I'm pretty sure I know the answer but I can't find the citation.

Can a lender require credit/life and disability insurance on a car loan?

I'm looking for the reg and citation.

Thanks

Yes, you can require it, however by requiring it you have to include it in the finance charge. Look at 226.4(b)

Check state law, though - if the insurance is being provided by an affiliate of yours, you may be prohibited from requiring it. (Edited: In Michigan, we can't even OFFER it...)

dpersfull,

I see that if they get it then it is a finance charge but where does it say you can require it to obtain the loan?

You can require it as a condition of the loan just as you can require insurance on the collateral. But in the case of credit life, making it a requirement adds the premium to the finance charge and APR. If I buy a new car, I'll insure it, but I won't increase my life insurance coverage because of my purchase. If you require that I do, it is conditioned on the loan.

That premium addition may lower your true earnings yield.

226.4 will tell you to add insurance to the FC on a loan. It will also tell you that if it is voluntary, under certain conditions it is excluded.

It doesn't say in no uncertain terms "you can require life insurance", but it doesn't say you can't and does leave it to the lender as an underwriting decision.

Sorry, I can’t find a specific site that says you can require it. However, in the past finance companies, and some banks, required CL&D on the loans to jack up fee income. Then the FTC (I think) jumped in and said it was an unfair & deceptive practice and required the disclosures that the borrower must sign or initial, basically to say they voluntarily chose to purchase credit insurance. I don’t remember any prohibition, other than possibly your state law as Bart mentioned, being put in place to prevent requiring it, just if the lender required it in connection with the credit transaction, they had to include it in the finance charge.

You can require a borrower to purchase CL/AH insurance. See if this will prove it to you:
12 CFR §226.4 Finance charge.
4. Other insurance. Fees for required insurance not of the types described in §226.4(b)(7) and (8) are finance charges and are not excludable.

One important note: You cannot make the borrower purchase the insurance from you or an affiliate though. The new Consumer Protection for Bank Sales of Insurance prohibit this.

No David. We want it to say, "the borrower may be required to purchase credit life". "Other" is too encompassing.

what is the max age for credit life insurance in the state of Michigan?

I don't think there is anything in the Statutes. It would be based on the individual insurance companies.