AUSTIN, Texas (Legal Newsline) - Texas Attorney General Greg Abbott has settled an enforcement action against a credit insurance company.
Resource Life Insurance Co. was alleged to have withheld premium refunds for many Texans who had paid off their auto loans early. Under terms of the settlement, Resource Life has agreed to pay an estimated 6,000 Texas policyholders a total of $2 million in credit insurance refunds.
The company is also required to pay up to $100,000 to refund administration costs and $500,000 in attorneys fees to the state.
This latest settlement resolves the ninth investigation into auto credit insurance company practices by Abbot. All told, the nine cases were settled for an estimated $37 million in refunds for Texas policyholders.
The Chicago-based Resource Life sold its policies through Texas auto dealers. The policies, intended to cover auto loan payments in the event of the borrower's death or becoming disabled, were based on the original loan period and often covered a period of five years.
The entire premium cost was paid for by customers at the time of their auto purchase. The premium amount was added to the customers' auto loans as part of their monthly payment, Abbott said.
For auto loans ending before the scheduled length of the loan, Resource Life was not owed a premium for provided coverage and thus owed a premium refund to the customer, Abbott said.
Resource Life, in many cases, failed to make the required refunds, Abbott said. The company was obligated, under the Texas Insurance Code, to refund the insurance premiums' unearned portion to those customers who paid off their loans early, Abbott said.