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(We discussed similar actions against three other Colorado credit unions here this past March, and have significant experience in dealing with the Colorado Attorney General in matters involving this issue.) The Massachusetts Attorney General also announced a $1.8 million settlement in March with GM Financial involving GAP refunds. These actions in Colorado are just the latest in the Attorney General’s enforcement of the state GAP law, resulting in $23.5 million in consumer refunds. Regulatory scrutiny of GAP by state and federal regulators has intensified. In addition to payment of the consumer remediation and civil money penalties, the credit unions have agreed to change their business practices in order to provide the refunds going forward. Colorado’s GAP requirements, like those in many other states, apply equally to any assignee or holder of a consumer credit sales contract or consumer loan.

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Where GAP is provided as a contractual term, the consumer must receive a pro rata refund. Rule 8 governs “Permissible Additional Charges – Guaranteed Automobile Protection” under the UCCR, and among other things, has a specific provision that requires a refund of the unearned fee or premium paid for GAP where a credit sale or consumer loan is prepaid prior to maturity or the vehicle is no longer in the consumer’s possession due to repossession or other disposition of the collateral.

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The action was brought pursuant to 4 CCR 902-1:8 (“Rule 8”) of Colorado’s Uniform Consumer Credit Code Rules (“UCCR”) and the Colorado Consumer Protection Act, C.R.S. Here, the retail installment sales contracts purchased by the credit unions included GAP waivers. A GAP waiver is an optional contractual obligation offered during the financing of an auto in which the seller agrees to waive any amounts still owed on an auto loan in the event of total loss. GAP insurance generally refers to third party insurance purchased by a consumer in a separate transaction from the actual vehicle purchase, typically as added coverage to their auto insurance.

GAP protects consumers from the depreciation in their auto’s value in the event of loss by covering the difference between an auto’s insured value and the amount left on a borrower’s auto loan. Under the terms set forth in the Assurances of Discontinuance, Bellco and Canvas have agreed to provide a combined $4 million in refunds to impacted consumers and each credit union will pay a $100,000 civil money penalty. An investigation conducted by the Consumer Protection Section of the Colorado Department of Law found that the credit unions were not refunding GAP fees owed to consumers under state law. On January 4, 2023, Colorado Attorney General Phil Weiser announced settlements with two state-chartered credit unions, Bellco Credit Union (“Bellco”) and Canvas Credit Union (“Canvas”), over Guaranteed Automobile Protection (commonly referred to as Guaranteed Asset Protection, or “GAP”) refunds.