Consumer groups want NC governor to veto industry bill
Consumer groups are sounding the alarm over a bill that was passed by the legislature at the behest of the consumer credit industry and is now on Governor Roy Cooper’s desk .
An industry spokesperson retorts that the measure simply clarifies existing law and wonders why consumer groups are making fuss. The spokesperson also defended the treatment of consumers by the industry.
“If we weren’t fair to our consumers, we wouldn’t be in business,” said RE Everette, chair of the legislative committee of the Resident Lenders of North Carolina, which represents the state’s independent consumer finance companies. . Everette owns the Greenville-based time finance department, which has 24 offices in North Carolina.
It is not known how the governor views the bill. A spokesperson for Cooper, Ford Porter, said the measure, HB 140, is one of several bills being considered by the governor.
Consumer groups say that if the bill becomes law, it would expand the types of products on which consumer finance companies can sell mortgage insurance in conjunction with a loan. Credit property insurance insures against damage or loss to property used to secure a loan; loan companies sell it along with other types of insurance, such as life insurance policies that pay off a loan when the borrower dies. Borrowers typically borrow the cost of the premiums as part of their loan.
Under state law, consumer loans can offer installment loans of up to $ 15,000 at interest rates ranging from 18% to 30%, depending on the loan amount.
Al Ripley, director of the NC Justice Center’s consumer and housing project, said the bill would allow the industry to increase sales of what he called “junk insurance.”
“If you are able to sell more of it, you are going to hurt more people,” he said.
The law currently states that mortgage insurance can be sold for “personal household goods” such as “furniture, furnishings and household appliances designed for household use”. The bill removes the word “household” and adds that such insurance can be sold for “other personal property”, but not for an automobile.
That, Ripley said, would extend credit property insurance to products such as all-terrain vehicles, off-road motorcycles and “the backyard trampoline.”
But Everette insisted the industry can already sell mortgage insurance for products like ATVs.
“We’re just modernizing the law… making sure everything is clear,” he said.
Consumer groups claim that mortgage insurance is expensive and very lucrative for the industry.
Kelly Tornow, director of NC policy at the Center for Responsible Lending in Durham, calculates that, based on data from the State Department of Insurance, the loss rate for mortgage insurance in North Carolina in 2013 was by 8.81%. In other words, for every $ 1 in premiums paid, insurers paid less than 9 cents in claims.
Everette questioned the accuracy of this analysis, saying the claims rate cited was “very low”.
“The insurance that we sell is not junk insurance,” Everette said. “It’s insurance at a reasonable price. … And everything is voluntary. It is not mandatory.
According to Reinvestment Partners, a consumer advocacy group in Durham, the National Association of Insurance Commissioners recommends that loss ratios for various types of credit insurance be at least 60%, that is, at least 60 cents paid in claims for every dollar in premiums.
Ripley said the low loss ratio demonstrated that mortgage insurance provided by the consumer loan industry “seldom benefits the consumer.” He noted that many consumers already have home or rental insurance that covers their property.
But it is widespread. According to a report by the state banking commissioner, 68% of the 528,479 consumer credit loans granted in 2014 included mortgage insurance premiums.
The credit property insurance measure surfaced in three different bills during this year’s legislative session. It was pulled from one after consumer groups complained, Ripley said, but was later added to two otherwise unrelated bills.
The consumer credit industry, Ripley said, has been “very persistent.”