• Report: #786545

Complaint Review: USAA Federal Savings Bank

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  • Submitted: Sat, October 08, 2011
  • Updated: Sun, October 09, 2011

  • Reported By: T-Henry — Amarillo Texas United States of America
USAA Federal Savings Bank
10750 McDermott Freeway San Antonio, Texas United States of America

USAA Federal Savings Bank USAA balks at Texas law by denying pro-rated refund of vehicle 'gap insurance' San Antonio, Texas

*Author of original report: Found the law that applies

*Author of original report: Thanks for the correction-which leads to Q

*Consumer Suggestion: Read the chapter

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USAA Federal Savings Bank is in direct violation of Texas state law by denying consumers (and myself) pro-rated refunds of 'Total Loss Protection' - commonly known as 'gap insurance.'

USAA Disclosure states, 'You may cancel Total Loss Protection and receive a full refund within sixty 60 days of the date of the plan agreement. If you cancel after the 60 day period, you will not receive a refund.'

A description of the plan states, 'The plan pays the difference between the amount you owe us and the amount you receive as an insurance settlement less certain refunds and payments.'

Texas Administrative Code, Title 7 Banking and Securities, Part 5 Office of Consumer Credit Commission, Chapter 83 Regulated Lenders and Credit Access Businesses, Subchapter A Rules for Regulated Lenders, Division 9 Insurance, Rule 83.812, states in 'e' (1), 'Upon termination of a gap waiver agreement prior to the scheduled maturity date of a loan, the licensee must provide the borrower a refund or credit calculated using the pro rata method.'

I paid off 4-5 year loans on two vehicles after only one year and was denied a pro rated refund of gap insurance. I attempted to recover the amounts in phone calls to USAA but was denied on all occasions. When I took out the loans the protection was sold with no special distinction from gap insurance - and, by USAA's own description functions the same.

USAA claims their own frivolous definition of the protection allows them not to refund any amounts. This is absurd, in my opinion, and flies arrogantly in the face of Texas law.

On another note, I've been a customer of USAA for nearly 20 years. It seemed as if they really used to care and be helpful. My experience with them over the past few years on several fronts has demonstrated in no uncertain terms that they do care - solely and completely about profit at whatever dishonorable price to their customers (and illegal in this specific case).

This report was posted on Ripoff Report on 10/08/2011 09:05 PM and is a permanent record located here: http://www.ripoffreport.com/r/USAA-Federal-Savings-Bank/San-Antonio-Texas-78288/USAA-Federal-Savings-Bank-USAA-balks-at-Texas-law-by-denying-pro-rated-refund-of-vehicle-786545. The posting time indicated is Arizona local time. Arizona does not observe daylight savings so the post time may be Mountain or Pacific depending on the time of year.

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REBUTTALS & REPLIES:
2Author 1Consumer 0Employee/Owner
Updates & Rebuttals

#1 Author of original report

Found the law that applies

AUTHOR: T-Henry - (United States of America)

Of course, you may have insight into how this doesn't apply which I'd be grateful to read BUT my original claim, minus the particular cited law seems to be correct. Under the Texas Insurance Code Chapter 558 USAA is required in no uncertain terms to refund unearned premium reserves. Since the 'Total Loss Protection' particularly covers the entire loan period in action and function, when the Protection is cancelled and an unearned premium remains (for the remainder of the loan), a pro rated refund is obviously due. I look forward to your rebuttal. In the meantime, I'll keep researching so I don't look like a complete idiot in my upcoming complaint filing with the state's attorney general.
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#2 Author of original report

Thanks for the correction-which leads to Q

AUTHOR: T-Henry - (United States of America)

I appreciate the clarification as to my reference of the law I cited. It sounds like you know a lot about the subject and therefore may be familiar with other applicable laws that actually would apply. Any help in that regard would be appreciated...so I'll be very curious to see if you respond.

I will research this issue further and hopefully provide an update. I've received gap insurance pro rated refunds before and would guess that the company would not have given me money if there wasn't a provision somewhere that requires them to do so.

And, yes, they do have a legal team which has somehow come up with a distinction to not call this gap insurance even though it is one and the same. Also, I'm positive it wouldn't be the first time a dishonorable entity such as USAA had lawyers split hairs to make a few bucks.

The 'Total Loss Protection' probably doesn't fit into the category I'll need to apply the law I'll likely find, granted, and thanks to USAA's shady distinction. However, I still don't think their distinction would hold before a judge, which means they are acting in bad faith.

If nothing else, I will be transferring my business elsewhere as it becomes feasible. I think the spirit of my issue is still right on, minus my apparently incorrect citing of the law. Thanks for your insight.

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#3 Consumer Suggestion

Read the chapter

AUTHOR: Josh - (U.S.A.)

You might want to actually read that law that you quoted.  If you had actually bothered to read the important "Scope" section, you would have noticed that it only applies to bad-credit lenders (defined as those that charge over 10% interest per year and with a few other restrictions).  Since I doubt that USAA falls into that category, they are not bound by that law. 

But seriously, if you think a provision of a contract doesn't apply because of relevant law -- consult a lawyer before you sign the contract, because you are very likely wrong.  Companies usually have very good lawyers, and they won't intentionally put in provisions that are contrary to state law.  That exposes them to all sorts of legal liability (for example, the entire contract may be held invalid, or they may be forced to pay a big class-action settlement).
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