Senate Study Bill 3057 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES BILL) A BILL FOR An Act relating to licensing of service companies, motor 1 vehicle service contracts, and residential service 2 contracts, and providing civil penalties. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5468XD (7) 91 nls/ko

S.F. _____ H.F. _____ Section 1. Section 507B.4, subsection 3, Code 2026, is 1 amended by adding the following new paragraph: 2 NEW PARAGRAPH . w. Service contracts. Failure of a person 3 in the business of service contracts to comply with chapter 4 523C. 5 Sec. 2. Section 523C.1, Code 2026, is amended by adding the 6 following new subsections: 7 NEW SUBSECTION . 1A. “Communicating in a verifiable manner” 8 means communication by in-person delivery, email, or, if there 9 is an auditable record of the communication, by telephone. 10 NEW SUBSECTION . 1B. “Gross consideration” means the total 11 value of a service contract without deducting any expenses or 12 costs. 13 NEW SUBSECTION . 6A. “Person” means an individual or a 14 business entity. 15 NEW SUBSECTION . 12A. “Service contract holder” means the 16 original purchaser of a service contract or the successor in 17 interest or transferee entitled to services under the service 18 contract. 19 NEW SUBSECTION . 12B. “Substitute part” means a part that is 20 not issued by the original part manufacturer, including but not 21 limited to a remanufactured part, an aftermarket part, and a 22 part obtained from a salvage yard. 23 NEW SUBSECTION . 12C. “Support services” means a person that 24 provides services that support, or a person that works under 25 the direction of, a licensed service company in connection with 26 the issuance, offer for sale, sale, or administration of a 27 service contract in this state, including but not limited to a 28 person that provides marketing, administrative, or technical 29 support to a service company. 30 Sec. 3. Section 523C.1, subsection 4, Code 2026, is amended 31 to read as follows: 32 4. “Motor vehicle” means any vehicle that is self-propelled 33 vehicle and subject to registration under chapter 321 . 34 Sec. 4. Section 523C.2, Code 2026, is amended by striking 35 -1- LSB 5468XD (7) 91 nls/ko 1/ 22

S.F. _____ H.F. _____ the section and inserting in lieu thereof the following: 1 523C.2 License required. 2 1. A person that will be contractually obligated to the 3 service contract holder under the terms of the service contract 4 shall not directly or indirectly issue, offer for sale, or 5 sell a motor vehicle service contract or residential service 6 contract in this state unless the person is a licensed service 7 company. 8 2. This chapter shall not apply to any person that provides 9 support services. A service company that utilizes support 10 services shall ensure the support services’ compliance with the 11 issuance, offer for sale, or sale of a service contract under 12 this chapter. 13 3. A service company shall maintain a license for the 14 duration of time that the service company is contractually 15 obligated to a service contract holder under the terms of a 16 service contract. 17 4. A service company shall report to the commissioner 18 within thirty calendar days any material change to the 19 information submitted by the service company in the service 20 company’s initial license application, or license renewal 21 application, including a change in the service company’s 22 contact information, ownership, officers or directors directly 23 responsible for the provider’s service contract business, 24 or any other change that substantially affects the service 25 company’s operations in the state. 26 5. A service company shall report to the commissioner 27 any administrative action taken against the service company 28 in another jurisdiction within thirty calendar days of final 29 disposition of the administrative action. The report must 30 include a copy of the order, consent to the order, and other 31 relevant legal documents. 32 6. Within thirty calendar days of the initial pretrial 33 hearing date, a service company shall report to the 34 commissioner a criminal prosecution in any jurisdiction of an 35 -2- LSB 5468XD (7) 91 nls/ko 2/ 22

S.F. _____ H.F. _____ owner with more than a ten percent ownership stake, an officer, 1 or a director directly responsible for the service contract 2 business of the service company, for an offense involving 3 dishonesty or a false statement including but not limited 4 to fraud, theft, misappropriation of funds, falsification 5 of documents, deceptive acts or practices, or other related 6 offenses. The report must include a copy of the initial 7 complaint filed, the order resulting from the hearing, and any 8 other relevant legal documents. 9 Sec. 5. Section 523C.3, Code 2026, is amended by striking 10 the section and inserting in lieu thereof the following: 11 523C.3 Application for license. 12 1. Application for a license as a service company shall 13 be filed with the commissioner on a form approved by the 14 commissioner and must include all of the following information: 15 a. The name and principal address of the applicant. 16 b. The state of incorporation of the applicant. 17 c. The name and address of the applicant’s registered agent 18 for service of process in Iowa. 19 d. The legal name of all of the following: 20 (1) Each owner of the service company that has a greater 21 than ten percent ownership stake in the service company. 22 (2) Each officer of the service company. 23 (3) Each director directly responsible for the business of 24 the service company. 25 e. A certificate of good standing for the applicant issued 26 by the secretary of state and dated not more than thirty 27 calendar days from the date of the application. 28 f. Evidence of compliance with section 523C.5. 29 g. A copy of each motor vehicle service contract form to be 30 used, issued, or offered for sale in this state by the service 31 company. 32 h. A copy of each residential service contract form to be 33 used, issued, or offered for sale in this state by the service 34 company. 35 -3- LSB 5468XD (7) 91 nls/ko 3/ 22

S.F. _____ H.F. _____ i. A national association of insurance commissioners’ 1 biographical affidavit and the verification of the biographical 2 affidavit for the chief executive officer and chief financial 3 officer of the service company, or for the individuals in 4 the equivalent positions. The service company shall use a 5 third-party vendor from a list of vendors approved by the 6 commissioner to verify the biographical affidavits. The 7 service company shall pay all costs associated with the 8 required verifications. 9 j. A list of any disciplinary actions taken against the 10 service company, or any of the service company’s owners, 11 officers, or directors directly responsible for the provider’s 12 service contract business, in the immediately preceding ten 13 consecutive years by a regulatory agency or state attorney 14 general in any jurisdiction. 15 2. The application must be accompanied by all of the 16 following: 17 a. A license fee in the amount of five hundred dollars. 18 b. A fee in the amount of thirty-five dollars for each motor 19 vehicle service contract form provided pursuant to subsection 20 1, paragraph “g” . 21 3. If the application for a service company license contains 22 the information under subsection 1, is accompanied by the 23 fees under subsection 2, includes any additional information 24 requested by the commissioner to verify the information in 25 the application, and the commissioner has not denied the 26 application pursuant to section 523C.9, the commissioner shall 27 issue the license to the applicant. 28 4. Fees collected under this section shall be deposited 29 into the service company oversight fund as provided in section 30 523C.24. 31 Sec. 6. Section 523C.4, Code 2026, is amended by striking 32 the section and inserting in lieu thereof the following: 33 523C.4 License expiration and renewal. 34 1. A license issued under this chapter shall be valid 35 -4- LSB 5468XD (7) 91 nls/ko 4/ 22

S.F. _____ H.F. _____ for a period of one year and shall be renewed annually on or 1 before August 31. A license that is not renewed prior to the 2 expiration date shall be deemed expired. Prior to a license 3 expiration date, and if a renewal application was submitted at 4 least fourteen calendar days prior to the license expiration 5 date, the commissioner may extend the renewal period for an 6 additional thirty calendar days. 7 2. An application for license renewal must include the 8 information required for an initial license as described in 9 section 523C.3, subsection 1, paragraphs “a” through “f” , 10 and a list of each service contract form the service company 11 continues to use, offer for sale, or issue in the state, 12 including the service contract form name, number, and the date 13 the form was last revised. 14 3. The license renewal application must be accompanied by 15 all of the following: 16 a. A license renewal fee in the amount of two hundred 17 dollars. 18 b. A fee in the amount of three percent of the aggregate 19 amount of payments the service company received for the sale or 20 issuance of residential service contracts in this state during 21 the period beginning on the date the service company’s license 22 was issued until the date of the service company’s renewal 23 filing, provided that such fee must be no greater than fifty 24 thousand dollars. 25 c. A fee in the amount of thirty-five dollars for each motor 26 vehicle service contract form filed with the commissioner that 27 the service company continues to use, offer for sale, or issue 28 in the state. 29 d. Information regarding service contracts for the service 30 company in the immediately preceding calendar year itemized as 31 follows: 32 (1) The number of motor vehicle service contracts issued. 33 (2) The number of residential service contracts issued. 34 (3) The number of motor vehicle service contracts canceled. 35 -5- LSB 5468XD (7) 91 nls/ko 5/ 22

S.F. _____ H.F. _____ (4) The number of residential service contracts canceled. 1 (5) The number of motor vehicle service contracts that 2 expired. 3 (6) The number of residential service contracts that 4 expired. 5 (7) The number of motor vehicle service contracts in effect 6 on December 31 of the immediately preceding calendar year. 7 (8) The number of residential service contracts in effect on 8 December 31 of the immediately preceding calendar year. 9 (9) The total dollar amount of refunds issued for all motor 10 vehicle service contracts that were canceled. 11 (10) The total dollar amount of refunds issued for all 12 residential service contracts that were canceled. 13 (11) The total dollar amount of motor vehicle service 14 contract fees received by the service company. 15 (12) The total dollar amount of residential service 16 contract fees received by the service company. 17 (13) The number of lawsuits filed by a third party or 18 a regulatory agency against the service company during the 19 immediately preceding calendar year regarding service contracts 20 issued, offered for sale, or sold by the service company. 21 4. If the license renewal application complies with this 22 section, includes any additional information requested by the 23 commissioner to verify the information in the application, and 24 the commissioner has not refused to renew the license pursuant 25 to section 523C.9, the commissioner shall renew the license. 26 If the commissioner refuses renewal of a license pursuant to 27 section 523C.9, the refusal shall be in writing setting forth 28 the grounds for the refusal. 29 5. If a service company submits a license renewal 30 application after the license has expired, the service company 31 shall pay a reinstatement fee of eight hundred dollars, and the 32 applicable fees pursuant to subsection 3. 33 6. a. A service company whose license has expired, and is 34 not within an additional thirty-day extension period granted 35 -6- LSB 5468XD (7) 91 nls/ko 6/ 22

S.F. _____ H.F. _____ by the commissioner pursuant to section 523C.4, subsection 1, 1 shall not offer, extend, or renew a service contract until the 2 service company’s license has been renewed, or the service 3 company has been issued a new license. 4 b. If, at the time a service contract is issued or sold in 5 this state, the service company has an expired license that is 6 not within an additional thirty-day extension period granted 7 by the commissioner pursuant to section 523C.4, subsection 1, 8 the service contract may be canceled at the discretion of the 9 service contract holder. If a service contract holder chooses 10 to cancel a service contract, the full purchase price of the 11 service contract, less any claims paid, shall be refunded to 12 the service contract holder within thirty calendar days. A ten 13 percent penalty shall be added to the refund each month if the 14 refund is not paid to the service contract holder within the 15 thirty calendar days. 16 Sec. 7. Section 523C.7, Code 2026, is amended by striking 17 the section and inserting in lieu thereof the following: 18 523C.7 Disclosure to service contract holders —— contract 19 form —— required provisions. 20 1. A service contract shall not be issued, sold, or offered 21 for sale in this state unless the service company does all of 22 the following: 23 a. Provides a receipt for the purchase of the service 24 contract to the service contract holder. 25 b. Provides a complete sample copy of the service contract 26 to the consumer prior to purchase. A service company may 27 comply with this paragraph by providing the consumer with a 28 complete electronic sample copy of the service contract, or 29 directing the consumer to a complete sample copy of the service 30 contract on an internet site. A paper copy of the sample 31 service contract shall be provided upon request of the consumer 32 at the expense of the service company. 33 c. Provides a fully executed paper or electronic copy of 34 the service contract to the service contract holder within ten 35 -7- LSB 5468XD (7) 91 nls/ko 7/ 22

S.F. _____ H.F. _____ calendar days of the date the service contract holder purchased 1 the service contract. A paper copy of the executed service 2 contract shall be provided to the service contract holder upon 3 request of the service contract holder at the expense of the 4 service company. 5 2. A service contract issued, sold, or offered for sale in 6 the state must comply with all of the following, as applicable: 7 a. A service contract must be written in clear, 8 understandable language in at least ten point type. 9 b. (1) A service contract insured under a reimbursement 10 insurance policy as provided in section 523C.5, subsection 1, 11 must include a statement in substantially the following form: 12 Obligations of the service company under this service contract 13 are guaranteed under a reimbursement insurance policy. If the 14 service company fails to pay or provide service on a claim 15 within sixty days after proof of loss has been filed with 16 the service company, the service contract holder is entitled 17 to make a claim directly against the reimbursement insurance 18 policy. 19 (2) A service contract insured under a reimbursement 20 insurance policy must conspicuously state the name and address 21 of the issuer of the reimbursement insurance policy for that 22 service contract. A claim against a reimbursement insurance 23 policy must also include a claim for return of any refund due 24 in accordance with paragraphs “m” and “n” . 25 c. A service contract not insured under a reimbursement 26 insurance policy must contain a statement in substantially the 27 following form: 28 Obligations of the service company under this service contract 29 are backed by the full faith and credit of the service company 30 and are not guaranteed under a reimbursement insurance policy. 31 d. A service contract must state the name and address of 32 the service company obligated to perform services under the 33 contract, and must conspicuously identify the service company, 34 any third-party administrator, and the service contract holder 35 -8- LSB 5468XD (7) 91 nls/ko 8/ 22

S.F. _____ H.F. _____ to the extent that the name and address of the service contract 1 holder has been furnished. The identities of such parties 2 shall not be required to be printed on the contract in advance 3 and may be added to the contract at the time of sale. 4 e. A service contract must clearly state the total purchase 5 price of the service contract and the terms under which the 6 service contract is sold. The total purchase price shall not 7 be required to be printed on the contract in advance and may be 8 added to the contract at the time of sale. 9 f. If prior approval of repair work is required, a service 10 contract must conspicuously describe the procedure for 11 obtaining prior approval and for making a claim, including a 12 toll-free telephone number for claim service, and the procedure 13 for obtaining emergency repairs performed outside of normal 14 business hours. 15 g. A service contract must clearly state any waiting period 16 applicable to coverage under the service contract, and the date 17 on which coverage begins. 18 h. A service contract must clearly state the existence of 19 any deductible amount. 20 i. A service contract must specify the merchandise or 21 services, or both, to be provided and any limitations, 22 exceptions, or exclusions. 23 j. A service contract must clearly state the conditions on 24 which the use of substitute parts or services will be allowed. 25 Such conditions must comply with applicable state and federal 26 laws. 27 k. A service contract must clearly state any terms, 28 restrictions, or conditions governing the transferability of 29 the service contract. 30 l. A service contract must clearly state the instructions 31 for cancellation of the service contract by the service 32 contract holder. Cancellation instructions must include all 33 necessary information for a service contract holder to complete 34 a cancellation. Cancellation instructions must include the 35 -9- LSB 5468XD (7) 91 nls/ko 9/ 22

S.F. _____ H.F. _____ phone number, email address, or mailing address necessary for 1 the cancellation of the service contract, as well as any other 2 information that the service contract holder must use to cancel 3 the contract. A service company shall accept cancellation of a 4 service contract from a service contract holder by telephone, 5 email, or mail, or any other cost-effective and accessible 6 method of communication. The method of cancellation utilized 7 by a service company for the cancellation of a service contract 8 shall be as accessible as the method utilized by the service 9 company for the service contract holder to enter into the 10 service contract. 11 m. A service contract must clearly state the terms and 12 conditions governing the cancellation of the contract prior 13 to the termination or expiration date of the contract by the 14 service company or the service contract holder. If the service 15 company cancels the contract, the service company shall mail a 16 written notice of termination to the service contract holder at 17 least fifteen calendar days before the date of the termination. 18 Prior notice of cancellation by the service company shall not 19 be required if the reason for cancellation is nonpayment of the 20 purchase price, a material misrepresentation by the service 21 contract holder to the service company or the support services 22 for the service company, or a substantial breach of duty by the 23 service contract holder relating to the covered product or use 24 of the covered product. The notice of cancellation must state 25 the effective date of the cancellation and the reason for the 26 cancellation. If a service contract is canceled by the service 27 company for any reason other than nonpayment of the purchase 28 price, the service company shall refund the service contract 29 holder in an amount equal to one hundred percent of the 30 unearned purchase price paid, calculated on a pro rata basis 31 based upon elapsed time or mileage, less any claims paid. The 32 service company may also charge a reasonable administrative fee 33 in an amount no greater than ten percent of the total purchase 34 price. A ten percent penalty shall be added to the refund each 35 -10- LSB 5468XD (7) 91 nls/ko 10/ 22

S.F. _____ H.F. _____ month if the refund is not paid to the service contract holder 1 within thirty calendar days. 2 n. (1) A service contract must permit the original service 3 contract holder who purchased the contract to cancel the 4 service contract within at least thirty calendar days of the 5 effective date of the service contract, provided no claims 6 have been paid under the service contract, or within a longer 7 period of time as permitted under the service contract. If 8 a claim has not been paid under the service contract prior 9 to cancellation by the service contract holder, the service 10 contract is void and the full purchase price of the service 11 contract shall be refunded to the service contract holder. A 12 ten percent penalty shall be added to the refund each month if 13 the refund is not paid to the service contract holder within 14 thirty calendar days, unless the service contract holder fails 15 to provide the information required by the service contract to 16 complete the cancellation. 17 (2) If the service contract holder cancels the service 18 contract in violation of subparagraph (1), the service company 19 shall refund the service contract holder an amount equal to one 20 hundred percent of the unearned purchase price paid, calculated 21 on a pro rata basis based upon elapsed time or mileage, 22 less any claims paid. The service company may also charge a 23 reasonable administrative fee in an amount no greater than ten 24 percent of the total purchase price. A ten percent penalty 25 shall be added to a refund each month if the refund is not paid 26 to the service contract holder within thirty calendar days of 27 the service contract cancellation request, unless the service 28 contract holder fails to provide the information required in 29 the service contract to complete the cancellation. 30 o. A service contract must set forth all obligations and 31 duties of the service contract holder, including but not 32 limited to the duty to protect against any further damage, and 33 the obligation to follow an owner’s manual and to perform, or 34 have performed, all required service or maintenance. 35 -11- LSB 5468XD (7) 91 nls/ko 11/ 22

S.F. _____ H.F. _____ p. A service contract must clearly state if the contract 1 covers or excludes consequential damages and preexisting 2 conditions, if applicable. A service contract may, but is not 3 required to, cover damage resulting from rust, corrosion, or 4 damage caused by a part or system not covered under the service 5 contract. 6 q. A service contract must clearly state the service call 7 fee, if any, charged to the service contract holder. 8 r. A service contract must state the name and address of 9 the commissioner, the current toll-free telephone number of the 10 division, and a statement that a consumer may file a complaint 11 with the division, including by filing a complaint on the 12 division’s internet site. 13 s. If a residential service contract relates to heating, 14 cooling, plumbing, refrigeration, or electrical service, 15 and the claim being made by the service contract holder is 16 essential to the health and safety of the service contract 17 holder or, if applicable, the service contract holder’s family, 18 the service company shall ensure all of the following: 19 (1) Repair or replacement of the essential good commences 20 within forty-eight hours after the report of the claim, and is 21 completed as soon as reasonably practicable. 22 (2) If the service company determines that the service 23 company cannot complete a repair, replacement, or service 24 within three calendar days after the report of the claim, 25 the service contract holder may seek an outside provider to 26 complete the repair, replacement, or service. The service 27 company shall cover reasonable costs associated with a repair, 28 replacement, or service completed by an outside service 29 provider up to the maximum dollar amount covered by the service 30 contract. 31 (3) Notice is provided to the service contract holder if a 32 repair cannot practicably be completed within three calendar 33 days after the report of the claim. The service company shall 34 provide a status report to the service contract holder by 35 -12- LSB 5468XD (7) 91 nls/ko 12/ 22

S.F. _____ H.F. _____ communicating in a verifiable manner as soon as practicable, 1 but no later than three calendar days after the date of the 2 report of the claim. The status report must include all of the 3 following: 4 (a) A list of all required repairs, replacements, or 5 services and the estimated cost to the service contract holder. 6 (b) The primary reason the required repair, replacement, or 7 service will take longer than three calendar days, including 8 the status of all parts required for the repair, replacement, 9 or service. 10 (c) The current estimated length of time to complete the 11 repair, replacement, or service. 12 (d) The telephone number of the service company in the 13 event the service contract holder or the commissioner wants 14 to make an inquiry concerning the claim, and a commitment by 15 the service company to respond to an inquiry no later than one 16 business day after the date the inquiry is received. 17 (e) A statement that if the service contract holder is not 18 satisfied with the manner in which the service company handles 19 the claim under the terms of a service contract, the service 20 contract holder may file a complaint with the division pursuant 21 to paragraph “r” . 22 (f) A notice to the service contract holder that the 23 service contract holder may seek an outside service provider 24 to complete the repair, replacement, or service, and that the 25 service company will cover reasonable costs associated with a 26 repair, replacement, or service completed by an outside service 27 provider up to the maximum dollar amount covered by the service 28 contract. 29 Sec. 8. NEW SECTION . 523C.8 Service contract forms —— fees. 30 1. A service company shall file with the division an 31 accurate copy of each service contract form prior to using the 32 service contract form for the sale of a service contract in 33 this state. 34 2. At the time of filing each motor vehicle service contract 35 -13- LSB 5468XD (7) 91 nls/ko 13/ 22

S.F. _____ H.F. _____ form with the division a service company shall pay a fee in the 1 amount of thirty-five dollars for each motor vehicle service 2 contract form. 3 3. Notwithstanding section 523C.7, a service company may 4 continue to use a service contract form that is noncompliant 5 with this chapter until August 31, 2027, provided no changes 6 are made to the service contract form and the service contract 7 form was filed with the division in 2026. 8 Sec. 9. Section 523C.9, Code 2026, is amended by striking 9 the section and inserting in lieu thereof the following: 10 523C.9 License denial, nonrenewal, suspension, or revocation. 11 1. The commissioner may suspend or revoke the license of, 12 deny an application for a license from, or refuse to renew the 13 license of, a service company, or may levy a civil penalty as 14 provided in section 523C.13 against a service company, for any 15 of the following reasons: 16 a. The service company violated this chapter, a lawful 17 order, regulation, or subpoena. 18 b. The service company failed to pay a final judgment 19 rendered against the service company in this state within sixty 20 calendar days after the date the judgment became final. 21 c. The service company, without just cause, refused 22 to perform, or negligently or incompetently performed, a 23 service required to be performed under the service company’s 24 service contracts and the refusal, or negligent or incompetent 25 performance, has occurred with such frequency as to indicate 26 the general business practices of the service company are 27 negligent or incompetent, as determined by the commissioner. 28 d. The service company violated section 523C.13. 29 e. The service company failed to demonstrate financial 30 responsibility pursuant to section 523C.5, if applicable. 31 f. The service company failed to maintain a corporate 32 certificate of good standing with the secretary of state. 33 g. The service company provided incorrect, misleading, 34 incomplete, or materially untrue information in the service 35 -14- LSB 5468XD (7) 91 nls/ko 14/ 22

S.F. _____ H.F. _____ company’s license application. 1 h. The service company obtained or attempted to obtain a 2 license through misrepresentation or fraud. 3 i. The service company improperly withheld, misappropriated, 4 or converted any money or property received in the course of 5 business as a service company. 6 j. The service company intentionally misrepresented the 7 terms of an actual or proposed service contract. 8 k. Within the immediately preceding ten consecutive years, 9 an owner, officer, or director of the service company has 10 been convicted of a criminal offense involving any aspect of 11 a business involving securities, commodities, investments, 12 franchises, insurance, banking, or finance. 13 l. An owner, officer, or director of the service company 14 has been convicted of a criminal offense involving dishonesty 15 or a false statement, including but not limited to fraud, 16 theft, misappropriation of funds, falsification of documents, 17 deceptive acts or practices, or other related offenses. 18 m. The service company admitted to committing, or was found 19 to have committed, any unfair trade practice or fraud. 20 n. The service company used fraudulent, coercive, 21 or dishonest practices, or demonstrated incompetence, 22 untrustworthiness, or financial irresponsibility, in conducting 23 business in this state or any other state. 24 o. The service company had a service company license or its 25 equivalent, denied, suspended, or revoked in any other state, 26 province, district, or territory. 27 p. The service company failed, or refused, to cooperate in 28 an investigation conducted by the commissioner of insurance. 29 2. If the commissioner suspends or revokes the license of, 30 denies the application for licensure of, or refuses to renew 31 the license of, a service company pursuant to this section, the 32 commissioner shall notify the service company in writing and 33 provide the reason for the suspension, revocation, denial, or 34 nonrenewal. The licensee or applicant may request a hearing 35 -15- LSB 5468XD (7) 91 nls/ko 15/ 22

S.F. _____ H.F. _____ on the suspension, revocation, nonrenewal, or denial, and a 1 hearing shall be conducted according to section 507B.6. 2 Sec. 10. Section 523C.13, Code 2026, is amended by striking 3 the section and inserting in lieu thereof the following: 4 523C.13 Prohibited acts or practices —— penalty —— violations 5 —— contracts voided. 6 1. A service company, or the service company’s support 7 services, that offers service contracts for sale in this state 8 shall not, directly or indirectly, represent in any manner, 9 whether by written solicitation or telemarketing, a false, 10 deceptive, or misleading statement with respect to any of the 11 following: 12 a. The service company’s affiliation with a motor vehicle 13 manufacturer or importer. 14 b. The validity or expiration of a warranty. 15 c. A motor vehicle service contract holder’s coverage 16 under a motor vehicle service contract, including statements 17 suggesting that the service contract holder must purchase a 18 new service contract in order to maintain coverage under the 19 existing service contract or warranty. 20 d. Descriptions of the service contract as a “policy”. 21 2. A licensed service company which offers service 22 contracts for sale in this state shall not, directly or 23 indirectly, do any of the following: 24 a. Fail to complete, or fail to ensure the completion of, a 25 repair, maintenance, replacement, service, or indemnification 26 of expenses associated with a covered claim within a reasonable 27 period of time. 28 b. Create or use any advertising that does not include the 29 name of the licensed service company. 30 c. Use any method of marketing that may induce the purchase 31 of a service contract through force, fear, or threats, whether 32 explicit or implied. 33 d. Create or use any service contract marketing materials 34 that contain incorrect or misleading information. 35 -16- LSB 5468XD (7) 91 nls/ko 16/ 22

S.F. _____ H.F. _____ e. Use, offer for sale, or issue in this state a service 1 contract form that has not been submitted as part of a license 2 application pursuant to section 523C.3, as part of a license 3 application renewal pursuant to section 523C.4, or submitted 4 to the division during the service company’s current license 5 period. 6 3. The commissioner may adopt rules pursuant to 7 chapter 17A that regulate service contracts to prohibit 8 misrepresentation, false advertising, defamation, boycotts, 9 coercion, intimidation, false statements and entries, and 10 unfair discrimination or practices. If the commissioner finds 11 that a person has violated rules adopted under this section, 12 the commissioner may order any of the following: 13 a. Payment of a civil penalty of not more than one thousand 14 dollars for each act or violation, not to exceed an aggregate 15 of ten thousand dollars, unless the person knew or reasonably 16 should have known the person was in violation of this section, 17 in which case the civil penalty shall be no more than five 18 thousand dollars for each act or violation, not to exceed an 19 aggregate of fifty thousand dollars in any one consecutive 20 six-month period. If the commissioner finds a violation of 21 this section was directed, encouraged, condoned, ignored, 22 or ratified by the employer of the person the commissioner 23 may assess the penalty to the employer and not the person. 24 Any civil penalties collected under this subsection shall be 25 deposited as provided in section 505.7. 26 b. Suspension or revocation of the person’s license, if the 27 person knew or reasonably should have known the person was in 28 violation of this section. 29 4. A violation of this chapter constitutes an unlawful 30 practice pursuant to section 714.16. 31 5. A person shall not engage, directly or indirectly, in any 32 unfair method of competition, or an unfair or deceptive act or 33 practice, in the business of service contracts. Any violation 34 of this chapter constitutes an unfair method of competition, 35 -17- LSB 5468XD (7) 91 nls/ko 17/ 22

S.F. _____ H.F. _____ or an unfair or deceptive act or practice. If, after hearing, 1 the commissioner determines that a person has engaged in an 2 unfair method of competition or an unfair or deceptive act or 3 practice, sections 507B.6 through 507B.8 shall apply. 4 Sec. 11. Section 523C.22, Code 2026, is amended to read as 5 follows: 6 523C.22 Claim procedures. 7 A licensed service company shall promptly provide a 8 detailed written explanation to the service contract holder, 9 describing the reasons for denying a claim or for the offer 10 of a compromise settlement, based on all relevant facts or 11 legal requirements and referring to applicable provisions of 12 the service contract. The written explanation must provide 13 an itemized list of services covered by, and not covered 14 by, the service company under the service contract. The 15 written explanation must provide instructions to the service 16 contract holder on the process for an appeal, second review, 17 arbitration, or similar provisions included in the contract, 18 as well as information on how to file a complaint with the 19 division, including the internet site on which to locate the 20 division’s complaint form. 21 Sec. 12. Section 523C.23, subsection 1, paragraph c, Code 22 2026, is amended by striking the paragraph. 23 Sec. 13. Section 523C.23, subsection 2, Code 2026, is 24 amended to read as follows: 25 2. Except as provided in section 523C.19 , a A proceeding 26 instituted under this chapter shall be conducted pursuant to 27 chapter 17A and rules adopted by the commissioner pursuant to 28 chapter 17A . 29 Sec. 14. NEW SECTION . 523C.25 Confidentiality. 30 1. Notwithstanding chapter 22, the commissioner shall 31 maintain the confidentiality of information submitted to the 32 division or obtained by the division in the course of an 33 investigation, examination, or inquiry pursuant to this chapter 34 or the commissioner’s licensing authority, including all notes, 35 -18- LSB 5468XD (7) 91 nls/ko 18/ 22

S.F. _____ H.F. _____ work papers, or other documents. Information obtained by 1 the commissioner in the course of investigating a complaint 2 or inquiry may, at the discretion of the commissioner, be 3 provided to the service company that is the subject of the 4 complaint or inquiry and the consumer who filed the complaint 5 or inquiry, without waiving the confidentiality afforded to 6 the commissioner or to any other person by this section. The 7 commissioner may disclose or release information that is 8 otherwise confidential under this subsection in the course of 9 an administrative or judicial proceeding. 10 2. Notwithstanding subsection 1, if the commissioner 11 determines that it is necessary in the public interest, the 12 commissioner may share information with other regulatory 13 authorities or government agencies, or may publish service 14 company-related data or information collected under this 15 chapter. Such information may be redacted so that neither 16 personally identifiable information nor service company 17 identifiable information is made available. 18 Sec. 15. Section 714.16, subsection 2, Code 2026, is amended 19 by adding the following new paragraph: 20 NEW PARAGRAPH . t. It is an unlawful practice for a person 21 to violate chapter 523C. 22 Sec. 16. REPEAL. Section 523C.19, Code 2025, is repealed. 23 EXPLANATION 24 The inclusion of this explanation does not constitute agreement with 25 the explanation’s substance by the members of the general assembly. 26 This bill relates to the licensing of service companies, 27 motor vehicle service contracts, and residential service 28 contracts. 29 The bill prohibits a person that will be contractually 30 obligated to a service contract holder under the terms of a 31 service contract from issuing, offering for sale, or selling a 32 motor vehicle service contract or residential service contract 33 in the state unless the person is a licensed service company. 34 The requirements of the bill do not apply to any person who 35 -19- LSB 5468XD (7) 91 nls/ko 19/ 22