
2amend
429.204 (1); to consolidate, renumber and amend 429.104 (13)
3(intro.) and (b); to amend 30.53 (title), 429.104 (13m) and 429.205 (1) (c); to
4repeal and recreate
424.201 (3); and to create 23.33 (2) (dm) 5., 23.335 (5)
5(g), 30.53 (5), 218.0148, 350.12 (3) (c) 5. and 429.104 (13k) of the statutes;
6relating to: guaranteed asset protection products sold in connection with
7vehicle credit sales, loans, and consumer leases.
Analysis by the Legislative Reference Bureau
This bill provides that guaranteed asset protection (gap) waivers may be offered
and sold in connection with the credit sale or lease of a vehicle and that gap waivers
are not insurance.
Current law imposes certain requirements, including various disclosure
requirements, on the lease to an individual of a motor vehicle that is used primarily
for personal, family, household, or agricultural purposes; that is for a term of more
than four months; and that has a total lease obligation, excluding any option to
purchase, of not more than $25,000 (consumer lease). If applicable, a consumer lease
must conspicuously disclose that the lessee is responsible for all or part of the “gap
amount.” Gap amount is defined as the difference between the amount to be paid by
the lessee under the consumer lease in the event of total loss or destruction of the

leased vehicle during the lease term and the amount received by the lessor from
insurance proceeds or other sources as a result of the vehicle's loss or destruction.
A lessor under a consumer lease may waive its right to hold a lessee liable for the gap
amount, and may include a separate charge in the consumer lease for this waiver,
if certain requirements are satisfied, including that the charge is conspicuously
disclosed to the lessee. A consumer lease may not be conditioned on the lessee's
agreement to obtain insurance or purchase a waiver covering the gap amount. A
lessor's waiver of its right to recover the gap amount, if made without separate
charge, is not property insurance and is excluded from the credit insurance
provisions of the Wisconsin Consumer Act (WCA), which govern insurance to satisfy
a debt in connection with a consumer credit transaction.
Current law also imposes certain requirements, including various disclosure
requirements, on a retail installment sale of a motor vehicle for personal, family, or
household use, and the retail installment contract must be in writing and signed by
the buyer. A “retail installment contract" means a contract to sell a motor vehicle at
retail in which the price of the motor vehicle is payable in one or more installments
over time and in which the dealer has retained title to, or taken a security interest
in, the vehicle. A sales finance company that acquires a retail installment contract
from a dealer must provide written notice to the buyer of the acquisition and provide
a statement of the contract's terms similar to that required of the dealer. A “sales
finance company" includes a dealer that sells or leases motor vehicles under retail
installment contracts or consumer leases and any person engaged in the business of
purchasing or otherwise acquiring retail installment contracts or consumer leases
from a dealer or lessor.
This bill provides that gap waivers may be offered and sold to borrowers in
compliance with the requirements set forth in the bill. A gap waiver is defined as a
contractual obligation under 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. A creditor is
defined as a sales finance company (which, as discussed above, may include a motor
vehicle dealer), a lessor under a consumer lease, or any other lender that extends
credit to a buyer for the purchase of a motor vehicle from a dealer, but does not include
a state or federally chartered financial institution. A finance agreement is defined
as a retail installment contract, a consumer lease, or a loan agreement in which a
creditor extends credit for the purchase of a motor vehicle. A borrower is defined as
a buyer of a motor vehicle under a retail installment contract; a lessee under a
consumer lease; or any other debtor to whom a creditor extends credit for the
purchase of a motor vehicle.
Under the bill, a creditor may not require a borrower to purchase a gap waiver.
A creditor also may not offer or sell a gap waiver to a borrower unless certain
conspicuous written disclosures are provided prior to or concurrent with the
execution of the gap waiver agreement, including the following: 1) that the purchase
of the gap waiver is optional and that the transaction may not be conditioned on the
purchase of a gap waiver; 2) the cost and terms of the gap waiver; and 3) the
procedure the borrower must follow to obtain gap waiver benefits. A borrower

desiring a gap waiver must indicate in writing, after receiving these disclosures, the
borrower's desire to purchase a gap waiver.
Under the bill, a gap waiver may be canceled by the borrower at any time
without penalty or fee and terminates upon the occurrence of specified events,
including payment in full by the borrower of the related credit transaction or any
other event specified in the gap waiver. If the cancellation or termination of the gap
waiver occurs within 30 days after purchasing the gap waiver, the borrower is
generally entitled to a full refund or credit. The borrower is generally entitled to a
partial refund or credit if the cancellation or termination occurs thereafter.
Under the bill, a gap waiver must be part of, or a separate addendum to, the
finance agreement for the motor vehicle. Any cost to the borrower for a gap waiver
entered into in compliance with federal credit laws must be separately stated and is
not considered a finance charge or interest. A gap waiver may be assigned and the
gap waiver remains a part of the finance agreement upon the assignment, sale, or
transfer of the finance agreement by the creditor.
The bill specifies that gap waivers are not insurance and the insurance laws do
not apply to them. The bill also specifies that a creditor offering or selling gap
waivers must comply with any applicable requirement under the WCA, but further
specifies that gap waivers are excluded from the credit insurance provisions of the
WCA. The provisions of the bill do not apply to a borrower who purchases a motor
vehicle under a retail installment contract primarily for business or commercial
purposes and not for personal, family, or household use. However, the bill further
specifies that a gap waiver offered or sold in conjunction with the purchase of a motor
vehicle to be used primarily for business or commercial purposes, or in conjunction
with the lease of a motor vehicle that is not a consumer lease, is not insurance.
The provisions of the bill replace provisions of current law relating to the offer
and sale of gap waivers in connection with consumer leases.
The bill also specifies that gap waivers may be offered and sold in connection
with the credit sale or lease of trailers, all-terrain vehicles, off-road motorcycles,
snowmobiles, and boats or other watercraft.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB663,1 1Section 1. 23.33 (2) (dm) 5. of the statutes is created to read:
AB663,4,22 23.33 (2) (dm) 5. Any all-terrain vehicle or utility terrain vehicle dealer or
3creditor may offer or sell guaranteed asset protection waivers in connection with the
4retail sale or lease of all-terrain vehicles or utility terrain vehicles in this state if the
5dealer or creditor complies with the same requirements applicable with respect to
6motor vehicles under s. 218.0148. Any guaranteed asset protection waiver offered

1or sold under this subdivision shall be treated the same as one offered or sold under
2s. 218.0148, including that the guaranteed asset protection waiver is not insurance.
AB663,2 3Section 2. 23.335 (5) (g) of the statutes is created to read:
AB663,4,104 23.335 (5) (g) Any off-highway motorcycle dealer or creditor may offer or sell
5guaranteed asset protection waivers in connection with the retail sale or lease of
6off-highway motorcycles in this state if the dealer or creditor complies with the same
7requirements applicable with respect to motor vehicles under s. 218.0148. Any
8guaranteed asset protection waiver offered or sold under this paragraph shall be
9treated the same as one offered or sold under s. 218.0148, including that the
10guaranteed asset protection waiver is not insurance.
AB663,3 11Section 3. 30.53 (title) of the statutes is amended to read:
AB663,4,13 1230.53 (title) Certificate of origin; requirements; contents; guaranteed
13asset protection waivers
.
AB663,4 14Section 4. 30.53 (5) of the statutes is created to read:
AB663,4,2115 30.53 (5) Guaranteed asset protection waivers. Any dealer in boats or creditor
16may offer or sell guaranteed asset protection waivers in connection with the retail
17sale or lease of boats in this state if the dealer or creditor complies with the same
18requirements applicable with respect to motor vehicles under s. 218.0148. Any
19guaranteed asset protection waiver offered or sold under this subsection shall be
20treated the same as one offered or sold under s. 218.0148, including that the
21guaranteed asset protection waiver is not insurance.
AB663,5 22Section 5. 218.0148 of the statutes is created to read:
AB663,4,24 23218.0148 Guaranteed asset protection agreements. (1) Definitions. In
24this section:
AB663,5,3
1(a) “Administrator" means a person, other than an insurer or creditor, that
2performs administrative or operational functions pursuant to guaranteed asset
3protection waiver programs.
AB663,5,64 (b) “Borrower" means a retail buyer who purchases a motor vehicle under a
5retail installment contract, a lessee, or any other debtor to whom a creditor extends
6credit for the purchase of a motor vehicle.
AB663,5,117 (c) “Creditor" means a sales finance company, including any motor vehicle
8dealer described in s. 218.0101 (34) (b), a lessor, or any other lender that extends
9credit to a retail buyer for the purchase of a motor vehicle, but does not include a
10depository institution, as defined in 12 USC 1813 (c) (1), or any state or federal credit
11union.
AB663,5,1212 (d) “Finance agreement" means any of the following:
AB663,5,1313 1. A retail installment contract.
AB663,5,1514 2. A loan agreement in which a creditor extends credit to a retail buyer for the
15purchase of a motor vehicle.
AB663,5,1616 3. A consumer lease.
AB663,5,2117 (e) “Guaranteed asset protection waiver" means a contractual obligation under
18which a creditor agrees, for a separate charge, to cancel or waive all or part of
19amounts due on a borrower's finance agreement in the event of a total physical
20damage loss or unrecovered theft of the motor vehicle specified in the finance
21agreement.
AB663,6,2 22(2) Guaranteed asset protection waivers authorized. (a) Subject par. (b),
23guaranteed asset protection waivers may be offered and sold to borrowers in this
24state in compliance with the requirements under this section. A guaranteed asset

1protection waiver must be part of, or a separate addendum to, the finance agreement
2for the motor vehicle.
AB663,6,43 (b) A creditor may not require a borrower to purchase a guaranteed asset
4protection waiver.
AB663,6,65 (c) Guaranteed asset protection waivers may, at the option of the creditor, be
6offered and sold upon a single payment or with required periodic payments.
AB663,6,97 (d) A guaranteed asset protection waiver may be assigned and the guaranteed
8asset protection waiver remains a part of the finance agreement upon the
9assignment, sale, or transfer of the finance agreement by the creditor.
AB663,6,1310 (e) Notwithstanding any other provision of law, any cost to the borrower for a
11guaranteed asset protection waiver entered into in compliance with the federal
12Truth in Lending Act, 15 USC 1601 et seq., and regulations adopted under that act,
13shall be separately stated and is not considered a finance charge or interest.
AB663,6,2214 (f) A retail seller shall insure its guaranteed asset protection waiver obligations
15under a contractual liability or other insurance policy issued by an insurer. A
16creditor, other than a retail seller, may insure its guaranteed asset protection waiver
17obligations under a contractual liability policy or other such policy issued by an
18insurer. Any such insurance policy may be directly obtained by a creditor or retail
19seller or may be procured by an administrator to cover a creditor's or retail seller's
20obligations. However, if a retail seller is also a lessor, the retail seller is not required
21to insure obligations related to guaranteed asset protection waivers on motor
22vehicles leased under a consumer lease.
AB663,7,223 (g) Any creditor that offers a guaranteed asset protection waiver shall report
24the sale of, and forward funds received on, all guaranteed asset protection waivers
25to the designated party, if any, prescribed in any applicable administrative services

1agreement, contractual liability policy, other insurance policy, or other specified
2program documents.
AB663,7,53 (h) Funds received or held by a creditor or administrator and belonging to an
4insurer, creditor, or administrator, pursuant to the terms of a written agreement,
5shall be held by the creditor or administrator in a fiduciary capacity.
AB663,7,116 (i) Any borrower or potential borrower desiring a guaranteed asset protection
7waiver shall give a specific, separately signed, affirmative written indication of the
8borrower's or potential borrower's desire to purchase a guaranteed asset protection
9waiver after receiving the disclosures required in sub. (3). A separate indication
10includes a signed, written, affirmative indication within a guaranteed asset
11protection waiver that is an addendum to the finance agreement.
AB663,7,2012 (j) A creditor may, as a provision within a guaranteed asset protection waiver,
13provide a discount or credit, or may waive or cancel an additional amount, as an
14incentive for purchasing, leasing, or financing a replacement vehicle. However, the
15creditor shall require the borrower to use the benefit on a purchase or lease from the
16retail seller that sold the original vehicle to the borrower, or with the creditor that
17financed the purchase or lease of the original vehicle. Inclusion of this provision does
18not cause the guaranteed asset protection waiver to be considered insurance.
19Notwithstanding any other provision of law, this paragraph also applies to any state
20or federally chartered bank or credit union.
AB663,7,25 21(3) Disclosure requirements for offering guaranteed asset protection
22waivers.
(a) No creditor may offer or sell to a borrower a guaranteed asset protection
23waiver in this state unless all of the following conspicuous written disclosures are
24provided prior to or concurrent with the execution of the guaranteed asset protection
25waiver agreement:
AB663,8,4
11. That the purchase of the guaranteed asset protection waiver is optional and
2that neither the extension of credit, nor the terms of the credit, nor the terms of the
3related motor vehicle sale or lease may be conditioned upon the purchase of the
4guaranteed asset protection waiver.
AB663,8,75 2. The cost and terms of the guaranteed asset protection waiver, including
6terms relating to the borrower's right to cancel the waiver and obtain a full or partial
7refund as provided under sub. (4).
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