OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
S.B. 157 Bill Analysis
135th General Assembly
Click here for S.B. 157’s Fiscal Note
Version: As Passed by the Senate
Primary Sponsor: Sen. Lang
Effective date:
Joe McDaniels, Division Chief
SUMMARY
▪ Exempts “excess wear and use waivers,” i.e., contracts that nullify fees that might
otherwise be owed at the end of a motor vehicle lease agreement for driving too many
miles or damaging the vehicle, from state insurance laws.
▪ Prohibits conditioning terms of a motor vehicle lease on the consumer’s payment for an
excess wear and use waiver.
▪ Expands the existing insurance law exemption for motor vehicle “debt cancellation or
debt suspension products” to include products that provide a financial benefit for the
purchase of a new vehicle.
▪ Limits the current requirement that debt cancellation or debt suspension products be
listed as a specific good when invoiced to the consumer to “optional” products that are
not a condition of the sale.
▪ Exempts optional debt cancellation or debt suspension products from state law
limitations on interest and finance charges.
▪ Expands the types of agreements that qualify as “ancillary product protection contracts”
and, thus, are exempted from state insurance laws to include certain contracts that
protect against lease-end charges, vehicle value protection agreements, and contracts
involving under-speed vehicles.
▪ Requires providers of “vehicle value protection agreements,” i.e., agreements that
provide a benefit to the purchaser when a vehicle is lost, stolen, damaged, obsolete, or
diminished in value, to allow a 30-day period for the contract holder to cancel the
agreement so long as no benefits have been paid.
▪ Establishes procedures and requirements for contract providers that seek to cancel a
vehicle value protection agreement.
August 7, 2024
Office of Research and Drafting LSC Legislative Budget Office
DETAILED ANALYSIS
Overview
Continuing law exempts certain maintenance, value protection, and repair products
offered in connection with the sale or lease of a motor vehicle from state insurance laws. The bill
expands the types of products that qualify for that exemption. It also modifies some of the
requirements associated with those products, including requirements involving invoicing,
cancellation, and surety.
Excess wear and use waivers
The bill creates a new class of motor vehicle products, referred to as “excess wear and
use waivers,” that are exempt from state insurance laws. A vehicle lease agreement typically
stipulates how many miles the person leasing the vehicle may drive the vehicle each year for the
duration of the lease. For example, it is common for leases to allow up to 10,000 or 12,000 miles
per year. At the end of the lease, a fee is paid for each mile driven beyond the allotted amount.
Excess wear and use waivers effectively nullify those fees.
Under the bill, an “excess wear and use waiver” is defined as any contractual agreement
that is part of, or a separate addendum to, a lease agreement for use of a motor vehicle, under
which the lessor (the entity providing the vehicle) agrees, with or without a separate charge, to
do one or both of the following:
▪ Cancel or waive all or part of amounts that may become due under a lease agreement as
a result of excess wear and use of a motor vehicle;
▪ Cancel or waive amounts due for excess mileage.
The bill specifies that the terms of a lease are not to be conditioned upon the consumer’s
payment for any excess wear and use waiver. Excess wear and use waivers may be discounted or
given at no extra charge in connection with the purchase of other noncredit related goods or
services.1
Debt cancellation or debt suspension products
A “debt cancellation or debt suspension product” is an agreement, exempt from state
insurance laws, that cancels any debt associated with a motor vehicle that is destroyed or stolen.
Under continuing law, the term includes a guaranteed asset protection waiver, guaranteed auto
protection waiver, or any other similarly named agreement. The bill adds that a debt cancellation
or debt suspension product may also provide a benefit that waives an amount, or provides a
borrower with a credit, towards the purchase of a replacement motor vehicle. Such a benefit
may be included with or without a separate charge.
Current law requires the charges associated with debt cancellation or debt suspension
products to be listed as a specific good. In other words, the charge cannot be lumped in with the
1 R.C. 1310.251.
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total purchase price for the vehicle. Under the bill, this requirement applies only to “optional”
debt cancelation or debt suspension products. Consequently, it appears that when a retail seller
conditions the sale of a motor vehicle on the consumer’s purchase of a debt cancellation or debt
suspension product, that product need not be itemized, and may be lumped into the total
purchase price.
Furthermore, the bill specifies that optional debt cancellation or debt suspension
products are not to be considered a finance charge or interest. Under continuing law, a finance
charge is an amount paid or contracted to a retail seller for the privilege of paying the principal
balance of the transaction in installments over time. Ohio law caps the amount that a retail seller
may collect as a finance charge or interest. The bill seemingly exempts optional debt cancellation
or debt suspension products from those limits. In addition, finance charges are subject to certain
disclosure requirements under the federal “Truth in Lending Act” (TILA). It is not clear what, if
any, affect the bill would have on the application of TILA to debt cancellation or debt suspension
products.2
Ancillary product protection contracts
Under current law, an ancillary product protection contract provides for the repair or
replacement of specified parts or components of a motor vehicle. The bill adds two new types of
products that qualify as an ancillary product protection contract and, therefore, are exempted
from state insurance laws. It also extends the exemption to contracts involving under-speed
vehicles and establishes alternatives to the current requirement that all contracts be covered by
a reimbursement insurance policy.
Protection against lease-end charges
The bill expands the services that qualify as motor vehicle ancillary product protection
contracts to include, in conjunction with a leased vehicle, both of the following:
▪ The repair, replacement, or maintenance of property, or indemnification for repair,
replacement, or maintenance, due to excess wear and use, damage for items such as tires,
paint cracks or chips, missing interior or exterior parts, or excess mileage that results in a
lease-end charge; and
▪ Any other charge for damage that is deemed as excess wear and use by a lessor under a
motor vehicle lease.
The bill specifies that such services do not qualify as a motor vehicle ancillary product
protection contract if the charge exceeds the purchase price of the vehicle at the end of the lease
term. It appears that an excess wear and use waiver, described above, would qualify as an
ancillary product protection contract in at least some cases.3
2 R.C. 1317.05(B); R.C. 1317.01, 1317.06, and 1343.01, not in the bill; 15 United States Code 1601, et. seq.
3 R.C. 3905.426(A)(4)(a)(vi).
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Vehicle value protection agreements
The bill also specifies that a motor vehicle ancillary product protection contract includes
a vehicle value protection agreement.
Characteristics
When a motor vehicle is damaged, lost, stolen, or otherwise depreciates in value, these
agreements provide a benefit towards either the reduction of some or all of the contract holder’s
current finance agreement deficiency balance (such as an amount still owed on a vehicle loan or
lease agreement), or towards the purchase or lease of a replacement motor vehicle or motor
vehicle services. Under the bill, “vehicle value protection agreement” includes trade-in-credit
agreements, diminished value agreements, depreciation benefit agreements, or other similar
agreements. “Vehicle value protection agreement” does not include a debt suspension or debt
cancellation product.4 “Finance agreement” is defined as a loan or retail installment contract
secured by a motor vehicle or a lease.5
Cancellation by contract holder
The bill specifies that a vehicle value protection agreement may be canceled by the
contract holder within 30 days of the effective date of the agreement. If the agreement is
cancelled, the contract holder is entitled to a full refund of the purchase price, so long as no
benefits have been paid under the agreement.6
For those vehicle value protection agreements that allow the contract holder to cancel
the agreement more than 30 days after the effective date of the agreement, the agreement must
state the conditions under which it may be canceled, including the procedures for requesting any
refund of the purchase price paid by the contract holder and the methodology for calculating any
refund of the purchase price.7
Any refund provided in response to a cancellation initiated by the contract holder is
required to be paid to the seller or assignee of a retail installment contract or lease agreement
unless otherwise agreed to by the contract holder and the seller or assignee.8
Cancellation by contract provider
If a vehicle value protection agreement is cancelled by the contract provider, the provider
is required to mail a written notice to the contract holder at the holder’s last known address at
least five days prior to cancellation. Prior notice is not required if the reason for cancellation is
nonpayment of the provider fee, a material misrepresentation by the contract holder to the
contract provider or administrator, or a substantial breach of duties by the contract holder
4 R.C. 3905.426(A)(2), (A)(4)(a)(vii), and (A)(10).
5 R.C. 3905.426(A)(2).
6 R.C. 3905.426(E).
7 R.C. 3905.426(F).
8 R.C. 3905.426(H).
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relating to the covered product or the use of the covered product. Such a notice must state the
effective date of the cancellation and the reason for the cancellation.
If a vehicle value protection agreement is canceled by the contract provider for a reason
other than nonpayment of the provider fee, the provider is required to refund to the contract
holder 100% of the “unearned” provider fee paid by the contract holder, if any. The bill does not
specify how or when all, or a portion of, the fee is earned by the contract provider. If coverage
under the vehicle value protection agreement continues after a claim, then the bill specifies that
all paid claims may be deducted from any required refund. A reasonable administrative fee of up
to $75 may be charged by the contract provider and deducted from any refund due to
cancellation.9
Under-speed vehicles
The bill amends the definition of “motor vehicle” to include an under-speed vehicle,
which is a three- or four-wheeled vehicle that can go less than 20 miles per hour and has a weight
of less than 3,000 pounds.10 In effect, this change exempts ancillary product protection contracts
involving under-speed vehicles from insurance laws.
HISTORY
Action Date
Introduced 09-19-23
Reported, S. Insurance 06-26-24
Passed, Senate (30-1) 06-26-24
ANSB0157PS-135/sb
9 R.C. 3905.426(G).
10 R.C. 3905.426(A).
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Statutes affected:
As Introduced: 1317.05, 3905.426
As Reported By Senate Committee: 1317.05, 3905.426
As Passed By Senate: 1317.05, 3905.426