Collateral Protection Insurance: Are You Paying for Unnecessary Coverage?
Last Updated on January 5, 2018
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Case Update
Report: Wells Fargo Forced Unnecessary Auto Insurance on Borrowers
On July 27, 2017, The New York Times reported that it uncovered a 60-page internal document from Wells Fargo that stated more than 800,000 people who went through the bank for their car loans were charged for insurance that they did not need. The report further claims that these individuals may still be paying for this unnecessary coverage.
At A Glance
- This Alert Affects
- Consumers who had collateral protection insurance (CPI) force placed on them by their bank or lender.
- Damages
- Consumers who had to pay the high costs of lender-placed collateral protection insurance may be able to participate in a lawsuit seeking compensation for the money paid out for this coverage.
- Company(ies)
- Banks, lenders.
- Additional Details
- CPI is designed to protect lenders in the event that the borrower fails to obtain auto insurance or allows their insurance to lapse.
- Type of Lawsuit
- Class Action
Allegations have surfaced that certain banks may be charging their borrowers for unnecessary and unauthorized collateral protection insurance (CPI).
It is believed that these banks are force-placing collateral protection insurance without proper notice to the consumer, and even purchasing coverage for borrowers who provided evidence of applicable insurance coverage.
What Rights Does My Lender Have in Regard to Force Placed Auto Insurance?
Typically, when a consumer takes out an automobile loan, they are obligated to maintain acceptable insurance on the vehicle. If the borrower does not purchase insurance, or allows their insurance to lapse, the lender has the right to purchase insurance, known as collateral insurance protection, on the borrower’s behalf. Typically, lender-placed insurance is more expensive than the policy the consumer could have purchased himself, and provides relatively narrow coverage. In some states, lenders are only permitted to force-place this insurance under very limited circumstances and may be subject to strict notification and disclosure rules.
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