Your state is likely to have laws governing credit insurance and debt protection coverage. These laws may cover premiums, rates and the insurance claims process. For information about how to contact the appropriate office in your state government, see If You Have a Question or Problem. The federal Bank Holding Company Act prohibits a banking institution from tying the approval of a loan to the purchase of credit insurance from the bank or an affiliate. Federal regulations governing debt cancellation/suspension programs contain similar prohibitions.
The federal Truth in Lending Act (TILA) requires that lenders disclose the terms and costs of a loan. Depending on the specific circumstances, the TILA says that the terms and costs of voluntary credit insurance (such as credit life or disability insurance) and property or hazard insurance (often required) must be disclosed by the creditor before a loan is consummated.
The Gramm-Leach-Bliley Act prohibits depository institutions and their insurance sales representatives from engaging in coercive or misleading practices. The law also requires certain advertising and disclosure requirements. For example, a bank or a company selling insurance for the bank must disclose that its insurance products are not insured by the FDIC against loss.
The Real Estate Settlement Procedures Act helps consumers understand the costs of a mortgage transaction and be "smarter" shoppers for services. For example, when someone applies for a mortgage, the lender or loan broker must provide a "good faith estimate" of the individual costs to be paid at the loan settlement, in part so that the borrower can compare the estimate to the actual charges imposed. The law also ensures that certain payments are properly handled from escrow accounts, such as those for homeowner's insurance.
