HF2756: Service Contract Regulation

Overhauls Iowa Chapter 523C governing service companies that issue motor vehicle and residential service contracts. It adds new definitions (including "communicating in a verifiable manner," "gross consideration," "service contract holder," "substitute part," and "support services"), and requires any person issuing, offering for sale, or selling motor vehicle or residential service contracts in Iowa to be licensed. The Act establishes detailed license application and renewal procedures, including a $500 initial license fee, $200 annual renewal fee, a 3% fee on residential service contract payments (capped at $50,000), an $800 reinstatement fee, and a $35 fee per new or modified motor vehicle service contract form filed. It mandates extensive disclosures and required provisions in service contracts (such as cancellation rights, refund procedures with 10% monthly penalties for late refunds, claim procedures, and emergency repair timelines for essential health/safety claims). The Act details grounds for license denial, suspension, nonrenewal, and revocation; prohibits deceptive marketing and false statements about warranties or manufacturer affiliations; authorizes civil penalties up to $1,000 per violation ($5,000 for knowing violations) with aggregate caps; voids contracts issued by unlicensed providers; provides confidentiality protections for division investigative records; and classifies violations as unlawful practices under Iowa's consumer fraud statute (section 714.16). Effective 1/1/2027.

Key Points & Impacts

• Requires any person issuing, offering for sale, or selling motor vehicle or residential service contracts in Iowa to be licensed; contracts issued by unlicensed providers are void and unenforceable.

• Establishes licensing fees: $500 initial license, $200 annual renewal, 3% of residential service contract payments (capped at $50,000), $800 reinstatement fee, and $35 per new/modified motor vehicle service contract form filed.

• Mandates annual renewal by August 31 with detailed reporting of contracts issued, canceled, expired, and in effect, along with total dollar amounts received.

• Requires service companies to report material changes, out-of-state administrative actions, and criminal prosecutions of owners/officers within 30 days.

• Specifies extensive required contract disclosures including cancellation rights (30-day free-look period), pro-rata refunds, and a 10% monthly penalty on refunds not paid within 30 days.

• Requires that residential service contract claims involving total loss of heating, cooling, plumbing, or substantial loss of electrical service (essential to health/safety) begin repair within 48 hours, with status reports communicated in a verifiable manner if not completed within 3 days.

• Authorizes the commissioner to immediately suspend licenses without hearing for insolvency or imminent public threats, and lists numerous grounds for denial, suspension, revocation, or nonrenewal of licenses.

• Authorizes civil penalties up to $1,000 per violation (up to $10,000 aggregate), increased to $5,000 per violation (up to $50,000 aggregate per six months) for knowing violations; designates violations of sections 523C.7 and 523C.13 as unlawful practices under section 714.16.