The Federal Reserve Board's proposed amendments to Regulation Z regarding credit insurance and debt protection products are inaccurate, misleading and negative. These proposals would not only significantly change the rules, they have the potential to devastate credit union sales of these products.
The new rules would apply to credit protection products such as short-term credit and mortgage life, disability, and unemployment insurance; debt cancellation and suspension products that cancel or suspend loan balances or payments in the event of death, disability, unemployment or other events; and guaranteed asset protection.
Currently, Reg Z says creditors can exclude the cost of credit protection products from a loan's annual percentage rate if three requirements are met: (1) the purchase of the product has no bearing on the creditor's decision to approve the loan; (2) the cost of the product is disclosed; and (3) the borrower consents to the purchase.
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