Minding the GAP
At least one of the examinations the Consumer Financial Protection Bureau (CFPB) completed in 2018 included instances in which auto lenders sold a GAP product to consumers under circumstances which the CFPB found led to an abusive practice. The regulator noted that lenders sold a GAP product to consumers whose low loan-to-value (LTV) meant that they would not benefit from the product.
GAP products cover the difference or “gap” between the amount the consumer owes on the auto loan and the amount received from the auto insurer in the event the vehicle is stolen, damaged, or totaled. Because many borrowers with low LTVs still purchased the voluntary protection product, the CFPB interpreted that to mean that consumers did not understand the product. “In response to these examination findings, the lenders have undertaken remedial and corrective actions, including reimbursing consumers for the cost of the product and establishing an LTV minimum for GAP product sales,” the report noted.
AFSA is working closely with the CFPB to highlight the important role that GAP coverage plays in the lives of American consumers.
September 25th, 2019 by Dan Bucherer