LANSING, Mich. – Michigan state regulators last week issued a bulletin ruling that the sale of debt cancellation contracts and debt suspension agreements by credit unions and banks does not come under the state’s insurance statute and regulations.
“Loan agreements of depository institutions do not become subject to the (Insurance) Code due to the sale of related DCCs and DSAs,” said new Office of Financial and Insurance Regulation Commissioner Ken Ross. “The principal object and purpose of a loan agreement is the loan itself, not insurance.”
In addition, Ross ruled that state chartered credit unions and banks may sell so-called GAP insurance, a form of debt cancellation which covers the difference between the balance on a loan and an insurance payment, without giving members the option of paying monthly or periodically. Credit unions and banks may offer members/customers a single-payment option on debt cancellation agreements.
