Senate File 619 S-3194 Amend Senate File 619 as follows: 1 1. By striking everything after the enacting clause and 2 inserting: 3 < Section 1. Section 523C.1, Code 2019, is amended to read 4 as follows: 5 523C.1 Definitions. 6 As used in this chapter , unless the context otherwise 7 requires: 8 1. “Commissioner” means the commissioner of insurance. 9 2. “Custodial account” means an account established by 10 agreement between a licensed service company and a custodian 11 under section 523C.5 . 12 3. “Custodial agreement” means an agreement entered into 13 between a licensed service company and a custodian under 14 section 523C.5 . 15 4. “Custodian” means an institution meeting the requirements 16 established by the commissioner which institution has entered 17 into a custodial agreement or reserve account agreement with a 18 licensed service company. 19 5. “Depository” means an institution designated by the 20 commissioner as an authorized custodian for purposes of 21 sections 523C.5 and 523C.11 . 22 6. 2. “Licensed service company” means a service company 23 which is licensed by the commissioner pursuant to this chapter . 24 3. “Maintenance agreement” means a contract of any duration 25 that provides for scheduled maintenance to property. 26 4. “Motor vehicle” means any self-propelled vehicle subject 27 to registration under chapter 321. 28 5. “Motor vehicle manufacturer” means any of the following: 29 a. A person who manufactures or produces motor vehicles 30 and sells the motor vehicles under the person’s trade name or 31 label. 32 b. A person who is a wholly owned subsidiary of any person 33 who manufactures or produces motor vehicles. 34 c. A person who holds a one hundred percent ownership 35 -1- SF619.2066 (1) 88 gh/rn 1/ 22 #1.

interest in another person who manufactures or produces motor 1 vehicles. 2 d. A person who does not manufacture or produce motor 3 vehicles, but for which motor vehicles are sold under the 4 person’s trade name or label. 5 e. A person who manufactures or produces motor vehicles, 6 but the motor vehicles are sold under the trade name or label 7 of another person. 8 f. A person who does not manufacture or produce motor 9 vehicles, but who licenses the use of the person’s trade name 10 or label to another person pursuant to a written contract, who 11 then sells motor vehicles under the trade name or label of the 12 licensor. 13 6. “Motor vehicle service contract” means a contract or 14 agreement sold for separate consideration for a specific 15 duration that undertakes to perform the repair, replacement, 16 or maintenance of a motor vehicle, or indemnification for 17 such repair, replacement, or maintenance, for the operation 18 or structural failure of a motor vehicle due to a defect in 19 materials, workmanship, or normal wear and tear, with or 20 without additional provisions for the incidental payment 21 of indemnity under limited circumstances, including but 22 not limited to motor vehicle towing, rental, emergency road 23 service, and road hazard protection. “Motor vehicle service 24 contract” also includes a contract or agreement sold for 25 separate consideration for a specific duration that provides 26 for any of the following services or products: 27 a. The repair or replacement of motor vehicle tires or 28 wheels that are damaged as a result of contact with road 29 hazards, including but not limited to potholes, rocks, wood 30 debris, metal parts, glass, plastic, curbs, or composite 31 scraps. 32 b. The removal of dents or creases on a motor vehicle 33 under a process that does not use paint or affect the existing 34 paint finish, and without sanding, bonding, or replacing motor 35 -2- SF619.2066 (1) 88 gh/rn 2/ 22

vehicle body panels. 1 c. The repair or replacement of motor vehicle windshields 2 that are damaged as a result of contact with road hazards. 3 d. The replacement of motor vehicle keys or key fobs in the 4 event that such device becomes inoperable, lost, or stolen. 5 e. Any other service or product approved by the 6 commissioner. 7 7. “Premium” means the consideration paid to an insurer for 8 a reimbursement insurance policy. 9 7. 8. “Record” means the same as defined in section 516E.1 10 information stored or preserved in any medium, including in 11 an electronic or paper format. A “record” includes but is 12 not limited to documents, books, publications, accounts, 13 correspondence, memoranda, agreements, computer files, film, 14 microfilm, photographs, and audio or visual tapes . 15 9. “Reimbursement insurance policy” means a contractual 16 liability insurance policy issued to a service company that 17 either provides reimbursement to a service company under the 18 terms of insured service contracts issued or sold by the 19 service company or, in the event of nonperformance by the 20 service company, pays, on behalf of the service company, all 21 covered contractual obligations incurred by the service company 22 under the terms of the insured service contracts issued or sold 23 by the service company. 24 8. “Reserve account agreement” means an agreement entered 25 into between a licensed service company and a depository under 26 section 523C.11 . 27 9. 10. “Residential service contract” means a contract or 28 agreement between a residential customer and a service company 29 which undertakes, for a predetermined fee and for a specified 30 any period of time, to service, maintain, repair, or replace , 31 or indemnify expenses for all or any part of the operational or 32 structural components, appliances, or electrical, mechanical, 33 plumbing, heating, cooling, or air-conditioning systems of 34 residential property containing not more than four dwelling 35 -3- SF619.2066 (1) 88 gh/rn 3/ 22

units in the state which fails due to normal wear or tear or 1 inherent defect. “Residential service contract” also includes 2 a contract which provides for the service, repair, replacement, 3 or maintenance of property for damage resulting from power 4 surges, roof leakage, and accidental damage . 5 10. 11. “Service company” means a person who issues and 6 performs, or arranges to perform, is contractually obligated to 7 perform services pursuant to a motor vehicle service contract 8 or residential service contract. 9 12. “Service contract” means a motor vehicle service 10 contract or residential service contract. 11 13. “Warranty” means a statement made solely by the 12 manufacturer, importer, or seller of property or services 13 without consideration, that is not negotiated or separated from 14 the sale of the product and is incidental to the sale of the 15 product, and that guarantees indemnity for defective parts, 16 mechanical or electrical breakdown, and labor or other remedial 17 measures, such as repair or replacement of the property or 18 repetition of services. 19 Sec. 2. Section 523C.2, Code 2019, is amended to read as 20 follows: 21 523C.2 License required. 22 1. A person shall not issue a , offer for sale, or sell a 23 motor vehicle service contract or residential service contract 24 or undertake or arrange to perform services pursuant to a 25 residential service contract in this state unless the person 26 is a corporation or other form of organization approved by the 27 commissioner by rule and is a licensed as a service company 28 under this chapter . 29 2. The licensure requirements of this chapter shall not 30 apply to any person who provides support services or works 31 under the direction of a licensed service company in connection 32 with the issuance, offer for sale, or sale of a service 33 contract in this state, including but not limited to a person 34 who provides marketing, administrative, or technical support. 35 -4- SF619.2066 (1) 88 gh/rn 4/ 22

Sec. 3. Section 523C.3, Code 2019, is amended to read as 1 follows: 2 523C.3 Application for license. 3 1. Application for a license as a service company shall 4 be made to and filed with the commissioner on forms approved 5 by the commissioner and shall include all of the following 6 information: 7 a. The name and principal address of the applicant. 8 b. The state of incorporation of the applicant. 9 c. The name and address of the applicant’s registered agent 10 for service of process within Iowa. 11 d. A certificate of good standing for the applicant issued 12 by the secretary of state and dated not more than thirty days 13 prior to the date of the application. 14 e. Evidence of compliance with section 523C.5. 15 f. A copy of each motor vehicle service contract form to be 16 used or issued in this state, if applicable. 17 g. A copy of each residential service contract form to be 18 used or issued in this state, if applicable. 19 2. The application shall be accompanied by all of the 20 following: 21 a. A certificate of good standing for the applicant issued 22 by the secretary of state and dated not more than thirty days 23 prior to the date of the application. 24 b. A surety bond, a copy of the receipt from the treasurer 25 of state that a cash deposit has been made, or a copy of a 26 custodial agreement as provided in section 523C.5 . 27 c. A copy of the most recent financial statement, including 28 balance sheets and related statements of income, of the 29 applicant, prepared in accordance with generally accepted 30 accounting principles, audited by a certified public accountant 31 and dated not more than twelve months prior to the date of the 32 application. 33 d. An affidavit of an authorized officer of the service 34 company stating the number of contracts issued by the service 35 -5- SF619.2066 (1) 88 gh/rn 5/ 22

company in the preceding calendar year, and stating that the 1 net worth of the service company satisfies the requirements of 2 section 523C.6 . 3 e. a. A license fee in the amount of two five hundred fifty 4 dollars. 5 b. If applicable, a fee in the amount of fifty dollars 6 for each motor vehicle service contract form submitted in an 7 application as provided in subsection 1, paragraph “f” . 8 3. If the application contains the required information and 9 is accompanied by the items set forth in subsection 2 , and if 10 the net worth requirements of section 523C.6 are satisfied, as 11 evidenced by the audited financial statements, the commissioner 12 shall issue the license. If the form of application is not 13 properly completed or if the required accompanying documents 14 are not furnished or in proper form, the commissioner shall 15 not issue the license and shall give the applicant written 16 notice of the grounds for not issuing the license. A notice 17 of license denial shall be accompanied by a refund of fifty 18 percent of the fee submitted with the application. 19 4. Fees collected under this section shall be deposited as 20 provided in section 505.7 523C.24 . 21 Sec. 4. Section 523C.4, Code 2019, is amended to read as 22 follows: 23 523C.4 License expiration and renewal. 24 1. Each license issued under this chapter shall expire 25 on June 30 next be valid for a period of one year and shall 26 be renewed by August 31 of each year following the date of 27 issuance. If the service company maintains in force the surety 28 bond described in section 523C.5 and if its license is not 29 subject to or under suspension or revocation under section 30 523C.9 , its license shall be renewed by the commissioner upon 31 receipt by the commissioner on or before the expiration date 32 of a renewal application accompanied by the items required by 33 section 523C.3, subsection 2 , paragraphs “b”, “c”, “d”, and “e” , 34 and section 523C.15 . 35 -6- SF619.2066 (1) 88 gh/rn 6/ 22

2. An application for renewal shall include the information 1 required for an initial license as described in section 523C.3, 2 subsection 1. 3 3. The renewal application shall be accompanied by all of 4 the following: 5 a. A license renewal fee in the amount of five hundred 6 dollars. 7 b. If applicable, a fee in the amount of three percent of 8 the aggregate amount of payments the licensee received for the 9 sale or issuance of residential service contracts in this state 10 during the preceding fiscal year, provided that such fee shall 11 be no less than one hundred dollars and no greater than fifty 12 thousand dollars. 13 c. If applicable, a fee in the amount of fifty dollars 14 for each motor vehicle service contract form submitted in a 15 renewal application as provided in section 523C.3, subsection 16 1, paragraph “f” . 17 d. Information regarding the number of motor vehicle service 18 contracts or residential service contracts issued during the 19 preceding fiscal year, the number canceled or expired during 20 the preceding fiscal year, the number in effect at the end of 21 the preceding fiscal year, and the amount of service contract 22 fees received during the preceding fiscal year. 23 4. If the commissioner denies renewal of the license, the 24 denial shall be in writing setting forth the grounds for denial 25 and shall be accompanied by a refund of fifty percent of the 26 license renewal fee. 27 5. In addition to the annual license renewal requirements 28 as provided in this section, a licensee shall report to the 29 commissioner any material change in information submitted by 30 the licensee in its initial license application which has 31 not been reported to the commissioner, including a change in 32 contact information, a change in ownership, or any other change 33 which substantially affects the licensee’s operations in this 34 state. 35 -7- SF619.2066 (1) 88 gh/rn 7/ 22

Sec. 5. Section 523C.5, Code 2019, is amended by striking 1 the section and inserting in lieu thereof the following: 2 523C.5 Financial responsibility —— demonstration 3 requirements. 4 In order to assure the faithful performance of a service 5 company’s obligations to its contract holders in this state, 6 a licensed service company shall demonstrate financial 7 responsibility to the commissioner by satisfying one of the 8 following, as evidenced by the service company: 9 1. Insuring all motor vehicle service contracts and 10 residential service contracts offered for sale in this state 11 under a reimbursement insurance policy that complies with 12 section 523C.6. 13 2. Doing both of the following: 14 a. Maintaining a funded reserve account for the service 15 company’s obligations under any issued and outstanding service 16 contracts in this state, in an amount no less than forty 17 percent of gross consideration received, less claims paid, for 18 the sale of all service contracts issued and in force in this 19 state. The reserve account shall be subject to examination and 20 review by the commissioner. 21 b. Placing in trust with the commissioner a financial 22 security deposit in an amount no less than five percent of 23 the gross consideration received by the service company, 24 less claims paid, for the sale of all motor vehicle service 25 contracts and residential service contracts issued and in force 26 in this state, but not less than twenty-five thousand dollars, 27 consisting of one of the following: 28 (1) Cash. 29 (2) Securities of the type eligible for deposit by insurers 30 authorized to transact business in this state. 31 (3) Certificates of deposit. 32 (4) A surety bond issued by an authorized surety company. 33 (5) Another form of security as prescribed by the 34 commissioner by rule. 35 -8- SF619.2066 (1) 88 gh/rn 8/ 22

3. Doing both of the following: 1 a. Maintaining, on its own or together with a parent 2 company, a minimum net worth or stockholders’ equity of one 3 hundred million dollars or more. 4 b. Upon request from the commissioner, providing either: 5 (1) A copy of the service company’s financial statements. 6 (2) If the service company’s financial statements are 7 consolidated with those of its parent company, a copy of the 8 parent company’s most recent form 10-K or form 20-F filed with 9 the federal securities and exchange commission within the last 10 calendar year, or if the parent company does not file with 11 the federal securities and exchange commission, a copy of the 12 parent company’s audited financial statements showing a net 13 worth of at least one hundred million dollars. If the service 14 company’s financial statements are consolidated with those of 15 its parent company, the service company shall also provide a 16 copy of a written agreement by the parent company guaranteeing 17 the obligations of the service company under motor vehicle 18 service contracts and residential service contracts issued and 19 outstanding by the service company in this state. 20 Sec. 6. Section 523C.6, Code 2019, is amended by striking 21 the section and inserting in lieu thereof the following: 22 523C.6 Reimbursement insurance policy requirements —— insurer 23 qualifications. 24 1. Requirements. A reimbursement insurance policy insuring 25 a motor vehicle service contract or residential service 26 contract issued, sold, or offered for sale in this state shall 27 provide for all of the following: 28 a. The reimbursement insurance policy shall obligate the 29 insurer that issued such policy to reimburse or pay on behalf 30 of the service company any covered sums that the service 31 company is legally obligated to pay according to the terms of 32 the contract or, in the event of nonperformance by the service 33 company, provide the service which the service company is 34 legally obligated to perform according to the terms of the 35 -9- SF619.2066 (1) 88 gh/rn 9/ 22

service contract, which shall be conspicuously stated in the 1 reimbursement insurance policy. 2 b. The reimbursement insurance policy shall entitle a 3 service contract holder to make a claim directly against the 4 insurance policy if the service company fails to pay or provide 5 service on a claim within sixty days after proof of loss is 6 filed with the service company. 7 c. The insurer that issued a reimbursement insurance policy 8 shall be deemed to have received the premiums upon the payment 9 of the total purchase price of the service contract by the 10 service contract holder. 11 2. Termination. As applicable, an insurer that issued a 12 reimbursement insurance policy shall not terminate the policy 13 unless a written notice has been received by the commissioner 14 and by each applicable service company. The notice shall 15 fix the date of termination at a date no earlier than ten 16 days after receipt of the notice by the commissioner. The 17 termination of a reimbursement insurance policy shall not 18 reduce the issuer’s responsibility for a service contract 19 issued by an insured service company prior to the date of 20 termination. 21 3. Indemnification or subrogation. This section does 22 not prevent or limit the right of an insurer that issued a 23 reimbursement insurance policy to seek indemnification from or 24 subrogation against a service company if the insurer pays or 25 is obligated to pay a service contract holder sums that the 26 service company was obligated to pay pursuant to the provisions 27 of a service contract or pursuant to a contractual agreement. 28 4. Premium tax liability. Payments for the purchase price 29 of a service contract by a service contract holder shall be 30 exempt from premium tax. However, premiums shall be subject 31 to premium tax. 32 5. Qualifications of insurer. An insurer issuing a 33 reimbursement insurance policy under this chapter shall be 34 authorized, registered, or otherwise permitted to transact 35 -10- SF619.2066 (1) 88 gh/rn 10/ 22

business in this state and shall meet one of the following 1 requirements: 2 a. At the time the policy is filed with the commissioner, 3 and continuously thereafter, the insurer maintains surplus 4 as to policyholders and paid-in capital of at least fifteen 5 million dollars and annually files copies of the insurer’s 6 financial statements, national association of insurance 7 commissioners annual statement, and actuarial certification, if 8 required and filed in the insurer’s state of domicile. 9 b. At the time the policy is filed with the commissioner and 10 continuously thereafter, the insurer does all of the following: 11 (1) Maintains surplus as to policyholders and paid-in 12 capital of less than fifteen million dollars but at least ten 13 million dollars. 14 (2) Demonstrates to the satisfaction of the commissioner 15 that the insurer maintains a ratio of net written premiums, 16 wherever written, to surplus as to policyholders and paid-in 17 capital of not greater than three to one. 18 (3) Files copies annually of the insurer’s financial 19 statements, national association of insurance commissioners 20 annual statement, and actuarial certification, if required and 21 filed in the insurer’s state of domicile. 22 Sec. 7. Section 523C.7, Code 2019, is amended by striking 23 the section and inserting in lieu thereof the following: 24 523C.7 Disclosure to service contract holders —— contract 25 form —— required provisions. 26 1. A motor vehicle service contract or residential service 27 contract shall not be issued, sold, or offered for sale in this 28 state unless the service company does all of the following: 29 a. Provides a receipt for the purchase of the service 30 contract to the service contract holder. 31 b. Provides a copy of the service contract to the service 32 contract holder within a reasonable period of time after the 33 date of purchase of the service contract. 34 c. Provides a complete sample copy of the terms and 35 -11- SF619.2066 (1) 88 gh/rn 11/ 22

conditions of the service contract to the service contract 1 holder prior to the date of purchase. A service company may 2 comply with this paragraph by providing the service contract 3 holder with a complete sample copy of the terms or conditions 4 of the service contract, or directing the service contract 5 holder to an internet site containing a complete sample copy of 6 the terms and conditions of the service contract. 7 2. A motor vehicle service contract or residential service 8 contract issued, sold, or offered for sale in this state shall 9 comply with all of the following, as applicable: 10 a. A service contract shall be written in clear, 11 understandable language in at least eight point font. 12 b. (1) A service contract insured by a reimbursement 13 insurance policy as provided in section 523C.5, subsection 1, 14 shall include a statement in substantially the following form: 15 Obligations of the service company under this service 16 contract are guaranteed under a reimbursement insurance policy. 17 If the service company fails to pay or provide service on a 18 claim within sixty days after proof of loss has been filed with 19 the service company, the service contract holder is entitled 20 to make a claim directly against the reimbursement insurance 21 policy. 22 (2) A service contract insured by a reimbursement insurance 23 policy shall conspicuously state the name and address of the 24 issuer of the reimbursement insurance policy for that service 25 contract. A claim against a reimbursement insurance policy 26 shall also include a claim for return of any refund due in 27 accordance with paragraphs “k” and “l” . 28 c. A service contract not insured under a reimbursement 29 insurance policy shall contain a statement in substantially the 30 following form: 31 Obligations of the service company under this service 32 contract are backed by the full faith and credit of the service 33 company and are not guaranteed under a reimbursement insurance 34 policy. 35 -12- SF619.2066 (1) 88 gh/rn 12/ 22

d. A service contract shall state the name and address of 1 the service company obligated to perform services under the 2 contract, and shall conspicuously identify the service company, 3 any third-party administrator, and the service contract holder 4 to the extent that the name and address of the service contract 5 holder has been furnished. The identities of such parties are 6 not required to be printed on the contract in advance and may 7 be added to the contract at the time of sale. 8 e. A service contract shall clearly state the total purchase 9 price of the service contract and the terms under which the 10 service contract is sold. The total purchase price is not 11 required to be printed on the contract in advance and may be 12 added to the contract at the time of sale. 13 f. If prior approval of repair work is required, a service 14 contract shall conspicuously describe the procedure for 15 obtaining prior approval and for making a claim, including a 16 toll-free telephone number for claim service, and the procedure 17 for obtaining emergency repairs performed outside of normal 18 business hours. 19 g. A service contract shall clearly state the existence of 20 any deductible amount. 21 h. A service contract shall specify the merchandise 22 or services, or both, to be provided and any limitations, 23 exceptions, or exclusions. 24 i. A service contract shall clearly state the conditions on 25 which the use of substitute parts or services will be allowed. 26 Such conditions shall comply with applicable state and federal 27 laws. 28 j. A service contract shall clearly state any terms, 29 restrictions, or conditions governing the transferability of 30 the service contract. 31 k. A service contract shall clearly state the terms and 32 conditions governing the cancellation of the contract prior 33 to the termination or expiration date of the contract by the 34 service company or the service contract holder. If the service 35 -13- SF619.2066 (1) 88 gh/rn 13/ 22

company cancels the contract, the service company shall mail a 1 written notice of termination to the service contract holder 2 at least fifteen days before the date of the termination. 3 Prior notice of cancellation by the service company is not 4 required if the reason for cancellation is nonpayment of the 5 purchase price, a material misrepresentation by the service 6 contract holder to the service company or its administrator, or 7 a substantial breach of duties by the service contract holder 8 relating to the covered product or its use. The notice of 9 cancellation shall state the effective date of the cancellation 10 and the reason for the cancellation. If a service contract 11 is canceled by the service company for any reason other than 12 nonpayment of the purchase price, the service company shall 13 refund the service contract holder in an amount equal to one 14 hundred percent of the unearned purchase price paid, calculated 15 on a pro rata basis based upon elapsed time or mileage, 16 less any claims paid. The service company may also charge a 17 reasonable administrative fee in an amount no greater than ten 18 percent of the total purchase price. 19 l. (1) A service contract shall permit the original 20 service contract holder that purchased the contract to cancel 21 and return the service contract within at least twenty days 22 of the date of mailing the service contract to the service 23 contract holder or within at least ten days after delivery of 24 the service contract if the service contract is delivered at 25 the time of sale of the service contract, or within a longer 26 period of time as permitted under the service contract. If no 27 claim has been made under the service contract prior to its 28 return, the service contract is void and the full purchase 29 price of the service contract shall be refunded to the service 30 contract holder. A ten percent penalty shall be added each 31 month to a refund that is not paid to a service contract holder 32 within thirty days of the return of the service contract to the 33 service company. 34 (2) If the service contract holder cancels the service 35 -14- SF619.2066 (1) 88 gh/rn 14/ 22

contract outside of the applicable time as provided in 1 subparagraph (1) or after a claim is made under the service 2 contract, the service company shall refund the service contract 3 holder in an amount equal to one hundred percent of the 4 unearned purchase price paid, calculated on a pro rata basis 5 based upon elapsed time or mileage, less any claims paid. The 6 service company may also charge a reasonable administrative fee 7 in an amount no greater than ten percent of the total purchase 8 price. 9 m. A service contract shall set forth all of the obligations 10 and duties of the service contract holder, including but not 11 limited to the duty to protect against any further damage, 12 and the obligation to follow an owner’s manual or any other 13 required service or maintenance. 14 n. A service contract shall clearly state whether or not 15 the contract provides for or excludes consequential damages 16 or preexisting conditions, if applicable. A service contract 17 may, but is not required to, cover damage resulting from rust, 18 corrosion, or damage caused by a part or system which is not 19 covered under the service contract. 20 o. A service contract shall clearly state the fee, if any, 21 charged on the service contract holder for making a service 22 call. 23 p. A service contract shall state the name and address of 24 the commissioner. 25 Sec. 8. Section 523C.9, Code 2019, is amended to read as 26 follows: 27 523C.9 Suspension or revocation of license. 28 1. In addition to the license revocation provisions of 29 section 523C.5 , the The commissioner may suspend or revoke or 30 refuse to renew the license of a service company for any of the 31 following grounds: 32 a. 1. The service company violated a lawful order of the 33 commissioner or any provision of this chapter . 34 b. 2. The service company failed to pay any final judgment 35 -15- SF619.2066 (1) 88 gh/rn 15/ 22

rendered against it in this state within sixty days after the 1 judgment became final. 2 c. 3. The service company has without just cause refused 3 to perform or negligently or incompetently performed services 4 required to be performed under its residential service 5 contracts and the refusal, or negligent or incompetent 6 performance has occurred with such frequency, as the 7 commissioner determines, as to indicate the general business 8 practices of the service company. 9 d. 4. The service company violated section 523C.13 . 10 e. 5. The service company failed to maintain the net worth 11 required by section 523C.6 demonstrate financial responsibility 12 pursuant to section 523C.5 . 13 f. The service company failed to maintain the reserve 14 account required by section 523C.11 . 15 g. 6. The service company failed to maintain its corporate 16 certificate of good standing with the secretary of state. 17 2. If the license of a service company is terminated 18 under section 523C.5 because of failure to maintain bond, the 19 commissioner shall give written notice of termination to the 20 service company. The notice shall include the effective date 21 of the termination. 22 Sec. 9. Section 523C.12, Code 2019, is amended to read as 23 follows: 24 523C.12 Optional examination. 25 The commissioner or a designee of the commissioner may 26 make an examination of the books and records of a service 27 company, including copies of contracts and records of claims 28 and expenditures, and verify its assets, liabilities, and 29 reserves. The actual costs of the examination shall be borne 30 by the service company. The costs of an examination under this 31 section shall not exceed an amount equal to ten percent of the 32 service company’s reported net income in the previous fiscal 33 year. 34 Sec. 10. Section 523C.13, Code 2019, is amended to read as 35 -16- SF619.2066 (1) 88 gh/rn 16/ 22

follows: 1 523C.13 Prohibited acts or practices —— penalty —— violations 2 —— contracts voided . 3 1. A licensed service company which offers motor 4 vehicle service contracts for sale in this state, or its 5 representative, shall not, directly or indirectly, represent in 6 any manner, whether by written solicitation or telemarketing, a 7 false, deceptive, or misleading statement with respect to any 8 of the following: 9 a. Statements regarding the service company’s affiliation 10 with a motor vehicle manufacturer or importer. 11 b. Statements regarding the validity or expiration of a 12 warranty. 13 c. Statements regarding a motor vehicle service contract 14 holder’s coverage under a motor vehicle service contract, 15 including statements suggesting that the service contract 16 holder must purchase a new service contract in order to 17 maintain coverage under the existing service contract or 18 warranty. 19 2. The commissioner shall may adopt rules which regulate 20 motor vehicle service contracts and residential service 21 contracts to prohibit misrepresentation, false advertising, 22 defamation, boycotts, coercion, intimidation, false statements 23 and entries and unfair discrimination or practices. If the 24 commissioner finds that a person has violated the rules adopted 25 under this section , the commissioner may order any or all of 26 the following: 27 1. a. Payment of a civil penalty of not more than one 28 thousand dollars for each and every act or violation, but not 29 to exceed an aggregate of ten thousand dollars, unless the 30 person knew or reasonably should have known the person was in 31 violation of this section , in which case the penalty shall be 32 not more than five thousand dollars for each and every act or 33 violation, but not to exceed an aggregate penalty of fifty 34 thousand dollars in any one six-month period. The commissioner 35 -17- SF619.2066 (1) 88 gh/rn 17/ 22

shall, if it finds the violations of this section were 1 directed, encouraged, condoned, ignored, or ratified by the 2 employer of such person, assess such penalty to the employer 3 and not such person. Any civil penalties collected under this 4 subsection shall be deposited as provided in section 505.7 . 5 2. b. Suspension or revocation of the license of a person, 6 if the person knew or reasonably should have known the person 7 was in violation of this section . 8 3. A violation of this chapter constitutes an unlawful 9 practice pursuant to section 714.16. 10 4. A service contract issued or sold in this state is void 11 if the person that issued or sold the service contract, at the 12 time of issuance or sale, was not licensed as a service company 13 under this chapter. 14 Sec. 11. Section 523C.15, Code 2019, is amended to read as 15 follows: 16 523C.15 Annual report. 17 A licensed service company that does not demonstrate 18 financial responsibility by insuring service contracts under a 19 reimbursement insurance policy as provided in section 523C.5, 20 subsection 1, shall file with the commissioner an annual 21 report within ninety days of the close of its fiscal no later 22 than August 31 of each year. The annual report shall be in 23 a form prescribed by the commissioner and contain all of the 24 following: 25 1. A current financial statement including a balance 26 sheet and statement of operations prepared in accordance with 27 generally accepted accounting principles and certified by an 28 independent certified public accountant. 29 2. The number of residential service contracts issued 30 during the preceding fiscal year, the number canceled or 31 expired during the year, the number in effect at year end and 32 the amount of residential service contract fees received. 33 3. 2. Any other information relating to the performance 34 and solvency of the residential service company required by the 35 -18- SF619.2066 (1) 88 gh/rn 18/ 22