“Your sister should definitely reach out to her lender. In a standard situation, gap insurance
would cover the $1,300 that your sister owed and the loan would be closed. Since she received a refund from the dealership and that money went directly to the loan, she is entitled to the $700 that was in excess. Her loan would now be overpaid.
It can take time for lenders and banks to process transactions like this. They may not have processed the dealership’s refund yet or applied it to the account. By reaching out to the lender directly, your sister will be able to get an update on the current state of her loan.
Also, be sure your sister keep records of everything in case she is asked to provide proof. “