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#16462 - 04/29/02 09:10 PM
Timing of Credit Insurance Disclosures
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Anonymous
Unregistered
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When we sell credit insurance with a mortgage loan do we need to provide the disclosure showing the amount of the premium and obtain the customer's signature saying they want coverage before the early-TIL, or does it meet the Reg Z requirement to do it at settlement? At the time of application we don't know the exact amount of coverage and the customer doesn't always know if they want coverage.
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#16465 - 04/30/02 01:33 PM
Re: Timing of Credit Insurance Disclosures
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10K Club
Joined: Nov 2000
Posts: 18,762
Central City, NE
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Maybe I'm missing something, but if you don't mention credit insurance until after committing to make a loan, you do not trigger the Consumer Credit Disclosure. Refer to the Q&A that was issued in Sept '01.
The original question was not about the Consumer Protection for Bank Sales of Insurance, it was whether the P-TIL must provide the premium for the credit insurance. The answer is "no" as this isn't triggered until the closing documents.
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#16467 - 04/30/02 06:20 PM
Re: Timing of Credit Insurance Disclosures
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Anonymous
Unregistered
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Thank you both. My primary concern is with the disclosures required by Regulation Z in order to exclude the premium from the finance charge, but the two are definitely linked.
DAVID: Your answer was based on a scenario where we don't offer the insurance until after the loan commitment is made. What if the lender offers credit insurance at the time of application? Are we required to meet the three Reg Z criteria at the time of loan application in order to exclude the premium from the finance charge on the early-TIL? Or would we be okay to exclude it from the finance charge on the early TIL based on the fact that we will meet the three Reg Z requirements by settlement?
Based on this scenario I know we would need to provide the Consumer Protection for Insurance Sales disclosure at the time of application (Anti-tying disclosure).
Thank you.
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#16469 - 05/01/02 02:04 PM
Re: Timing of Credit Insurance Disclosures
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Anonymous
Unregistered
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David,
I'm glad to hear that. I thought we were providing the disclosures for 226.4(d)at the time of loan application, but I just found out we that don't do it until settlement. I was getting nervous. It's good to know we didn't violate Regulation Z as a result. Can you tell me where to find something from the regulators that supports your statement? I have read many of your comments on this website, and I trust your expertise, but I always feel more comfortable having something from the regulation or a regulator's bulletin to back me up. Thank you.
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#16471 - 05/01/02 06:44 PM
Re: Timing of Credit Insurance Disclosures
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Anonymous
Unregistered
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I read Comment #2 but I did not interpret it in the same way. Isn't it just referring to situations where the 226.4(d) disclosures are not made with the early-TIL because the coverage was not offered until later in the process?
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#16473 - 05/01/02 08:31 PM
Re: Timing of Credit Insurance Disclosures
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Anonymous
Unregistered
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You have a good point. I don't think the regulation or the commentary clearly spells out whether you must provide the disclosure before/with the early-TIL versus waiting until closing. I have been looking at it this way: If you need to tell the customer the cost of coverage and tell them that it is optional in order to exclude it from the finance charge then it might be difficult to justify excluding it from the finance charge in the early-TIL before you have given those pieces of information. I would think this is especially true if we take an application for insurance at the time we take an application for the loan.
Do any of your banks take the insurance application early in the loan process but wait to disclose the 226.4(d) items at closing? If so, have the examiners reviewed this practice?
What about some of the people who may be following this discussion? Do any of you have exam experience with this?
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#16475 - 05/06/02 08:35 PM
Re: Timing of Credit Insurance Disclosures
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Anonymous
Unregistered
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Thanks David. That definitely gives me comfort.
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