Insurance > Credit Insurance

Government tips for avoiding credit insurance scams
The Associated Press. Associated Press. 
Copyright Associated Press

Citigroup Inc. agreed Thursday to repay customers $215 million to settle federal charges that a company it acquired manipulated people into buying overpriced credit insurance.

Credit insurance covers loan payments when the borrower gets sick, loses a job or dies. It is illegal for a lender to include credit insurance without a borrower's knowledge or permission.

According to the Federal Trade Commission, to avoid being scammed borrowers should:

Ask the lender whether the loan includes any charges for voluntary credit insurance before signing loan papers.

Tell the lender if they don't want credit insurance. If the lender still pressures them, find another lender.

Report lenders who make credit insurance a condition of the loan to the state attorney general, state insurance commissioner or the FTC. Lenders can't deny credit to borrows who don't buy credit insurance or don't buy it directly from them. However, in some cases where there is a small down payment, lenders can require mortgage insurance to protect the lender against a borrower defaulting on a loan.

Review loan papers carefully to be sure they are correct.

Watch out for other extra products packaged with their loan, such as auto or shopping clubs, home or auto security plans, and debt cancellation products.


Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.
Dateline: Undated
The tips on this website should be considered food for thought only. Lendingtips.com is a clearinghouse of ideas, not a professional adviser. Before any important decision, please consult the appropriate professionals (lawyer, accountant, real estate agency, broker etc.).