Arizona Modifies Provisions Regarding Consumer Lenders
Arizona modified its provisions relating to consumer lenders prohibited acts and insurance. These provisions are effective on August 26, 2016 (or 90 days following adjournment of the legislative session).
Prohibited Acts
A licensee is prohibited from knowingly using false, misleading, or deceptive advertising in connection with rates, terms, or conditions for a consumer lender loan.
A.R.S. 6-611 Prohibited Acts
A licensee shall not knowingly advertise, display, distribute, broadcast or televise, or cause or permit to be advertised, displayed, distributed, broadcast or televised, in any manner, any false, misleading or deceptive statement or representation with regard to the rates, terms or conditions for a consumer lender loan. To the extent applicable, all advertising shall comply with the advertising requirements of the truth in lending act.
Insurance
Section A of A.R.S. 6-636 dictates the different types of insurance that may be sold to a consumer in connection with a consumer lender loan. Section B states that any insurance, except for insurance on property securing a consumer lender loan, is optional and may be cancelled for any reason at any time within thirty days after the loan is made.
A.R.S. 6-636 Insurance Securing Loan; Cancellation; Notice
- The following types of insurance may be sold to the consumer in connection with a consumer lender loan and the consumer may contract for:
- Property insurance covering any property securing a consumer lender loan.
- Life insurance insuring the life of one or more consumers obligated on a consumer lender loan
- Credit disability insurance that provides indemnity for payments due on a consumer lender loan while any covered consumer has a disability
- Credit involuntary unemployment insurance that provides indemnity for payments due on a consumer lender loan while one or more consumers are involuntarily unemployed.
- Accidental death and dismemberment insurance providing a benefit if death occurs as a result of an accident or if dismemberment occurs
- Disability income protection insurance providing a benefit if a total disability occurs during the term of the insurance.
- Any insurance purchased by a consumer from or through a licensee, except insurance on property securing a consumer lender loan, is optional, and a licensee shall not refuse to make a consumer lender loan based on the consumer’s refusal to purchase the insurance. The consumer may cancel any insurance purchased in connection with a consumer lender loan for any reason at any time within thirty days after the consumer lender loan is made and shall mail or deliver a written notice of the cancellation to the licensee’s place of business. If the consumer cancels the insurance pursuant to this subsection, the consumer is entitled to a full refund of any premiums paid for the insurance. Before executing the note or agreement evidencing a consumer lender loan that includes a premium for insurance, the licensee shall give the consumer the disclosures required to exclude those insurance premiums from the finance charge in accordance with the truth in lending act.
Other Insurance
Section A and B of A.R.S. 6-638 state the conditions for a licensee selling life insurance, accidental death and dismemberment insurance, and disability income protection insurance in connection with a consumer lender loan.
A.R.S. 6-638 Other Insurance
- A licensee who is licensed to sell life insurance pursuant to Title 20 may sell and include in the principal amount of a consumer lender loan the cost of the premium for life insurance that is not for credit if all of the following apply:
- The insurance policy or certificate is approved by the director of the department of insurance.
- The purchase of the insurance is not a condition of the consumer lender loan
- The consumer signs an application for the insurance that is separate from the consumer lender loan application.
- The licensee does not offer or discuss with the consumer the option of life insurance until after the consumer lender loan application is completed and the consumer lender loan is approved.
- A licensee who is licensed to sell disability insurance pursuant to Title 20 may sell and include in the principal amount of the consumer lender loan the cost of the premium for accidental death and dismemberment insurance or disability income protection insurance, or both, if all of the following apply:
- The insurance policy or certificate is approved by the director of the department of insurance.
- The purchase of the insurance is not a condition of the consumer lender loan.
- The consumer signs an application for the insurance that is separate from the consumer lender loan application.
- The licensee does not offer or discuss with the consumer the option of accidental death and dismemberment insurance or disability income protection insurance until after the consumer lender loan application is completed and the consumer lender loan is approved.
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