Wisconsin Consumer Act Interpretive Opinion

​​​​Guaranteed Asset Protection (GAP) Products

(Applicable only for non-depository institutions) 

The Department approves the practice of assessing a charge for GAP when sold as debt cancellation agreements in connection with credit sales and loans if the conditions listed below are met. This approval is made under our authority contained in Wis. Stat. s. 426.104(4)

1)  The GAP is not required by the creditor and that fact is clearly and conspicuously disclosed in writing to the customer. 

2)  Any customer desiring GAP gives a specific, separately signed, affirmative written indication of the desire after receiving written disclosure of the cost and term of the product. 

3)  In connection with a credit sale and to comply with Wis. Stat. s.​ 422.303(1)​, the disclosure requirement under condition (1) and the customer’s separately signed written affirmation of their desire to acquire the GAP, along with the cost and term of the GAP, are incorporated within the installment sales contract. 

4) The GAP agreement indicates that the GAP agreement is between the customer and the creditor that sold the GAP, and after any assignment, between the customer and assignee. 

5) The GAP agreement may be cancelled at any time by the customer without penalty. The GAP agreement terminates no later than the earliest of the following events: 

  1. cancellation by the customer, 

  2. payment in full of the related credit transaction, 

  3. expiration of any redemption period after a repossession or surrender of the related collateral, 

  4. upon total loss of the covered collateral after the gap amount is waived or it is determined that no gap amount exists. 

GAP agreements may also be terminated by the creditor upon other events (e.g., default) that occur earlier than the above events if the GAP agreement so states. If any termination occurs within 30 days of the GAP purchase, the customer is entitled to a full refund of the GAP cost or a full credit of the GAP cost plus the amount of applicable finance charges. If any termination occurs after 30 days, the customer is entitled to a refund/credit of a portion of the GAP cost. At the minimum, the refund allowed shall be calculated by a method no less favorable to the customer than the monthly “Rule of 78.” No cancellation fee or similar fee may be assessed. If a GAP benefit has been or will be paid no refund is required. Cancellation provisions shall be disclosed in the GAP agreement. When calculating the refunds for the unearned GAP charges on agreements that contract for the “Rule of 78” method, refunds shall be based on the number of full months earned from the contract date to the actual termination date, counting a fractional month of 16 days or more as a full month. When calculating the refunds for the unearned GAP charge on agreements that contract for a Pro Rata refunding method and a monthly Pro Rata method is used, the number of full months earned shall be counted in a similar manner. 

6) Upon any termination, the creditor shall make an appropriate refund/credit of the GAP charge or shall cause to be made an appropriate refund/credit by instructing in writing the appropriate party to make such refund/credit. 

7) The gap agreement complies with the Wisconsin Consumer Act and all terms and conditions are reasonable.

History: Issued 6-6-94, Revised 8-1-04, 10-10-05, 6-5-08, 7-1-15

​Wisconsin Consumer Act Interpretive Opinion - GAP Products, July 1, ​2015​​​