Committee Approves Expanded Vehicle Service Contract Provisions

The Senate Banking & Insurance Committee today (October 21) approved Senate Bill 1229, legislation introduced by Senator Dan Laughlin that addresses motor vehicle service contracts and theft protection program warranties — products that are sold primarily by auto dealers and provide financial protection against damage to or theft of motor vehicles.

Senator Laughlin’s legislation amends Pennsylvania’s existing service contract statute by specifically clarifying that certain cases are included under the current statutory definition of a service contract, including:

  • Repair or replacement of tires or wheels that are damaged by road hazards;
  • Removal of dents or creases that are repairable by paintless dent removal;
  • Repair or replacement of motor vehicle windshields that are damaged by road hazards;
  • Replacement of a motor vehicle key-fob if it becomes inoperable or is lost or stolen; and,
  • Excess wear and use coverage on a leased vehicle.

“These additions are certainly not beyond the scope of services covered by these contracts since at least 30 states have enacted legislation expressly authorizing some or all of these five items,” said Senator Laughlin.

SB 1229 also expressly authorizes the sale of theft protection programs and the issuance of their warranties as non-insurance products, much like service contracts. A theft protection program is a device or system installed on or applied to a motor vehicle to prevent loss or damage by theft or to aide in the recovery of stolen vehicles.

Finally, the bill also expressly authorizes guaranteed asset protection, or GAP, waiver agreements as non-insurance products. GAP waivers are agreements under which a creditor agrees — for a separate charge — to waive or cancel amounts due in the event of total loss or unrecovered theft of a vehicle.

“Senate Bill 1229 will provide regulatory certainty for these products as well as consistency for the industry in the treatment of these products from state-to-state,” Senator Laughlin said.

The Committee also approved Senate Bill 1331, a measure introduced by Senator Laughlin that would strengthen the independence of the Banking Fund and ensure a strong dual banking system in our Commonwealth.

All banks and credit unions are chartered either by the state in which they are domiciled or by the federal government, which creates a healthy banking environment and consumer choice. State-chartered banks and credit unions pay semi-annual assessments to the Department of Banking & Securities, which are then deposited into the Banking Fund to pay for its operations and for the examination of state-chartered institutions. The Fund can also be used to take control of or liquidate a financially distressed non-federally insured institution.

In the past two year, two transfers have been made from the Fund. In June 2018, $21 million was transferred to the General Fund and in January 2020, another $21 million was transferred to supplement the budgets of the Department of Conservation & Natural Resources and the Department of Environmental Protection.

“These transfers violated the purpose of the Banking Fund as described in the Banking and Securities Code, undermined the value of a state charter and eroded the dual banking system that benefits consumers and businesses in our Commonwealth,” said Senator Laughlin. “Regulatory assessments paid by financial institutions should be used for the intended purposes of the Banking Fund, not support general government operations or to augment appropriations unrelated purposes.”

Senate Bills 1229 and 1331 now go to the full Senate for consideration.


Audio and Video from the hearing.

Contact:           Matt Azeles       

Back to Top