Credit life insurance refusal & signatures

Question: I know that we need to get the customer's signature if we sell voluntary credit life insurance to avoid including the premium in the finance charge. Do we need to get the customer's signature if they don't want the insurance?

Answer: No. Regulation Z only requires the customer's affirmative indication for purposes of the finance charge treatment of the premium. Regulation Z has no requirements for the non-sale of credit life insurance. However, there have been several situations when consumers who presumably chose not to purchase the insurance later wish they had and try to place blame on the lender. Some attorneys therefore advise lenders to obtain the signature for both purchase and rejection of insurance. It's your choice.

This is also a good time to remind institutions to get the customer's signature when the customer does want the insurance. Failing to do so is on the common violation list. The result is restitution.

Copyright © 2002 Compliance Action. Originally appeared in Compliance Action, Vol. 7, No. 14, 12/02