Single Interest Insurance Policy: Passing On The Premiums
by Mary Beth Guard, BOL Guru BIO AND CONTACT INFO
QUESTION: Our bank is interested in obtaining a blanket lenders single interest insurance policy. I would like information on what amount of the premium could be passed through to the consumer, and if that amount would be need to be included in the finance charge?
ANSWER: Are the loans consumer loans covered by Regulation Z? If so, you can pass on the incremental charge for VSI (vendors single interest insurance) and exclude the fee from the finance charge under Reg Z Section 226.4(d)(2) if a) the insurer waives all right of subrogation against the consumer; b) the insurance coverage may be obtained from a person of the consumer's choice; and c) this fact is disclosed.
If the loan is not covered by Reg Z, the amount you can charge will be governed by the contractual agreement with the customer.
As always, check your state law for pertinent provisions.
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