WASHINGTON, D.C. -

The state government affairs committee of the American Financial Services Association recently issued a white paper, focusing on a trend in vehicle franchise legislation that affects the relationship between automakers regulated financial institutions and franchised dealers related to the sale of ancillary products. These products include vehicle service contracts, guaranteed asset protection (GAP) waivers and extended warranties.

The paper outlines recent legislation in Florida, Illinois, Mississippi, New Hampshire, New York, North Carolina, Oklahoma, and South Carolina with provisions prohibiting a manufacturer (or captive finance company) from coercing or requiring a dealer to sell or sell exclusively their ancillary products or to take action against a dealer for offering third-party products.

"In some cases, the provisions prohibit captive finance companies from offering exclusivity incentives to the dealer and/or requiring the dealer to disclose to the consumer when it is a third-party product," AFSA said.

"While the stated goal of this legislation may be to avoid preferential treatment of any one company's ancillary products, in certain circumstances, these bills can impair a financial institution's ability to choose not to finance products from third parties that may put the financial institution in a position of financial responsibility for the products," the association went on to say.

AFSA members can download the white paper here.