HB 1006
SignedHouse
Service contracts
Regulating service contracts and protection product guarantees.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
HB 1006 strengthens oversight of service contracts and protection product guarantees sold in Washington by requiring providers to register, prove financial responsibility, and provide clear contract terms. It gives consumers stronger refund rights, ensures reimbursement insurers meet specific standards, and clarifies how these products differ from standard warranties.
- Clarifies definitions of key terms like *service contract*, *protection product guarantee*, *administrator*, and *reimbursement insurance policy* to distinguish them from standard warranties and clarify regulatory scope.
- Requires registration and financial responsibility for protection product guarantee providers—including a $250 application fee, net worth of at least $200,000, and proof of financial backing (e.g., insurance, reserve accounts, or surety bonds).
- Strengthens consumer refund rights: Consumers can return service contracts within 20 days (non–motor vehicles) or 30 days (motor vehicles) for a full refund if no claim is made; late returns may incur a $25 cancellation fee.
- Mandates clear disclosures and contract terms, including coverage limits, exclusions, maintenance requirements, deductible amounts, and the right to return the contract—plus requires reimbursement insurance policies to let consumers file claims directly with the insurer.
- Requires service contract and protection product guarantee forms to be filed with and approved by the Insurance Commissioner, especially for motor vehicles, and prohibits deceptive advertising or unfair jurisdiction clauses.
Who is affected
- Consumers — Consumers who buy motor vehicles or other tangible goods may purchase service contracts or protection product guarantees for added coverage; this bill adds transparency, refund rights, and stronger oversight to protect them from misleading or unfulfilled promises.
- Service contract and protection product providers/sellers — Companies that sell or administer service contracts or protection product guarantees must meet new registration, financial responsibility, and disclosure requirements before operating in Washington.
- Insurers issuing reimbursement insurance policies — Insurance companies that issue reimbursement policies for service contracts or protection product guarantees must follow new rules about policy terms, claim handling, and direct consumer access to coverage.
- Motor vehicle manufacturers and importers — Motor vehicle manufacturers and importers who offer service contracts directly must file contract forms with the state and comply with specific disclosure and refund rules.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The 20/30-day unconditional return right for service contracts (if no claim made) gives consumers a meaningful cooling-off period—especially valuable for high-pressure dealership sales—reducing buyer’s remorse and protecting against deceptive or high-pressure tactics that disproportionately affect elderly, low-income, or non-English-speaking buyers.
consumer protectionPeopleRef: Sec. 2(3) & Sec. 8(4)(a)The $250 registration fee and $200,000 net worth requirement, while potentially burdensome for very small operators, ensures that only financially responsible entities can sell protection products—reducing the risk of insolvency and nonpayment, which disproportionately harms low-income consumers who cannot absorb out-of-pocket losses.
FinancialPeopleRef: Sec. 3(3)(e) & Sec. 3(3)(f)Allowing consumers to file claims directly with the insurer when the provider defaults removes a major barrier to redress—especially for vulnerable populations who may not have legal resources to pursue insolvent providers, and ensures coverage is actually available when needed.
consumer protectionPeopleRef: Sec. 4(3) & Sec. 4(4)Mandatory clear disclosures—including coverage limits, exclusions, maintenance requirements, and refund rights—help consumers compare products and avoid hidden terms, which historically have disadvantaged low-income and less-educated buyers who are more likely to accept opaque contracts at point of sale.
consumer protectionPeopleRef: Sec. 5(2) & Sec. 5(4)(a)-(i)The prohibition on denying claims based on general vehicle maintenance failures—unless the failure directly involves the part in question—prevents providers from using overly broad maintenance exclusions to avoid paying claims, protecting consumers who follow reasonable care but still experience component failures.
consumer protectionPeopleRef: Sec. 8(5)
Potential Concerns (5)
The 20/30-day return window for service contracts excludes claims made during the period, meaning consumers who experience a covered failure early in the term (e.g., a transmission failure 15 days after purchase) lose the right to a full refund—this disproportionately harms consumers with early mechanical failures, who are often lower-income and less able to absorb unexpected repair costs.
consumer protectionPeopleRef: Sec. 2(3)The $250 application fee and $200,000 net worth requirement for protection product guarantee providers may exclude small, independent providers—especially those operating in rural or underserved communities—while large national providers can easily absorb the cost, consolidating market power among incumbents.
Business & EmploymentPeopleRef: Sec. 3(3)(e)The $25 cancellation fee and 10% monthly penalty on late refunds may disproportionately burden consumers who are already financially strained—especially those who rely on service contracts as budgeting tools—and the penalty compounds quickly, potentially exceeding the original contract value for long delays.
FinancialLean peopleRef: Sec. 2(3) & Sec. 8(4)(a)The bill does not extend the same refund and disclosure protections to home heating fuel service contracts as it does to motor vehicles, despite similar consumer vulnerability—low-income households relying on heating contracts in winter may face unaffordable penalties or denial of refunds when systems fail.
HousingLean peopleRef: Sec. 2(3) & Sec. 8(4)(b)The 10% monthly penalty for late refunds creates a financial disincentive for providers to process claims promptly—especially when combined with vague timelines for “reasonable period” delivery of contracts—potentially increasing disputes and delaying critical repairs for consumers in safety-sensitive contexts (e.g., vehicle breakdowns in remote areas).
Public SafetyPeopleRef: Sec. 2(3) & Sec. 8(4)(c)
Who Is Most Affected
Low- and middle-income vehicle buyers—especially those purchasing extended warranties at dealerships—benefit significantly from refund rights, clear disclosures, and direct insurer access; these consumers are most vulnerable to deceptive sales and provider insolvency.
Large national service contract providers and insurers can absorb the $250 fee and $200K net worth requirement, and benefit from reduced liability risk due to direct claim rights being limited to provider default; smaller providers may be squeezed out.
Dealerships and auto sellers benefit from streamlined compliance (e.g., standardized forms) and reduced liability exposure, but may face margin pressure from refund obligations and disclosure requirements.
Small, independent protection product providers (e.g., local tire shops, dent removal specialists) may struggle to meet the $200K net worth and $250 fee, reducing competition and potentially limiting access in rural or underserved areas.
Motor vehicle manufacturers and importers face new filing and disclosure requirements for their own service contracts, but benefit from clearer regulatory boundaries and reduced liability risk for third-party contracts they administer.