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Bank-generated GAP (general automotive protection) contracts cannot be sold unless customers have signed a written permission form, according to a new regulation from the U.S. Treasury Office of the Comptroller of the Currency.
The regulation, effective June 16, 2003, also requires oral disclosures about the terms, conditions and benefits of GAP products.
The Treasury Department made it clear that GAP products offered by captive lenders or third-party providers are not affected. This regulation is aimed solely at bank-sponsored contracts.
The Chicago Automobile Trade Association (CATA) said that banks “sometimes urge sale of GAP agreements to reduce their risks in questionable deals – primarily those with impaired-credit borrowers.”
“But sale of a GAP product cannot be a condition for the consumer to obtain financing through a bank, or to offer better terms such as a longer note or lower rate,” CATA said.
The new federal regulation gives plaintiffs’ attorneys “another avenue to pursue cases in which they argue that retailers did not make proper disclosures,” CATA asserts.
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