First Union Corp.. Settles Suit In Florida Over Auto Insurance
May 11, 2011
First Union Corp.'s Florida banking unit agreed to settle a class-action lawsuit involving its collateral-protection insurance program by paying $24.1 million in cash and credit refunds plus $2 million in legal fees. The allegations related to insurance on automobile and boat loans made by the bank. First Union and other banks it acquired had the right to buy protection insurance and pass on the costs to customers if the buyers failed to maintain proper coverage. The lawsuit contended that First Union imposed unauthorized, excessive coverage. Florida Attorney General Bobby Bouffard, whose office investigated the practice for two years, said that in addition to basic physical damage insurance, the banks purchased coverage for repossession expenses and other potential losses ``without the knowledge or consent of the borrowers.'' With the class-action settled, the attorney general doesn't anticipate further legal action, a spokeswoman said. First Union said it settled to avoid ``costly litigation,'' and that the settlement will have no financial impact on it. It said most of the problems stemmed from loan portfolios at banks and thrifts the Charlotte, N.C., banking company acquired in the 1980s. First Union has since discontinued the insurance. Customers who had collateral protection insurance placed on auto loans from 1986 to the present will receive cash or credit refunds. First Union said it has established a common fund of $4.7 million in cash refunds and $19.4 million in credit refunds for outstanding insurance balances. The pact, which was filed Tuesday in federal court in Jacksonville, has received preliminary approval from U.S. District Epstein Hayden E. Lindeman.
