This class action lawsuit claims that Ally Bank sold GAP Agreements for vehicles in Maryland that did not cancel consumers’ loan debt when the vehicle was totaled.
“GAP Agreements” refer to debt cancellation agreements. Maryland law defines debt cancellation agreements as agreements “between a credit grantor and a borrower which provide for cancellation of the remaining loan balance in the event of theft or total destruction of the collateral for the loan after application of the proceeds of any insurance maintained on the collateral for the loan.” GAP agreements are designed to cover the difference between what insurance will pay after the total loss of a vehicle and what the consumer still owes on the vehicle. The GAP agreements sold by Ally Bank are not true debt cancellation agreements under Maryland law. After a “covered” vehicle is totaled, Ally Bank does not fully cover the amount of money necessary to cover the loan.
One plaintiff in this lawsuit, Jennifer Hernandez, is a citizen of Maryland. On December 28, 2013, Hernandez purchased a new Chevrolet Malibu and opted to purchase an “Optional GAP Contract” from Ally Bank for $595.00. Contrary to Maryland law, the GAP Agreement excluded numerous amounts from the remaining debt or “gap” after the application of the proceeds of any insurance maintained on the collateral. On March 9, 2016, Hernandez suffered a total loss of the Malibu. She made a claim to her insurance company, which then paid $14,497.70. The remaining gap between what her insurance paid and what she owed on her vehicle was $7,000. When Hernandez requested the $7,000 from Ally to cancel her debt, her request was denied based on an “exclusion” that was not permitted under Maryland law.
Hernandez is not alone in receiving “phony” GAP coverage. Consumers across Maryland have suffered from similar experiences.
Based on the facts of the case, the plaintiff alleges the following violations:
- Credit Grantor Closed End Credit Provisions
- Consumer Protection Act
- Breach of Contract