How New CA Law AB 2311 Affects Used Car Sales

ca law ab 2311

GAP Insurance. There are pros and cons to this new law for car dealerships. On the one hand, it provides customers with more information about a product that could be beneficial to them. On the other hand, it adds another layer of compliance for car dealerships, which are already struggling to keep up with all the new regulations related to the pandemic.

As there has been much debate on whether car dealerships should be allowed to sell GAP insurance to customers. Some argue that it is a valuable product that can protect consumers in the event of an accident or theft. Others argue that car dealerships often charge exorbitant prices for GAP insurance and that it is unnecessary for most consumers. Here are some important points to take into consideration if you are selling GAP insurance to your customers under the newly enacted bill starting 01/01/2023:

  • It’s prohibited to conditioning the extension of credit, term of credit, or terms of a conditional sale contract upon purchasing a GAP waiver;
  • The new bill permits the buyer to cancel the GAP waiver at any time without penalty;
  • It prohibits the sale of a GAP waiver where the conditional sale contract’s loan-to-value ratio exceeds any provision in the contract that specifies a maximum loan-to-value ratio covered by the GAP waiver unless such terms are disclosed and the buyer is informed in writing of such limitation;
  • It requires a separate GAP waiver disclosure that must be separately signed by the buyer;
  • The bill authorizes the buyer to recover from the holder three times the amount of any GAP charges paid if the seller or holder violates Subdivision l of Section 2982.
  • Mentions that sellers must tell buyers when GAP insurance has been added to their loan, and clearly outline the terms of the GAP coverage.
  • Under this bill, buyers are free to reject the insurance, particularly when it’s not financially beneficial.
  • It obligates lenders to refund money to buyers who cancel or pay off their loans.

If you would like to review the full information in AB 2311, visit:

Let us know if you have any questions, our Dealer Defense Team at DealerXT is always ready to help