House Study Bill 523 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON YOUNG) A BILL FOR An Act relating to certain sales of auto club memberships and 1 vehicle warranties. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 5508YC (2) 91 nls/ko

H.F. _____ Section 1. Section 536.13, Code 2026, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 5A. After a licensee has approved a loan 3 to a borrower, the licensee may offer the borrower the option 4 to purchase an auto club membership or vehicle warranty. If 5 the licensee offers a borrower the option to purchase an auto 6 club membership or vehicle warranty, all of the following shall 7 apply: 8 a. The licensee shall inform the borrower, in a written 9 document initialed by the borrower, that the purchase of an 10 auto club membership or vehicle warranty is optional and 11 failure to purchase an auto club membership or vehicle warranty 12 will not affect the receipt of the loan by the borrower. 13 b. If the borrower chooses to purchase an auto club 14 membership or vehicle warranty the licensee shall permit the 15 borrower either to pay the cost of the auto club membership 16 or vehicle warranty with funds that are not the proceeds of 17 the loan, or to include the cost in the loan the borrower 18 obtains from the licensee. The auto club membership or vehicle 19 warranty shall not be included when calculating the maximum 20 interest rate of the loan. 21 c. A licensee shall permit a borrower to cancel an auto 22 club membership or vehicle warranty and to receive a full 23 refund of the purchase price at any time within thirty calendar 24 days following the date of purchase from the licensee if the 25 borrower has not used any service provided through the auto 26 club membership or vehicle warranty. 27 EXPLANATION 28 The inclusion of this explanation does not constitute agreement with 29 the explanation’s substance by the members of the general assembly. 30 This bill relates to certain sales of auto club memberships 31 and vehicle warranties. 32 Under the bill, a licensed loan officer (licensee) may, 33 after approving a loan to a borrower, offer the borrower the 34 option to purchase an auto club membership (membership) or 35 -1- LSB 5508YC (2) 91 nls/ko 1/ 2

H.F. _____ vehicle warranty (warranty). If the licensee offers the option 1 to purchase a membership or warranty, the licensee shall: 2 inform the borrower, in a written document initialed by the 3 borrower, that the purchase of a membership or warranty is 4 optional and will not affect the receipt of the loan by the 5 borrower; if the borrower chooses to purchase a membership or 6 warranty, permit the borrower either to pay for the cost with 7 funds that are not the proceeds of the loan, or to include the 8 cost in the total amount financed by the loan the borrower 9 obtains from the licensee; and permit the borrower to cancel 10 the membership or warranty and receive a full refund of the 11 purchase price at any time within 30 days following the date 12 of purchase if the borrower has not used the membership or 13 warranty. Under the bill, a membership or warranty shall not 14 be included when calculating the maximum interest rate of a 15 loan. 16 -2- LSB 5508YC (2) 91 nls/ko 2/ 2