We are not aware of any limitations in Illinois law on the amount that a financial institution may charge for guaranteed automobile (or asset) protection (GAP) products. The Illinois Department of Financial and Professional Regulation has recognized that Illinois banks are permitted to offer GAP products, without mention of any limitations on the fees charged for such products. IDFPR Interpretive Letter, 94-13 (July 27, 1994).

However, other limitations under federal law may apply. As noted in that IDFPR letter, state banks are prohibited from any activities that are prohibited for national banks (under 12 CFR 362.3(b)). After the IDFPR letter was released, the OCC released a letter confirming that national banks may offer GAP products. But the OCC does impose some restrictions on GAP products, including a prohibition on conditioning an extension of credit on the purchase of a GAP product. OCC Interpretive Letter 1032 (June 16, 2005). Because the IDFPR has stated that a state bank may not offer GAP products that are prohibited for national banks, we believe that the OCC’s restrictions on these products would apply to your bank.

Also, note that you may exclude the GAP premium from your finance charge calculations only if certain conditions are met, and any amounts charged above the cost of the GAP premium should be included in your finance charge calculations. 12 CFR 1026.4(d)(3).