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A Discount on a Loan for Getting Credit Life Insurance

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Question: 
I have a retail manager who wants to give a .25% discount on loans to customers who get credit life insurance. For the last several years I have been under the impression that when credit insurance is involved, you cannot give a discount, but I can’t find this stated in any regulation. Do you know if this can be done?
Answer: 

I was unable to find anything specific and I would be interested in opinions on this also. It sounds like a good idea to boost credit insurance sales.

  1. Persons over the age of 66 (in most cases) would not be eligible for the discount - possible age discrimination? Unless some other product is offered that would allow the discount.
  2. Is credit life a "traditional banking product" - possible anti-tying violations?
  3. What happens if I take the insurance and after the loan closes I cancel the insurance?
  4. Since the insurance is required to get the discount - would the premium then become a finance charge?


First published on BankersOnline.com 5/23/05

First published on 05/23/2005

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