Loan Protection: Products Are Not the Issue

by: Irene Mitchel, Vice President, CRI Solutions

There has been a lot of regulatory and media buzz about credit cards and debt protection which has led to many questions about the advisability of selling debt protection on members’ loans.  The recent enforcement action by the FDIC and CFPB against credit card providers is a result of deceptive telemarketing practices which included:

• Misleading consumers about the fact that there was a charge for the product.
• Misleading consumers about whether they had purchased the products.
• Enrolling consumers without their consent.
• Withholding pertinent information about a consumer’s eligibility for certain benefits.

It is important to note that the issues that were cited did not criticize the products that were offered, but rather the way that they were explained, or not explained, to the consumer.

In the future it is likely that the CFPB attention will continue to monitor the marketing practices associated with the sale of loan add-on products, looking not only at credit cards, but other consumer loans also.  This does not mean that it is necessary to eliminate loan protection products from your offerings since they do provide needed protection for both the member and the credit union.

It is, however, important that staff offering these products be fully trained. The features and benefits associated with each product must be communicated.  In addition it is vital that the member understand that loan protection is voluntary, and is not a necessary condition for granting the loan.

Periodic refresher trainings about the features and benefits of loan protection products are a good way to ensure that your members are receiving the correct information. Interactive online product training, geared to the credit union’s loan protection products, allows staff a convenient way to obtain a quick review of product parameters.

Remember it’s not the product that is in question, but the way that is was incorrectly or not fully disclosed that is the issue.

Irene Mitchell is Vice President at CRI Solutions where she is responsible for marketing, training and product administration.  She has worked in credit unions and the credit union industry for more than 24 years.  In her free time she enjoys spending time with her 3 grandchildren.

CRI Solutions, a Transamerica company, provides financial and technology solutions for credit unions.  Working exclusively with the credit union community, the company provides Debt Protection, Credit Insurance, GAP, Vehicle Service Contracts and online services for members – InterLend® and InterAcct. In addition, CRI Solutions offers IT Consulting, Business Continuity Services, and Training. For more information, visit www.CRISolutions.net.