OAIN: Maryland Court Ruling Could Lower Up-Front Auto Insurance Costs for Some
January 01, 2012 (PRLEAP.COM) Business NewsOnline Auto Insurance News (OAIN) reports that a recent court ruling could mean lower up-front and overall costs for Maryland residents who get their vehicle coverage through a state program that insures high-risk drivers who cannot find policies elsewhere.
In a decision that should interest Maryland motorists who have sought low down payment auto insurance through the Maryland Automobile Insurance Fund (MAIF), an appellate panel ruled that a handful of premium finance companies have been hitting clients with illegally high interest charges.
The MAIF-which has existed, under one name or another, since the 1950s-was established to provide coverage for drivers who have been rejected by insurers on the open market. In order to be eligible, state residents must have been turned down by a minimum of two private insurers or have had their policies canceled or not renewed for any reason except nonpayment of premiums.
While most motorists can take advantage of interest-free payment plans offered by private insurers, state law says that MAIF policies must be paid in one lump sum, so program participants frequently rely on finance companies to pay off their policies and then pay those companies back through an installment plan.
But according to regulators and the state Court of Appeals, the top finance companies have violated Maryland law by applying excessive amounts of interest to loans they extended to MAIF policyholders.
The court found that more than a half-dozen finance companies were charging consumers higher interest rates during the first few months of the loan period, causing those customers to pay more than they were legally obligated to. State law limits the amount of interest finance companies can tack on to a maximum of 1.15 percent during any 30-day period.
The ruling follows a legal battle in several lower courts that followed a cease-and-desist order issued to the companies three years ago.
While finance charges don't make up the largest portion of most motorists' costs for vehicle coverage, it can add up to a significant chunk of change. Industry experts say it is important to read policy statements and other paperwork closely in order to make sure you're not paying more than you should be.
To learn more about this and other car insurance issues, readers can go to http://www.onlineautoinsurance.com/pay-monthly/ where they will find informative resource pages and a rate-comparison generator that can help drivers in any state evaluate their coverage options.