Business Purpose Loans & "Consumer Protection in Sales of Insurance"

Question:

In the regulation, "Consumer Protection in Sales of Insurance", the coverage applies to insurance offered or sold to a consumer. I initially interpreted the text as not covering business transactions, but now I'm not sure. For example, if you have a loan to an individual for business purposes, but credit insurance is solicited or sold, does the regulation apply? If you have a loan to a corporation and an officer purchases credit life, does the regulation apply?

Answer:

I do not believe the Consumer Protection for Bank Sales of Insurance rules apply to nonconsumer PURPOSE loans. The term "consumer" is defined as "an individual who purchases, applies to purchase, or is solicited to purchase from you insurance products or annuities primarily for personal, family or household purposes" [see Section 343.20(d)].

First published on BankersOnline.com 04/07/03