Colorado lawmakers are considering legislation that would significantly expand consumer protections around motor vehicle finance and sales. House Bill 26‑1261, introduced on February 19, 2026 and currently pending before the House Business Affairs & Labor Committee, would overhaul repossession timelines for certain “qualified motor vehicles,” restrict use of vehicle-disabling technology, and create a three‑business‑day right to return certain vehicles purchased from dealers.

If enacted, the bill would insert a new Article 9.4 into Colorado’s “Uniform Consumer Credit Code” and add a new dealer-focused section 44‑20‑130.5. Violations would be deemed unfair or deceptive trade practices under the Colorado Consumer Protection Act (CCPA), exposing creditors and dealers to statutory remedies, including treble damages for willful violations and attorneys’ fees.

Key Points

• Scope: “Qualified motor vehicle” and “covered person”
  • A “qualified motor vehicle” is any self‑propelled vehicle required to be registered in Colorado that is the debtor’s only motor vehicle. Fleet vehicles are excluded. 
  • A “covered person” is a natural person who enters into a retail installment contract or lease for a qualified motor vehicle. 
  • The new Article 9.4 would apply to enforcement of security interests in qualified motor vehicles, and any contractual waiver of rights under the Article is void. 
• Extended right to cure before repossession
  • Current law generally requires at least 20 days’ notice before repossessing collateral after a payment default. 
  • For qualified motor vehicles, HB 26‑1261 would extend the cure period to 60 days after the creditor provides a notice of right to cure. 
  • During this 60‑day window, a covered person could cure by paying all past‑due amounts plus delinquency or deferral charges. Upon cure, all rights are restored as if no default occurred. 
  • The extended cure does not apply if a default continues for 120 days or more or to a second or subsequent default. 
• Ban on using kill‑switches to enforce payment
  • The bill would prohibit secured parties from disabling a motor vehicle (including remotely or electronically) to enforce payment obligations under the related purchase transaction or promissory note. 
  • This effectively bans the use of starter‑interrupt and similar disabling devices as a repossession or collection tool for qualified motor vehicles. 
• New post‑repossession 48‑day cure right
  • After repossessing a qualified motor vehicle, a secured party could not dispose of the vehicle until 48 days after repossession. 
  • Within 48 hours of repossession, the secured party must notify the covered person that:
    • The vehicle has been repossessed; 
    • The exact date on which it will be subject to disposition if the default is not cured; 
    • The amount needed to cure; 
    • Acceptable forms of payment; and 
    • The secured party’s name, address, and telephone number. 
  • To cure, the covered person must pay the overdue amounts plus the reasonable cost of repossession. 
  • If the default is cured within 48 days, the secured party must return the vehicle and restore the covered person’s rights and obligations as though no default occurred. 
• Three‑business‑day right to return certain vehicles purchased from dealers
  • Consumers who purchase a qualified motor vehicle from a licensed dealer would have a right to return the vehicle within three business days after the later of purchase or delivery. 
  • If the consumer exercises this right:
    • The dealer must, within three business days, refund amounts actually paid (minus permitted fees and repair costs) and unwind or cancel related financing or leasing arrangements. 
    • If there was a trade‑in, the dealer must either return the trade‑in in substantially the same condition (if still owned) or pay the agreed trade‑in value stated in the purchase contract. 
• Conditions on exercising the return right
  • To use the three‑day return right, a consumer must:
    • Return the vehicle to the dealer’s place of business during normal business hours within the three‑business‑day period. 
    • Sign and transfer the certificate of title to the dealer. 
    • Return all items received as part of the transaction. 
    • Either return the vehicle in substantially delivered condition (excluding ordinary wear and tear and “reasonable mileage) or pay the reasonable cost of repair, capped at 0.5% of the vehicle’s value at the point of sale. 
    • Pay a “reasonable” restocking fee and any reasonable excess mileage fee, determined under the bill’s fee provisions. 

Next Steps

For lenders, lessors, and dealers operating in Colorado or financing Colorado transactions, HB 26‑1261 bears close watching. If enacted in its current or similar form, it would require substantial changes to credit policies, repossession practices, and standard retail installment and lease documentation, as well as dealer sales and finance and insurance processes.

We will monitor this legislation and provide updates.