The rule, which prohibits single-premium credit insurance financing offered in connection with residential mortgages, had an original June 1 effective date proposed because the bureau believed it “did not present a significant implementation burden for affected institutions.”
The groups, which include the American Bankers Association, American Bankers Insurance Association, Consumer Bankers Association, Consumer Credit Industry Association, Financial Services Roundtable, Housing Policy Council, Independent Community Bankers of America and Mortgage Bankers Association, did not previously protest about the effective date “because the financing of single-premium credit insurance policies in connection with residential mortgages has long since ceased to be a wide-spread practice in the industry.”
The groups said, however, that they were “surprised” to see the CFPB had interpreted a section of the rule to prohibit other premium structures like monthly paid programs.
“This interpretation, a response to a comment letter with no opportunity for others to comment, placed a legal cloud over such other products and triggered an immediate, and significant, compliance burden for the industry,” the groups said, adding that monthly paid programs are common and that it would be challenging to disassemble such programs by June 1. “Terminating those programs by June 1 would also impose a burden on many consumers, especially low- and moderate-income borrowers who rely on monthly paid credit insurance to protect what is often their most valuable investment—their home.”
Additionally, the groups indicated the new effective date should be Jan. 10, which would “align the prohibition on the financing of single premium credit insurance with other provisions in the Final Rule and other mortgage rules issued by the Bureau.”
“On the other hand, should the Bureau decide in a new rulemaking that the prohibition applies to other premium structures, including monthly paid programs, the industry would need additional time to comply beyond that date,” the groups said. “In which case, we ask that the effective date be at least 12 months after the rule is final.”