Colorado Attorney General Phil Weiser on March 3 announced that his office has secured more than $9.5 million to refund Coloradans who were charged unnecessary guaranteed automobile protection fees by Wells Fargo.
In 2018 Wells Fargo entered into a settlement with all 50 states and the District of Columbia that required the bank to refund unearned GAP premiums collected between 2008 and 2018. Colorado received confirmation from Wells Fargo on Dec. 28 that it had completed restitution to Colorado consumers, the Colorado Attorney General’s Office said in a news release last week. The financial institution refunded more than $9.58 million to Coloradans on more than 51,000 accounts. Additionally, Wells Fargo refunded $82.4 million to consumers in other states.
GAP coverage is sold to consumers who finance their car purchases and is meant to protect the borrower if the vehicle is totaled or stolen. The coverage fills in the gap between the amount the consumer could recover from their auto insurance and the amount they still owe on their car loan so they aren’t stuck paying off a loan for a car they can no longer drive.
Borrowers pay GAP fees in full at the time of purchase, but if the borrower pays off the loan ahead of schedule or the car is repossessed before the loan is paid off, state law requires the lender to refund the portion of the GAP fee it has not earned. Colorado and the other states alleged that Wells Fargo had failed to refund the unearned fees to consumers.
“We are committed to protecting hard-working Coloradans, especially from deceptive and illegal practices that cause them significant stress, hardship, and financial losses,” Weiser said in the news release.
“We believe that as a result of our efforts, Wells Fargo and other institutions are complying with appropriate practices under the law,” the Colorado Attorney General’s Office said. “However, other institutions may not be as complaint. While we have not been seeing a significant volume of recent complaints related to this issue, we are continuing our investigations.”
The news release noted that class action lawsuits are also underway that complement the attorney general’s efforts to ensure compliance. “Those cases could provide additional financial relief to consumers in Colorado and address the type of conduct at issue,” the announcement stated.
In 2018, plaintiffs represented by Franklin D. Azar & Associates as well as firms in California and Pennsylvania filed a class-action lawsuit against Wells Fargo in a California federal court. They alleged the lender failed to refund unearned fees customers prepaid for GAP coverage. According to a Dec. 14 filing in the case, the parties attended a mediation and reached a tentative class action settlement. FDAzar is also representing plaintiffs in a similar suit filed against Toyota Motor Credit Corporation in November.