Colorado Attorney General Phil Weiser announced Sept. 27 that Compass Bank (now BBVA USA) and Air Academy Federal Credit Union will refund Colorado borrowers after failing to return guaranteed automobile protection fees that were improperly retained by those institutions.
"Compass Bank will refund borrowers approximately $1.68 million, and Air Academy Federal Credit Union is currently working to determine what it owes to customers, which involves a manual review of lending files that could take several months," according to a news release issued by the AG's office.
"GAP is an add-on product sold to car buyers who finance their purchase," according to the release. "If a buyer’s car is totaled in an accident, the buyer’s auto 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."
If a borrower pays off the loan early or the car is repossessed before the loan is paid, Colorado law requires the lender automatically refund borrowers any unearned GAP payments — funds that are not paying for any service of value to consumers.
"An investigation by the consumer credit unit in the consumer protection division of the Colorado Attorney General’s Office revealed that Compass Bank and Air Academy Federal Credit Union did not refund the unearned GAP fees for many consumers as required by Colorado law," the release said. "In the settlements, the lenders agreed to comply with their legal obligations and to pay consumers what they are owed. The credit union has also committed to a robust oversight system to ensure that it complies with that requirement."
Earlier this year, the Department of Law secured more than $9.5 million in refunds for Colorado consumers from Wells Fargo for failure to return unused GAP fees and $121,983 from American Assurance Corporation related to GAP coverage overcharges.
According to the release, the administrator of the Uniform Consumer Credit Code, who is part of the AG's office, is leading this investigation.
In addition to enforcement activities, the administrator also licenses, regulates and examines certain lenders and their contractors.
"In the past year, through a separate, routine, confidential oversight process, the administrator secured $161,385 GAP refunds paid to a total of 614 consumers. The oversight process allows for additional compliance without the need for a lawsuit," the release said.