Violated the state statute which requires financing providers give at least a 20-day notice to insuring issuing policy
Flatiron Capital, a Colorado-based premium financing company, has agreed to pay $32,000 to nearly 50 of its customers in Massachusetts as a result of a settlement agreement that it has entered into with the Attorney General of Massachusetts. The company will also pay $10,000 to the Commonwealth. In addition the company will modify its auto cancellation procedures in order to bring it into compliance with Massachusetts law.
Premium Financing companies like Flatiron, provides loans to insureds which allow them to pay their insurance premiums in installments. The unearned premium on the policy isused as a collateral for the premium finance providers loan. If a customer misses a scheduled payment, the premium financing provider has the right to cancel the policy. Under Massachusetts law, however, premium financing providers are required to provide at least a 20-day notice to the insurance company issuing the policy. The purpose of this statute, in combination with other relevant statutes, is to provide an adequate amount of time for insureds to settle their accounts or bring them current prior to a cancellation of their policy.
According to the AG’s office as well as court documents filed in Suffolk Superior Court, Flatiron Capital had been issuing various cancellation requests to insurance companies with an effective date that was also the same date as the notice which is a violation of the state statute.
“We allege that Flatiron failed to provide enough time to Massachusetts customers to seek replacement coverage before canceling their auto insurance,” AG Coakley said. “It is important that these providers play by the rules and give customers adequate time to bring their accounts current before they face costly interruptions.”
In 2011, Attorney General Coakley’s office began an investigation into the practices of premium financing companies and illegal cancellation practices. The AG’s office notes that this is the second investigation resulting in a corrective action and relief for Massachusetts insureds. In 2011, the Attorney General settled with IPFS Corporation over similar allegations.
Other articles from Agency Checklists that you might be interested in….