Questions and Answers
If we require that the consumer purchase credit life insurance as a condition for granting the loan, are we required to include the amount of the premium in the finance charge disclosure under Truth-in-Lending? What if the consumer satisfies our requirement by assigning to us an existing life insurance policy?
Normally, the premium for credit life insurance can be excluded from the finance charge disclosure only if the consumer is not required to purchase the insurance. If the creditor requires the insurance, the premium must be included in the finance charge regardless whether the consumer purchases the insurance from the creditor or from a third party. If the consumer assigns an existing policy, however, the creditor should not include any premium amount in the finance charge. Such a policy could not be said to be "written in connection with the loan."
See the Commentary to Regulation Z, Section 4(d)-5.
(Posted: 06/26/2007)
