With the change in administration, the general consensus is that consumer regulatory oversight will increasingly shift from federal agencies to the states. For those offering consumer financial services and products, including auto dealers and finance and insurance providers, understanding where state regulators are directing their attention is crucial for mitigating compliance risks. Recent state initiatives make it clear that voluntary protection products—including vehicle service contracts, guaranteed asset protection, and theft protection programs—are at the forefront of lawmakers’ scrutiny. In a continuation of a broader trend to reshape how VPPs are marketed, sold, and administered, several states have introduced legislation targeting the sale, financing, and administration of these products. As the regulatory climate evolves, staying ahead of legislative changes is essential for maintaining compliance and preserving profitability. Here is a look at some recent state legislative initiatives, which may provide insight into what VPP-related practices may be the subject of future enforcement by state attorneys general.
California’s CARS Act: A Model for State-Level Regulation?
While the Federal Trade Commission’s Combating Auto Retail Scams (CARS) Rule was recently struck down by the Fifth Circuit, California is forging ahead with its own aggressive legislative approach. The California CARS Act, Senate Bill 766, mirrors key prohibitions in the FTC’s CARS Rule, signaling a determination at the state level to thwart allegedly deceptive and misleading dealer practices in vehicle and VPP sales. The proposed law would prohibit misrepresentations about vehicle pricing, financing terms, and the nature of VPPs. It would also ban the sale of VPPs that do not provide value to consumers. Furthermore, dealers would be required to retain all records necessary to prove compliance with the law for seven years. By mandating extremely burdensome requirements, California is setting a new precedent that other states may soon follow. Even if similar legislation does not gain traction elsewhere, state AGs and regulatory agencies still have broad enforcement authority under existing unfair and deceptive acts and practices statutes. Dealers and F&I providers should anticipate increased scrutiny of their sales practices, regardless of whether a specific CARS Act-style law is enacted or regulation is adopted in their state.
Increased Focus on VPP Cancellations and Refunds
Legislative efforts to regulate the administration of VPPs continue to focus on the handling of cancellations and refunds. Michigan House Bill 5354, for example, proposes requiring creditors to issue a detailed statement of account when a retail installment sale contract is marked as paid and returned to the customer after payoff. This statement must include clear disclosures of any amounts credited to the buyer from the cancellation of ancillary products. This legislative push reflects a growing regulatory emphasis on timely refunds when a vehicle-secured debt is paid off early or refinanced. As state legislators continue scrutinizing refund practices, creditors, servicers, and product administrators must assess their own procedures to ensure compliance with emerging transparency requirements. Failure to adhere to evolving refund policies could result in increased enforcement actions and private litigation.
The Impact of “Junk Fee” Legislation on VPP Pricing and Disclosures
Several states are moving forward with legislative efforts targeting what they classify as “junk fees.” This movement poses potential risks for the sale of VPPs, particularly when bundled pricing or unclear disclosures could cause regulators to lump optional, beneficial products into the category of unnecessary fees. At least three states, Colorado (House Bill 1090), Hawaii (Senate Bill 50), and Virginia (Senate Bill 1212), have introduced legislation that would require advertised prices to include all mandatory fees, aiming to prevent consumer confusion and deceptive pricing. Dealers and anyone else selling VPPs should be proactive in ensuring that products are properly disclosed as optional and are positioned as value-driven solutions rather than add-on costs. Strengthening compliance efforts now can prevent regulatory scrutiny and potential enforcement actions in the future.
States Expanding Regulation of VPPs
Beyond disclosure and refunding concerns, some states are taking legislative action to expand the regulatory framework governing VPPs. Massachusetts (House Docket 809) and New York (Assembly Bill 1063) have proposed redefining vehicle service contracts to include additional coverages, a move that could bring more products under regulatory oversight. Showing similar intent to impose more specific guardrails, Ohio has introduced Senate Bill 65 addressing GAP waivers, excessive wear-and-use waivers, and vehicle value protection programs. Likewise, Connecticut has proposed Senate Bill 1425 regulating vehicle theft protection products and theft protection warranties, further illustrating how states are becoming increasingly knowledgeable about the intricacies of VPPs. This growing familiarity suggests that state regulators may not only continue their enforcement efforts but may also refine their approach to overseeing VPPs, making compliance a moving target for industry participants. Anyone engaged in selling, financing, and administering VPPs must keep pace with these changes to ensure their offerings align with emerging legal standards.
Preparing for the Future: A Proactive Approach to Compliance
State legislators are making it clear that VPPs are a priority for scrutiny, and these state initiatives indicate that oversight of VPP sales, financing, and administration is likely to intensify. The growing focus on transparency, consumer protections, and pricing integrity underscores the need for creditors, servicers, and product administrators to refine their compliance programs now rather than waiting for enforcement actions or litigation to force their hand. Staying informed about legislative developments and proactively adjusting sales and administrative practices will be key to maintaining a competitive edge while mitigating regulatory risk. The best course of action for the industry is to double down on compliance efforts, ensuring that VPPs remain valuable, transparent, and compliant with the evolving state landscape.
CounselorLibrary.com, LLC, provides articles on its website written by attorneys with Hudson Cook, LLP, and by other authors, for information purposes only.
CounselorLibrary.com, LLC, and Hudson Cook, LLP, do not warrant the accuracy or completeness of the articles, and have no duty to correct or update information contained on the CounselorLibrary.com website. The views and opinions contained in the articles do not constitute the views and opinions of CounselorLibrary.com, LLC, or Hudson Cook, LLP. Such articles do not constitute legal advice from such authors or from Hudson Cook, LLP, or CounselorLibrary.com, LLC. For legal advice on a matter, one should seek the advice of legal counsel.
Copyright © 2025 CounselorLibrary.com, LLC. All rights reserved.
