The American Financial Services Association (AFSA) has submitted a letter to the Kentucky Department of Revenue, seeking clarification on refund calculations for credit insurance and debt cancellation products under the U-Drive-It Program. The announcement was made on AFSA’s website.
In its comment letter dated May 8, 2025, AFSA raised concerns about the Kentucky Department of Revenue’s interpretation of refund requirements under KRS 138.463. Specifically, AFSA urged the department to clarify that refunds for credit insurance and debt cancellation products must be calculated using an actuarial method or another method no less favorable to consumers. AFSA said that lenders and servicers need this clarification to ensure compliance and protect consumers’ financial interests when early payoffs occur. The lack of clear guidance could result in inconsistent practices across the industry and may expose lenders to regulatory risk.
According to the Kentucky Transportation Cabinet (KYTC), the Kentucky U-Drive-It Program, governed by KRS 138.460 and KRS 138.463, offers an alternative method for paying motor vehicle usage tax for vehicles rented without drivers. This program allows permit holders to defer tax payments at the time of registration, instead remitting taxes based on rental and lease receipts. Proper accounting systems are required to record all vehicle usage and revenue generated from operations on Kentucky highways. The program’s guidelines emphasize that all transactions will be taxed at the Fair Market Value (FMV) of the rented or leased vehicle.
AFSA recommended that the Kentucky Department of Revenue issue formal clarification and consider working with the Department of Insurance to ensure consistency for all related products. The association found that without coordinated guidance between these departments, there could be conflicting requirements for lenders and servicers. Such inconsistencies may not only confuse industry stakeholders but also undermine consumer protections intended by state regulations. AFSA’s advocacy efforts aim to promote uniformity in refund practices across the financial services industry.
As per its website, AFSA, founded in 1916, is the national trade association for the consumer credit industry. Its membership comprises over 450 companies, including consumer and commercial finance companies, vehicle finance/leasing companies, mortgage lenders, credit card issuers, and industry suppliers.
