Attorney General Bonta and Assemblymember Maienschein’s Legislation to Strengthen Protections for Car Buyers Signed into Law

OAKLAND – California Attorney General Rob Bonta and Assemblymember Brian Maienschein today applauded Governor Gavin Newsom for signing legislation that will establish a number of new protections for car buyers. Assembly Bill 2311 (AB 2311) addresses the sale and administration of guaranteed asset protection (GAP) waivers, a costly add-on product of little value to consumers that is often sold by car dealers along with auto loans. Authored by Assemblymember Maienschein and sponsored by Attorney General Bonta, AB 2311 will require creditors to automatically refund the unearned portion of a GAP waiver if a consumer pays off or otherwise terminates their auto loan early, among other protections.  

“Buying a car is a huge financial decision for many Californians,” said Attorney General Bonta. “The last thing they need is for auto dealers to drive prices even higher by tacking unnecessary junk products on to their auto loans. I sponsored AB 2311 to strengthen California’s consumer protection laws for car buyers, and I’m glad to see Governor Newsom sign it into law.” 

“The sale of GAP waivers is just one example of vulnerable customers being taken advantage of when committing to a large purchase,” said Assemblymember Maienschein. “AB 2311 will strengthen California’s consumer protection laws to ensure that car buyers can avoid the costly add-on when unnecessary.”

GAP waivers provide car buyers with minimal protections: providing that if their car is wrecked or stolen, the creditor must waive the portion of the auto loan, if any, that exceeds the value of the vehicle. For most consumers, GAP waivers are a bad deal, making sense only if they are already underwater on their loan. Consumers make a one-time, up-front payment often as much as $900 for GAP coverage that is typically financed at a high interest rate, burying consumers in additional, often avoidable debt. Currently, California law does not specifically address the rights and responsibilities of consumers and sellers in the sale and administration of these products, opening the door to unfair practices and limiting competition.

AB 2311 will strengthen protections for car buyers by: 

• Requiring creditors to promptly refund the unearned, prepaid GAP waiver charges if the loan or waiver agreement is terminated early;
• Capping the amount that can be charged for a GAP waiver relative to the amount of the loan amount;
• Limiting partial waivers and valueless waivers from being sold as GAP waivers; and
• Requiring auto dealers to make important disclosures to consumers regarding GAP waivers, including that the product is entirely optional and cannot be a condition to the loan or sale terms.