Friday, July 14, 2006
Attorney General Abbott Sues Credit Insurance Firm To Get Refunds For Texas Vehicle OwnersAUSTIN - Texas Attorney General Greg Abbott sued a Galveston-based company on Thursday that networks with Texas auto dealerships to offer credit insurance to protect consumers for the period they finance vehicles, but failed to refund certain premiums when vehicle loans were paid off early.
The Attorney General’s lawsuit requests a court judgment, with interest, ordering American National Insurance Co. to refund unearned credit insurance premiums owed to Texas consumers who paid off their vehicles earlier than the expected period of the loans. The Attorney General’s investigation has already identified about 17,000 Texas consumers who may be due refunds. Average refunds for these consumers is currently estimated at $268.75 per consumer.
“Consumers who opted for this coverage may not even be aware this company wrongly withheld a portion of the money they paid up-front for premiums, and that money rightfully belongs to those consumers, not the insurance company,” said Attorney General Abbott. “We will seek full restitution for consumers.”
Dealerships often offer vehicle buyers the option to purchase credit insurance, which would pay off a financed vehicle in the event the buyer develops a long-term disability or dies during the finance period.
Like many credit insurers, American National’s policies are “single-premium policies,” in which a single payment for as much as six years of coverage is financed as part of the vehicle buyer’s loan. However, the company’s own policies state – and the Texas Insurance Code requires – that if a consumer pays off his or her debt early, American National will refund the unearned portion of the insurance premium.
This company, and others now under investigation, allegedly failed to make refunds of unearned insurance premiums, as required by law, but instead retained those funds, enriching itself at the expense of consumers.
The Attorney General’s lawsuit cites violations of the Insurance Code and Texas Deceptive Trade Practices Act (DTPA). In addition to refunds to harmed consumers, the suit seeks civil penalties of up to $20,000 per violation of the DTPA and $10,000 per violation of the Insurance Code.
The injunction sought would prohibit the company from engaging in these practices in the future and ensure it modifies its procedures so that consumers get full and timely refunds.