FIRST Funding Failed to Give Required Notice before Canceling Policies of Nearly 200 Massachusetts Customers; AG’s Investigation of Four Premium Financing Companies has recovered More Than $484,000 to Date
Attorney General Martha Coakley has announced that an Illinois-based premium financing company has agreed to pay $200,000 to resolve allegations that it illegally and prematurely cancelled premium financed auto insurance policies affecting nearly 200 Massachusetts customers. [pullquote]General Laws Chapter 175, § 113A requires that premium finance companies give at least a 20-day notice of the intended cancellation to the insured and insurer[/pullquote]According to the assurance of discontinuance filed in Suffolk Superior Court Thursday, May 1st,, FIRST Insurance Funding Corporation (FIRST Funding) issued cancellation requests to insurance companies with an effective date that was the same as the date of the notice. General Laws Chapter 175, § 113A requires that premium finance companies give at least a 20-day notice of the intended cancellation to the insured and insurer.
“Financing companies are required to give Massachusetts customers adequate protections and proper notice of auto insurance cancellations so they can determine a solution for continued coverage,” AG Coakley said. “Our office will continue to track these providers to make sure that they are complying with state laws when dealing with the insurance policies of consumers and small businesses.”
A premium finance company provides loans that enable people to pay their insurance premiums in installments. The company uses the unearned premium on the policy as collateral for the loan. If a customer misses a scheduled payment, the premium financing company may seek to cancel the policy in the insured’s name under the power of attorney granted in the premium finance agreement.
Under the terms of the settlement, FIRST Funding will pay more than $140,000 to roughly 200 customers in Massachusetts whose policies FIRST Funding either cancelled or tried to cancel illegally. FIRST Funding will also pay an additional $60,000 to the Commonwealth as costs. FIRST Funding has also agreed to modify its auto insurance cancellation procedures and bring its notice practices into compliance with state statutes.
The Agency Checklists articles on the other three premium finance companies the Attorney General fined are linked here: IPFS Corporation, Flatiron and AAICO.
