Colorado settles GAP fee case with credit unions for $4M
(The Center Square) – Coloradans who were to guaranteed automobile protection fee refunds from two credit unions will get $4 million in refunds from a recent settlement, Attorney General Phil Weiser's office announced.
The settlement announcement comes following a state investigation revealing Bellco and Canvas credit unions were not properly refunding GAP fees.
“When hardworking Coloradans pay for GAP coverage, they deserve to receive what they are owed,” the attorney general said in a press release. “My office will continue to hold accountable companies that violate the law and leave Coloradans without the money they were due.”
According to the attorney general's office, GAP "is often sold to car buyers who finance their purchase. If a buyer’s car is totaled in an accident, the buyer’s insurance typically pays only the fair market value of the car, which can be less than the amount owed on the buyer’s loan. GAP applies in that situation to cancel, or pay off, the remaining balance owed on the loan."
“Borrowers pay the full GAP fee when they buy the car, but typically the fee is only earned gradually over the life of the loan,” the office added. “If the borrower pays off the loan early, or if the car is repossessed and later sold at auction before the loan is paid off, Colorado law requires that the borrower receive a refund of the unearned portion of the GAP fee.”
As part of the settlement with Colorado, the credit unions said they will refund GAP fees in "a timely manner."