Two Colorado credit unions have agreed to pay borrowers $4 million to settle complaints that they failed to refund certain fees as required by law.
Auto loan customers of Canvas Credit Union in Lone Tree and Bellco Credit Union in Greenwood Village were entitled to refunds of fees related to guaranteed automobile protection, Colorado Attorney General Phil Weiser said in a news release this month.
Borrowers often pay the GAP fee when they buy a vehicle for coverage over the full term of the loan. If the borrower pays off the loan early, or if the car is repossessed and later sold at auction, Colorado law requires that the borrower receive a refund of the unearned portion of the GAP fee, the attorney general said.
An investigation by the consumer protection section of the Colorado Department of Law revealed that the $7.1 billion-asset Bellco and the $4.2 billion-asset Canvas habitually failed to refund unearned GAP fees owed to consumers.
"When hardworking Coloradans pay for GAP coverage, they deserve to receive what they are owed," Weiser said in the release. "My office will continue to hold accountable companies that violate the law and leave Coloradans without the money they were due."
Bellco and Canvas agreed to refund GAP fees to borrowers in a timely manner. Canvas said it would pay $2.6 million of the $4 million of refunds as well as pay the attorney general's office $100,000. Bellco did not provide additional details regarding its payout.
"Bellco followed all applicable laws and denies any wrongdoing," a public relations firm representing the company wrote in an email to American Banker. "As a not-for-profit credit union, it's in our members' best interest to settle with the Colorado attorney general rather than continue to fight a costly lawsuit."
Canvas began issuing refunds to members Wednesday, a company spokesman told American Banker in a separate email. Correspondence to all refund recipients went out via email Tuesday, he said.
"We are fully cooperating with the Colorado attorney general's office regarding the GAP fee refunds, as we share the common goal of protecting our members and their best interests. We are also working to implement the necessary practices to ensure we continually meet all evolving regulation," the company said in a statement.
The settlement is part of the attorney general's broader efforts related to GAP, resulting in total refunds to consumers of $23.5 million thus far.
Canvas reported net income of $38.1 million in the first nine months of 2022, a 5% decrease compared with a year earlier, according to call report data from the National Credit Union Administration.
Bellco reported net income of $69.4 million in the first nine months of 2022, a 35% increase compared with the same period in 2021.
