Tuesday, March 13, 2007

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Attorney General Abbott Files Suit Against Companies to Recover Credit Insurance Refunds

AUSTIN – Attorney General Greg Abbott today took legal action against four insurance companies for defrauding consumers who purchased “credit insurance” policies to protect their vehicles’ financing. According to the Attorney General’s petitions, the companies failed to refund unearned premiums to customers who paid off their vehicles ahead of schedule or otherwise terminated their financing earlier than expected. Refunds to Texas vehicle owners in these cases could reach a total of $6 million.

“The Texas economy depends upon the thousands of businesses that fairly and lawfully conduct commerce across the state,” said Attorney General Abbott. “Texans will not tolerate businesses that boast about benefits of credit insurance but secretly scheme to keep premiums that actually belong to consumers. We intend to return hard-earned money to consumers who bought credit insurance from these defendants.”

Media links
Attorney General's lawsuit against American Heritage Life Insurance Company
Attorney General's lawsuit against Old United Life Insurance Company
Attorney General's lawsuit against Protective Life Insurance Company
Attorney General's lawsuit against Resource Life Insurance Company

The companies named in the suit are:

• American Heritage Life Insurance Co. (Dallas)
• Protective Life Insurance Co. (Dallas)
• Old United Life Insurance Co. (Dallas)
• Resource Life Insurance Co. (Austin)

The refunds, if approved by a court, would amount to an average of $222, plus interest, for an estimated 27,000 Texans who purchased the coverage but did not receive the required refunds.

The lawsuits charge the companies with convincing customers to purchase credit insurance that covered consumers for the duration of their vehicular loans. In the event of an insured’s death or disability, the insurance would pay off the balance of the vehicle loan. The defendants sold consumers “single-premium” policies, in which the companies bundled the entire cost of the credit insurance policy into the buyer’s total loan. However, if the customer paid off the loan early, the defendants promised to refund the unearned portion of the insurance premium. Despite those promises, they retained the unearned premiums. The Texas Insurance Code requires that these premiums be refunded.

In addition to consumer refunds, the lawsuit seeks penalties of up to $10,000 and $20,000, respectively, for violations of the Insurance Code and Texas Deceptive Trade Practices Act.