New Jersey

The relevant statutes are the Retail Installment Sales Act, N.J. Stat. Ann. §§17:16C-1 et seq. (“NJ-RISA”) (governs sales of goods and services for $10,000 or less) and the Collateral Protection Insurance Act, N.J. Rev. Stat. §§17:16V-1 et seq. (“NJ-CPI”).

A. Actions creditor may take:

(1) NJ-RISA §17:16C-30 - When buyer fails or is unable to acquire insurance or creditor is unable to purchase dual-interest insurance, creditor may purchase a single interest insurance policy and may collect the premium from buyer.

(2) NJ-CPI §§17:16V-2, 17:16V-3 - Creditor may purchase collateral protection insurance after buyer fails to provide evidence of insurance or fails to maintain insurance against loss or damage to the motor vehicle as a result of fire, theft, damage or other risks as required in the credit agreement.

(3) NJ-CPI §17:16V-3(b) – Collateral insurance protection purchased by the creditor shall be effective: as of the date of the initial credit transaction, if insurance designating the creditor as loss payee or beneficiary protecting against loss or damage to the collateral is not purchased by the debtor; as of the dated the required coverage lapsed, if purchased initially but not maintained by the debtor; or at a later date as determined by the creditor.

B. Notices required: NJ-CPI §17:16V-3 - Within 14 days following placement of the collateral protection insurance creditor must mail to the debtor, via first class postage prepaid service, the following information contained in NJ-CPI §17:16V-3(c):

(1) as of (insert date), evidence that you have purchased or maintained the insurance required by the terms of your credit agreement has not been provided to the creditor, (name of creditor);

(2) collateral protection insurance has been purchased by the creditor, with respect to the following credit transaction: (insert type of credit transaction);

(3) you are responsible for the cost of the collateral protection insurance purchased by the creditor, which cost is $ _______________.

(4) the amount stated under paragraph (3) of this notice has been added to the principal balance in your account as of (indicate date);

(5) all or part of the cost of the collateral protection insurance stated under par. (3) of this notice may be paid by you at any time and amounts paid will be applied to your account;

(6) the effective date of the coverage of the collateral protection insurance purchased by the creditor is the date of the initial credit transaction, if you failed to obtain insurance coverage initially, or the date of the lapse of coverage, if you failed to maintain or renew your coverage, or on (specify date if on a later date as determined by the creditor pursuant to section A.(3) above.

(7) the cost of the collateral protection insurance purchased by the creditor may be more than the cost of insurance you can obtain on your own;

(8) the amount of coverage will not be greater than the outstanding principal balance in your account as of the effective date of the collateral protection insurance purchased by the creditor, which may be less than the value of your property, and as a result, you may be underinsured;

(9) [in bold and in a larger type size than the other provisions of this notice] the coverage purchased by the creditor will not include any liability coverage for claims made against you and will not satisfy any mandatory liability insurance law or financial responsibility law of this or any other state;

(10) if you provide us with evidence that you have the required insurance, we shall cause the collateral protection insurance to be canceled as of the effective date of the coverage which you provide (as shown on the policy or other evidence of coverage sent to us), and any unearned premium, costs and interest applicable to the collateral protection insurance after that date will be applied to the balance of your account, and the excess, if any, will be paid to you; and

(11) if you have insurance coverage in place, or if you have replaced the coverage, and it has been in place without any lapse in the coverage but you have failed to provide the creditor with evidence of that coverage, you may, within 30 days after this notice was mailed, provide the creditor evidence of the insurance coverage showing the creditor as loss payee or beneficiary, and the collateral protection insurance coverage placed by the creditor will be canceled and the creditor will deduct from your principal balance all costs of the collateral protection insurance purchased by the creditor, including any interest charged to your account as a result of the costs of that insurance being added to your principal balance.

C. Charges permitted: NJ-CPI §17:16V-2, 17:16V-3(a), 17:16V-3(f), 17:16V-3(g) - If creditor purchases collateral protection insurance, the cost is to be paid or reimbursed by buyer. It may be added to the principal balance in buyer's account.

(1) The cost of collateral protection insurance means the premium paid, including all commissions and fees paid by the insurer, whether paid to the creditor or an unrelated person or entity.

(2) The cost of collateral protection insurance also includes all fees, penalties and administrative costs charged to creditor upon cancellation of the insurance, but will not include any placement charges charged by creditor.

(3) No costs may be charged to buyer for collateral protection insurance if buyer's only failure was to timely provide evidence to creditor of insurance coverage.

(4) Costs charged to buyer may not be excessive or discriminatory. Any cost approved by the Department or filed with the Department and not disapproved, will not be deemed excessive or discriminatory.

D. Finance charge allowed on creditor's payment: Yes. See C. above.

Click here to view relevant New Jersey Code and Regulations.