During Friday’s (August 13, 2021) Compliance Master’s Group session, you mentioned the up-front collection of single-premium credit insurance. I just wanted to clarify this issue to make sure I understand correctly.
On the risk assessment sample you provided, it states, “Institution does not utilize aggressive marketing tactics, promote loan flipping (frequent refinancing) or collect up-front single-premium credit insurance for life, disability, or unemployment when the consumer does not receive a net tangible financial benefit.”
Is this to say that credit insurance may NEVER be collected up front as a single premium? Or is it to caution against using aggressive tactics to promote the purchase? Would it be considered a UDAAP/predatory lending if a bank collects single-premium credit insurance premiums up front?
Single premium credit insurance has a few restrictions under federal laws, and some states prohibit the product. While it is not generally prohibited, it is considered to be a higher risk product. The sale of the product is not automatically considered an UDAAP practice, but it is higher risk. That is the point made in the risk assessment and the point I was making in the CMG session – it is not generally prohibited, but it is higher risk.