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Postponing Credit Insurance Rule Effective Date Would Improve Compliance Efforts
WASHINGTON (4/22/13)--The compliance deadline for portions of pending credit insurance provisions must be extended beyond June 1, the Credit Union National Association said in a Friday letter to Consumer Financial Protection Bureau Director Richard Cordray.

The CFPB credit insurance rule bans the financing of any premiums or fees for payment protection products in connection with a consumer credit transaction secured by a dwelling. The rule does allow the products to be paid for on a monthly basis.

CUNA Deputy General Counsel Mary Dunn in the letter said CUNA supports prohibiting the financing of true single-premium credit insurance. However, credit union mortgage lenders are concerned by language in the regulation that appears to prohibit the financing of any premiums or fees for credit insurance. Some terms in the supplementary language of the rule have also puzzled credit unions, Dunn wrote.

Language that may prohibit the addition of any monthly charge for the insurance to the loan balance has also given credit unions pause, she noted: "This practice appears to be fairly common among credit union mortgage lenders as a number of credit unions' data processing systems add the insurance premium amount to the loan balance on a monthly basis." It will be quite costly for credit unions to make the needed changes to comply with this portion of the rule by June, Dunn added.

To ease compliance and help avoid unneeded costs, the CUNA letter suggested the CFPB delay the effective date of any provisions of the existing final rule that would impact products other than actual single-premium credit insurance, as well as any future rule that will address these issues, until January 10, 2014. Most of the rest of the mortgage loan originator compensation rule is set to take effect at that time.

Postponing the effective date of these provisions will give all parties the time needed to gain a clear understanding on what is required, and to take the necessary compliance steps, Dunn wrote. Such steps could include changes to contracts, data processing programs, and member payment arrangements.


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