The bill is an act related to consumer credit financing in the sale or lease of motor vehicles, specifically amending Section 8-37A-4 of the Code of Alabama 1975, which pertains to motor vehicle value protection agreements. The amendment seeks to clarify the insurance requirements for providers of these agreements to ensure they can fulfill their obligations to contract holders. The bill introduces new legal language that specifies the insurance policy must pay or reimburse the provider's obligations under any motor vehicle value protection agreements in the event the provider fails to perform. This insurance policy must be issued by an insurer authorized to operate in Alabama and must meet certain financial criteria, such as having a surplus to policyholders and paid-in capital of at least $15 million or not less than $10 million with a net written premiums to surplus ratio of no greater than three to one.

Additionally, the bill outlines that providers must either maintain a funded reserve account for obligations under contracts issued in Alabama, with reserves not less than 40 percent of gross consideration received less claims paid, or place a financial security deposit with the Superintendent of Banks. The deposit must be at least five percent of the gross consideration received less claims paid, but not less than $25,000, and can be in the form of a surety bond, eligible securities, cash, a letter of credit, or another form approved by the superintendent. Providers, or their parent companies, must also maintain a net worth or stockholders' equity of $100 million and provide financial documentation upon request. The act will take effect immediately after its passage and approval by the Governor, or otherwise becoming law.