The Texas Attorney General’s Office has settled the state’s enforcement action against a credit insurance company that withheld premium refunds from many Texans who paid off their auto loans early.
Under the terms of the court-approved settlement, Resource Life Insurance Co. will pay $2 million in credit insurance refunds to an estimated 6,000 Texas policyholders.
The company must also pay $500,000 in attorneys’ fees to the state and up to $100,000 in refund administration costs.
With this settlement, the AG’s office has now resolved nine investigations into auto credit insurance companies’ practices. Together, the nine cases settled for an estimated $37 million in refunds to policyholders.
Resource Life Insurance Company, a Chicago-based insurer, sold policies through Texas auto dealers, including some in the Katy area. The policies were intended to cover auto loan payments in the event the borrower died or became disabled. The credit insurance premium charged was based on the original loan period, often covering a period of five years.
Customers who bought these policies paid for the entire premium cost at the time of their auto purchase. The premium amount was added to their auto loan as part of the monthly payment. If the auto loan ended before the scheduled length of the loan, Resource Life was not owed a premium for provided coverage and owed a premium refund to the customer.
In many cases, Resource Life failed to make the required refunds.
Under the Texas Insurance Code, Resource Life was obligated to refund the insurance premiums’ unearned portion to those customers who paid off their loans early.
