Wednesday, September 12, 2007
Credit insurance policies sold by American Heritage were intended to cover vehicle payments in the event the borrower died or became disabled. American Heritage customers bought single-premium policies which were paid in a lump sum, typically when the insureds purchased their vehicles. The full cost of the credit insurance policy was bundled into the buyer’s vehicle loan. The coverage period lasted through the term of the vehicle loan, in some cases as long as six years.
Under the Texas Insurance Code, American Heritage was obligated to refund the unearned portion of the insurance premiums to those customers who paid off their loans ahead of schedule. The company, however, retained the unearned premiums.
American Heritage is the third insurer to reach an agreement with the Attorney General involving credit insurance policies. The Attorney General originally took legal action against eight companies, five of which are still pending. In May, Enterprise Life Insurance Co. was the first company to offer refunds to eligible customers under the settlement agreement with the Attorney General.