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Senate File 619 - IntroducedA Bill ForAn Act 1modifying provisions applicable to certain service
2contract providers regulated by the commissioner of
3insurance, providing fees, making penalties applicable,
4making an appropriation, and including effective date
5provisions.
6BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 523C.1, Code 2019, is amended to read as
2follows:
3523C.1 Definitions.
4As used in this chapter, unless the context otherwise
5requires:
61. “Commissioner” means the commissioner of insurance.
72. “Custodial account” means an account established by
8agreement between a licensed service company and a custodian
9under section 523C.5.
103. “Custodial agreement” means an agreement entered into
11between a licensed service company and a custodian under
12section 523C.5.
134. “Custodian” means an institution meeting the requirements
14established by the commissioner which institution has entered
15into a custodial agreement or reserve account agreement with a
16licensed service company.
175. “Depository” means an institution designated by the
18commissioner as an authorized custodian for purposes of
19sections 523C.5 and 523C.11.
206. 2. “Licensed service company” means a service company
21which is licensed by the commissioner pursuant to this chapter.
223. “Maintenance agreement” means a contract of any duration
23that provides for scheduled maintenance to property.
244. “Motor vehicle” means any self-propelled vehicle subject
25to registration under chapter 321.
265. “Motor vehicle manufacturer” means any of the following:
27a. A person who manufactures or produces motor vehicles
28and sells the motor vehicles under the person’s trade name or
29label.
30b. A person who is a wholly owned subsidiary of any person
31who manufactures or produces motor vehicles.
32c. A person who holds a one hundred percent ownership
33interest in another person who manufactures or produces motor
34vehicles.
35d. A person who does not manufacture or produce motor
-1-1vehicles, but for which motor vehicles are sold under the
2person’s trade name or label.
3e. A person who manufactures or produces motor vehicles,
4but the motor vehicles are sold under the trade name or label
5of another person.
6f. A person who does not manufacture or produce motor
7vehicles, but who licenses the use of the person’s trade name
8or label to another person pursuant to a written contract, who
9then sells motor vehicles under the trade name or label of the
10licensor.
116. “Motor vehicle service contract” means a contract or
12agreement given for consideration over and above the lease
13or purchase price of a new or used motor vehicle having a
14gross vehicle weight rating of less than sixteen thousand
15pounds, that undertakes to perform the repair, replacement,
16or maintenance of the motor vehicle, or indemnification for
17such repair, replacement, or maintenance, for the operation
18or structural failure of the motor vehicle due to a defect
19in materials, workmanship, or normal wear and tear, with or
20without additional provisions for the incidental payment
21of indemnity under limited circumstances, including but
22not limited to motor vehicle towing, rental, emergency road
23service, and road hazard protection. “Motor vehicle service
24contract” also includes a contract or agreement sold for
25separate consideration for a specific duration that provides
26for any of the following services or products:
27a. The repair or replacement of motor vehicle tires or
28wheels that are damaged as a result of contact with road
29hazards, including but not limited to potholes, rocks, wood
30debris, metal parts, glass, plastic, curbs, or composite
31scraps.
32b. The removal of dents or creases on a motor vehicle
33under a process that does not use paint or affect the existing
34paint finish, and without sanding, bonding, or replacing motor
35vehicle body panels.
-2- 1c. The repair or replacement of motor vehicle windshields
2that are damaged as a result of contact with road hazards.
3d. The replacement of motor vehicle keys or key fobs in the
4event that such device becomes inoperable, lost, or stolen.
5e. Any other service or product approved by the
6commissioner.
77. “Premium” means the consideration paid to an insurer for
8a reimbursement insurance policy.
97. 8. “Record” means the same as defined in section 516E.1
10information stored or preserved in any medium, including in
11an electronic or paper format. A “record” includes but is
12not limited to documents, books, publications, accounts,
13correspondence, memoranda, agreements, computer files, film,
14microfilm, photographs, and audio or visual tapes.
159. “Reimbursement insurance policy” means a contractual
16liability insurance policy issued to a service company that
17either provides reimbursement to a service company under the
18terms of insured service contracts issued or sold by the
19service company or, in the event of nonperformance by the
20service company, pays, on behalf of the service company, all
21covered contractual obligations incurred by the service company
22under the terms of the insured service contracts issued or sold
23by the service company.
248. “Reserve account agreement” means an agreement entered
25into between a licensed service company and a depository under
26section 523C.11.
279. 10. “Residential service contract” means a contract or
28agreement between a residential customer and a service company
29which undertakes, for a predetermined fee and for a specified
30 any period of time, to service, maintain, repair, or replace,
31or 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
34residential property containing not more than four dwelling
35units in the state which fails due to normal wear or tear or
-3-1inherent defect. “Residential service contract” also includes
2a contract which provides for the service, repair, replacement,
3or maintenance of property for damage resulting from power
4surges, roof leakage, and accidental damage from repair work.
510. 11. “Service company” means a person who issues and
6performs, or arranges to perform, is contractually obligated to
7perform services pursuant to a motor vehicle service contract
8or residential service contract.
912. “Service contract” means a motor vehicle service
10contract or residential service contract.
1113. “Warranty” means a statement made solely by the
12manufacturer, importer, or seller of property or services
13without consideration, that is not negotiated or separated from
14the sale of the product and is incidental to the sale of the
15product, and that guarantees indemnity for defective parts,
16mechanical or electrical breakdown, and labor or other remedial
17measures, such as repair or replacement of the property or
18repetition of services.
19 Sec. 2. Section 523C.2, Code 2019, is amended to read as
20follows:
21523C.2 License required.
221. A person shall not issue a, offer for sale, or sell a
23motor vehicle service contract or residential service contract
24or undertake or arrange to perform services pursuant to a
25residential service contract in this state unless the person
26is a corporation or other form of organization approved by the
27commissioner by rule and is a licensed as a service company
28under this chapter.
292. The licensure requirements of this chapter shall not
30apply to any person who provides support services or works
31under the direction of a licensed service company in connection
32with the issuance, offer for sale, or sale of a service
33contract in this state, including but not limited to a person
34who provides marketing, administrative, or technical support.
35 Sec. 3. Section 523C.3, Code 2019, is amended to read as
-4-1follows:
2523C.3 Application for license.
31. Application for a license as a service company shall
4be made to and filed with the commissioner on forms approved
5by the commissioner and shall include all of the following
6information:
7a. The name and principal address of the applicant.
8b. The state of incorporation of the applicant.
9c. The name and address of the applicant’s registered agent
10for service of process within Iowa.
11d. A certificate of good standing for the applicant issued
12by the secretary of state and dated not more than thirty days
13prior to the date of the application.
14e. Evidence of compliance with section 523C.5.
15f. A copy of each motor vehicle service contract form to be
16used or issued in this state, if applicable.
17g. A copy of each residential service contract form to be
18used or issued in this state, if applicable.
192. The application shall be accompanied by all of the
20following:
21a. A certificate of good standing for the applicant issued
22by the secretary of state and dated not more than thirty days
23prior to the date of the application.
24b. A surety bond, a copy of the receipt from the treasurer
25of state that a cash deposit has been made, or a copy of a
26custodial agreement as provided in section 523C.5.
27c. A copy of the most recent financial statement, including
28balance sheets and related statements of income, of the
29applicant, prepared in accordance with generally accepted
30accounting principles, audited by a certified public accountant
31and dated not more than twelve months prior to the date of the
32application.
33d. An affidavit of an authorized officer of the service
34company stating the number of contracts issued by the service
35company in the preceding calendar year, and stating that the
-5-1net worth of the service company satisfies the requirements of
2section 523C.6.
3e. a. A license fee in the amount of two five hundred fifty
4 dollars.
5b. If applicable, a fee in the amount of fifty dollars
6for each motor vehicle service contract form submitted in an
7application as provided in subsection 1, paragraph “f”.
83. If the application contains the required information and
9is accompanied by the items set forth in subsection 2, and if
10the net worth requirements of section 523C.6 are satisfied, as
11evidenced by the audited financial statements, the commissioner
12shall issue the license. If the form of application is not
13properly completed or if the required accompanying documents
14are not furnished or in proper form, the commissioner shall
15not issue the license and shall give the applicant written
16notice of the grounds for not issuing the license. A notice
17of license denial shall be accompanied by a refund of fifty
18percent of the fee submitted with the application.
194. Fees collected under this section shall be deposited as
20provided in section 505.7 523C.24.
21 Sec. 4. Section 523C.4, Code 2019, is amended to read as
22follows:
23523C.4 License expiration and renewal.
241. Each license issued under this chapter shall expire
25on June 30 next be valid for a period of one year and shall
26be renewed by August 31 of each year following the date of
27issuance. If the service company maintains in force the surety
28bond described in section 523C.5 and if its license is not
29subject to or under suspension or revocation under section
30523C.9, its license shall be renewed by the commissioner upon
31receipt by the commissioner on or before the expiration date
32of a renewal application accompanied by the items required by
33section 523C.3, subsection 2, paragraphs “b”, “c”, “d”, and “e”,
34and section 523C.15.
352. An application for renewal shall include the information
-6-1required for an initial license as described in section 523C.3,
2subsection 1.
33. The renewal application shall be accompanied by all of
4the following:
5a. A license renewal fee in the amount of five hundred
6dollars.
7b. If applicable, a fee in the amount of three percent of
8the aggregate amount of payments the licensee received for the
9sale or issuance of residential service contracts in this state
10during the preceding fiscal year, provided that such fee shall
11be no less than one hundred dollars and no greater than fifty
12thousand dollars.
13c. If applicable, a fee in the amount of fifty dollars
14for each motor vehicle service contract form submitted in a
15renewal application as provided in section 523C.3, subsection
161, paragraph “f”.
17d. Information regarding the number of motor vehicle service
18contracts or residential service contracts issued during the
19preceding fiscal year, the number canceled or expired during
20the preceding fiscal year, the number in effect at the end of
21the preceding fiscal year, and the amount of service contract
22fees received during the preceding fiscal year.
234. If the commissioner denies renewal of the license, the
24denial shall be in writing setting forth the grounds for denial
25and shall be accompanied by a refund of fifty percent of the
26license renewal fee.
275. In addition to the annual license renewal requirements
28as provided in this section, a licensee shall report to the
29commissioner any material change in information submitted by
30the licensee in its initial license application which has
31not been reported to the commissioner, including a change in
32contact information, a change in ownership, or any other change
33which substantially affects the licensee’s operations in this
34state.
35 Sec. 5. Section 523C.5, Code 2019, is amended by striking
-7-1the section and inserting in lieu thereof the following:
2523C.5 Financial responsibility — demonstration
3requirements.
4In order to assure the faithful performance of a service
5company’s obligations to its contract holders in this state,
6a licensed service company shall demonstrate financial
7responsibility to the commissioner by satisfying one of the
8following, as evidenced by the service company:
91. Insuring all motor vehicle service contracts and
10residential service contracts offered for sale in this state
11under a reimbursement insurance policy that complies with
12section 523C.6.
132. Doing both of the following:
14a. Maintaining a funded reserve account for the service
15company’s obligations under any issued and outstanding service
16contracts in this state, in an amount no less than forty
17percent of gross consideration received, less claims paid, for
18the sale of all service contracts issued and in force in this
19state. The reserve account shall be subject to examination and
20review by the commissioner.
21b. Placing in trust with the commissioner a financial
22security deposit in an amount no less than five percent of
23the gross consideration received by the service company,
24less claims paid, for the sale of all motor vehicle service
25contracts and residential service contracts issued and in force
26in this state, but not less than twenty-five thousand dollars,
27consisting of one of the following:
28(1) Cash.
29(2) Securities of the type eligible for deposit by insurers
30authorized 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
34commissioner by rule.
353. Doing both of the following:
-8- 1a. Maintaining, on its own or together with a parent
2company, a minimum net worth or stockholders’ equity of one
3hundred million dollars or more.
4b. 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
7consolidated with those of its parent company, a copy of the
8parent company’s most recent form 10-K or form 20-F filed with
9the federal securities and exchange commission within the last
10calendar year, or if the parent company does not file with
11the federal securities and exchange commission, a copy of the
12parent company’s audited financial statements showing a net
13worth of at least one hundred million dollars. If the service
14company’s financial statements are consolidated with those of
15its parent company, the service company shall also provide a
16copy of a written agreement by the parent company guaranteeing
17the obligations of the service company under motor vehicle
18service contracts and residential service contracts issued and
19outstanding by the service company in this state.
20 Sec. 6. Section 523C.6, Code 2019, is amended by striking
21the section and inserting in lieu thereof the following:
22523C.6 Reimbursement insurance policy requirements — insurer
23qualifications.
241. Requirements. A reimbursement insurance policy insuring
25a motor vehicle service contract or residential service
26contract issued, sold, or offered for sale in this state shall
27provide for all of the following:
28a. The reimbursement insurance policy shall obligate the
29insurer that issued such policy to reimburse or pay on behalf
30of the service company any covered sums that the service
31company is legally obligated to pay according to the terms of
32the contract or, in the event of nonperformance by the service
33company, provide the service which the service company is
34legally obligated to perform according to the terms of the
35service contract, which shall be conspicuously stated in the
-9-1reimbursement insurance policy.
2b. The reimbursement insurance policy shall entitle a
3service contract holder to make a claim directly against the
4insurance policy if the service company fails to pay or provide
5service on a claim within sixty days after proof of loss is
6filed with the service company.
7c. The insurer that issued a reimbursement insurance policy
8shall be deemed to have received the premiums upon the payment
9of the total purchase price of the service contract by the
10service contract holder.
112. Termination. As applicable, an insurer that issued a
12reimbursement insurance policy shall not terminate the policy
13unless a written notice has been received by the commissioner
14and by each applicable service company. The notice shall
15fix the date of termination at a date no earlier than ten
16days after receipt of the notice by the commissioner. The
17termination of a reimbursement insurance policy shall not
18reduce the issuer’s responsibility for a service contract
19issued by an insured service company prior to the date of
20termination.
213. Indemnification or subrogation. This section does
22not prevent or limit the right of an insurer that issued a
23reimbursement insurance policy to seek indemnification from or
24subrogation against a service company if the insurer pays or
25is obligated to pay a service contract holder sums that the
26service company was obligated to pay pursuant to the provisions
27of a service contract or pursuant to a contractual agreement.
284. Premium tax liability. Payments for the purchase price
29of a service contract by a service contract holder shall be
30exempt from premium tax. However, premiums shall be subject
31to premium tax.
325. Qualifications of insurer. An insurer issuing a
33reimbursement insurance policy under this chapter shall be
34authorized, registered, or otherwise permitted to transact
35business in this state and shall meet one of the following
-10-1requirements:
2a. At the time the policy is filed with the commissioner,
3and continuously thereafter, the insurer maintains surplus
4as to policyholders and paid-in capital of at least fifteen
5million dollars and annually files copies of the insurer’s
6financial statements, national association of insurance
7commissioners annual statement, and actuarial certification, if
8required and filed in the insurer’s state of domicile.
9b. At the time the policy is filed with the commissioner and
10continuously thereafter, the insurer does all of the following:
11(1) Maintains surplus as to policyholders and paid-in
12capital of less than fifteen million dollars but at least ten
13million dollars.
14(2) Demonstrates to the satisfaction of the commissioner
15that the insurer maintains a ratio of net written premiums,
16wherever written, to surplus as to policyholders and paid-in
17capital of not greater than three to one.
18(3) Files copies annually of the insurer’s financial
19statements, national association of insurance commissioners
20annual statement, and actuarial certification, if required and
21filed in the insurer’s state of domicile.
22 Sec. 7. Section 523C.7, Code 2019, is amended by striking
23the section and inserting in lieu thereof the following:
24523C.7 Disclosure to service contract holders — contract
25form — required provisions.
261. A motor vehicle service contract or residential service
27contract shall not be issued, sold, or offered for sale in this
28state unless the service company does all of the following:
29a. Provides a receipt for the purchase of the service
30contract to the service contract holder.
31b. Provides a copy of the service contract to the service
32contract holder within a reasonable period of time after the
33date of purchase of the service contract.
34c. Provides a complete sample copy of the terms and
35conditions of the service contract to the service contract
-11-1holder prior to the date of purchase. A service company may
2comply with this paragraph by providing the service contract
3holder with a complete sample copy of the terms or conditions
4of the service contract, or directing the service contract
5holder to an internet site containing a complete sample copy of
6the terms and conditions of the service contract.
72. A motor vehicle service contract or residential service
8contract issued, sold, or offered for sale in this state shall
9comply with all of the following, as applicable:
10a. A service contract shall be written in clear,
11understandable language in at least eight point font.
12b. (1) A service contract insured by a reimbursement
13insurance policy as provided in section 523C.5, subsection 1,
14shall include a statement in substantially the following form:
15Obligations of the service company under this service
16contract are guaranteed under a reimbursement insurance policy.
17If the service company fails to pay or provide service on a
18claim within sixty days after proof of loss has been filed with
19the service company, the service contract holder is entitled
20to make a claim directly against the reimbursement insurance
21policy.
22(2) A service contract insured by a reimbursement insurance
23policy shall conspicuously state the name and address of the
24issuer of the reimbursement insurance policy for that service
25contract. A claim against a reimbursement insurance policy
26shall also include a claim for return of the unearned service
27company fee paid for the service contract.
28c. A service contract not insured under a reimbursement
29insurance policy shall contain a statement in substantially the
30following form:
31Obligations of the service company under this service
32contract are backed by the full faith and credit of the service
33company and are not guaranteed under a reimbursement insurance
34policy.
35d. A service contract shall state the name and address of
-12-1the service company obligated to perform services under the
2contract, and shall conspicuously identify the service company,
3any third-party administrator, and the service contract holder
4to the extent that the name and address of the service contract
5holder has been furnished. The identities of such parties are
6not required to be printed on the contract in advance and may
7be added to the contract at the time of sale.
8e. A service contract shall clearly state the total purchase
9price of the service contract and the terms under which the
10service contract is sold. The total purchase price is not
11required to be printed on the contract in advance and may be
12added to the contract at the time of sale.
13f. If prior approval of repair work is required, a service
14contract shall conspicuously describe the procedure for
15obtaining prior approval and for making a claim, including a
16toll-free telephone number for claim service, and the procedure
17for obtaining emergency repairs performed outside of normal
18business hours.
19g. A service contract shall clearly state the existence of
20any deductible amount.
21h. A service contract shall specify the merchandise
22or services, or both, to be provided and any limitations,
23exceptions, or exclusions.
24i. A service contract shall clearly state the conditions on
25which the use of substitute parts or services will be allowed.
26Such conditions shall comply with applicable state and federal
27laws.
28j. A service contract shall clearly state any terms,
29restrictions, or conditions governing the transferability of
30the service contract.
31k. A service contract shall clearly state the terms and
32conditions governing the cancellation of the contract prior
33to the termination or expiration date of the contract by the
34service company or the service contract holder. If the service
35company cancels the contract, the service company shall mail a
-13-1written notice of termination to the service contract holder
2at least fifteen days before the date of the termination.
3Prior notice of cancellation by the service company is not
4required if the reason for cancellation is nonpayment of the
5purchase price, a material misrepresentation by the service
6contract holder to the service company or its administrator, or
7a substantial breach of duties by the service contract holder
8relating to the covered product or its use. The notice of
9cancellation shall state the effective date of the cancellation
10and the reason for the cancellation. If a service contract
11is canceled by the service company for any reason other than
12nonpayment of the purchase price, the service company shall
13refund the service contract holder in an amount equal to one
14hundred percent of the unearned purchase price paid, less any
15claims paid. The service company may also charge a reasonable
16administrative fee in an amount no greater than ten percent of
17the total purchase price.
18l. (1) A service contract shall permit the original
19service contract holder that purchased the contract to cancel
20and return the service contract within at least twenty days
21of the date of mailing the service contract to the service
22contract holder or within at least ten days after delivery of
23the service contract if the service contract is delivered at
24the time of sale of the service contract, or within a longer
25period of time as permitted under the service contract. If no
26claim has been made under the service contract prior to its
27return, the service contract is void and the full purchase
28price of the service contract shall be refunded to the service
29contract holder. A ten percent penalty shall be added each
30month to a refund that is not paid to a service contract holder
31within thirty days of the return of the service contract to the
32service company.
33(2) If the service contract holder cancels the service
34contract outside of the applicable time as provided in
35subparagraph (1) or after a claim is made under the service
-14-1contract, the service company shall refund the service
2contract holder in an amount equal to one hundred percent of
3the unearned purchase price paid, less any claims paid. The
4service company may also charge a reasonable administrative fee
5in an amount no greater than ten percent of the total purchase
6price.
7m. A service contract shall set forth all of the obligations
8and duties of the service contract holder, including but not
9limited to the duty to protect against any further damage,
10and the obligation to follow an owner’s manual or any other
11required service or maintenance.
12n. A service contract shall clearly state whether or not
13the contract provides for or excludes consequential damages
14or preexisting conditions, if applicable. A service contract
15may, but is not required to, cover damage resulting from rust,
16corrosion, or damage caused by a part or system which is not
17covered under the service contract.
18o. A service contract shall clearly state the fee, if any,
19charged on the service contract holder for making a service
20call.
21p. A service contract shall state the name and address of
22the commissioner.
23 Sec. 8. Section 523C.9, Code 2019, is amended to read as
24follows:
25523C.9 Suspension or revocation of license.
261. In addition to the license revocation provisions of
27section 523C.5, the The commissioner may suspend or revoke or
28refuse to renew the license of a service company for any of the
29following grounds:
30a. 1. The service company violated a lawful order of the
31commissioner or any provision of this chapter.
32b. 2. The service company failed to pay any final judgment
33rendered against it in this state within sixty days after the
34judgment became final.
35c. 3. The service company has without just cause refused
-15-1to perform or negligently or incompetently performed services
2required to be performed under its residential service
3contracts and the refusal, or negligent or incompetent
4performance has occurred with such frequency, as the
5commissioner determines, as to indicate the general business
6practices of the service company.
7d. 4. The service company violated section 523C.13.
8e. 5. The service company failed to maintain the net worth
9required by section 523C.6 demonstrate financial responsibility
10pursuant to section 523C.5.
11f. The service company failed to maintain the reserve
12account required by section 523C.11.
13g. 6. The service company failed to maintain its corporate
14certificate of good standing with the secretary of state.
152. If the license of a service company is terminated
16under section 523C.5 because of failure to maintain bond, the
17commissioner shall give written notice of termination to the
18service company. The notice shall include the effective date
19of the termination.
20 Sec. 9. Section 523C.12, Code 2019, is amended to read as
21follows:
22523C.12 Optional examination.
23The commissioner or a designee of the commissioner may
24make an examination of the books and records of a service
25company, including copies of contracts and records of claims
26and expenditures, and verify its assets, liabilities, and
27reserves. The actual costs of the examination shall be borne
28by the service company. The costs of an examination under this
29section shall not exceed an amount equal to ten percent of the
30service company’s reported net income in the previous fiscal
31year.
32 Sec. 10. Section 523C.13, Code 2019, is amended to read as
33follows:
34523C.13 Prohibited acts or practices — penalty.
351. A licensed service company which offers motor
-16-1vehicle service contracts for sale in this state, or its
2representative, shall not, directly or indirectly, represent in
3any manner, whether by written solicitation or telemarketing, a
4false, deceptive, or misleading statement with respect to any
5of the following:
6a. Statements regarding the service company’s affiliation
7with a motor vehicle manufacturer or importer.
8b. Statements regarding the validity or expiration of a
9warranty.
10c. Statements regarding a motor vehicle service contract
11holder’s coverage under a motor vehicle service contract,
12including statements suggesting that the service contract
13holder must purchase a new service contract in order to
14maintain coverage under the existing service contract or
15warranty.
162. The commissioner shall may adopt rules which regulate
17motor vehicle service contracts and residential service
18contracts to prohibit misrepresentation, false advertising,
19defamation, boycotts, coercion, intimidation, false statements
20and entries and unfair discrimination or practices. If the
21commissioner finds that a person has violated the rules adopted
22under this section, the commissioner may order any or all of
23the following:
241. a. Payment of a civil penalty of not more than one
25thousand dollars for each and every act or violation, but not
26to exceed an aggregate of ten thousand dollars, unless the
27person knew or reasonably should have known the person was in
28violation of this section, in which case the penalty shall be
29not more than five thousand dollars for each and every act or
30violation, but not to exceed an aggregate penalty of fifty
31thousand dollars in any one six-month period. The commissioner
32shall, if it finds the violations of this section were
33directed, encouraged, condoned, ignored, or ratified by the
34employer of such person, assess such penalty to the employer
35and not such person. Any civil penalties collected under this
-17-1subsection shall be deposited as provided in section 505.7.
22. b. Suspension or revocation of the license of a person,
3if the person knew or reasonably should have known the person
4was in violation of this section.
5 Sec. 11. Section 523C.15, Code 2019, is amended to read as
6follows:
7523C.15 Annual report.
8A licensed service company that does not demonstrate
9financial responsibility by insuring service contracts under a
10reimbursement insurance policy as provided in section 523C.5,
11subsection 1, shall file with the commissioner an annual
12report within ninety days of the close of its fiscal no later
13than August 31 of each year. The annual report shall be in
14a form prescribed by the commissioner and contain all of the
15following:
161. A current financial statement including a balance
17sheet and statement of operations prepared in accordance with
18generally accepted accounting principles and certified by an
19independent certified public accountant.
202. The number of residential service contracts issued
21during the preceding fiscal year, the number canceled or
22expired during the year, the number in effect at year end and
23the amount of residential service contract fees received.
243. 2. Any other information relating to the performance
25and solvency of the residential service company required by the
26commissioner.
27 Sec. 12. Section 523C.16, Code 2019, is amended to read as
28follows:
29523C.16 Exclusions.
30This chapter does not apply to any of the following:
311. A performance guarantee given by a builder of a residence
32or the manufacturer or seller or lessor of residential property
33if no identifiable charge is made for the guarantee.
342. A residential service contract, guarantee or warranty
35between a residential customer and a service company which will
-18-1perform the work itself and not through subcontractors for
2the service, repair or replacement of residential property,
3 appliances, or electrical, plumbing, heating, cooling or
4air-conditioning systems.
53. A contract between a service company issuing residential
6service contracts and a person who actually performs the
7maintenance, repairs, or replacements of structural components,
8or appliances, or electrical, plumbing, heating, cooling, or
9air-conditioning systems, if someone other than the service
10company actually performs these functions.
114. A residential service contract, guarantee or warranty
12issued by a retail merchant to a retail customer, guaranteeing
13or warranting the repair, service or replacement of appliances
14or electrical, plumbing, heating, cooling or air-conditioning
15systems sold by said retail merchant.
165. A residential service contract, guarantee, or warranty
17issued by a manufacturer, third party, or retail company,
18covering the repair, maintenance, or replacement of residential
19property, individual appliances, and other individual items
20of merchandise marketed and sold by a retail company, in the
21ordinary course of business.
226. A motor vehicle service contract issued by the
23manufacturer or importer of the motor vehicle covered by
24the service contract or to any third party acting in an
25administrative capacity on the manufacturer’s behalf in
26connection with that service contract.
277. A residential service contract involving residential
28property containing more than four dwelling units.
298. A warranty.
309. A motor vehicle service contract issued, offered for
31sale, or sold to any person other than a consumer.
3210. A maintenance agreement.
33 Sec. 13. Section 523C.17, Code 2019, is amended to read as
34follows:
35523C.17 Lending institutions, service companies, and
-19-1insurance companies.
2A bank, savings association, insurance company, or other
3lending institution shall not require the purchase of a motor
4vehicle service contract or residential service contract as a
5condition of a loan or the sale of any property. A service
6company or an insurer, either directly or indirectly, as a
7part of any real property transaction in which a residential
8service contract will be issued, purchased, or acquired, shall
9not require that a residential service contract be issued,
10purchased, or acquired in conjunction with or as a condition
11precedent to the issuance, purchase, or acquisition, by any
12person, of a policy of insurance. A lending institution shall
13not sell a residential service contract to a borrower unless
14the borrower signs an affidavit acknowledging that the purchase
15is not required. Violation of this section is punishable as
16provided in section 523C.13.
17 Sec. 14. Section 523C.22, Code 2019, is amended to read as
18follows:
19523C.22 Claim procedures.
20A licensed service company shall promptly provide a written
21explanation to the residential customer service contract
22holder, describing the reasons for denying a claim or for the
23offer of a compromise settlement, based on all relevant facts
24or legal requirements and referring to applicable provisions of
25the residential service contract.
26 Sec. 15. NEW SECTION. 523C.24 Service company oversight
27fund.
281. A service company oversight fund is created in the
29state treasury as a separate fund under the control of the
30commissioner. The fund shall consist of all moneys deposited
31in the fund pursuant to subsection 2.
322. The commissioner shall deposit in the service company
33oversight fund an amount equal to one-third of all licensing,
34examination, renewal, and inspection fees collected under this
35chapter, provided that the maximum amount of fees deposited
-20-1in the fund each fiscal year shall not exceed five hundred
2thousand dollars. Any remaining fees collected under this
3chapter and not deposited in the service company oversight fund
4shall be deposited as provided in section 505.7.
53. Moneys in the service company oversight fund are
6appropriated to the commissioner for the administration and
7enforcement of this chapter, and for establishing service
8contract consumer complaint, education, and outreach programs.
94. Notwithstanding section 12C.7, subsection 2, interest or
10earnings on moneys deposited in the service company oversight
11fund shall be credited to the fund. Notwithstanding section
128.33, moneys credited to the fund shall not revert at the close
13of a fiscal year.
14 Sec. 16. REPEAL. Chapter 516E, Code 2019, is repealed.
15 Sec. 17. REPEAL. Sections 523C.8, 523C.8A, 523C.11,
16523C.14, and 523C.18, Code 2019, are repealed.
17 Sec. 18. EMERGENCY RULES. The commissioner of insurance
18may adopt emergency rules under section 17A.4, subsection 3,
19and section 17A.5, subsection 2, paragraph “b”, to implement
20the provisions of this Act and the rules shall be effective
21immediately upon filing unless a later date is specified in the
22rules. Any rules adopted in accordance with this section shall
23also be published as a notice of intended action as provided
24in section 17A.4.
25 Sec. 19. EFFECTIVE DATE. This Act, being deemed of
26immediate importance, takes effect upon enactment.
27EXPLANATION
28The inclusion of this explanation does not constitute agreement with
29the explanation’s substance by the members of the general assembly.
30This bill modifies provisions applicable to certain service
31contract providers regulated by the commissioner of insurance.
32Current Code chapter 516E requires service contract
33providers, or service companies, that offer motor vehicle
34service contracts for sale in Iowa to register annually
35with the commissioner, whereas service companies that offer
-21-1residential service contracts must become licensed annually by
2the commissioner under Code chapter 523C.
3The bill repeals Code chapter 516E, incorporates certain
4provisions regarding service companies offering motor vehicle
5service contracts in Code chapter 523C, thereby requiring any
6service company that sells motor vehicle service contracts
7or residential service contracts in Iowa to obtain an annual
8license from the commissioner under Code chapter 523C, and
9makes other changes to provisions in Code chapter 523C.
10The bill makes several changes to the definitions in Code
11section 523C.1. The bill removes definitions for “custodial
12account”, “custodial agreement”, “custodian”, “depository”,
13and “reserve account agreement”. The bill adds definitions
14for “maintenance agreement”, “motor vehicle”, “motor vehicle
15manufacturer”, “motor vehicle service contract”, “premium”,
16“reimbursement insurance policy”, “service contract”, and
17“warranty”, and modifies existing definitions for “residential
18service contract” and “service contract”, as described in the
19bill.
20The bill provides that a person shall not issue, offer for
21sale, or sell a motor vehicle service contract or residential
22service contract in Iowa unless the person is licensed as
23a service company under Code chapter 523C. The licensure
24requirements do not apply to any person who provides support
25services or works under the direction of a licensed service
26company, including but not limited to a person who provides
27marketing, administrative, or technical support.
28The bill specifies the information required in an
29application for a license under Code chapter 523C. In addition
30to such information, an application shall be accompanied
31by a license fee of $500 and a fee of $50 for each motor
32vehicle service contract form submitted in an application,
33if applicable. The commissioner shall issue a license if
34an application contains the required information and is
35accompanied by the required fees.
-22- 1The bill provides that each license issued under Code
2chapter 523C shall be valid for a period of one year and shall
3be renewed by August 31 of each year following the date of
4issuance. An application for renewal shall require the same
5information required in an initial application, a $500 license
6renewal fee, other fees described in the bill that apply to
7certain service companies, and other information described in
8the bill regarding a service company’s operations during the
9preceding fiscal year. In addition to such requirements, a
10service company must report to the commissioner any material
11change in information provided in the initial application which
12has not been reported to the commissioner.
13The bill replaces Code section 523C.5, which provides a
14surety bond requirement, with a new Code section which requires
15a service company to demonstrate financial responsibility to
16the commissioner. The service company shall satisfy this
17requirement by either insuring all of its service contracts
18offered for sale in Iowa under a reimbursement insurance
19policy that complies with the bill, maintaining a funded
20reserve account and placing in trust with the commissioner a
21financial security deposit, or maintaining a minimum net worth
22or stockholders’ equity and providing certain information to
23the commissioner upon request, as described in the bill.
24The bill replaces Code section 523C.6, which provides a net
25worth requirement, with a new Code section which establishes
26certain requirements for reimbursement insurance policies
27that insure service contracts offered for sale in Iowa. The
28requirements include provisions regarding insurer obligations,
29service contract holder rights, termination, indemnification
30or subrogation, insurance premium tax liability, and insurer
31qualifications, as described in the bill.
32The bill replaces Code section 523C.7, which provides
33service contract filing and form requirements, with a new
34Code section which establishes certain requirements regarding
35disclosure to service contract holders, service contract forms,
-23-1and provisions included in service contracts, as described in
2the bill.
3The bill provides that the commissioner may suspend or
4revoke or refuse to renew the license of a service company if
5the service company violates a lawful order of the commissioner
6or any provision of Code chapter 523C, fails to pay a final
7judgment in Iowa within 60 days, indicates negligence,
8incompetence, or a refusal to perform services, performs any
9prohibited acts or practices described in the bill, fails to
10demonstrate financial responsibility as provided in the bill,
11or fails to maintain its corporate certificate of good standing
12with the secretary of state.
13The bill provides that the costs of a service company
14examination conducted at the discretion of the commissioner,
15which is paid by the service company, shall not exceed an
16amount equal to 10 percent of the service company’s reported
17net income in the previous fiscal year.
18The bill prohibits a licensed service company offering
19for sale in Iowa motor vehicle service contracts, or its
20representatives, from directly or indirectly representing a
21false, deceptive, or misleading statement with respect to
22certain statements regarding its affiliation with a motor
23vehicle manufacturer or importer, the validity or expiration
24of a warranty, or a service contract holder’s coverage
25under a service contract, as described in the bill. The
26bill also allows the commissioner to adopt rules regulating
27service contract practices, any violation of which allows the
28commissioner to assess certain civil penalties or suspend or
29revoke a license, as described in the bill.
30The bill provides that annual reporting requirements
31shall apply only to licensed service companies which do not
32demonstrate financial responsibility by insuring their service
33contracts under a reimbursement insurance policy. The annual
34report shall be filed with the commissioner no later than
35August 31 of each year and shall contain certain information
-24-1described in the bill.
2The bill excludes from regulation under Code chapter 523C,
3in addition to residential service contracts currently excluded
4under Code section 523C.16, certain motor vehicle service
5contracts currently excluded from regulation under Code chapter
6516E, residential service contracts involving residential
7property containing more than four dwelling units, warranties,
8motor vehicle service contracts issued or sold to any person
9other than a consumer, and maintenance agreements.
10The bill prohibits a lending institution from requiring the
11purchase of a motor vehicle service contract or residential
12service contract as a condition of a loan or the sale of
13any property. A violation of this provision allows the
14commissioner to assess certain civil penalties or suspend or
15revoke a license, as described in the bill.
16The bill establishes new Code section 523C.24, which
17creates a service company oversight fund under the control
18of the commissioner. The fund shall consist of all moneys
19deposited in the fund pursuant to the bill. The bill directs
20the commissioner to deposit in the fund an amount equal
21to one-third of all licensing, examination, renewal, and
22inspection fees collected under Code chapter 523C, provided
23that the maximum amount deposited each fiscal year shall
24not exceed $500,000. Any remaining fees collected and not
25deposited in the fund shall be deposited in the department
26of commerce revolving fund, pursuant to Code section
27505.7. Moneys in the oversight fund are appropriated to the
28commissioner for the administration and enforcement of Code
29chapter 523C, and for establishing service contract consumer
30complaint, education, and outreach programs. Interest or
31earnings on moneys deposited in the fund shall be credited to
32the fund. Moneys deposited in the fund shall not revert at the
33close of a fiscal year.
34In addition to repealing Code chapter 516E, the bill
35repeals the following Code sections: 523C.8 (provisions
-25-1regarding rebates and commissions), 523C.8A (prohibition
2against the issuance of residential service contracts without
3consideration), 523C.11 (reserve account requirements), 523C.14
4(provisions regarding rate review), and 523C.18 (criminal
5penalty no longer applicable). The bill makes conforming
6changes throughout Code chapter 523C.
7The bill allows the commissioner to adopt emergency rules
8to implement the provisions of the bill. Any such rules shall
9be effective immediately upon filing unless a later date is
10specified and shall be published as a notice of intended
11action.
12The bill takes effect upon enactment.
-26-gh/rn
2contract providers regulated by the commissioner of
3insurance, providing fees, making penalties applicable,
4making an appropriation, and including effective date
5provisions.
6BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 523C.1, Code 2019, is amended to read as
2follows:
3523C.1 Definitions.
4As used in this chapter, unless the context otherwise
5requires:
61. “Commissioner” means the commissioner of insurance.
72. “Custodial account” means an account established by
8agreement between a licensed service company and a custodian
9under section 523C.5.
103. “Custodial agreement” means an agreement entered into
11between a licensed service company and a custodian under
12section 523C.5.
134. “Custodian” means an institution meeting the requirements
14established by the commissioner which institution has entered
15into a custodial agreement or reserve account agreement with a
16licensed service company.
175. “Depository” means an institution designated by the
18commissioner as an authorized custodian for purposes of
19sections 523C.5 and 523C.11.
206. 2. “Licensed service company” means a service company
21which is licensed by the commissioner pursuant to this chapter.
223. “Maintenance agreement” means a contract of any duration
23that provides for scheduled maintenance to property.
244. “Motor vehicle” means any self-propelled vehicle subject
25to registration under chapter 321.
265. “Motor vehicle manufacturer” means any of the following:
27a. A person who manufactures or produces motor vehicles
28and sells the motor vehicles under the person’s trade name or
29label.
30b. A person who is a wholly owned subsidiary of any person
31who manufactures or produces motor vehicles.
32c. A person who holds a one hundred percent ownership
33interest in another person who manufactures or produces motor
34vehicles.
35d. A person who does not manufacture or produce motor
-1-1vehicles, but for which motor vehicles are sold under the
2person’s trade name or label.
3e. A person who manufactures or produces motor vehicles,
4but the motor vehicles are sold under the trade name or label
5of another person.
6f. A person who does not manufacture or produce motor
7vehicles, but who licenses the use of the person’s trade name
8or label to another person pursuant to a written contract, who
9then sells motor vehicles under the trade name or label of the
10licensor.
116. “Motor vehicle service contract” means a contract or
12agreement given for consideration over and above the lease
13or purchase price of a new or used motor vehicle having a
14gross vehicle weight rating of less than sixteen thousand
15pounds, that undertakes to perform the repair, replacement,
16or maintenance of the motor vehicle, or indemnification for
17such repair, replacement, or maintenance, for the operation
18or structural failure of the motor vehicle due to a defect
19in materials, workmanship, or normal wear and tear, with or
20without additional provisions for the incidental payment
21of indemnity under limited circumstances, including but
22not limited to motor vehicle towing, rental, emergency road
23service, and road hazard protection. “Motor vehicle service
24contract” also includes a contract or agreement sold for
25separate consideration for a specific duration that provides
26for any of the following services or products:
27a. The repair or replacement of motor vehicle tires or
28wheels that are damaged as a result of contact with road
29hazards, including but not limited to potholes, rocks, wood
30debris, metal parts, glass, plastic, curbs, or composite
31scraps.
32b. The removal of dents or creases on a motor vehicle
33under a process that does not use paint or affect the existing
34paint finish, and without sanding, bonding, or replacing motor
35vehicle body panels.
-2- 1c. The repair or replacement of motor vehicle windshields
2that are damaged as a result of contact with road hazards.
3d. The replacement of motor vehicle keys or key fobs in the
4event that such device becomes inoperable, lost, or stolen.
5e. Any other service or product approved by the
6commissioner.
77. “Premium” means the consideration paid to an insurer for
8a reimbursement insurance policy.
97. 8. “Record” means the same as defined in section 516E.1
10information stored or preserved in any medium, including in
11an electronic or paper format. A “record” includes but is
12not limited to documents, books, publications, accounts,
13correspondence, memoranda, agreements, computer files, film,
14microfilm, photographs, and audio or visual tapes.
159. “Reimbursement insurance policy” means a contractual
16liability insurance policy issued to a service company that
17either provides reimbursement to a service company under the
18terms of insured service contracts issued or sold by the
19service company or, in the event of nonperformance by the
20service company, pays, on behalf of the service company, all
21covered contractual obligations incurred by the service company
22under the terms of the insured service contracts issued or sold
23by the service company.
248. “Reserve account agreement” means an agreement entered
25into between a licensed service company and a depository under
26section 523C.11.
279. 10. “Residential service contract” means a contract or
28agreement between a residential customer and a service company
29which undertakes, for a predetermined fee and for a specified
30 any period of time, to service, maintain, repair, or replace,
31or 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
34residential property containing not more than four dwelling
35units in the state which fails due to normal wear or tear or
-3-1inherent defect. “Residential service contract” also includes
2a contract which provides for the service, repair, replacement,
3or maintenance of property for damage resulting from power
4surges, roof leakage, and accidental damage from repair work.
510. 11. “Service company” means a person who issues and
6performs, or arranges to perform, is contractually obligated to
7perform services pursuant to a motor vehicle service contract
8or residential service contract.
912. “Service contract” means a motor vehicle service
10contract or residential service contract.
1113. “Warranty” means a statement made solely by the
12manufacturer, importer, or seller of property or services
13without consideration, that is not negotiated or separated from
14the sale of the product and is incidental to the sale of the
15product, and that guarantees indemnity for defective parts,
16mechanical or electrical breakdown, and labor or other remedial
17measures, such as repair or replacement of the property or
18repetition of services.
19 Sec. 2. Section 523C.2, Code 2019, is amended to read as
20follows:
21523C.2 License required.
221. A person shall not issue a, offer for sale, or sell a
23motor vehicle service contract or residential service contract
24or undertake or arrange to perform services pursuant to a
25residential service contract in this state unless the person
26is a corporation or other form of organization approved by the
27commissioner by rule and is a licensed as a service company
28under this chapter.
292. The licensure requirements of this chapter shall not
30apply to any person who provides support services or works
31under the direction of a licensed service company in connection
32with the issuance, offer for sale, or sale of a service
33contract in this state, including but not limited to a person
34who provides marketing, administrative, or technical support.
35 Sec. 3. Section 523C.3, Code 2019, is amended to read as
-4-1follows:
2523C.3 Application for license.
31. Application for a license as a service company shall
4be made to and filed with the commissioner on forms approved
5by the commissioner and shall include all of the following
6information:
7a. The name and principal address of the applicant.
8b. The state of incorporation of the applicant.
9c. The name and address of the applicant’s registered agent
10for service of process within Iowa.
11d. A certificate of good standing for the applicant issued
12by the secretary of state and dated not more than thirty days
13prior to the date of the application.
14e. Evidence of compliance with section 523C.5.
15f. A copy of each motor vehicle service contract form to be
16used or issued in this state, if applicable.
17g. A copy of each residential service contract form to be
18used or issued in this state, if applicable.
192. The application shall be accompanied by all of the
20following:
21a. A certificate of good standing for the applicant issued
22by the secretary of state and dated not more than thirty days
23prior to the date of the application.
24b. A surety bond, a copy of the receipt from the treasurer
25of state that a cash deposit has been made, or a copy of a
26custodial agreement as provided in section 523C.5.
27c. A copy of the most recent financial statement, including
28balance sheets and related statements of income, of the
29applicant, prepared in accordance with generally accepted
30accounting principles, audited by a certified public accountant
31and dated not more than twelve months prior to the date of the
32application.
33d. An affidavit of an authorized officer of the service
34company stating the number of contracts issued by the service
35company in the preceding calendar year, and stating that the
-5-1net worth of the service company satisfies the requirements of
2section 523C.6.
3e. a. A license fee in the amount of two five hundred fifty
4 dollars.
5b. If applicable, a fee in the amount of fifty dollars
6for each motor vehicle service contract form submitted in an
7application as provided in subsection 1, paragraph “f”.
83. If the application contains the required information and
9is accompanied by the items set forth in subsection 2, and if
10the net worth requirements of section 523C.6 are satisfied, as
11evidenced by the audited financial statements, the commissioner
12shall issue the license. If the form of application is not
13properly completed or if the required accompanying documents
14are not furnished or in proper form, the commissioner shall
15not issue the license and shall give the applicant written
16notice of the grounds for not issuing the license. A notice
17of license denial shall be accompanied by a refund of fifty
18percent of the fee submitted with the application.
194. Fees collected under this section shall be deposited as
20provided in section 505.7 523C.24.
21 Sec. 4. Section 523C.4, Code 2019, is amended to read as
22follows:
23523C.4 License expiration and renewal.
241. Each license issued under this chapter shall expire
25on June 30 next be valid for a period of one year and shall
26be renewed by August 31 of each year following the date of
27issuance. If the service company maintains in force the surety
28bond described in section 523C.5 and if its license is not
29subject to or under suspension or revocation under section
30523C.9, its license shall be renewed by the commissioner upon
31receipt by the commissioner on or before the expiration date
32of a renewal application accompanied by the items required by
33section 523C.3, subsection 2, paragraphs “b”, “c”, “d”, and “e”,
34and section 523C.15.
352. An application for renewal shall include the information
-6-1required for an initial license as described in section 523C.3,
2subsection 1.
33. The renewal application shall be accompanied by all of
4the following:
5a. A license renewal fee in the amount of five hundred
6dollars.
7b. If applicable, a fee in the amount of three percent of
8the aggregate amount of payments the licensee received for the
9sale or issuance of residential service contracts in this state
10during the preceding fiscal year, provided that such fee shall
11be no less than one hundred dollars and no greater than fifty
12thousand dollars.
13c. If applicable, a fee in the amount of fifty dollars
14for each motor vehicle service contract form submitted in a
15renewal application as provided in section 523C.3, subsection
161, paragraph “f”.
17d. Information regarding the number of motor vehicle service
18contracts or residential service contracts issued during the
19preceding fiscal year, the number canceled or expired during
20the preceding fiscal year, the number in effect at the end of
21the preceding fiscal year, and the amount of service contract
22fees received during the preceding fiscal year.
234. If the commissioner denies renewal of the license, the
24denial shall be in writing setting forth the grounds for denial
25and shall be accompanied by a refund of fifty percent of the
26license renewal fee.
275. In addition to the annual license renewal requirements
28as provided in this section, a licensee shall report to the
29commissioner any material change in information submitted by
30the licensee in its initial license application which has
31not been reported to the commissioner, including a change in
32contact information, a change in ownership, or any other change
33which substantially affects the licensee’s operations in this
34state.
35 Sec. 5. Section 523C.5, Code 2019, is amended by striking
-7-1the section and inserting in lieu thereof the following:
2523C.5 Financial responsibility — demonstration
3requirements.
4In order to assure the faithful performance of a service
5company’s obligations to its contract holders in this state,
6a licensed service company shall demonstrate financial
7responsibility to the commissioner by satisfying one of the
8following, as evidenced by the service company:
91. Insuring all motor vehicle service contracts and
10residential service contracts offered for sale in this state
11under a reimbursement insurance policy that complies with
12section 523C.6.
132. Doing both of the following:
14a. Maintaining a funded reserve account for the service
15company’s obligations under any issued and outstanding service
16contracts in this state, in an amount no less than forty
17percent of gross consideration received, less claims paid, for
18the sale of all service contracts issued and in force in this
19state. The reserve account shall be subject to examination and
20review by the commissioner.
21b. Placing in trust with the commissioner a financial
22security deposit in an amount no less than five percent of
23the gross consideration received by the service company,
24less claims paid, for the sale of all motor vehicle service
25contracts and residential service contracts issued and in force
26in this state, but not less than twenty-five thousand dollars,
27consisting of one of the following:
28(1) Cash.
29(2) Securities of the type eligible for deposit by insurers
30authorized 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
34commissioner by rule.
353. Doing both of the following:
-8- 1a. Maintaining, on its own or together with a parent
2company, a minimum net worth or stockholders’ equity of one
3hundred million dollars or more.
4b. 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
7consolidated with those of its parent company, a copy of the
8parent company’s most recent form 10-K or form 20-F filed with
9the federal securities and exchange commission within the last
10calendar year, or if the parent company does not file with
11the federal securities and exchange commission, a copy of the
12parent company’s audited financial statements showing a net
13worth of at least one hundred million dollars. If the service
14company’s financial statements are consolidated with those of
15its parent company, the service company shall also provide a
16copy of a written agreement by the parent company guaranteeing
17the obligations of the service company under motor vehicle
18service contracts and residential service contracts issued and
19outstanding by the service company in this state.
20 Sec. 6. Section 523C.6, Code 2019, is amended by striking
21the section and inserting in lieu thereof the following:
22523C.6 Reimbursement insurance policy requirements — insurer
23qualifications.
241. Requirements. A reimbursement insurance policy insuring
25a motor vehicle service contract or residential service
26contract issued, sold, or offered for sale in this state shall
27provide for all of the following:
28a. The reimbursement insurance policy shall obligate the
29insurer that issued such policy to reimburse or pay on behalf
30of the service company any covered sums that the service
31company is legally obligated to pay according to the terms of
32the contract or, in the event of nonperformance by the service
33company, provide the service which the service company is
34legally obligated to perform according to the terms of the
35service contract, which shall be conspicuously stated in the
-9-1reimbursement insurance policy.
2b. The reimbursement insurance policy shall entitle a
3service contract holder to make a claim directly against the
4insurance policy if the service company fails to pay or provide
5service on a claim within sixty days after proof of loss is
6filed with the service company.
7c. The insurer that issued a reimbursement insurance policy
8shall be deemed to have received the premiums upon the payment
9of the total purchase price of the service contract by the
10service contract holder.
112. Termination. As applicable, an insurer that issued a
12reimbursement insurance policy shall not terminate the policy
13unless a written notice has been received by the commissioner
14and by each applicable service company. The notice shall
15fix the date of termination at a date no earlier than ten
16days after receipt of the notice by the commissioner. The
17termination of a reimbursement insurance policy shall not
18reduce the issuer’s responsibility for a service contract
19issued by an insured service company prior to the date of
20termination.
213. Indemnification or subrogation. This section does
22not prevent or limit the right of an insurer that issued a
23reimbursement insurance policy to seek indemnification from or
24subrogation against a service company if the insurer pays or
25is obligated to pay a service contract holder sums that the
26service company was obligated to pay pursuant to the provisions
27of a service contract or pursuant to a contractual agreement.
284. Premium tax liability. Payments for the purchase price
29of a service contract by a service contract holder shall be
30exempt from premium tax. However, premiums shall be subject
31to premium tax.
325. Qualifications of insurer. An insurer issuing a
33reimbursement insurance policy under this chapter shall be
34authorized, registered, or otherwise permitted to transact
35business in this state and shall meet one of the following
-10-1requirements:
2a. At the time the policy is filed with the commissioner,
3and continuously thereafter, the insurer maintains surplus
4as to policyholders and paid-in capital of at least fifteen
5million dollars and annually files copies of the insurer’s
6financial statements, national association of insurance
7commissioners annual statement, and actuarial certification, if
8required and filed in the insurer’s state of domicile.
9b. At the time the policy is filed with the commissioner and
10continuously thereafter, the insurer does all of the following:
11(1) Maintains surplus as to policyholders and paid-in
12capital of less than fifteen million dollars but at least ten
13million dollars.
14(2) Demonstrates to the satisfaction of the commissioner
15that the insurer maintains a ratio of net written premiums,
16wherever written, to surplus as to policyholders and paid-in
17capital of not greater than three to one.
18(3) Files copies annually of the insurer’s financial
19statements, national association of insurance commissioners
20annual statement, and actuarial certification, if required and
21filed in the insurer’s state of domicile.
22 Sec. 7. Section 523C.7, Code 2019, is amended by striking
23the section and inserting in lieu thereof the following:
24523C.7 Disclosure to service contract holders — contract
25form — required provisions.
261. A motor vehicle service contract or residential service
27contract shall not be issued, sold, or offered for sale in this
28state unless the service company does all of the following:
29a. Provides a receipt for the purchase of the service
30contract to the service contract holder.
31b. Provides a copy of the service contract to the service
32contract holder within a reasonable period of time after the
33date of purchase of the service contract.
34c. Provides a complete sample copy of the terms and
35conditions of the service contract to the service contract
-11-1holder prior to the date of purchase. A service company may
2comply with this paragraph by providing the service contract
3holder with a complete sample copy of the terms or conditions
4of the service contract, or directing the service contract
5holder to an internet site containing a complete sample copy of
6the terms and conditions of the service contract.
72. A motor vehicle service contract or residential service
8contract issued, sold, or offered for sale in this state shall
9comply with all of the following, as applicable:
10a. A service contract shall be written in clear,
11understandable language in at least eight point font.
12b. (1) A service contract insured by a reimbursement
13insurance policy as provided in section 523C.5, subsection 1,
14shall include a statement in substantially the following form:
15Obligations of the service company under this service
16contract are guaranteed under a reimbursement insurance policy.
17If the service company fails to pay or provide service on a
18claim within sixty days after proof of loss has been filed with
19the service company, the service contract holder is entitled
20to make a claim directly against the reimbursement insurance
21policy.
22(2) A service contract insured by a reimbursement insurance
23policy shall conspicuously state the name and address of the
24issuer of the reimbursement insurance policy for that service
25contract. A claim against a reimbursement insurance policy
26shall also include a claim for return of the unearned service
27company fee paid for the service contract.
28c. A service contract not insured under a reimbursement
29insurance policy shall contain a statement in substantially the
30following form:
31Obligations of the service company under this service
32contract are backed by the full faith and credit of the service
33company and are not guaranteed under a reimbursement insurance
34policy.
35d. A service contract shall state the name and address of
-12-1the service company obligated to perform services under the
2contract, and shall conspicuously identify the service company,
3any third-party administrator, and the service contract holder
4to the extent that the name and address of the service contract
5holder has been furnished. The identities of such parties are
6not required to be printed on the contract in advance and may
7be added to the contract at the time of sale.
8e. A service contract shall clearly state the total purchase
9price of the service contract and the terms under which the
10service contract is sold. The total purchase price is not
11required to be printed on the contract in advance and may be
12added to the contract at the time of sale.
13f. If prior approval of repair work is required, a service
14contract shall conspicuously describe the procedure for
15obtaining prior approval and for making a claim, including a
16toll-free telephone number for claim service, and the procedure
17for obtaining emergency repairs performed outside of normal
18business hours.
19g. A service contract shall clearly state the existence of
20any deductible amount.
21h. A service contract shall specify the merchandise
22or services, or both, to be provided and any limitations,
23exceptions, or exclusions.
24i. A service contract shall clearly state the conditions on
25which the use of substitute parts or services will be allowed.
26Such conditions shall comply with applicable state and federal
27laws.
28j. A service contract shall clearly state any terms,
29restrictions, or conditions governing the transferability of
30the service contract.
31k. A service contract shall clearly state the terms and
32conditions governing the cancellation of the contract prior
33to the termination or expiration date of the contract by the
34service company or the service contract holder. If the service
35company cancels the contract, the service company shall mail a
-13-1written notice of termination to the service contract holder
2at least fifteen days before the date of the termination.
3Prior notice of cancellation by the service company is not
4required if the reason for cancellation is nonpayment of the
5purchase price, a material misrepresentation by the service
6contract holder to the service company or its administrator, or
7a substantial breach of duties by the service contract holder
8relating to the covered product or its use. The notice of
9cancellation shall state the effective date of the cancellation
10and the reason for the cancellation. If a service contract
11is canceled by the service company for any reason other than
12nonpayment of the purchase price, the service company shall
13refund the service contract holder in an amount equal to one
14hundred percent of the unearned purchase price paid, less any
15claims paid. The service company may also charge a reasonable
16administrative fee in an amount no greater than ten percent of
17the total purchase price.
18l. (1) A service contract shall permit the original
19service contract holder that purchased the contract to cancel
20and return the service contract within at least twenty days
21of the date of mailing the service contract to the service
22contract holder or within at least ten days after delivery of
23the service contract if the service contract is delivered at
24the time of sale of the service contract, or within a longer
25period of time as permitted under the service contract. If no
26claim has been made under the service contract prior to its
27return, the service contract is void and the full purchase
28price of the service contract shall be refunded to the service
29contract holder. A ten percent penalty shall be added each
30month to a refund that is not paid to a service contract holder
31within thirty days of the return of the service contract to the
32service company.
33(2) If the service contract holder cancels the service
34contract outside of the applicable time as provided in
35subparagraph (1) or after a claim is made under the service
-14-1contract, the service company shall refund the service
2contract holder in an amount equal to one hundred percent of
3the unearned purchase price paid, less any claims paid. The
4service company may also charge a reasonable administrative fee
5in an amount no greater than ten percent of the total purchase
6price.
7m. A service contract shall set forth all of the obligations
8and duties of the service contract holder, including but not
9limited to the duty to protect against any further damage,
10and the obligation to follow an owner’s manual or any other
11required service or maintenance.
12n. A service contract shall clearly state whether or not
13the contract provides for or excludes consequential damages
14or preexisting conditions, if applicable. A service contract
15may, but is not required to, cover damage resulting from rust,
16corrosion, or damage caused by a part or system which is not
17covered under the service contract.
18o. A service contract shall clearly state the fee, if any,
19charged on the service contract holder for making a service
20call.
21p. A service contract shall state the name and address of
22the commissioner.
23 Sec. 8. Section 523C.9, Code 2019, is amended to read as
24follows:
25523C.9 Suspension or revocation of license.
261. In addition to the license revocation provisions of
27section 523C.5, the The commissioner may suspend or revoke or
28refuse to renew the license of a service company for any of the
29following grounds:
30a. 1. The service company violated a lawful order of the
31commissioner or any provision of this chapter.
32b. 2. The service company failed to pay any final judgment
33rendered against it in this state within sixty days after the
34judgment became final.
35c. 3. The service company has without just cause refused
-15-1to perform or negligently or incompetently performed services
2required to be performed under its residential service
3contracts and the refusal, or negligent or incompetent
4performance has occurred with such frequency, as the
5commissioner determines, as to indicate the general business
6practices of the service company.
7d. 4. The service company violated section 523C.13.
8e. 5. The service company failed to maintain the net worth
9required by section 523C.6 demonstrate financial responsibility
10pursuant to section 523C.5.
11f. The service company failed to maintain the reserve
12account required by section 523C.11.
13g. 6. The service company failed to maintain its corporate
14certificate of good standing with the secretary of state.
152. If the license of a service company is terminated
16under section 523C.5 because of failure to maintain bond, the
17commissioner shall give written notice of termination to the
18service company. The notice shall include the effective date
19of the termination.
20 Sec. 9. Section 523C.12, Code 2019, is amended to read as
21follows:
22523C.12 Optional examination.
23The commissioner or a designee of the commissioner may
24make an examination of the books and records of a service
25company, including copies of contracts and records of claims
26and expenditures, and verify its assets, liabilities, and
27reserves. The actual costs of the examination shall be borne
28by the service company. The costs of an examination under this
29section shall not exceed an amount equal to ten percent of the
30service company’s reported net income in the previous fiscal
31year.
32 Sec. 10. Section 523C.13, Code 2019, is amended to read as
33follows:
34523C.13 Prohibited acts or practices — penalty.
351. A licensed service company which offers motor
-16-1vehicle service contracts for sale in this state, or its
2representative, shall not, directly or indirectly, represent in
3any manner, whether by written solicitation or telemarketing, a
4false, deceptive, or misleading statement with respect to any
5of the following:
6a. Statements regarding the service company’s affiliation
7with a motor vehicle manufacturer or importer.
8b. Statements regarding the validity or expiration of a
9warranty.
10c. Statements regarding a motor vehicle service contract
11holder’s coverage under a motor vehicle service contract,
12including statements suggesting that the service contract
13holder must purchase a new service contract in order to
14maintain coverage under the existing service contract or
15warranty.
162. The commissioner shall may adopt rules which regulate
17motor vehicle service contracts and residential service
18contracts to prohibit misrepresentation, false advertising,
19defamation, boycotts, coercion, intimidation, false statements
20and entries and unfair discrimination or practices. If the
21commissioner finds that a person has violated the rules adopted
22under this section, the commissioner may order any or all of
23the following:
241. a. Payment of a civil penalty of not more than one
25thousand dollars for each and every act or violation, but not
26to exceed an aggregate of ten thousand dollars, unless the
27person knew or reasonably should have known the person was in
28violation of this section, in which case the penalty shall be
29not more than five thousand dollars for each and every act or
30violation, but not to exceed an aggregate penalty of fifty
31thousand dollars in any one six-month period. The commissioner
32shall, if it finds the violations of this section were
33directed, encouraged, condoned, ignored, or ratified by the
34employer of such person, assess such penalty to the employer
35and not such person. Any civil penalties collected under this
-17-1subsection shall be deposited as provided in section 505.7.
22. b. Suspension or revocation of the license of a person,
3if the person knew or reasonably should have known the person
4was in violation of this section.
5 Sec. 11. Section 523C.15, Code 2019, is amended to read as
6follows:
7523C.15 Annual report.
8A licensed service company that does not demonstrate
9financial responsibility by insuring service contracts under a
10reimbursement insurance policy as provided in section 523C.5,
11subsection 1, shall file with the commissioner an annual
12report within ninety days of the close of its fiscal no later
13than August 31 of each year. The annual report shall be in
14a form prescribed by the commissioner and contain all of the
15following:
161. A current financial statement including a balance
17sheet and statement of operations prepared in accordance with
18generally accepted accounting principles and certified by an
19independent certified public accountant.
202. The number of residential service contracts issued
21during the preceding fiscal year, the number canceled or
22expired during the year, the number in effect at year end and
23the amount of residential service contract fees received.
243. 2. Any other information relating to the performance
25and solvency of the residential service company required by the
26commissioner.
27 Sec. 12. Section 523C.16, Code 2019, is amended to read as
28follows:
29523C.16 Exclusions.
30This chapter does not apply to any of the following:
311. A performance guarantee given by a builder of a residence
32or the manufacturer or seller or lessor of residential property
33if no identifiable charge is made for the guarantee.
342. A residential service contract, guarantee or warranty
35between a residential customer and a service company which will
-18-1perform the work itself and not through subcontractors for
2the service, repair or replacement of residential property,
3 appliances, or electrical, plumbing, heating, cooling or
4air-conditioning systems.
53. A contract between a service company issuing residential
6service contracts and a person who actually performs the
7maintenance, repairs, or replacements of structural components,
8or appliances, or electrical, plumbing, heating, cooling, or
9air-conditioning systems, if someone other than the service
10company actually performs these functions.
114. A residential service contract, guarantee or warranty
12issued by a retail merchant to a retail customer, guaranteeing
13or warranting the repair, service or replacement of appliances
14or electrical, plumbing, heating, cooling or air-conditioning
15systems sold by said retail merchant.
165. A residential service contract, guarantee, or warranty
17issued by a manufacturer, third party, or retail company,
18covering the repair, maintenance, or replacement of residential
19property, individual appliances, and other individual items
20of merchandise marketed and sold by a retail company, in the
21ordinary course of business.
226. A motor vehicle service contract issued by the
23manufacturer or importer of the motor vehicle covered by
24the service contract or to any third party acting in an
25administrative capacity on the manufacturer’s behalf in
26connection with that service contract.
277. A residential service contract involving residential
28property containing more than four dwelling units.
298. A warranty.
309. A motor vehicle service contract issued, offered for
31sale, or sold to any person other than a consumer.
3210. A maintenance agreement.
33 Sec. 13. Section 523C.17, Code 2019, is amended to read as
34follows:
35523C.17 Lending institutions, service companies, and
-19-1insurance companies.
2A bank, savings association, insurance company, or other
3lending institution shall not require the purchase of a motor
4vehicle service contract or residential service contract as a
5condition of a loan or the sale of any property. A service
6company or an insurer, either directly or indirectly, as a
7part of any real property transaction in which a residential
8service contract will be issued, purchased, or acquired, shall
9not require that a residential service contract be issued,
10purchased, or acquired in conjunction with or as a condition
11precedent to the issuance, purchase, or acquisition, by any
12person, of a policy of insurance. A lending institution shall
13not sell a residential service contract to a borrower unless
14the borrower signs an affidavit acknowledging that the purchase
15is not required. Violation of this section is punishable as
16provided in section 523C.13.
17 Sec. 14. Section 523C.22, Code 2019, is amended to read as
18follows:
19523C.22 Claim procedures.
20A licensed service company shall promptly provide a written
21explanation to the residential customer service contract
22holder, describing the reasons for denying a claim or for the
23offer of a compromise settlement, based on all relevant facts
24or legal requirements and referring to applicable provisions of
25the residential service contract.
26 Sec. 15. NEW SECTION. 523C.24 Service company oversight
27fund.
281. A service company oversight fund is created in the
29state treasury as a separate fund under the control of the
30commissioner. The fund shall consist of all moneys deposited
31in the fund pursuant to subsection 2.
322. The commissioner shall deposit in the service company
33oversight fund an amount equal to one-third of all licensing,
34examination, renewal, and inspection fees collected under this
35chapter, provided that the maximum amount of fees deposited
-20-1in the fund each fiscal year shall not exceed five hundred
2thousand dollars. Any remaining fees collected under this
3chapter and not deposited in the service company oversight fund
4shall be deposited as provided in section 505.7.
53. Moneys in the service company oversight fund are
6appropriated to the commissioner for the administration and
7enforcement of this chapter, and for establishing service
8contract consumer complaint, education, and outreach programs.
94. Notwithstanding section 12C.7, subsection 2, interest or
10earnings on moneys deposited in the service company oversight
11fund shall be credited to the fund. Notwithstanding section
128.33, moneys credited to the fund shall not revert at the close
13of a fiscal year.
14 Sec. 16. REPEAL. Chapter 516E, Code 2019, is repealed.
15 Sec. 17. REPEAL. Sections 523C.8, 523C.8A, 523C.11,
16523C.14, and 523C.18, Code 2019, are repealed.
17 Sec. 18. EMERGENCY RULES. The commissioner of insurance
18may adopt emergency rules under section 17A.4, subsection 3,
19and section 17A.5, subsection 2, paragraph “b”, to implement
20the provisions of this Act and the rules shall be effective
21immediately upon filing unless a later date is specified in the
22rules. Any rules adopted in accordance with this section shall
23also be published as a notice of intended action as provided
24in section 17A.4.
25 Sec. 19. EFFECTIVE DATE. This Act, being deemed of
26immediate importance, takes effect upon enactment.
27EXPLANATION
28The inclusion of this explanation does not constitute agreement with
29the explanation’s substance by the members of the general assembly.
30This bill modifies provisions applicable to certain service
31contract providers regulated by the commissioner of insurance.
32Current Code chapter 516E requires service contract
33providers, or service companies, that offer motor vehicle
34service contracts for sale in Iowa to register annually
35with the commissioner, whereas service companies that offer
-21-1residential service contracts must become licensed annually by
2the commissioner under Code chapter 523C.
3The bill repeals Code chapter 516E, incorporates certain
4provisions regarding service companies offering motor vehicle
5service contracts in Code chapter 523C, thereby requiring any
6service company that sells motor vehicle service contracts
7or residential service contracts in Iowa to obtain an annual
8license from the commissioner under Code chapter 523C, and
9makes other changes to provisions in Code chapter 523C.
10The bill makes several changes to the definitions in Code
11section 523C.1. The bill removes definitions for “custodial
12account”, “custodial agreement”, “custodian”, “depository”,
13and “reserve account agreement”. The bill adds definitions
14for “maintenance agreement”, “motor vehicle”, “motor vehicle
15manufacturer”, “motor vehicle service contract”, “premium”,
16“reimbursement insurance policy”, “service contract”, and
17“warranty”, and modifies existing definitions for “residential
18service contract” and “service contract”, as described in the
19bill.
20The bill provides that a person shall not issue, offer for
21sale, or sell a motor vehicle service contract or residential
22service contract in Iowa unless the person is licensed as
23a service company under Code chapter 523C. The licensure
24requirements do not apply to any person who provides support
25services or works under the direction of a licensed service
26company, including but not limited to a person who provides
27marketing, administrative, or technical support.
28The bill specifies the information required in an
29application for a license under Code chapter 523C. In addition
30to such information, an application shall be accompanied
31by a license fee of $500 and a fee of $50 for each motor
32vehicle service contract form submitted in an application,
33if applicable. The commissioner shall issue a license if
34an application contains the required information and is
35accompanied by the required fees.
-22- 1The bill provides that each license issued under Code
2chapter 523C shall be valid for a period of one year and shall
3be renewed by August 31 of each year following the date of
4issuance. An application for renewal shall require the same
5information required in an initial application, a $500 license
6renewal fee, other fees described in the bill that apply to
7certain service companies, and other information described in
8the bill regarding a service company’s operations during the
9preceding fiscal year. In addition to such requirements, a
10service company must report to the commissioner any material
11change in information provided in the initial application which
12has not been reported to the commissioner.
13The bill replaces Code section 523C.5, which provides a
14surety bond requirement, with a new Code section which requires
15a service company to demonstrate financial responsibility to
16the commissioner. The service company shall satisfy this
17requirement by either insuring all of its service contracts
18offered for sale in Iowa under a reimbursement insurance
19policy that complies with the bill, maintaining a funded
20reserve account and placing in trust with the commissioner a
21financial security deposit, or maintaining a minimum net worth
22or stockholders’ equity and providing certain information to
23the commissioner upon request, as described in the bill.
24The bill replaces Code section 523C.6, which provides a net
25worth requirement, with a new Code section which establishes
26certain requirements for reimbursement insurance policies
27that insure service contracts offered for sale in Iowa. The
28requirements include provisions regarding insurer obligations,
29service contract holder rights, termination, indemnification
30or subrogation, insurance premium tax liability, and insurer
31qualifications, as described in the bill.
32The bill replaces Code section 523C.7, which provides
33service contract filing and form requirements, with a new
34Code section which establishes certain requirements regarding
35disclosure to service contract holders, service contract forms,
-23-1and provisions included in service contracts, as described in
2the bill.
3The bill provides that the commissioner may suspend or
4revoke or refuse to renew the license of a service company if
5the service company violates a lawful order of the commissioner
6or any provision of Code chapter 523C, fails to pay a final
7judgment in Iowa within 60 days, indicates negligence,
8incompetence, or a refusal to perform services, performs any
9prohibited acts or practices described in the bill, fails to
10demonstrate financial responsibility as provided in the bill,
11or fails to maintain its corporate certificate of good standing
12with the secretary of state.
13The bill provides that the costs of a service company
14examination conducted at the discretion of the commissioner,
15which is paid by the service company, shall not exceed an
16amount equal to 10 percent of the service company’s reported
17net income in the previous fiscal year.
18The bill prohibits a licensed service company offering
19for sale in Iowa motor vehicle service contracts, or its
20representatives, from directly or indirectly representing a
21false, deceptive, or misleading statement with respect to
22certain statements regarding its affiliation with a motor
23vehicle manufacturer or importer, the validity or expiration
24of a warranty, or a service contract holder’s coverage
25under a service contract, as described in the bill. The
26bill also allows the commissioner to adopt rules regulating
27service contract practices, any violation of which allows the
28commissioner to assess certain civil penalties or suspend or
29revoke a license, as described in the bill.
30The bill provides that annual reporting requirements
31shall apply only to licensed service companies which do not
32demonstrate financial responsibility by insuring their service
33contracts under a reimbursement insurance policy. The annual
34report shall be filed with the commissioner no later than
35August 31 of each year and shall contain certain information
-24-1described in the bill.
2The bill excludes from regulation under Code chapter 523C,
3in addition to residential service contracts currently excluded
4under Code section 523C.16, certain motor vehicle service
5contracts currently excluded from regulation under Code chapter
6516E, residential service contracts involving residential
7property containing more than four dwelling units, warranties,
8motor vehicle service contracts issued or sold to any person
9other than a consumer, and maintenance agreements.
10The bill prohibits a lending institution from requiring the
11purchase of a motor vehicle service contract or residential
12service contract as a condition of a loan or the sale of
13any property. A violation of this provision allows the
14commissioner to assess certain civil penalties or suspend or
15revoke a license, as described in the bill.
16The bill establishes new Code section 523C.24, which
17creates a service company oversight fund under the control
18of the commissioner. The fund shall consist of all moneys
19deposited in the fund pursuant to the bill. The bill directs
20the commissioner to deposit in the fund an amount equal
21to one-third of all licensing, examination, renewal, and
22inspection fees collected under Code chapter 523C, provided
23that the maximum amount deposited each fiscal year shall
24not exceed $500,000. Any remaining fees collected and not
25deposited in the fund shall be deposited in the department
26of commerce revolving fund, pursuant to Code section
27505.7. Moneys in the oversight fund are appropriated to the
28commissioner for the administration and enforcement of Code
29chapter 523C, and for establishing service contract consumer
30complaint, education, and outreach programs. Interest or
31earnings on moneys deposited in the fund shall be credited to
32the fund. Moneys deposited in the fund shall not revert at the
33close of a fiscal year.
34In addition to repealing Code chapter 516E, the bill
35repeals the following Code sections: 523C.8 (provisions
-25-1regarding rebates and commissions), 523C.8A (prohibition
2against the issuance of residential service contracts without
3consideration), 523C.11 (reserve account requirements), 523C.14
4(provisions regarding rate review), and 523C.18 (criminal
5penalty no longer applicable). The bill makes conforming
6changes throughout Code chapter 523C.
7The bill allows the commissioner to adopt emergency rules
8to implement the provisions of the bill. Any such rules shall
9be effective immediately upon filing unless a later date is
10specified and shall be published as a notice of intended
11action.
12The bill takes effect upon enactment.
-26-gh/rn