Toyota GAP Insurance Refund Lawsuit and Settlement

Guaranteed Asset Protection (GAP) insurance is an optional add-on product that car buyers can purchase when financing a new vehicle. GAP insurance helps cover the difference between what a car is worth and what is still owed on the loan if the vehicle is totaled or stolen.

Recently, Toyota’s financial services division Toyota Motor Credit Corporation (TMCC) got caught up in a major class action lawsuit over its handling of GAP insurance refunds when customers paid off their auto loans early. The lawsuit alleged Toyota failed to provide adequate GAP refunds to consumers as required by law.

This article will cover details on the Toyota GAP insurance refund lawsuit, the resulting $60 million settlement, and what it means for affected consumers.

Overview of the Toyota GAP Insurance Refund Class Action

In 2020, a class action lawsuit was filed against Toyota’s financing arm TMCC regarding its practices around GAP insurance refunds. The lawsuit alleged that TMCC failed to provide consumers with fair partial refunds of GAP fees when they paid off their auto loan agreements early.

The plaintiffs claimed that under the terms of GAP agreements and certain state laws, consumers were entitled to receive pro-rated refunds of unused GAP fees if they settled their finance contract before maturity. However, Toyota allegedly did not properly issue these refunds.

Specifically, the class action lawsuit claimed Toyota violated the laws regarding GAP cancellations and refunds in 13 states: Alabama, Colorado, Indiana, Iowa, Massachusetts, New Jersey, Oklahoma, Oregon, Texas, Vermont, Wisconsin and Wyoming.

The lawsuit sought monetary damages on behalf of all Toyota/Lexus customers in the U.S. who paid off their auto loans more than 30 days early, had GAP insurance through TMCC, and did not receive an appropriate refund.

Details of the $60 Million Toyota GAP Insurance Settlement

In November 2022, Toyota agreed to settle the class action lawsuit for approximately $60 million. As part of the settlement, TMCC agreed to pay $48 million in refunds to affected consumers across the United States.

The settlement established two separate classes:

• Statutory Class – Consumers in the 12 specific states listed above who paid off loans 30+ days early and should have received a GAP refund under state laws. This group will get automatic payments.

• Non-Statutory Class – Consumers in other states who paid off loans 30+ days early from 2016-2021 and did not get a GAP refund. This group must submit claims to qualify for payment.

In addition to the monetary relief, Toyota agreed to reform its GAP cancellation and refund practices as part of the settlement. TMCC will now automatically provide timely GAP refunds when consumers pay off loans early.

Toyota also paid a $12 million penalty to the Consumer Financial Protection Bureau related to the issues raised in the class action lawsuit.

Am I Eligible for a Payment in the Toyota GAP Settlement?

If you had GAP insurance through TMCC and paid off your auto loan more than 30 days before maturity without receiving a refund, you may be eligible for compensation. Here are the specifics on qualifying for payment:

For the Statutory Class:

• Had a Toyota/Lexus finance agreement with GAP protection
• Agreement was assigned to TMCC
• Lived in AL, CO, IN, IA, MA, NJ, OK, OR, TX, VT, WI or WY when loan originated
• Paid off loan 30+ days before maturity between specific dates for your state
• Did not get a GAP refund

For the Non-Statutory Class:

• Had a Toyota/Lexus finance agreement with GAP through TMCC
• Paid off loan 30+ days before maturity between 1/1/2016 – 10/25/2021
• Did not receive a GAP refund
• Not included in the Statutory Class

Class members who qualify could receive up to the full amount of their GAP premium that was not refunded upon early payoff.

How to File a Claim for Payment in the Toyota Settlement

The deadline to file a claim in the Toyota GAP insurance settlement was September 26, 2022. But here is how the claims process worked:

• Statutory Class Members – Did not need to file claims. Received automatic payments via check.

• Non-Statutory Class Members – Needed to complete and submit a claim form to be eligible for payment. Could submit online or by mail.

In order to receive a settlement payment, Non-Statutory class members were required to provide information such as their name, current address, phone number, VIN number, loan details, and early payoff date.

The settlement website provided a venue to file claims online as well as access to a printable mail-in claim form.

When Will Toyota GAP Settlement Payments Go Out?

The settlement received final approval in November 2022. Payments to eligible class members started going out shortly after.

• Statutory Class – Began receiving automatic settlement checks in the mail in late 2022.

• Non-Statutory Class – Settlement administrators started mailing checks or processing electronic payments for approved claims in early 2023.

Class members entitled to payments had 180 days from the date checks were issued to cash them. Uncashed checks became void after 180 days.

Why Is Proper GAP Refunding Important for Consumers?

GAP insurance can provide valuable protection, but it also adds significant cost to an auto loan. On a $30,000 loan, GAP may cost $600-$1,000 in upfront fees.

When a loan is paid off early, the car buyer does not get the full benefit of the GAP coverage they paid for. In those cases, consumers have a right to receive a partial refund for the unused portion.

GAP refunds typically return 40-60% of the fee when a loan is paid off halfway through. Without proper refunds, the lender receives an unfair windfall. Receiving due GAP refunds can save consumers hundreds of dollars.

Can I Still File a Claim Against Toyota?

No, the deadline to file a claim in this GAP insurance class action settlement passed on September 26, 2022. Eligible consumers needed to submit claims by that date to qualify for payment.

However, those included in the Statutory Class should have received settlement checks automatically in late 2022 or early 2023. If you were part of the Statutory Class and have not received payment, you may want to contact the Settlement Administrator.

Going forward, Toyota has agreed to reform its GAP refund practices. Consumers with Toyota finance agreements who pay off loans early should now receive automatic GAP refunds in a timely manner.

Key Takeaways on the Toyota GAP Insurance Settlement

• A class action lawsuit alleged Toyota failed to provide proper GAP refunds to consumers who paid off auto loans early
• Toyota agreed to a $60 million settlement to resolve the claims
• Eligible consumers who paid off loans 30+ days early without a GAP refund could receive payments
• A claims process awarded payments to qualifying class members
• Toyota also reformed its GAP cancellation and refund policies under the settlement

This major settlement provided important monetary relief to Toyota/Lexus customers nationwide. It also set an important precedent for other automakers and lenders regarding compliance with GAP insurance cancellation and refund regulations. Consumers have an obligation to adhere to the terms of GAP agreements and applicable laws.