The last time you turned in your car, did you remember to get the refund on your service contract? Me neither, and I have been in this business a long time. The only way I know to get the refund is to dig up the paper contract and phone the provider. It’s like the “breakage model” behind rebates and gift cards.
The first time I tried, professionally, to account for the refund was at GMAC Insurance prior to the bankruptcy. I was working on an interface to do rate quotes. Our plan was to detect the existence of a prior GMPP contract, and then apply the refund as a discount to the new contract.
Imagine how many vehicles are traded or repossessed and never see the end of their VSA or GAP contracts. Actually, I don’t have to imagine, because I have statistics from Rich Apicella, who runs Express Recoveries. This is an ingenious business model, leveraging the provider relationships of F&I Express to automate VSA refunds for lenders.
In case of a repossession, the refund from a product contract will reduce the deficiency balance. What began as found money in the recoveries department is now a compliance requirement. It never hurts to review the CFPB Examination Manual. This is from page 42:
This is a great business for F&I Express, because it’s countercyclical. Their main business is originating product contracts and then, when times are bad, they can earn some money cancelling them. It’s also handy as a leading economic indicator.
Disclosure: Intersection Technologies is a client and, although I am not working with Express Recoveries, they are just down the hall.