The CFPB delayed on Wednesday the effective date of a mortgage rule ban on the financing of credit insurance premiums until Jan. 10, allowing the agency extra time to clarify the rule’s application and implications.
The ban was adopted as part of the loan originator compensation rule and was originally scheduled to take effect June 1. Under the rule, creditors are prohibited from financing premiums and fees for certain credit insurance products related to dwelling-secured consumer transactions.
Since the agency published the final rule in January, industry participants have expressed concern that the rule left “substantial uncertainty” about when and whether credit insurance product premiums can be charged for covered consumer credit transactions secured by a dwelling.
Credit unions and other small lenders have expressed concern that the final rule could be interpreted to prohibit any credit insurance premiums, which they said are not financed by the creditor and should be considered as calculated and paid in full on a monthly basis.
The CFPB plans to coordinate with other agencies, publish plain-language compliance guides and updates as needed and educate consumers on the new rules as part of its implementation plan.