Section 2982.12.
Cal. Civil Code - CIV § 2982.12.
in effect(a)
(1)
A guaranteed asset protection waiver may be offered, sold, or provided to a buyer, or administered, in connection with a conditional sale contract subject to this chapter only in compliance with this chapter and paragraph (2) of subdivision (h) of Section 1758.992 of the Insurance Code.
(2)
A guaranteed asset protection waiver, which may be titled as an addendum, forms part of the conditional sale contract and remains a part of the conditional sale contract upon the assignment, sale, or transfer of that conditional sale contract.
(3)
Neither the extension of credit, the term of credit, nor the terms of a conditional sale contract may be conditioned upon the purchase of a
guaranteed asset protection waiver.
(4)
(A)
The terms and conditions of the guaranteed asset protection waiver, including those terms required by subdivision (b), shall appear on a document separate from the conditional sale contract and a buyer or potential buyer shall separately sign the document setting forth the guaranteed asset protection waiver’s terms and conditions in addition to the conditional sale contract.
(B)
The separate document displaying the guaranteed asset protection waiver’s terms and conditions shall do the following:
(i)
Conspicuously state that the guaranteed asset protection waiver is an optional addition to the conditional sale contract, and that the holder of the conditional sale contract is the contracting party to the guaranteed asset protection waiver, and state the
name and mailing address of the seller. If the conditional sale contract is assigned, written notice of the assignment of both the conditional sale contract and guaranteed asset protection waiver, and the assignee’s name and mailing address, shall be provided to the buyer in person or by mail, or by a means of notice that the buyer previously agreed to with the seller or holder in connection with the conditional sale contract within 30 days of the assignment.
(ii)
Conspicuously disclose the name and mailing address of any administrator known as of the date of the sale. In this section, “administrator” means any person, other than an insurer, that performs administrative or operational functions in connection with the guaranteed asset protection waiver. An administrator is deemed to be an agent of the contemporaneous holder with respect to performance of the holder’s obligations under the guaranteed asset protection waiver and this section.
(iii)
Contain a notice with a heading in at least 12-point bold type and the text in at least 10-point bold type, circumscribed by a line, immediately above the contract signature line, that reads as follows:
STOP AND READ:
YOU CANNOT BE REQUIRED TO BUY A GAP WAIVER OR ANY OTHER OPTIONAL ADD-ON PRODUCTS OR SERVICES. IT IS OPTIONAL.
NO ONE CAN MAKE YOU BUY A GAP WAIVER OR ANY OTHER OPTIONAL ADD-ON PRODUCTS OR SERVICES TO GET FINANCING, TO GET CERTAIN FINANCING TERMS, OR TO GET CERTAIN TERMS FOR THE SALE OF A VEHICLE.
IT IS UNLAWFUL TO REQUIRE OR ATTEMPT TO REQUIRE THE PURCHASE OF THIS GAP WAIVER OR ANY OTHER OPTIONAL ADD-ON PRODUCTS OR SERVICES.
(5)
A person that sells a guaranteed asset protection waiver subject to this chapter shall not do either of the following:
(A)
Charge more for the guaranteed asset protection waiver than 4 percent of the amount the buyer finances under a conditional sale contract.
(B)
Sell a guaranteed asset protection waiver if one of the following applies:
(i)
The amount financed through the conditional sale contract exceeds a maximum dollar amount covered by the guaranteed asset protection waiver.
(ii)
The conditional sale contract’s loan-to-value ratio at the contracting date exceeds the maximum loan-to-value ratio covered by the guaranteed asset protection waiver, unless the terms of the guaranteed asset protection waiver conspicuously disclose the
maximum loan-to-value ratio limitation, including the method by which the limitation is applied, and the buyer is informed in a writing, acknowledged by the buyer, that the amount financed in the buyer’s conditional sale contract exceeds the waiver’s maximum loan-to-value limitation and therefore the waiver will not cover the total amount owed on the conditional sale contract. As used in this subclause, “loan-to-value ratio” means the total amount financed through a conditional sale contract as a percentage of the manufacturer suggested retail price for a new motor vehicle or the average retail value for a used motor vehicle, as determined by a nationally recognized pricing guide, as defined in paragraph (2) of subdivision (c) of Section 11950 of the Vehicle Code.
(iii)
The amount financed through a conditional sale contract is less than 70 percent of the manufacturer suggested retail price for a new motor vehicle or the average retail value
for a used motor vehicle, as determined by a nationally recognized pricing guide, as defined in paragraph (2) of subdivision (c) of Section 11950 of the Vehicle Code.
(6)
Notwithstanding any provision in any conditional sale contract for the sale of a motor vehicle to the contrary, when communicating in writing an itemized contract balance to the buyer, including a payoff letter, payoff quote, or any written notice required under subdivision (a) of Section 2983.2 of this code or subdivision (b) of Section 22328 of the Financial Code, the holder of a conditional sale contract that includes a guaranteed asset protection waiver shall do either of the following:
(A)
Individually identify as a credit or refund available to the buyer the unearned portion of all guaranteed asset protection waiver charges paid by the buyer as of the date of the communication on a pro rata basis.
(B)
Conspicuously state that a buyer who purchased a guaranteed asset protection waiver is generally entitled to a refund of the unearned portion of the guaranteed asset protection waiver charges on a pro rata basis upon early termination of their conditional sale contract or cancellation of the guaranteed asset protection waiver, and that the buyer should contact the administrator identified in the buyer’s guaranteed asset protection waiver, or any other appropriate person designated by the holder, for identification of the amount of such a refund available to the buyer at that time.
(b)
(1)
A guaranteed asset protection waiver terminates no later than the earliest of the following events:
(A)
Cancellation of the guaranteed asset protection waiver by the buyer, as provided by paragraph (4).
(B)
Payment in full by the buyer of the conditional sale contract.
(C)
Expiration of any redemption and reinstatement periods after a repossession or surrender of the motor vehicle specified in the conditional sale contract pursuant to subdivision (a) of Section 2983.2.
(D)
Upon total loss or unrecovered theft of the motor vehicle specified in the conditional sale contract, after the holder has applied all applicable benefits required under the guaranteed asset protection waiver.
(E)
Upon any other event that occurs earlier than the events listed in subparagraphs (A) to (D), inclusive, as specified in the guaranteed asset protection waiver.
(2)
Subject to paragraph (3), upon termination of a
guaranteed asset protection waiver, the buyer is entitled to a refund as follows:
(A)
If the termination occurs within 30 days after the date the buyer purchased the guaranteed asset protection waiver, the buyer is entitled to a full refund of the guaranteed asset protection waiver charges plus all finance charges attributable to the guaranteed asset protection waiver.
(B)
(i)
If the termination occurs later than 30 days after the date the buyer purchased the guaranteed asset protection waiver, the buyer is entitled to a refund of the unearned guaranteed asset protection waiver charges, which shall be calculated on a pro rata basis.
(ii)
For the purposes of this subparagraph, “calculating a refund on a pro rata basis” shall require multiplying the total dollar amount of guaranteed asset
protection waiver charges by the quotient of the number of calendar days from the termination date to the conditional sale contract’s original full term date, including the termination date as a full calendar day, divided by the total number of calendar days in the conditional sale contract’s original term.
(iii)
Notwithstanding clause (ii), if the original full term of the conditional sale contract exceeded the original full term of the guaranteed asset protection waiver as of the date the buyer purchased the guaranteed asset protection waiver, “calculating a refund on a pro rata basis” shall require multiplying the total dollar amount of guaranteed asset protection waiver charges by the quotient of the number of calendar days from the termination date to the guaranteed asset protection waiver’s original full term date, including the termination date as a full calendar day, divided by the total number of calendar days in the guaranteed asset
protection waiver’s original term.
(C)
No refund is required upon termination if there has been a total loss or unrecovered theft of the motor vehicle specified in the conditional sale contract and the buyer has or will receive the benefit of the guaranteed asset protection waiver.
(3)
Within 60 business days from the termination of a guaranteed asset protection waiver, the holder shall tender the refund required under paragraph (2) or shall cause to be made the refund under paragraph (2) by instructing in writing the administrator or any other appropriate party to make the refund.
(A)
A refund owed under this section may be applied by the holder as a reduction of the amount owed under the conditional sale contract unless the conditional sale contract has been paid in full.
(B)
Refunds owed under this section are not exclusive and shall be in addition to any other refunds provided for in this chapter.
(4)
A guaranteed asset protection waiver may be canceled by the buyer at any time without penalty.
(5)
A cancellation fee, termination fee, or similar fee shall not be assessed in connection with the termination of a guaranteed asset protection waiver.
(6)
In addition to the requirements of Section 2984.5, the holder shall maintain records identifying any refund made and tendered under paragraphs (2) and (3) of this subdivision, including those refunds the holder instructed the administrator or other appropriate party to make, and provide electronic access to those records, in response to any subpoena or other administratively or
judicially enforceable request, until four years after the date the refund was tendered.
(c)
Any waiver of a provision of this section is contrary to public policy and is void and unenforceable.
References
referencesCal. Insurance Code - INS § 1758.992.
referencesCal. Vehicle Code - VEH § 11950.
referencesCal. Financial Code - FIN § 22328.
referencesCal. Civil Code - CIV § 2983.2.
referencesCal. Civil Code - CIV § 2984.5.
Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026