February 2, 2015 at 11:41 am EST #6656cbg7811Member
We have an auto dealer from whom we purchase dealer contracts. They sell their own life insurance for the loan (it’s not written through the Bank). They have started putting us as the creditor on the insurance policy for those that they have contracted to sell at the time the loan is closed. Is that a standard practice or does that make us responsible to issue the consumer sales of insurance notices to the customer (and make sure the dealer does the one at application).
Thanks.February 4, 2015 at 10:06 am EST #6673rcooperMember
Since these are loans you have already contracted for, it sounds like the dealer may be acting on your behalf and if so the disclosures would need to be provided since they are offering and/or soliciting an insurance product to a consumer. See excerpts from the regulation, below, for the general purpose of the rule, to determine if the dealership is acting on behalf of the bank and if it is what “you” must disclose.
According to the Consumer Protection in Sale of Insurance rule :
This part establishes consumer protections in connection with retail sales practices, solicitations, advertising, or offers of any insurance product or annuity to a consumer by:
(a) Any bank; or
(b) Any other person that is engaged in such activities at an office of the bank or on behalf of the bank.
j)(1) You means:
(i) A bank; or
(ii) Any other person only when the person sells, solicits, advertises, or offers an insurance product or annuity to a consumer at an office of the bank or on behalf of a bank.
(2) For purposes of this definition, activities on behalf of a bank include activities where a person, whether at an office of the bank or at another location sells, solicits, advertises, or offers an insurance product or annuity and at least one of the following applies:
(i) The person represents to a consumer that the sale, solicitation, advertisement, or offer of any insurance product or annuity is by or on behalf of the bank;
(ii) The bank refers a consumer to a seller of insurance products or annuities and the bank has a contractual arrangement to receive commissions or fees derived from a sale of an insurance product or annuity resulting from that referral; or
(iii) Documents evidencing the sale, solicitation, advertising, or offer of an insurance product or annuity identify or refer to the bank.
Here’s the link to the FDIC’s regulation: https://www.fdic.gov/regulations/laws/rules/2000-6300.html#fdic2000part343.10
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