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Life Health > Life Insurance

Trades Want CFPA Certainty

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WASHINGTON BUREAU — Insurance groups are asking Congress to change and clarify the Consumer Financial Protection Agency proposal, to ensure that no insurance product comes under the agency’s authority.

The Treasury Department’s CFPA proposal already contains a provision excluding activities involved in the “business of insurance” from the authority of the proposed agency.

But the current CFPA proposal language says the activities of companies and individuals that underwrite and sell “mortgage, title and credit insurance” would come under CFPA authority, the groups write in a letter sent to the chairmen and highest-ranking Republican members of the House Financial Services Committee and the Senate Banking Committee.

The letter also was sent to Treasury Secretary Timothy Geithner.

The insurance groups want the provision putting mortgage, title and credit insurance under CFPA jurisdiction removed.

The groups also are expressing concern in their letter about the possibility that, unless the language of the current bill is further tightened, there is the risk that other forms of insurance could come under CFPA jurisdiction.

Industry groups believe that a company or individual that is deemed to be a “financial advisor” that “provides financial or other related advisory services” or “tax-planning” services would come under the authority of the proposed agency, the groups write in their letter.

One concern is that, to the extent the CFPA’s authority covers products that do not involve a direct extension of credit, “the slippery-slope” debate over the intended scope of the proposed legislation will likely generate lengthy litigation, where the courts will ultimately make that determination, the groups write.

This is especially true in situations in which the definitions of terms such as “financial advisor,” “business of insurance” and “credit insurance” leave room for interpretation and confusion, the groups write.

“This problem is compounded for terms like the ‘business of insurance’ where there are no statutory boundaries, and the CFPA itself determines what activity falls within the scope of the ‘business of insurance,’” the groups write.

“Vesting the CFPA with authority to define the parameters of this term may lead to an expansion of the CFPA’s incursion into insurance, and any judicially contested determination may be afforded administrative deference by the courts,” the groups write.

Both lenders and insurers invite consumers to participate in financial transactions and other activities, but they deliver very different products, the groups write.

“Importantly,” the groups write, “insurance is not an extension of credit.”

Rather, the groups write, insurance protects against risk of loss.

“The fact that some insurance protection covers risks surrounding a credit transaction does not alter the essence of the insurance product — a promise to provide protection in the event of a specified loss,” the groups write.

“Given this distinction, no forms of insurance should be included within the CFPA mandate – including mortgage, title and credit insurance,” the groups write.

The groups that signed the letter include the Association for Advanced Life Underwriting, Falls Church, Va.; the American Council of Life Insurers, Washington; Agents for Change, Washington; the American Insurance Association, Washington; the American Land Title Association; the Consumer Credit Industry Association, Chicago; the Council of Insurance Agents & Brokers, Washington; the National Association of Insurance and Financial Advisors, Falls Church, Va.; the National Association of Mutual Insurance Companies, Indianapolis; the National Association of Independent Life Brokerage Agencies, Fairfax, Va.; NAVA – The Association for Insured Retirement Solutions, Washington; the National Association of Professional Insurance Agents, Alexandria, Va.; and the Property Casualty Insurers Association of America, Des Plaines, Ill.


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