Another Colorado Credit Union to Pay GAP Refunds

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

The Denver-area credit union ($355 million, 16,123 members) has paid $312,268 to 1,330 members who were owed the refunds on Guaranteed Automobile Protection (GAP) insurance from 2014 to 2020, according to a settlement signed 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 non-lender GAP administrators.

Five of the six credit unions account for more than a third of the payments. The sixth 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 Air Academy FCU union owed GAP refunds, but said it was “currently working to determine what it owes to customers, which involves a manual review of lending files that could take several months.”

The refunds involved unearned GAP premiums.

GAP is an add-on product 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 that the amount owed on the buyer’s loan.

GAP applies in that situation to pay off the loan’s remaining balance. 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.

The attorney general’s news release said Red Rocks was aware of Colorado’s ongoing GAP enforcement actions against other lending institutions and, before agreeing to the class-action settlement, sought an agreement with the department to release the credit union from any legal action if it paid full refunds plus interest to Colorado consumers.

“This settlement reflects our office’s efforts to ensure hardworking consumers are not cheated out of money, even by trusted lending institutions whose business practices must comply with Colorado law,” Weiser said. “Denying a consumer GAP refunds to which they are entitled is unfair and illegal.”

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

Five credit unions have paid $7.2 million to 27,070 members. Besides Red Rocks, they were:

1. ENT Credit Union, Colorado Springs, Colo. ($5.7 billion in assets, 347,312 members), which paid $5.2 million to 19,011 customers. It is the largest credit union auto lender based in the state.

2. Westerra Credit Union, Denver, ($1.6 billion in assets, 120,380 members), which paid $846,115 to 3,422 customers.

3. Premier Members Credit Union, Boulder, Colo. ($1.2 billion in assets, 72,529 members), which paid $792,873 to 2,563 customers.

4. Credit Union of Denver, Lakewood, Colo. ($824.8 million in assets, 61,829 members), which paid $122,022 to 744 customers.