Compass Bank, Air Academy Federal Credit Union to refund Colorado vehicle owners after failing to return unused GAP fees

Sept. 27, 2021 (DENVER)— Attorney General Phil Weiser today announced that Compass Bank, now called BBVA USA, and Air Academy Federal Credit Union will refund Colorado borrowers after failing to return GAP 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.

Guaranteed automobile protection (GAP) is an add-on product sold 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. If a borrower pays off the loan early, or the car is repossessed before the loan is paid off, Colorado law requires that the lender automatically refund borrowers any unearned GAP payments—that is, 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. 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.

“We are committed to protecting hard-working Coloradans, especially from unfair, deceptive, and illegal practices that cause them stress, hardship, and financial losses,” Weiser said. “I am pleased that this money will be returned to Colorado residents and service members who paid for GAP when they purchased a vehicle. We will continue demanding compliance from lending institutions in Colorado to protect all consumers.”

Earlier this year, the department secured for Colorado consumers more than $9.5 million in refunds from Wells Fargo for failure to return unused GAP fees and $121,983 from American Assurance Corporation related to GAP coverage overcharges.

The administrator of the Uniform Consumer Credit Code, who is part of the Department of Law, is leading this investigation. In additional 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.

Borrowers who believe they are owed a GAP fee refund because they paid off a car loan early or did not receive a full benefit for GAP coverage should contact the consumer credit unit at uccc@coag.gov, or file a complaint here.

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Lawrence Pacheco
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Lawrence.pacheco@coag.gov