(a) GAP waivers may be offered, sold, or provided to borrowers in this state in compliance with this chapter.
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Terms Used In Tennessee Code 56-59-103

  • Fiduciary: A trustee, executor, or administrator.
  • Finance charge: The total cost of credit a customer must pay on a consumer loan, including interest. The Truth in Lending Act requires disclosure of the finance charge. Source: OCC
  • Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • Truth in Lending Act: The Truth in Lending Act is a federal law that requires lenders to provide standardized information so that borrowers can compare loan terms. In general, lenders must provide information on Source: OCC
  • written: includes printing, typewriting, engraving, lithography, and any other mode of representing words and letters. See Tennessee Code 1-3-105
(b) GAP waivers may, at the option of the creditor, be sold for a single payment or may be offered with a monthly or periodic payment option.
(c) Notwithstanding any other law, any cost to the borrower for a GAP waiver entered into in compliance with the Truth in Lending Act ( 15 U.S.C. § 1601 et seq.), and its implementing regulations, must be separately stated and is not to be considered a finance charge or interest.
(d)

(1) A retail seller shall insure its GAP waiver obligations under a contractual liability or other insurance policy issued by an insurer; provided, that:

(A) A retail seller that does not assign the financing agreement of which the GAP waiver is a part to anyone other than the retail seller’s related finance company is not required to insure its GAP waiver obligation; and
(B) Retail sellers that are lessors of motor vehicles are not required to insure obligations related to GAP waivers on leased vehicles.
(2) A creditor not otherwise required to insure its GAP waiver obligation pursuant to subdivision (d)(1) may insure its GAP waiver obligation under a contractual liability policy or other such policy issued by an insurer. Any such insurance policy may be directly obtained by a creditor, retail seller, or may be procured by an administrator to cover a creditor or retail seller’s obligations.
(e) The GAP waiver remains a part of the finance agreement upon the assignment, sale or transfer of such finance agreement by the creditor.
(f) Neither the extension of credit, the term of credit, nor the term of the related motor vehicle sale or lease may be conditioned upon the purchase of a GAP waiver.
(g) Any creditor that offers a GAP waiver must report the sale of, and forward funds received on all such waivers to the designated party, if any, as prescribed in any applicable administrative services agreement, contractual liability policy, other insurance policy or other specified program documents.
(h) Funds received or held by a creditor or administrator and belonging to an insurer, creditor or administrator, pursuant to the terms of a written agreement must be held by such creditor or administrator in a fiduciary capacity.
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