Capital One Full GAP Fees Charged at Auto Loan Payoff Class Action

This class action against Capital One, NA, doing business as Capital One Auto Finance, concerns GAP waiver fees on retail installment sales contracts for auto purchases. The complaint alleges that when the contracts are paid off early, Capital One makes the customer pay all GAP fees that would’ve been paid over the life of the loan. According to the complaint, no GAP fees can be earned once the contract is paid off.

The sales contracts in this case all included Guaranteed Automobile Protection (GAP) waivers. A GAP waiver cancels debt in certain cases. If the borrower suffers a total loss of the vehicle, and if the actual cash value of the vehicle is less than the amount still owed to the creditor, then the creditor will waive the difference.

To use the example in the complaint, if a vehicle is stolen, and the customer still owes $10,000 on it, but the insurer will pay only $8,000, then the customer must pay the $2,000 difference. However, if the customer’s contract has a GAP waiver, the $2,000 will be waived.

GAP fees are listed separately on the contract, but they are paid bit by bit as part of the customer’s monthly payment. If the customer pays off the loan early, then the lender is no longer at risk of having to waive GAP fees. So the GAP fees will no longer be earned, just as the interest on the contract will no longer be earned. Thus the complaint alleges that, just as no more interest is charged to the customer, no more GAP fees should be charged either.

However, the complaint alleges that Capital One has been requiring that customers pay off all the GAP fees.

It works this way. When a customer wants to pay off a loan early, the lender gives the customer a payoff amount. The complaint claims that Capital One includes the GAP fees for the remainder of the contract term in this amount. The complaint alleges, “Capital One fraudulently represents to its customers … that they owe Capital One the unearned GAP fees for the remaining term of the contract, even though Capital One knows these fees are not earned, and can never be earned, because the finance agreement is terminating early.”

The complaint argues that since the GAP waiver is an addendum to the contract, the early payoff of the contract cancels the GAP waiver along with the rest of the contract.

The Nationwide Class for this action is all persons (1) who entered into financing agreements with GAP waiver addendums that were assigned to Capital One, (2) who paid off the agreements before the end of their term, and (3) who did not receive a credit or refund of the unearned GAP fees or accrued interest on the unpaid amounts, during the applicable statute of limitations.

California and Minnesota Subclasses have also been defined.

Article Type: Lawsuit
Topic: Consumer
Tags: Breach of Contract, Charges for Service Not Received, Unfair Charges