You purchase a new car and just as added peace of mind, you also purchase something called credit life insurance to pay off the loan if you die before the life of the loan. It is protection against the risk of defaulting. There is also credit disability insurance to pay a loan off if you become disabled and cannot work.
Farah & Farah’s consumer lawyers want you to know that several class action lawsuits have been filed and some settled on behalf of consumers who purchased this type of insurance and paid off their auto loans early but did not get an “unearned premium” refund. Because the entire premium for the loan is paid up-front in a single premium, if the loan is paid off early, there is no longer any loan left to insure. That consumer then is owed a portion of the up-front premium.
In some cases, the consumer may have paid the loan and purchased or traded in one car for another car later to find the credit life or credit disability policy did not exist on the new vehicle loan.
You may have rights and not know it. Contact Farah & Farah if you paid one of these up-front premiums and never heard another word after paying off your loan early. Thousands of these certificates of insurance have been purchased, representing a financial boom to the insurers. Remember- the return of these funds is mandatory.
In many cases forming a “class” simply makes more sense because it allows an individual plaintiff access to a remedy through the courts in a way that would not make financial sense as an individual.
Source: http://cfbfirm.com/wp-content/uploads/2011/02/2.14.11-Order-Granting-Preliminary-Approval-of-Settlement.pdf; http://www.ins.state.ny.us/ogco2003/rg031114.htm