KRS 367.708: Definitions for section -- Administrator may be utilized for compliance

with KRS 367.701 to 367.709 -- Duties of provider as to vehicle value

protection agreements -- Vehicle value protection agreement requirements.

(Effective January 1, 2027)

(1) As used in this section:

(a) "Administrator" means a person, other than a provider, that performs

administrative or operational functions relating to vehicle value protection

agreements, including the adjudication of claims or benefits requested by

contract holders;

(b) "Provider" means a person that is obligated to provide a benefit under a

vehicle value protection agreement; and

(c) "SEC" means the United States Securities and Exchange Commission.

(2) A provider may, but shall not be required to, utili ze an administrator to be

responsible for any and all of the administration of a vehicle value protection

agreement in compliance with KRS 367.701 to 367.709.

(3) A vehicle value protection agreement shall not be sold unless the contract holder

has been, o r will be, provided access to a copy of the vehicle value protection

agreement.

(4) In order to ensure faithful performance under a vehicle value protection agreement,

each provider shall comply with at least one (1) of the following paragraphs of this

subsection:

(a) A provider shall insure all of its vehicle value protection agreements under an

insurance policy that:

1. Pays or reimburses if the provider fails to perform it obligations under

any vehicle value protection agreement; and

2. Is issued by an insurer;

(b) 1. A provider shall:

a. Maintain a funded reserve account for its obligations under all of

its vehicle value protection agreements issued and outstanding in

this state, which shall:

i. Contain not less than forty percent (40%) of the gross

consideration received, less claims paid, on the sale of all in -

force vehicle value protection agreements; and

ii. Be subject to examination and review by the Attorney

General; and

b. Place a financial security deposit, in the form required by

subparagraph 2. of this paragraph, in trust with the Attorney

General that has a value of not less than the greater of the

following:

i. Five percent (5%) of the gross consideration received, less

claims paid, on the sale of all in -force vehicle value

protection agreements; or

ii. Twenty-five thousand dollars ($25,000).

2. The financial security deposit required under subparagraph 1.b. of this

paragraph shall be in the form of one (1) of the following:

a. A surety bond issued by an authorized surety;

b. Securities of the type eligible for deposit by authorized insurers in

this state;

c. Cash; or

d. A letter of credit issued by a qualified financial institution; or

(c) 1. Subject to subparagraph 2. of this paragraph, a provider shall:

a. Maintain, or togethe r with its parent company maintain, a net

worth of stockholder's equity of at least one hundred million

dollars ($100,000,000); and

b. Upon request, provide the Attorney General with a copy of the

provider's or its parent company's:

i. Except as provided i n subpart ii. of this subdivision, most

recent Form 10 -K or Form 20 -F filed with the SEC within

the last calendar year; or

ii. If the provider and its parent company does not file with the

SEC, the audited financial statements of the provider or its

parent company that show a net worth of the provider or its

parent company of at least one hundred million dollars

($100,000,000).

2. If the Form 10 -K, Form 20 -F, or audited financial statements of the

provider's parent company are used to satisfy the requiremen ts of

subparagraph 1. of this paragraph, the parent company shall agree to

guarantee the obligations of the provider under the vehicle value

protection agreements sold by the provider in this state.

(5) Except as provided in subsection (4) of this section, a provider shall not be subject

to financial security requirements relating to vehicle value protection agreements.

(6) A vehicle value protection agreement, other than a vehicle value protection

agreement offered in connection with a commercial transacti on, shall disclose the

following in writing and in clear and understandable language that is easy to read:

(a) That the following shall not be conditioned on the contract holder's purchase

of an agreement:

1. The extension of credit;

2. The terms of a loan; or

3. The terms of any related vehicle sale or lease;

(b) The name and address of:

1. The provider and contract holder; and

2. The administrator, if applicable;

(c) The terms and conditions of the agreement, including:

1. The purchase price of the agreement, if any;

2. The requirements for eligibility, conditions, and exclusions; and

3. The procedure the contract holder must follow, if any, to obtain a benefit

under t he agreement, including, if applicable, a telephone number or

website and address where the contract holder may apply for vehicle

value protection agreement benefits;

(d) That the agreement is not a contract of insurance;

(e) That the contract holder:

1. May cancel the agreement within a free look period of not less than

thirty (30) days as specified in the agreement; and

2. Will be entitled to a full refund of the purchase price paid by the

contract holder, if any, if:

a. The borrower cancels the agreemen t during the free look period;

and

b. A benefit has not been provided;

(f) Whether the agreement is cancellable after the free look period and the

conditions under which it may be canceled, if applicable, including the

procedures for requesting any refund of amounts paid;

(g) The terms, restrictions, and conditions governing a cancellation of the

agreement by the provider or the contract holder prior to the termination or

expiration of the agreement, which shall include:

1. Except as provided in subparagrap h 2. of this paragraph, the provider

shall mail a written notice of the cancellation to the contract holder's last

known address contained in the records of the provider at least five (5)

days prior to the cancellation of an agreement by the provider;

2. A provider shall not be required to provide prior notice of its

cancellation of an agreement if the cancellation is due to:

a. Nonpayment of a provider fee;

b. A material misrepresentation by the contract holder to the provider

or administrator; or

c. A sub stantial breach of duties by the contract holder under the

terms of the agreement;

3. A notice of cancellation of an agreement by a provider shall state:

a. The effective date of the cancellation; and

b. The reason for the cancellation;

4. If the cancellat ion of an agreement by a provider is not due to

nonpayment of a provider fee, the provider shall provide the contract

holder with a refund of one hundred percent (100%) of the unearned pro

rata provider fee paid by the contract holder, if any;

5. If coverage under the agreement continues after a claim, any claims paid

may be deducted from any refund; and

6. The provider may charge a reasonable administrative fee not to exceed

seventy-five dollars ($75); and

(h) The methodology for calculating any refund of the unearned purchase price of

the agreement, if any, that will be due in the event of a cancellation, including

that any refund may be reduced by claims paid.