Does anyone know if there are any regulatory requirement for the posting of GAP checks to loan? Do the checks need to be effective date to the date of vehicle loss? Or effective dated with the date the GAP check was actual received?

Any help would be greatly appreciated.

I guess I am confused. GAP insurance pays the difference between what the normal collision insurance pays and the loan amount when car is totaled.

We have some borrowers who prefer to make their monthly payments until the GAP check is received. They do no want a 30 or 60 day late showing on their credit report, should it take a while for the GAP claim to be processed.

I would first advise you to check what your state Dept. of Insurance rules are concerning GAP.

IMHO the GAP should pay what the balance is as of the date of loss and any overpayments by the borrower would be refunded to them.

Is this a private policy or one that the bank sold them? If you sold it, the loan should be paid off the minute you get the check from their collision insurance and then settle with the GAP insurer outside of the realm of the loan to the consumer.

Some are third-party that were obtained through dealer financing, some sold by the credit union. There would be no issue if the borrower didn't make any payments between the claim being filed and funds being received. It is the borrowers that continue to make payments. If we need to effective date the posting of the GAP funds to the date the claim was submitted, in addition to returning the overpayment of principal, we need to reimburse the interest payments that were part of the monthly payments that the borrower continued to make.

If this was thru a third party, the borrower would still be responsible for the loan payments prior to the GAP insurance settlement being received according to your loan contract and I think you could continue interest accrual, etc., until the GAP insurance check arrived. If your CU sold them the insurance, I would say not considering the loan paid while you are waiting for the GAP to settle might be in UDAP territory. I think there is a big difference.

Randy, Thanks for the guidance.