Another Colorado Credit Union to Pay GAP Refunds

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Red Rocks Credit Union this month became the sixth credit union ordered to pay back the charges by Colorado Attorney General Phil Weiser.

Denver-area Credit Union ($355 million, 16,123 members) paid $312,268 to 1,330 members who had to repay Guaranteed Automobile Protection (GAP) insurance from 2014-2020, according to a regulation signed on June 15 by interim CEO Darius Wise.

So far, the attorney general has ordered more than $19 million in payments to Coloradans from two banks, six credit unions and some nonlending GAP administrators.

Five of the six credit unions account for more than a third of payments. The sixth largest credit union is Air Academy Federal Credit Union of Colorado Springs ($588.5 million in assets, 48,300 members). The attorney general announced last September that the Air Academy FCU union owed GAP repayments, but said it was “currently working to determine what it owed customers, which involves a manual review of loan records that could take several months.

Refunds involve unearned GAP bonuses.

GAP is an add-on product for car buyers financing their purchase. If a buyer’s car is destroyed in an accident, the buyer’s auto insurance usually pays only the fair market value of the car, which may be less than the amount owed on the buyer’s loan.

GAP applies in this situation to repay the remaining balance of the loan. If a borrower prepays the loan or the car is repossessed before the loan is paid off, Colorado law requires the lender to automatically reimburse borrowers for any unearned GAP payments.

The Attorney General’s press release said Red Rocks CU was aware of Colorado’s pending GAP enforcement actions against other lending institutions and, prior to accepting the class action settlement, sought a agreement with the department to release the credit union from legal action if it paid full refunds plus interest to Colorado consumers.

“This settlement reflects our office’s efforts to ensure that hard-working consumers are not defrauded, even by trusted lending institutions whose business practices must comply with Colorado law,” Weiser said. “To deny a consumer GAP refunds to which they are entitled is unfair and illegal.”

The largest payout came from Wells Fargo of San Francisco ($1.77 trillion in assets), which the attorney general announced in March 2021 had paid out $9.6 million to 51,434 customers. The other bank, BBVA of Birmingham, Ala. ($101.9 billion in assets), paid out $1.7 million to 5,209 clients.

Five credit unions disbursed $7.2 million to 27,070 members. In addition to Red Rocks CU, these are:

  1. ENT Savings Fund, Colorado Springs, Colorado ($5.7 billion in assets, 347,312 members), which has paid out $5.2 million to 19,011 clients. It is the largest credit union auto lender based in the state.
  2. Westerra Credit UnionDenver, ($1.6 billion in assets, 120,380 members), which has paid out $846,115 to 3,422 clients.
  3. Premier Members Credit UnionBoulder, Colorado ($1.2 billion in assets, 72,529 members), which paid out $792,873 to 2,563 clients.
  4. Denver Credit UnionLakewood, Colorado ($824.8 million in assets, 61,829 members), which paid out $122,022 to 744 clients.
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