Two large lenders have admitted they’ve charged more than the legal limit on auto loans in Massachusetts, and will soon send refunds to consumers as part of a settlement with the government.
The issue is related to GAP insurance, which is meant to cover the difference between what a car is worth and what is still owed on a loan if the car is totaled. For example, if your car is flood damaged and only worth $10,000 at the time, but you still owe $15,000 on your auto loan, GAP insurance would pay the extra $5,000.
The problem is that you aren’t charged for GAP insurance as part of your own insurance policy. Instead, it is wrapped into your auto loan. Because of this, the fees associated with GAP insurance have caused many consumers to be effectively charged more than the legal limit of 21% on their car loan.
American Credit Acceptance LLC and Westlake Services LLC have agreed to forgive outstanding excess interest on the auto loans, and refund overpayments consumers have already made.
On average, all of the roughly 2,000 consumers affected should get about $3,000. To find out if you are eligible, you can call 1-888-830-6277.
If you are interested in shopping for auto, loans you can always use our free auto loan calculator.