Relates to expanding the availability of meaningful service contracts to protect New Yorkers leasing automobiles for their personal use from unanticipated "lease-end" charges related to excess use or wear and tear of the leased vehicle.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A268
SPONSOR: Cahill TITLE OF BILL:
An act to amend the insurance law, in relation to expanding the avail-
ability of meaningful service contracts to protect New Yorkers leasing
automobiles for their personal use from unanticipated "lease-end" charg-
es related to excess use or wear and tear of the leased vehicle
PURPOSE:
This bill will allow New York State registered service contract provid-
ers to issue service contracts that include meaningful protection from
unanticipated charges at lease-end related to excess use or wear and
tear of a leased vehicle.
SUMMARY OF PROVISIONS:
Section 1 of the bill amends the definition of a "service contract" in
Insurance Law § 7902(k). Specifically, Section 1 of the bill clarifies
that, for automobiles leased for personal use, a service contract
includes a contracts to perform the repair, replacement or maintenance
of the vehicle (or to provide indemnification for such) due to excess
wear and use or damage to items such as tires, paint cracks or chips,
interior stains, rips or scratches, exterior dents or scratches, windsh-
ield cracks or chips, missing interior or exterior parts that result in
a lease-end charge. The lease end charge may not be otherwise covered by
a service agreement or warranty and it may not exceed the purchase price
of the vehicle.
Section 2 of the bill provides for an immediate effective date.
JUSTIFICATION:
A growing number of New Yorkers are choosing to lease, rather than
purchase, their personal automobiles. Leasing has become an attractive
alternative due to lower initial costs, lower monthly payments, and the
avoidance of maintenance and repair costs associated with long-term
vehicle ownership. However, most lease contracts include terms that
require the lessee to pay any costs associated with damage or excess
wear and tear at the time they turn in the leased vehicle. As such, New
Yorkers are at risk for any excess damage that exceeds the lessor's
standards.
While damage in excess of a lessor's standards is not uncommon (e.g. a
stained carpet, ripped seat, dinged paint, cloudy headlights), the cost
of such damage is difficult for consumers to anticipate or budget for.
Therefore, lease-end charges place some consumers in financial peril. At
the same time, the potential for lease-end charges cause other consumers
to avoid leasing a vehicle.
New York has an existing law and regulatory infrastructure permitting
the issuance of service contracts and ensuring appropriate regulatory
oversight of service contract providers. However, the New York State
Department of Financial Services' ("DFS") Office of General Counsel has
issued legal opinions that provide that New York's existing law would
not permit the issuance of a service contract that would protect against
the lease-end charges as described above. While New York's existing law
allows service contract to cover wear and tear, such as a worn carpet,
DFS has not interpreted this statutory authority to permit coverage of
similar damage resulting from accidental or fortuitous events, such as a
carpet stain from a spill or an upholstery tear. Given the damage that
leads to lease-end charges tends to result from some combination of wear
and tear and accidental damage, it is not possible to provide meaningful
protection against lease end charges under current law and interpreta-
tion.
This bill would allow consumers to avoid unanticipated lease-end
expenses by purchasing a service contract including meaningful
protections from a New York registered service contract provider that
meets New York's regulatory requirements (including net worth or finan-
cial requirements designed to ensure that all service contract providers
have the financial wherewithal to meet service contract obligations). As
such, the bill would protect consumers while encouraging greater access
to leased vehicles.
LEGISLATIVE HISTORY:
2017-2018: A.8352 - Referred to Insurance
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
268
2019-2020 Regular Sessions
IN ASSEMBLY(Prefiled)
January 9, 2019
___________
Introduced by M. of A. CAHILL -- read once and referred to the Committee
on Insurance
AN ACT to amend the insurance law, in relation to expanding the avail-
ability of meaningful service contracts to protect New Yorkers leasing
automobiles for their personal use from unanticipated "lease-end"
charges related to excess use or wear and tear of the leased vehicle
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subsection (k) of section 7902 of the insurance law, as
2 amended by chapter 409 of the laws of 2012, is amended to read as
3 follows:
4 (k) "Service contract" means a contract or agreement, for a separate
5 or additional consideration, for a specific duration to perform the
6 repair, replacement or maintenance of property, or indemnification for
7 repair, replacement or maintenance, due to a defect in materials or
8 workmanship or wear and tear, with or without additional provision for
9 indemnity payments for incidental damages, provided any such indemnity
10 payment per incident shall not exceed the purchase price of the property
11 serviced. Service contracts may include towing, rental and emergency
12 road service, and may also provide for the repair, replacement or main-
13 tenance of property for damage resulting from power surges and acci-
14 dental damage from handling. Service contracts may also include
15 contracts to repair, replace or maintain residential appliances and
16 systems. Such term shall also mean a contract or agreement made (1) by
17 or for the manufacturer or seller of a motor vehicle tire for repair or
18 replacement of the tire or wheel as the result of damage arising from a
19 road hazard, (2) by or for the supplier or seller of a service for
20 repair of chips or cracks in a motor vehicle windshield, but not includ-
21 ing services that involve the replacement of the entire windshield, and
22 (3) by or for the supplier or seller of a service for repair or removal
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD03105-01-9
A. 268 2
1 of dents, dings or creases from a motor vehicle without affecting the
2 existing paint finish using paintless dent repair techniques, but not
3 including services that involve the replacement of vehicle body panels,
4 or sanding, bonding or painting. In conjunction with a motor vehicle
5 leased for personal use, such term shall also mean a contract to perform
6 the repair, replacement or maintenance of property, or to provide indem-
7 nification for repair, replacement or maintenance, due to excess wear
8 and use or damage for items such as tires, paint cracks or chips, inte-
9 rior stains, rips or scratches, exterior dents or scratches, windshield
10 cracks or chips, missing interior or exterior parts that result in a
11 lease-end charge not otherwise covered by a service agreement or warran-
12 ty, provided any such payment shall not exceed the purchase price of the
13 vehicle.
14 § 2. This act shall take effect immediately.
