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Timing of Insurance Disclosures

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Question: 
Should the Federal Sale of Insurance Disclosure be given to customer at the time of application, or once the loan has been approved? What if the loan is declined?
Answer: 

From the:
INTERAGENCY RESPONSES TO ABIA AND ABA QUESTIONS ON THE INSURANCE SALES PRACTICES REGULATION

2. Disclosures
a. Question: Many depository institutions do not solicit loan customers for credit insurance until after a loan application has been approved. We assume that if there is a period of time between the notification of the customer of the acceptance of the loan application and approval of the loan, then the institution will not be required to make the credit disclosures specified by the rule. Is this assumption correct?

Answer: The assumption is not correct. A covered person must make the credit disclosures if a consumer is solicited to purchase insurance while the consumer's loan application is pending. A consumer's application for credit is still "pending" for purposes of the regulation if the depository institution has approved the consumer's loan application, but not yet notified the consumer. Until the consumer is notified of the loan approval, the covered person must provide the credit disclosures if the consumer is solicited, offered or sold insurance.

The disclosure must be given at, or before, the time insurance is solicited. We give the disclosure at the time of application. How many times do you here a lender ask when they take an application, "Do you want credit insurance?"?

First published on BankersOnline.com 12/6/04

First published on 12/06/2004

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