BILL NUMBER:  S5847

 TITLE OF BILL :  An act to amend the insurance law, in relation to
expanding the availability of meaningful service contracts to protect
New Yorkers leasing automobiles for their personal use from
unanticipated "lease-end" charges related to excess use or wear and
tear of the leased vehicle

 PURPOSE :

This bill will allow New York State registered service contract
providers to issue service contracts that include meaningful
protection from unanticipated charges at lease-end related to excess
use or wear and tear of a leased vehicle.

 SUMMARY OF PROVISIONS :

Section 1 of the bill amends the definition of a "service contract" in
Insurance Law § 7902(k). Specifically, Section 1 of the bill clarifies
that, for automobiles leased for personal use, a service contract
includes a contracts to perform the repair, replacement or maintenance
of the vehicle (or to provide indemnification for such) due to excess
wear and use or damage to items such as tires, paint cracks or chips,
interior stains, rips or scratches, exterior dents or scratches,
windshield cracks or chips, missing interior or exterior parts that
result in a lease-end charge.  The lease end charge may not be
              

otherwise covered by a service agreement or warranty and it may not
exceed the purchase price of the vehicle.

Section 2 of the bill provides for an immediate effective date.

 JUSTIFICATION :

A growing number of New Yorkers are choosing to lease, rather than
purchase, their personal automobiles. Leasing has become an attractive
alternative due to lower initial costs, lower monthly payments, and
the avoidance of maintenance and repair costs associated with
long-term vehicle ownership. However, most lease contracts include
terms that require the lessee to pay any costs associated with damage
or excess wear and tear at the time they turn in the leased vehicle.
As such, New Yorkers are at risk for any excess damage that exceeds
the lessor's standards.

While damage in excess of a lessor's standards is not uncommon (e.g. a
stained carpet, ripped seat, dinged paint, cloudy headlights), the
cost of such damage is difficult for consumers to anticipate or budget
for. Therefore, lease-end charges place some consumers in financial
peril. At the same time, the potential for lease-end charges cause
other consumers to avoid leasing a vehicle.

New York has an existing law and regulatory infrastructure permitting
the issuance of service contracts and ensuring appropriate regulatory
oversight of service contract providers. However, the New York State
Department of Financial Services' ("DFS") Office of General Counsel
has issued legal opinions that provide that New York's existing law
would not permit the issuance of a service contract that would protect
against the lease-end charges as described above. While New York's
existing law allows service contract to cover wear and tear, such as a
worn carpet, DFS has not interpreted this statutory authority to
permit coverage of similar damage resulting from accidental or
fortuitous events, such as a carpet stain from a spill or an
upholstery tear. Given the damage that leads to lease-end charges
tends to result from some combination of wear and tear and accidental
damage, it is not possible to provide meaningful protection against
lease-end charges under current law and interpretation.

This bill would allow consumers to avoid unanticipated lease-end
expenses by purchasing a service contract including meaningful
protections from a New York registered service contract provider that
meets New York's regulatory requirements (including net worth or
financial requirements designed to ensure that all service contract
providers have the financial wherewithal to meet service contract
obligations). As such, the bill would protect consumers while
encouraging greater access to leased vehicles.

 LEGISLATIVE HISTORY :

New bill.

 FISCAL IMPLICATIONS :

None.

 EFFECTIVE DATE :
Immediately.