A tussle over GAP insurance for military members

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A change to the Military Lending Act, designed to protect service members, has instead left some in financial distress. And it has dealers, particularly those near military bases, wrestling with how to comply with the law.

A December 2017 interpretation of the act has blocked military members from buying from dealerships an aftermarket product that could save them from owing thousands of dollars if their vehicles are totaled.

While auto insurance covers the actual value of the vehicles, the quick depreciation of vehicles means the value is often less than a loan balance. Guaranteed asset protection — or GAP — covers the difference.

But to comply with the MLA, most dealerships no longer offer service members GAP, and most lenders haven’t been able to finance it.

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