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Three States Pass GAP Laws

July 13, 2017

By Gregory Arroyo

AUGUSTA, Maine — With Governor Paul LePage’s signing of S.P. 531 into law on June 12 — legislation that clarifies what GAP is and does, and defines how it is sold — the Guaranteed Asset Protection Alliance is now two states away from reaching its 2017 goal.

Set to take effect on Jan. 1, 2018, Maine’s new law mirrors the model act developed by the GAPA, an alliance of GAP providers, underwriters and finance sources that is managed by Tallahassee, Fla.-based law firm Meenan P.A. Aside from the consumer protections it puts in place and the tools its gives state regulators to discipline bad actors, Maine’s new law offers GAP providers protections as well.

“In some cases, GAP is regulated by just an opinion offered by the state’s department of insurance or the insurance commissioner, but it’s only good as long as that person is in office,” said Rob Berger, president of the GAPA and executive vice president and director of operations for F&I product provider Wise F&I. “But commissioners get voted out, and opinions change. That’s why GAPA goes into states that might already allow GAP from an opinion. Once GAP gets into the books, an insurance commissioner can’t say, ‘I don’t want it.’ So it protects the product.”

Maine was one of four states the GAPA targeted this year, Berger said. Alabama, another state targeted by the alliance, passed similar legislation that was signed into law by Governor Kay Ivey on May 26. Remaining is New Jersey and Wisconsin.

The Texas Legislature also passed a GAP bill in mid-May — legislation signed into law by Governor Greg Abbott on May 26. Berger said the bill, Senate Bill 1052, wasn’t initiated by the GAPA. Set to take effect Sept. 1, the legislation amends current state law governing the sales of debt-cancellation products, allowing GAP to be sold in connection with the financing of motorsports and powersports vehicles. It also allows the product to be sold on lease transactions.

The new Texas GAP law also states that finance sources can satisfy their GAP waiver refund obligations by providing written instructions to dealers and GAP administrators, and by ensuring that refunds or credits are made no later than 60 days after the termination of a debt-cancellation agreement.

The main thrust of the GAPA’s model act is to clarify that a GAP debt waiver is not insurance, according to Meenan P.A.’s Timothy J. Meenan. It also clarifies the roles of the dealer, the administrator and the creditor, ensures that GAP waivers contain clear coverage and disclosures as well as the correct structure to ensure consumers get the proper amount waived after their vehicle is totaled.

Considered one of F&I’s core products, GAP is designed to protect consumers by paying the difference between the value of their vehicle at the time it’s totaled (or stolen and not recovered) and the balance owed on the loan. For dealers, the product puts consumers who suffered a total loss of their vehicle back in the market for a new car.

Maine’s law states that a GAP waiver must either be included in the auto finance agreement or attached to it as an addendum. It also states that the waiver may be sold for a single or monthly payment, but “may not be considered a finance charge or interest” when disclosed in compliance with the Truth in Lending Act. The new law also states that the waiver must remain part of the finance contract when the contract is assigned, sold or transferred.

As for consumer protections, Maine’s new law requires that GAP waivers sold in the state include a 30-day “free-look” period in which the borrower can cancel the waiver and receive a full refund. The waiver contract must also provide clear instructions on how to obtain waiver benefits, and prohibits dealers and other creditors from requiring that consumers purchase the protection to obtain credit or to secure better terms.

Additionally, Maine’s GAP law says a consumer is entitled to a refund of any unearned portion of the purchase price of the waiver if it is canceled or the finance agreement is terminated early. If the latter happens, the law states that “the borrower must provide a written request within 90 days of the event terminating the finance agreement” to receive that refund. The waiver must also disclose the method for calculating the amount of the refund.

Berger said the alliance’s lobbying efforts are already in full swing in New Jersey and Wisconsin, noting that there are still more than 20 other states that have yet to define GAP as a waiver through legislation. Before the end of the year, he added, GAPA will create a new list of states to target in 2018.


  1. 1. F&I Dude [ July 13, 2017 @ 02:03PM ]

    Little known fact - consumers can get GAP through their own insurance company for around $10 per year. So even foolish people who choose to finance their vehicle for 84 months would pay a maximum of around $100 over the 7-year term. Yet, plenty of people are foolish enough to agree to $800 financed over the term of their contract... absolutely mind boggling.

  2. 2. Gerry White [ July 13, 2017 @ 02:26PM ]

    F&I Dude - please name the top 3 insurance companies that sell GAP on an insurance policy for around $10 per year?? Also, if true, why don't they advertise as such?

  3. 3. Larry Wenger [ July 13, 2017 @ 02:49PM ]

    Every time I ask my insurance company, they say no

  4. 4. Marty Heacock [ July 13, 2017 @ 03:00PM ]

    F&I Dude - Another fact, the gap from an insurance policy does not typically coverage any negative equity that you add to your new auto loan, as well as the collision deductible. If a person has a lot of negative equity the only way to guaranty coverage for the term of the loan is to add the gap to the contract. If they change insurance companies the new company may not offer gap or only offer it on new vehicles. I read on one insurance companies web site that if you have negative equity they recommended that you buy gap from the dealer! I even once sold a gap policy to an insurance agent after I explained the difference. So cheaper isn't always better.

  5. 5. Daryl Libby [ July 13, 2017 @ 04:20PM ]

    plus thew insurance companies like USAA only cover up to 125 % LTV .Franchise stores are 150%.

  6. 6. Leon [ July 13, 2017 @ 06:44PM ]

    We had a massive hail storm in the South Texas area last spring and plenty of folks learned a very expensive lesson by not having gap insurance. Cheaper is not always better like they say in boxing "Protect yourself at all times".

  7. 7. F&I Dude [ July 14, 2017 @ 03:58PM ]

    Gerry - I can't name three, but I will say with certainty that Ameriprise - that I got through Costco, offered me GAP for $5 for six months. And Marty - good point - I did not roll in any negative equity, but it would be wise to speak to your insurance company to make sure you know what is covered.

  8. 8. Marty Heacock [ July 15, 2017 @ 08:06PM ]

    F & I Dude- are you in the F & I dept of a store? If so why wouldn't you buy your own gap product?

  9. 9. F&I Dude [ July 18, 2017 @ 01:27PM ]

    Hi Marty - I'll put it like this... there are plenty of drug dealers who don't use the drugs they sell. They know what's in them and how overpriced they are - not to mention some can kill you (not weed).

  10. 10. Eric Morgan [ July 22, 2017 @ 10:38AM ]

    F&I Dude. The insurance companies that sell gap also will collect the deductible in the event of a total loss. My gap pays up to 1000 dollar deductible. Let alone the issue of conflict of interest putting your gap with the insurance company.

    Gap was invented BECAUSE of the insurance industry.

  11. 11. Jim Crane [ July 24, 2017 @ 06:21AM ]

    Also the insurance company is going to fix the vehicle rather than total it to save money, plus you now have a "Bad Car Fax" vehicle which is worth considerably less for trade in etc.

  12. 12. David [ August 07, 2017 @ 11:56AM ]

    F&I Dude, what happens if you lose your insurance or change insurance companies??? Game over Dude!

  13. 13. Real F&I Dude [ September 19, 2017 @ 03:19PM ]

    F&I Dude , You are a smuck

  14. 14. Kevin nolan [ February 17, 2018 @ 11:02AM ]

    If i want to trade my vehicle in for a new vehicle does gap ins or gap waiver cover the negative equity?
    Or does it have to be a loss claim?

  15. 15. Kevin nolan [ February 17, 2018 @ 11:04AM ]

    Will gap ins or gap waiver pay negative equity if i want to trade my vehicle for a new vehicle?

  16. 16. CHANDRA MACK [ June 27, 2018 @ 12:46PM ]


  17. 17. Bren [ August 17, 2018 @ 01:00PM ]

    In the state of Maine, is there a maximum amount dealers can charge for GAP?


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