6525 AMS .... S4253.1

SB 6525 - S AMD 586

By Senator Honeyford

                                                  ADOPTED 02/16/02

    Strike everything after the enacting clause and insert the following:

    "NEW SECTION. Sec. 1.  A new section is added to chapter 48.30 RCW to read as follows:

    (1) Credit insurance may not be sold on the single premium payment method, in connection with a home loan, except under all of the following circumstances:

    (a) The borrower is provided the opportunity to select a monthly premium payment method in lieu of the single premium payment method;

    (b) To the extent required by law, the premium rates to be charged under both the single premium payment method and the monthly premium payment method are filed with and approved by the commissioner;

    (c) Each borrower that purchases credit-related insurance on the single premium payment method must execute, no later than the time the underlying loan is closed, a disclosure and consent form that meets the requirements of subsection (2) of this section.  The disclosure and consent form may be separate, or may be attached or integrated into the other documents associated with the underlying loan; and

    (d) The lender or insurer must retain a copy of each executed disclosure and consent form for a period not less than one year after the expiration or cancellation of the insurance coverage.

    (2) A disclosure and consent form is acceptable for purposes of subsection (1) of this section, if it contains, in substantially the same format, the following information:

                     CREDIT-RELATED INSURANCE

                 BORROWER'S DISCLOSURE AND CONSENT

    Attention Borrower:  You have indicated that you want to purchase credit-related insurance in connection with this loan.  THE PURCHASE OF CREDIT-RELATED INSURANCE IS NOT REQUIRED to close this loan, and the cost of credit-related insurance is being included in your loan at your request.  YOU HAVE THE RIGHT TO CANCEL YOUR INSURANCE AFTER PURCHASE.

    You have indicated that you want the cost of your credit-related insurance included in the principal amount of your loan.  You may also elect to have the insurance charge added to each monthly loan payment.  By including the cost of insurance in the principal amount of your loan, you are pre-paying for the entire term of the insurance, and the amount financed will be subject to the same terms as other disbursements under the loan.

    Your regular loan payment without the credit-related insurance would be:  $. . . . . ..  Your regular loan payment with the charge for credit-related insurance included in the principal amount would be:  $. . . . . . during the term of your loan.

    By executing this form you are affirming your decision to have the charge for your insurance included in the principal amount of your loan.  IF YOU DO NOT WANT TO PURCHASE CREDIT-RELATED INSURANCE, OR PREFER TO PAY FOR THE INSURANCE ON A MONTHLY BASIS, DO NOT EXECUTE THIS DISCLOSURE AND CONSENT STATEMENT.

    I, . . . . . . (borrower) have read the above disclosure and consent statement, and want the full charge for my credit-related insurance to be included in the principal amount of my loan.

    Signed:  . . . . . . . . (borrower)             Date: . . . . 

             . . . . . . . . (lender's representative) Date: . . . . 

    (3) For purposes of this section:

    (a) "Credit-related insurance" means life insurance; disability insurance, including accident and health; involuntary unemployment insurance; or any debt deferment or debt cancellation product covering similar risk or risks of loss; when the insurance or product covers amounts due or to be due under a specific credit transaction, and when that credit transaction is entered into for personal or household purposes.

    (b) "Home loan" means a loan made for personal, family household, or purchase money purposes that is secured by a deed of trust or mortgage on land located in the state of Washington that is improved by an owner-occupied, one-to-four unit dwelling structure.

    (c) "Monthly premium payment method" means a method of premium collection by which the premium charge applicable for the selected term of insurance coverage is collected from the borrower monthly or on the same periodic basis as principal and interest installments for the underlying loan, and when finance charges are not assessed on the premiums.  The periodic premium charge under the monthly method may be calculated based on (i) the outstanding loan balance during the current payment period; (ii) by dividing the total premium for the applicable term of insurance by the number of scheduled loan payments that will be due during the term of insurance coverage; or (iii) by any other method approved by the commissioner.

    (d) "Single premium payment method" means a method of premium collection by which the total premium charge applicable for the selected term of insurance coverage is included as a lump sum in the principal amount of the loan.

    (4) With respect to credit life insurance, credit disability insurance, or credit involuntary unemployment insurance, this section is applicable on the later of (a) July 1, 2003; or (b) ninety days after the insurance commissioner, by public notice, certifies that a sufficient quantity of forms and rates based on the monthly premium payment method are approved and available in the state of Washington for sale in connection with closed-end home loans.  With respect to debt suspension or debt cancellation products, this section is applicable on the effective date of this section."

SB 6525 - S AMD 586

By Senator Honeyford

                                                  ADOPTED 02/16/02

    On page 1, after line 1 of the title, strike the remainder of the title and insert "and adding a new section to chapter 48.30 RCW."

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