We are going to treat GAP as a finance charge because it is mentioned as such in the commentary to 1026.4(b)(10).
I agree with Andy when he says that it won't usually be an issue, since warranties will usually be associated with purchases, but they are available on refinances, so I think it is worth discussing. We are NOT going to treat an auto warranty as a finance charge because the cost would be the same in a cash transaction, and there isn't anything in MLA that indicates that a warranty is "credit-related".
Additionally, in the Federal Register, the DOD outlined its thinking on other credit-related products by saying, "As stated when issuing the existing rule, the Department remains concerned that covered borrowers are sold credit insurance products ‘without having these credit insurance products placed in the context of the Service member’s employment status or his or her current level of insurance coverage.’ " - page 43582. See
https://www.gpo.gov/fdsys/pkg/FR-2015-07-22/pdf/2015-17480.pdfThat statement seems to indicate that they are thinking that service members already have insurance that would meet their needs related to the extension of credit, and implicitly, NOT a service warranty.
I'm interested to hear other opinions.
Best,
James