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Requiring Customer to Buy Life Insurance Policy
Answer by Jim Bedsole, BOL Guru
Guru Bios
Question: A customer has requested a work out loan due to the death of the joint applicant resulting in partial loss of income. The value of the collateral (home) has substantially decreased. Can the customer be required to buy a life insurance policy and assign it to the bank?
Answer: I believe this can be done, but the bank cannot require that the insurance be purchased from an affiliate (that would violate the anti-tying rules). Also, there may be some issues with reporting the premium for the policy as a finance charge under Reg Z. Look closely at 226.4(b)(7) and the Official Staff Commentary to that section.
First published on BankersOnline.com 5/12/08
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