Thread Options
#26818 - 08/06/02 10:41 AM Life after single-premium insurance?
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,007
Toano, VA
Many posts during the past few months indicate that a good number of BOLers are discontinuing (or severely curtailing) single premium credit insurance products rather than become Sec. 32 lenders. Knowing that many customers actually like credit life, disability & similar insurance products as a feature of their loans, substitute products must be under development. What alternatives are being developed and rolled-out?
_________________________
...gone fishing.

Return to Top
Lending Compliance
#26819 - 08/06/02 01:30 PM Re: Life after single-premium insurance?
Tiger Fan Offline
100 Club
Joined: Jun 2002
Posts: 180
We are looking into a Debt Management or Debt Cancellation plan. It is not insurance, but may "cancel" (with restrictions) the debt if death, disability or unemployment occurs.

One word of warning, several of the proposed state predatory lending laws are including this type of plan as a factor just like credit life.


Return to Top
#26820 - 08/06/02 02:58 PM Re: Life after single-premium insurance?
redsfan Offline
Power Poster
redsfan
Joined: Dec 2000
Posts: 3,455
The Pennant Race
Amounts paid on debt cancellation or suspension agreements will still be subject to the points and fees trigger under 226.32. So, if your debt cancellation agreement calls for the borrower to pay the fee at or piro to closing, you will still have to include it in your HOEPA-eligibility calculation.

Richard, I attended a meeting between our retail people and our credit insurance people. We talked the about the development of monthly-premium products. Those are in the pipeline, but may not be ready to meet the October deadline.

However, our retail people also made the decision to make loans subject to HOEPA as well.

At the moment, at least, there are no laws in Nebraska similar to the Georgia or North Carolina statutes. If our legislature decides to pass a predatory lending law of its own, that decision may change.
_________________________
The opinions expressed here are personal and do not represent opinions of my employer.

Return to Top
#26821 - 08/07/02 01:52 PM Re: Life after single-premium insurance?
Anonymous
Unregistered

My company is discontinuing the single premium credit insurane and rolling out a monthly premium product. Granted,this limits the choices that the customer has since it would be best for the consumer to be able to choose from which of the two (or neither) best meets their financial needs.

Unfortunately, many of the states have seen fit to implement laws that essentially eliminate this choice for the consumer.

jon m

Return to Top
#26822 - 08/07/02 08:28 PM Re: Life after single-premium insurance?
DebNP Offline
100 Club
DebNP
Joined: Oct 2001
Posts: 179
Eastern PA and NJ
We are considering rolling out a monthly credit insurance product; the Single Premium will be eliminated. One additional question, does anyone offer truncated (expiration date based) or partial ($ Amount based) forms of limited credit insurance products? If so, how do you disclose, sell it to the customer? The obvious issues that come to mind are making sure that the customer is aware of the limited coverage that might not payoff the debt in full. Are there other issues that I may have missed?

Return to Top
#26823 - 08/07/02 08:39 PM Re: Life after single-premium insurance?
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,007
Toano, VA
Customers will not like a payment schedule where no two payments are alike. Are you going to bill the customer or can your coupon vendor generate coupon booklets with declining payment amounts?
_________________________
...gone fishing.

Return to Top
#26824 - 08/08/02 02:24 PM Re: Life after single-premium insurance?
Anonymous
Unregistered

Please let me know the definition of the Sec. 32 lender. What are we discussing here?

Return to Top
#26825 - 08/08/02 02:48 PM Re: Life after single-premium insurance?
campste Offline
100 Club
campste
Joined: Jun 2002
Posts: 145
LA
My sentiments exactly, I think many of our BOL readers and posters are experiencing brain fatigue due to the number of changes taking place in our industry. The banking industry seems to be hardest hit by an influx of new laws and regs.
Mr. Insley's question hits right at at home as to how will your bank respond to these changes affecting our right to do business AND MAKE A PROFIT. I may be wrong, but 12 CFR 226.32 applies to loans secured by the borrower's dwelling.
Am I correct in saying that loans that are unsecured may still be written with Single Premium Credit Life Insurnace?
I hope that Mr. Insley or Andy or David might shed some light on this very cloudy subject.

Return to Top
#26826 - 08/08/02 03:26 PM Re: Life after single-premium insurance?
waldensouth Offline
Power Poster
waldensouth
Joined: Nov 2001
Posts: 7,974
FINALLY ABOVE the gnat line
Johncrcm, go to Reg. Z look at section 32. It will describe the qualities a loan must have to fall into that category. If you make one of these loans you are a section 32 lender. It is basically a high rate-high cost lending scheme. Reg. Z defines what constitutes a high rate -high cost loan and what disclosures are then required.

This section only applies to closed-end consumer loans that are secured by the consumer's principal dwelling. It does not apply to purchase money transactions or open-end credit transactions. So, campste, you are correct - you may continue to finance single premium credit life insurance on any loan that fails to meet this definition. You may finance single premium credit life on these loans under HOEPA as long as it doesn't push your percentage of fees and points over the tolerances in the reg. without your loan being considered high cost or high rate.
_________________________
"Once you learn to read, you will be forever free."

- Frederick Douglass




My Opinion Only.

Return to Top
#26827 - 08/08/02 03:29 PM Re: Life after single-premium insurance?
CSpellman Offline
100 Club
Joined: Nov 2000
Posts: 176
Richard
Our insurance vendor has applied for a new type of coverage where a "total" premium is calculated on a decreasing balance but the premium charged to the customer is the same. It acts like single premium but it's monthly and the customer gets the benefit being that it premium is always the same. There will be no rebates so if the borrower pays off early then the insurance company has a loss. The state has not approved this product yet but it does appear to meet a need.
_________________________
...but I saved a lot on my auto insurance

Return to Top
#26828 - 08/08/02 03:42 PM Re: Life after single-premium insurance?
campste Offline
100 Club
campste
Joined: Jun 2002
Posts: 145
LA
WHEW! Thanks for the post. I needed that!!

Return to Top
#26829 - 08/08/02 06:40 PM Re: Life after single-premium insurance?
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,007
Toano, VA
Johncrcm- Although the Sec. 32 label only applies to residentially-secured loans (as explained above), the familiar problem will be to train your lenders to handle these loans differently from other loans that are not affected by Sec. 32. Most banks are choosing to discontinue any form of lending that gets them covered by Sec. 32 or any of the other rules (including state & local) that address predatory lending.

The point about making a profit is well-taken. Because they have behaved irresponsibly, many people deserve to pay higher prices for financial services that are priced according to the level of risk. By chasing responsible players out of the market, the very consumers the G is trying to help will actually be hurt. Why can't we resist the socialist urge to "fix" markets?
_________________________
...gone fishing.

Return to Top
#26830 - 08/08/02 08:29 PM Re: Life after single-premium insurance?
waldensouth Offline
Power Poster
waldensouth
Joined: Nov 2001
Posts: 7,974
FINALLY ABOVE the gnat line
Richard, we in Georgia would have to discontinue all home lending in order to avoid completely the restrictions now imposed under the Georgia Fair Lending Act (GAFLA). We won't be financing single premium credit life on any home loan as it is now forbidden. We're trying to figure out how to offer the Monthly premium type in compliance with this law. Most computer systems don't treat the monthly credit life premium as completely separate from the loan payment. On most systems if the customer shorts the credit life premium the loan is shown past due. That is considered "indirect financing" by the GA Dept. of Banking and Finance and is now forbidden as well. There seems to be a prejudice against any form of credit life in Atlanta. They don't seem to understand that some folks can't get life insurance and that this saves their families a lot of grief should they die before the loan is paid in full.

They created a new category of home loan called the "covered home loan" that has a much different rate trigger and a much lower fee trigger. If you make a covered home loan then you cannot renew or refinance that loan within 5 years unless you can show a tangible net benefit(as yet undefined) to the customer. The fact that the customer requests it is apparently irrelevant. They must be protected from their own judgement. The fact that the customer took out a 36 month loan before this law was passed is also irrelevant. The fact that they took out the loan at another bank is also irrelevant - we have to obtain a copy of their original note and determine if the loan falls into this category before refinancing. I wonder if the fact that the customer must sell their home to pay off the debt would be considered enough of a tangible net benefit to warrant renewing the loan?

I know customers need to be protected from unscrupulous lenders - HOWEVER - I fear the legislature has harmed more than they helped with this one.
_________________________
"Once you learn to read, you will be forever free."

- Frederick Douglass




My Opinion Only.

Return to Top
#26831 - 08/08/02 10:28 PM Re: Life after single-premium insurance?
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,007
Toano, VA
Are your local consumer advocates aware of the unintended consequences of your Assembly's "protection" of GA citizens? If GBA could convince a few of the more visible groups & organizations to back a move to relax this onerous standard, that would be very persuasive.
_________________________
...gone fishing.

Return to Top
#26832 - 08/09/02 02:01 PM Re: Life after single-premium insurance?
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 77,591
Galveston, TX
While I know that credit life sales results in income to the bank, but as I am currently an independant sole without a specific banking affiliation (and after this comment I fully expect that this will continue for some time), I have to wonder if this is not such a bad idea. Personally, I'm opposed to the sale of credit life insurance to the mass public as a disservice to the customer. It is extremely expensive compared to other forms of life insurance that would serve the same purpose. I'm not saying that there is absolutely no case for credit life insurance, but in general, it's a waste of money for the normal consumer.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#26833 - 08/09/02 03:50 PM Re: Life after single-premium insurance?
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,007
Toano, VA
While credit insurance may be expensive, so are many other things consumers gladly purchase, including credit cards. My bank sold a lot of credit insurance to repeat customers, so they apparently considered the well-disclosed price to be reasonable. For consumers whose health disqualifies them for conventional types of products, credit insurance is a great product.

Governments shouldn't meddle in markets unless products are dangerous. Citizens should be responsible for making informed decisions, and allowed to suffer the consequences of bad ones--next time they'll pay more attention.
_________________________
...gone fishing.

Return to Top
#26834 - 08/09/02 04:22 PM Re: Life after single-premium insurance?
Anonymous
Unregistered

DITTO!! Over the past 10 years we have seen some of the best cases of "BAD LAWS" being passed by elected officials,who apparently give "lip-service" to the voting public in the name of protecting the consumer. What a croc?
These ill-conceived laws are pooooorly written and without merit or value to the consumer, who will ultimately pay the price.

The views expressed are not necessarily those of any one beyond that of the writer.

Return to Top
#26835 - 08/09/02 04:25 PM Re: Life after single-premium insurance?
Anonymous
Unregistered

Has GA elected officals gone nuts! Or are they just that deparate to remain in office? It looks like GA needs a new broom.

Return to Top
#26836 - 08/09/02 05:04 PM Re: Life after single-premium insurance?
waldensouth Offline
Power Poster
waldensouth
Joined: Nov 2001
Posts: 7,974
FINALLY ABOVE the gnat line
Fortunately it IS an election year!
_________________________
"Once you learn to read, you will be forever free."

- Frederick Douglass




My Opinion Only.

Return to Top
#26837 - 08/09/02 10:40 PM Re: Life after single-premium insurance?
Anonymous
Unregistered

Richard,

My employer gave up on coupon books years ago. We issue a monthly billing statement to all of our loan customers (unsecured, real estate loans, HELOCs, etc.). This allows us to quickly change statement messages (for marketing), formatting and to keep up with any legally required statement disclosures. It also minimizes complaints from customers who are 'surprised' at their principal balances (i.e. customer who continually pays late/inconsistently on a daily simple interest loan).

jon

Return to Top
#26838 - 08/12/02 01:44 PM Re: Life after single-premium insurance?
cnakashige Offline
Member
Joined: Jul 2002
Posts: 61
Our bank also will discontinue offering single-premium life & disability insurance in Florida for real-estate related transactions due to state law and the company we offer it through discontinuing this type of insurance (will still offer single-premium for auto and other installment loan types). We now will solicit monthly premiums for this type of insurance with premiums based on the outstanding balance. Since the payment will change every month, a monthly billing statement will need to be sent. Our bank is working with the software service company to test whether this option will work, which must be in place by October 1 of course. We will still need to implement Section 32 procedures, however, since we use mortgage brokers (who can have high fees) and may offer a high-cost loan on a periodic basis. By discontinuing single-premium credit life, it does not mean banks are necessarily out of danger of originating Section 32 loans.

Return to Top
#26839 - 09/05/02 07:11 PM Re: Life after single-premium insurance?
1 Peter 5:7 Offline
Diamond Poster
1 Peter 5:7
Joined: Jun 2001
Posts: 1,339
TX
Agree or disagree with me? A credit life insurer is telling us that HOEPA will not be triggered if the premium for their single-premium credit life product is debited from the borrower's checking account after closing of the loan and not paid from loan proceeds. Obviously, they do not want to abandon their single-premium product and go to a monthly premium. I told them I am unconvinced based on what I read in the supplementary information in the final rule. The Board seems to say that the fee trigger is meant to identify transactions with high cost where consumers are vulnerable. Further, that the rationale for including insurance premiums in the fee trigger calculation takes into account that:

* coverage is purchased in connection with the mortgage transaction
* the creditor or credit account is the beneficiary, and
* creditors receive commisions for selling it.

The fact that the premium is not financed seems to me not to make a difference. It smells of the "designed to evade" section in the Act that the Board says could be the basis for more restrictive or expansive interpretation of fee triggers. Further complicating this is the almost assured reaction by a loan officer to add a little extra to the loan request roughly equal to the premium so the insurance company's debit to the borrower's account doesn't bounce.

What do you think? I don't buy the insurer's logic.
_________________________
Opinions are mine not my employer's, and should not be taken as legal advice.

Return to Top

Moderator:  Andy_Z