Bryan Cohen Jun. 9, 2014, 6:41pm

BOSTON (Legal Newsline) - Massachusetts Attorney General Martha Coakley announced a settlement on Friday with Harley-Davidson Financial Services Inc. (HDFS) to resolve allegations it failed to pay proper refunds under the terms of its motorcycle finance agreements.

HDFS allegedly did not always provide correct refunds of finance contract enrollment fees. Borrowers typically pay the optional enrollment fees in return for additional special loan terms. Borrowers who pay their loans off early are often allowed to obtain prorated refunds of the fees.

The refunds are usually remitted to borrowers through the auto dealership that helped to arrange the loan. When a dealership has gone out of businesses, borrowers may encounter difficulty obtaining the refunds.

"We are pleased that this finance company stepped forward to reimburse Massachusetts customers and promptly adopted changes to its procedures," Coakley said. "We are continuing to review the practices of other motor vehicle finance companies operating in the commonwealth to ensure compliance with contractual obligations."

Under the terms of the settlement, HDFS will reimburse more than 600 Massachusetts borrowers a total of $228,000. Notices and payments will be sent out to eligible borrowers via mail in early July.

HDFS also agreed to follow policies and procedures to ensure that Massachusetts borrowers obtain complete and timely refunds going forward. HDFS will also pay $25,000 to the state for attorney costs.

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