Honda Financial Illegally Keeps Millions in GAP Waiver Fees From Drivers, Class Action Alleges

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Honda Financial GAP Waiver Class Action Lawsuit Overview:

• Who: Honda Financial Services
• What: Honda Financial is accused of keeping unearned Guaranteed Asset Protection Waivers (GAP Waivers) fees when customers pay off their vehicles early, in violation of consumer and contract law.
• Where: The lawsuit was filed in California court.

A company that helps drivers finance their Hondas has been illegally keeping millions of dollars of unearned fees when consumers pay off their cars early, a new nationwide class action lawsuit alleges. 

Plaintiff Brian Lanouette filed the class action complaint against Honda Financial Services in a California court Wednesday, alleging a practice of collecting and failing to refund unearned fees from Guaranteed Asset Protection Waivers (GAP Waivers) in breach of its contracts with consumers. 

GAP Waivers are a debt cancellation agreement where – in the event of a “total loss” of the vehicle, including theft – the creditor agrees to write off the “gap” between what the insurer offers to pay for the loss and what the consumer still owes the vehicle seller. 

The consumer pays a fee for the right to this waiver. In Lanouette’s case, the fee was $750. 

Under the terms of its contracts with consumers, Honda Financial is required to refund to consumers all unearned fees for GAP Waivers when consumers pay off their automobile finance agreements early, Lanouette says.

“Such a provision makes sense: consumers should not have to pay for a service they no longer need and derive no benefit from,” the complaint states. 

Honda Financial ‘Knowingly Collects and Retains Millions of Dollars’ in Unearned Fees

However, the class action lawsuit alleges Honda Financial has a policy of failing to refund consumers unearned fees when finance agreements terminate early. 

“As a result of this practice, Honda Financial knowingly collects and retains millions of dollars per year in unearned fees from automobile purchasers,” Lanouette said in the complaint.

Lanouette said he paid off his car early but did not receive a refund of a pro rata share of the $750 Gap Waiver fee he had paid. 

Honda Financial’s policy and practice of retaining these unearned fees is a breach of contract, and an unfair business practice in violation of state consumer protection law, the lawsuit alleges.

Lanouette said he wants to end alleged Honda Financial’s practices and force it to refund unearned GAP fees. He’s seeking damages, restitution, and injunctive relief on behalf of the general public. 

He’s looking to represent anyone in the United States who had a finance agreement with a GAP Waiver through Honda Financial, and who paid off their finance agreements before the end of the loan term but did not receive a refund of unearned GAP fees, plus a Massachusetts Subclass.

This is not the first time Honda Financial Services has faced class action. In 2019, plaintiffs secured a $1.9 million payment and the forgiveness of $19.8 million in debt in a class action settlement over allegations that Honda Financial failed to properly inform car owners of their rights in repossession.

Do you think Honda Financial should have to refund the fees pro-rata? Let us know in the comments! 

The plaintiff is represented by Jeffrey D. Kaliel and Sophia G. Gold of KalielGold PLLC

The Honda Financial Services Class Action Lawsuit is Lanouette et al., v. American Honda Finance Corporation, Case No. 2:21-cv-07068 in the U.S. District Court Central District of California

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