HB2231 • 2026

Motor Vehicles

AN ACT to amend Tennessee Code Annotated, Title 47; Title 55 and Title 56, relative to vehicle value protection agreements.

Active

The official status still shows this bill as active or still awaiting another formal step.

Sponsor: Dixie, Lamar
Last action: 2026-03-11
Official status: Taken off notice for cal in s/c Insurance Subcommittee of Insurance Committee
Effective date: Not listed

Plain English Breakdown

The official source material does not specify the exact details about how much providers can charge for these agreements, leaving this as an open point.

Vehicle Value Protection Agreements Act

This act sets rules for vehicle value protection agreements, which are contracts that provide benefits when a car's value drops or it is lost.

What This Bill Does

Defines what a 'vehicle value protection agreement' means and lists specific types of agreements covered by the law.
Requires providers to meet certain conditions before offering these agreements, such as providing clear information about cancellation policies and benefits.
Prohibits providers from making credit or vehicle sale terms dependent on purchasing an agreement.
Establishes that a provider's obligations under an agreement must be guaranteed by insurance issued by a licensed insurer.
Sets rules for canceling agreements, including notice requirements and refund procedures.

Who It Names or Affects

Vehicle owners who might purchase vehicle value protection agreements.
Providers of these agreements, such as dealerships or financial institutions.
Insurance companies that issue policies to guarantee providers' obligations.

Terms To Know

vehicle value protection agreement: A contract between a provider and a vehicle owner that provides benefits if the car's value decreases due to damage or loss.
provider: The company offering the vehicle value protection agreement, such as a dealership or financial institution.

Limits and Unknowns

Does not specify how much providers can charge for these agreements.
Rules about canceling agreements and refunds are detailed but may vary based on specific circumstances.
The bill does not cover all types of contracts related to vehicle sales, such as service contracts.

Bill History

2026-03-11 Tennessee General Assembly
Taken off notice for cal in s/c Insurance Subcommittee of Insurance Committee
2026-03-04 Tennessee General Assembly
Placed on s/c cal Insurance Subcommittee for 3/11/2026
2026-03-04 Tennessee General Assembly
Action Def. in s/c Insurance Subcommittee to 3/11/2026
2026-03-03 Tennessee General Assembly
Assigned to General Subcommittee of Senate Commerce and Labor Committee
2026-02-25 Tennessee General Assembly
Placed on s/c cal Insurance Subcommittee for 3/4/2026
2026-02-24 Tennessee General Assembly
Placed on Senate Commerce and Labor Committee calendar for 3/3/2026
2026-02-05 Tennessee General Assembly
Assigned to s/c Insurance Subcommittee
2026-02-05 Tennessee General Assembly
P2C, ref. to Insurance Committee- Government Operations for Review
2026-02-05 Tennessee General Assembly
Passed on Second Consideration, refer to Senate Commerce and Labor Committee
2026-02-04 Tennessee General Assembly
Intro., P1C.
2026-02-02 Tennessee General Assembly
Filed for introduction
2026-02-02 Tennessee General Assembly
Introduced, Passed on First Consideration
2026-02-02 Tennessee General Assembly
Filed for introduction

Official Summary Text

This bill prohibits a provider
from
offer
ing
a vehicle value protection agreement
("agreement")
unless the agreement meets th
is bill's
requirements.
As used in this bill, a
"
v
ehicle value protection agreement" means a contractual agreement between a provider and a contract holder that provides benefits applied toward either:



The value of the contract holder's covered vehicle upon the occurrence of an adverse event, including damage incurred and reported on a vehicle history report, causing the covered vehicle to decrease in value; the total loss or unrecovered theft of the covered vehicle that, at the time of the loss or theft, had decreased in value compared to the value of the vehicle at the time it was purchased; or events covered by a contractual agreement between a dealer and a contract holder that provide the contract holder a loyalty benefit when the contract holder returns to the dealer to purchase or lease a replacement vehicle after a total loss, unrecovered theft, or trade-in of the covered vehicle.


The finance agreement for or secure bill of sale on a replacement vehicle upon the occurrence of an event.

This bill clarifies that the term specifically

i
ncludes a trade-in agreement, diminished value agreement, cash down payment protection agreement, or depreciation benefit agreement
,

but the term
does not include a debt waiver or a service contract.

REQUIREMENTS OF AN AGREEMENT

This bill prohibits a
provider
from
condition
ing
the extension of credit, the terms of credit, or the terms of the related vehicle sale or lease upon the purchase of
an
agreement.
Additionally, an
agreement must
meet all of the following requirements:



Provide a benefit to the contract holder upon the trade-in, total loss, or unrecovered theft of a covered vehicle. The benefit may be a credit toward the purchase or lease of a subsequent or replacement vehicle; or an amount applied to the cash value of the covered vehicle at the time of trade-in.


Identify, in the contract, the administrator or provider, the dealer, the contract holder, and the terms of the sale.


Guarantee the provider's obligations by an insurance policy that complies; and conspicuously state that the provider's obligations are guaranteed by an insurance policy, issued by an insurer, that pays the contract holder if the provider fails to perform its obligations under the agreement.


Outline the terms, including the purchase price of the covered vehicle and any eligibility requirements, conditions of coverage, or exclusions, of the agreement.


Notify the contract holder of (i) whether the agreement is cancellable and the procedures for requesting any refund of the unearned purchase price of the agreement paid by the contract holder; (ii) the methodology for calculating any refund of the unearned purchase price of the agreement after the agreement is canceled; (iii) any procedures the contract holder must follow to obtain a benefit under the terms and conditions of the agreement and, if applicable, a telephone number, website, and address where the contract holder may apply for a benefit; and (iv) that neither the extension of credit, the terms of credit, nor the terms of the related vehicle sale or lease may be conditioned upon the purchase of the agreement.


State the terms, restrictions, and conditions governing cancellation of the agreement prior to the termination date of the agreement by either the provider or the contract holder.

This bill
authorizes
a provider to perform as an administrator or retain the services of a third-party administrator. An administrator has the same powers and duties as a provider.

This bill requires a provider to guarantee the provider's obligations by an insurance policy, issued by an insurer, that pays the contract holder if the provider fails to perform the obligations in accordance with the agreement. The insurance policy mus
t provide that:



If the provider fails to perform its obligations under the agreement, the contractual liability insurer will pay all covered amounts that the provider is legally obligated to pay according to the agreement.


The contract holder may file directly with the insurer for reimbursement if the payment due under the terms of the agreement is not made by the provider within 60 days after proof of loss or trade-in of the covered vehicle has been filed in accordance with the terms of the agreement.

This bill clarifies that an
agreement that complies with this bill is not insurance and is
exempt from regulation as insurance.

REQUIREMENTS TO CANCEL A
N
AGREEMENT

In order t
o cancel a
n
agreement, this bill requires the provider to mail a written notice to the contract holder at the last-known address of the contract holder contained in the records of the provider at least five days prior to cancellation by the provider
. The
cancellation takes effect immediately upon the provider sending the notice to the contract holder if the reason for the cancellation is either nonpayment of any provider fee required to be paid by the contract holder
,
a material misrepresentatio
n by the contract holder to the provider
,
or a substantial breach of duties by the contract holder relating to the covered vehicle or its use. The notice must state the effective date of the cancellation and the reason for the cancellation.

If a
n
agreement is canceled by the provider for a reason other than nonpayment of the provider fee,
then this bill requires
the provider
to
refund to the contract holder, on a pro rata basis, any unearned provider fee paid by the contract holder
. However,
the provider may charge a reasonable administrative fee of up to $75. If coverage under the agreement continued after a benefit was paid under the agreement,
then
the provider may deduct the amount of the benefit paid from the refund to the contract hol
der.

RULEMAKING

This bill authorizes the commissioner of commerce and insurance to promulgate rules to effectuate this bill. The rules must include:



Additional disclosures for the benefit of the warranty holder, in the discretion of the commissioner.


Record keeping requirements.


Registration fees.


Penalties for violating this bill.


Procedures for public complaints.


The conditions under which surplus lines insurers may be rejected for the purpose of underwriting agreements.

APPLICABILITY

This
bill
applies to agreements entered into, renewed, or amended on or after
July 1, 2026.

Current Bill Text

Read the full stored bill text

SENATE BILL 2342
By Lamar

HOUSE BILL 2231
By Dixie
HB2231
011355
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 47;
Title 55 and Title 56, relative to vehicle value
protection agreements.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 56, Chapter 55, is amended by deleting
the chapter and substituting:
56-55-101. Short title.
This chapter is known and may be cited as the "Tennessee Vehicle Value
Protection Product Act."
56-55-102. Chapter definitions.
As used in this chapter:
(1) "Administrator" means the person that is responsible for the
administrative or operational functions of a vehicle value protection agreement,
including the adjudication of a benefit request by a contract holder;
(2) "Contract holder" means a person that is the purchaser or holder of a
vehicle value protection agreement;
(3) "Covered vehicle" means a vehicle that is the subject of a vehicle
value protection agreement;
(4) "Dealer" means:
(A) A motor vehicle dealer, as defined in § 55-17-102; or
(B) A recreational vehicle dealer as defined in § 55-17-401;

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(5) "Finance agreement" means a loan agreement for the purchase or
refinancing of a vehicle; a retail installment sales contract for the purchase,
refinancing, or lease of a vehicle; or an agreement to lease a vehicle;
(6) "Insurer" means a licensed insurance company authorized to issue
contractual liability insurance under this title;
(7) "Provider" means a person that is obligated to provide a benefit in
accordance with a vehicle value protection agreement;
(8) "Secure bill of sale" means an agreement between a dealer and a
contract holder that:
(A) Identifies the vehicle by year, make, and VIN or by other
identifying information;
(B) Shows the time and date of sale; and
(C) Is signed by both the buyer and the seller;
(9) "Vehicle" means:
(A) A motor vehicle, as defined in § 55-17-102; or
(B) A recreational vehicle, as defined in § 55-28-102; and
(10) "Vehicle value protection agreement":
(A) Means a contractual agreement between a provider and a
contract holder that provides benefits applied toward:
(i) The value of the contract holder's covered vehicle upon
the occurrence of the following:
(a) An adverse event, including damage incurred
and reported on a vehicle history report, causing the
covered vehicle to decrease in value;

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(b) The total loss or unrecovered theft of the
covered vehicle that, at the time of the loss or theft, had
decreased in value compared to the value of the vehicle at
the time it was purchased; or
(c) Events covered by a contractual agreement
between a dealer and a contract holder that provide the
contract holder a loyalty benefit when the contract holder
returns to the dealer to purchase or lease a replacement
vehicle after a total loss, unrecovered theft, or trade-in of
the covered vehicle; or
(ii) The finance agreement for or secure bill of sale on a
replacement vehicle upon the occurrence of an event described in
subdivisions (10)(A)(i)(a)-(c);
(B) Includes a trade-in agreement, diminished value agreement,
cash down payment protection agreement, or depreciation benefit
agreement; and
(C) Does not include a debt waiver or a service contract, as
defined under § 56-2-126.
56-55-103. Requirements for offering a vehicle value protection agreement.
(a) A provider shall not offer a vehicle value protection agreement unless the
agreement meets the requirements of this chapter. A provider shall not condition the
extension of credit, the terms of credit, or the terms of the related vehicle sale or lease
upon the purchase of a vehicle value protection agreement.
(b) A vehicle value protection agreement must:

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(1) Provide a benefit to the contract holder upon the trade-in, total loss,
or unrecovered theft of a covered vehicle. The benefit may be:
(A) A credit toward the purchase or lease of a subsequent or
replacement vehicle; or
(B) An amount applied to the cash value of the covered vehicle at
the time of trade-in;
(2) Identify, in the contract, the administrator or provider, the dealer, the
contract holder, and the terms of the sale;
(3)
(A) Guarantee the provider's obligations by an insurance policy
that complies with § 56-55-106; and
(B) Conspicuously state that the provider's obligations are
guaranteed by an insurance policy, issued by an insurer, that pays the
contract holder if the provider fails to perform its obligations under the
vehicle value protection agreement;
(4) Outline the terms, including the purchase price of the covered vehicle
and any eligibility requirements, conditions of coverage, or exclusions, of the
vehicle value protection agreement;
(5) Notify the contract holder of the following:
(A) Whether the vehicle value protection agreement is cancellable
and the procedures for requesting any refund of the unearned purchase
price of the agreement paid by the contract holder;
(B) The methodology for calculating any refund of the unearned
purchase price of the vehicle value protection agreement after the
agreement is canceled;

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(C) Any procedures the contract holder must follow to obtain a
benefit under the terms and conditions of the vehicle value protection
agreement and, if applicable, a telephone number, website, and address
where the contract holder may apply for a benefit; and
(D) That neither the extension of credit, the terms of credit, nor
the terms of the related vehicle sale or lease may be conditioned upon
the purchase of the vehicle value protection agreement; and
(6) State the terms, restrictions, and conditions governing cancellation of
the vehicle value protection agreement prior to the termination date of the
agreement by either the provider or the contract holder.
56-55-104. Requirements for a provider to cancel a vehicle value protection
agreement.
(a)
(1) To cancel a vehicle value protection agreement, the provider must
mail a written notice to the contract holder at the last-known address of the
contract holder contained in the records of the provider at least five (5) days prior
to cancellation by the provider; provided, that, the cancellation takes effect
immediately upon the provider sending the notice to the contract holder if the
reason for the cancellation is:
(A) Nonpayment of any provider fee required to be paid by the
contract holder;
(B) A material misrepresentation by the contract holder to the
provider; or
(C) A substantial breach of duties by the contract holder relating
to the covered vehicle or its use.

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(2) The notice must state the effective date of the cancellation and the
reason for the cancellation.
(b)
(1) If a vehicle value protection agreement is canceled by the provider for
a reason other than nonpayment of the provider fee, the provider shall refund to
the contract holder, on a pro rata basis, any unearned provider fee paid by the
contract holder; provided, that, the provider may charge a reasonable
administrative fee of up to seventy-five dollars ($75.00).
(2) If coverage under the vehicle value protection agreement continued
after a benefit was paid under the agreement, the provider may deduct the
amount of the benefit paid from the refund to the contract holder.
56-55-105. Third-party administrator.
A provider may perform as an administrator or retain the services of a third-party
administrator. An administrator has the same powers and duties established under this
chapter as a provider.
56-55-106. Vehicle value protection agreements - Contractual liability insurance
policies.
A provider shall guarantee the provider's obligations by an insurance policy,
issued by an insurer, that pays the contract holder if the provider fails to perform the
obligations in accordance with the vehicle value protection agreement. The insurance
policy must provide that:
(1) If the provider fails to perform its obligations under the vehicle value
protection agreement, the contractual liability insurer will pay all covered amounts
that the provider is legally obligated to pay according to the agreement; and

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(2) The contract holder may file directly with the insurer for
reimbursement if the payment due under the terms of the vehicle value protection
agreement is not made by the provider within sixty (60) days after proof of loss or
trade-in of the covered vehicle has been filed in accordance with the terms of the
agreement.
56-55-107. Vehicle value protection agreements not insurance.
A vehicle value protection agreement that complies with this chapter is not
insurance and is exempt from regulation as insurance.
56-55-108. Rulemaking.
The commissioner of commerce and insurance shall promulgate rules to
effectuate this chapter. The rules must:
(1) Include:
(A) Additional disclosures for the benefit of the warranty holder, in
the discretion of the commissioner;
(B) Record keeping requirements;
(C) Registration fees;
(D) Penalties for violating this chapter;
(E) Procedures for public complaints; and
(F) The conditions under which surplus lines insurers may be
rejected for the purpose of underwriting vehicle protection product
warranty agreements; and
(2) Be promulgated in accordance with the Uniform Administrative
Procedure Act, compiled in title 4, chapter 5.

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SECTION 2. The headings in this act are for reference purposes only and do not
constitute a part of the law enacted by this act. However, the Tennessee Code Commission is
requested to include the headings in any compilation or publication containing this act.
SECTION 3. This act takes effect July 1, 2026, the public welfare requiring it, and
applies to agreements entered into, renewed, or amended on or after that date.