Colorado vehicle owners to receive $121,983 in refunds after company failed to pay full GAP benefits
May 20, 2021 (DENVER)—Attorney General Phil Weiser today announced that his office secured $121,983 in refunds for 171 Colorado vehicle owners who did not receive their full GAP benefits from a Colorado company.
Guaranteed automobile protection (GAP) is an optional benefit offered to car buyers who finance their purchase. 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.
An investigation by the attorney general’s office revealed that American Assurance Corporation—a Lakewood-based company that acts as the GAP administrator between lenders, dealers, and consumers—did not always pay full coverage owed to consumers under Colorado law. The company cooperated with the investigation and agreed to promptly and fully refund consumers whose benefits were improperly withheld.
“We are committed to ensuring hardworking Coloradans receive the full GAP benefits they are entitled to,” said Weiser. “Our office will protect consumers by holding accountable institutions that fail to fully pay the amounts owed for GAP coverage or keep charging GAP coverage after a vehicle is already paid off.”
Because American Assurance voluntarily acknowledged its past behavior of not paying full GAP coverage owed to consumers and cooperated fully with the investigation, the attorney general’s office did not request additional payments beyond full consumer refunds, even though the law permitted the office to do so.
Colorado law ensures that consumers receive their buyer protection in full, and only allows creditors to deduct from this benefit a handful of items such as missed payments, late fees, or returned check fees.
The attorney general’s office has conducted a comprehensive GAP investigation that has uncovered information suggesting some creditors are not complying with Colorado law. For example, some creditors are not providing consumers with their full GAP benefit—as was the case with American Assurance—or creditors are not refunding unused GAP coverage payments if consumers sell their vehicle and do not need the GAP benefit. The first of these practices deprives consumers of protections that they paid for when they need them most—when their car has just been totaled. The second overcharges consumers and violates Colorado law.
In March, as part of a multistate settlement with Wells Fargo, Weiser secured more than $9.5 million in refunds for Colorado consumers who were not refunded GAP fees for unneeded coverage.
The administrator of the Uniform Consumer Credit Code, who is part of the attorney general’s office, is leading this investigation. In additional to enforcement activities, the administrator also licenses, regulates, and examines certain lenders and their contractors.