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#515 - 01/22/01 08:45 PM Credit Life and Commercial Loans
Jan94 Offline
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Joined: Mar 2001
Posts: 828
The protection rules for sales of insurance is directed toward consumers. However, could this apply in a commercial situation? An example would be where an individual makes a loan to purchase rental property (business purpose) and the borrower purchases credit life insurance. Are the insurance disclosures required in this instance since the insurance is sold to an individual? Thank you.

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#516 - 01/22/01 10:55 PM Re: Credit Life and Commercial Loans
Andy_Z Offline
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I am unsure which protection rules you are talking about. Reg. Z rules wouldn't apply if this is a business transaction. Other disclosure requirements would be state regulated, I believe, so there are many variations.

Andy Zavoina
Opinions stated are not necessarily that of my employer.

My opinions are not necessarily my employers.
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#517 - 01/23/01 01:21 AM Re: Credit Life and Commercial Loans

Andy - I am referring to the consumer protection rules for the sale of insurance products (i.e. NDIP). We have determined that the rules for disclosure also apply to the sale of credit life which prompts my question above? Does this help?

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#518 - 01/24/01 09:23 PM Re: Credit Life and Commercial Loans
Lucy Griffin Offline

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Lucy Griffin
Joined: Nov 2000
Posts: 1,544
The regulation Z rules that require special disclosures to keep the credit life fees out of the finance charge are triggered by the loan's Reg Z coverage. Thus, a business purpose loan that is exempt from Reg Z would not be subject to the special cost disclosures in 226.4 even though the insurance was being purchased by the consumer.

However, for purposes of disclosures about the non-insured status of non-deposit products, such as when the bank is selling the insurance, the rules make no distinction whatsoever on the nature of the customer or the purpose of the purchase. The NDIP rules are an FDIC deposit insurance issue and FDIC wants every possible customer -- business or otherwise -- to know that the product is not FDIC insured.

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