I am really confused and apparently way behind on the Act 55 state legislation since I didn't know it applied to Federal Banks. Can anyone tell me if Section 512(F) means we have 18 months from the date of the Act (June 2001 to Dec.2002) before having to offer both a single premium product or monthly premium product to the customer. Or are we required to be able to offer both as of July 2002 if we sell single premium life/A&H insurance?

Now that I've read the summary of Act 55, I'm confused, too. It says in the preface that the mandatory compliance date for Act 55 is 6/25/02, but regarding Credit insurance it states that the date is 18 months to 2 years after the enactment date of 6/25/01.

If you send me your e-mail address, I'll send a copy of the summary.

Its: rjusti@thebank.com
And thank you.

Act 55 - PA's "Mortgage Bankers and Brokers Consumer Equity Protection Act" does have the 18 month clause,(from 6/25/01) which puts the effective date at Dec. 25, 2002 for restrictions on Single Premium Credit Insurance.

Basically the law says if you sell single premium, you must also offer the customer the choice of monthly (pay as you go) coverage also.

Keep in mind that this applies only to covered loans. A covered loan is described as " A consumer credit mortgage loan transction involving property located within the Commonwealth that is considered a mortgage under section 103(aa) of TIL and regulations adoped by the Federal Reserve Board, including 12 CFR Section 226.32 for which the original principal balnace of the loan is less than $100,000."

The regulation also places other restrictions on covered loans, like ballon payments, call provisions, negative amoritization, advance payment, prepayment penalties, etc. This is PA's Predatory Lending law and in my opinion very similar to those passed in a few other states.

This legislation has caused some issues for discussion at alot of our local banks. Some issues that came up were:

1. Can your systems (documentation, accounting, and insurance payment quotation systems) handle the monthly or periodic premium calculations? (Some systems can't; some require special programming and additional costs and testing.) Have you tested it?

2. Is your insurance carrier approved in the state of PA to offer the monthly (or periodic) coverage? (some are just getting approved now.....this caught them by surprise, and the approval process takes some time)

3. Single Premium Credit Insurance Products are causing many to look at whether they want the stigma of predatory lending in their organization. Yes, many have sold this product in PA, but this issue, along with the other points above have caused many to re-evaluate whether they want to sell this product and used the required disclosures, eliminate it, or limit it in some fashion. Some banks in our area have decided to limit the sale of Single Premium to non-real estate secured products.

4. If you decide to sell Single Premium, be sure that you have the High Cost Loan controls in place, so that you give the disclosures, within the proper time frame. i.e. will your lenders (or branch staff) be able to distinguish the high cost loan from a non-high cost loan?

In our bank, we assigned a team of lenders, compliance and others to evaluate this product and our course of action. Hope this helps.

I'm not a lawyer, and these opinions are my own, not my employers.

We are regulated by the OCC and have also found PA Act 55 a thorn in our side shall we say. Our rates are not excessive but when you use the second trigger BAM it becomes a hoepa loan and here we go. Currently, our MIS guy is trying to get our system capable of daily accural so we can be compliant by December. Vendors say this isn't a reg and are charging for revisions to systems. Good Luck all our us PA banks will need it.

Debra - I started digging into the Senate Bill version, and I found language that indicates an 18-month period (from 6/25/01)until enactment, PLUS an additional 6 month period, if necessary, to obtain approval from the state insurance commission for the insurnace product.

Here is a paste of this language. I apologize for the way it is formatted from Wordpad (the numbers within the text were originally the line numbers in the bill):

10 (F) RESTRICTIONS ON SINGLE PREMIUM CREDIT INSURANCE.--A 11 LENDER SHALL NOT SELL ANY INDIVIDUAL OR GROUP CREDIT LIFE, 12 ACCIDENT AND HEALTH OR UNEMPLOYMENT INSURANCE PRODUCT ON A 13 PREPAID SINGLE PREMIUM BASIS IN CONJUNCTION WITH A COVERED LOAN 14 UNLESS THE FOLLOWING CONDITIONS ARE MET: 15 (1) AFTER THE EXPIRATION OF 18 MONTHS FROM THE DATE OF 16 ENACTMENT OF THIS CHAPTER AND FOR AN ADDITIONAL SIX-MONTH 17 PERIOD THAT MAY BE NECESSARY IN ORDER TO SECURE ANY NECESSARY 18 APPROVALS FOR A MONTHLY PREMIUM CREDIT INSURANCE PRODUCT BY 19 THE INSURANCE DEPARTMENT, IF A LENDER OFFERS ANY INDIVIDUAL 20 OR GROUP CREDIT LIFE, ACCIDENT AND HEALTH AND UNEMPLOYMENT 21 INSURANCE PRODUCTS PURCHASED ON A PREPAID SINGLE PREMIUM 22 BASIS IN CONJUNCTION WITH A COVERED LOAN, THE LENDER SHALL 23 OFFER THE OBLIGOR THE OPTION OF PURCHASING ALL SUCH INSURANCE 24 ON A MONTHLY PREMIUM BASIS.

Big disclaimer: I'm not lawyer and could very well be reading this entirely wrong.