CCIA URGES CREDIT INSURANCE/DEBT CANCELLATION FLEXIBILITY IN REVISED DOD MAPR

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Contact: William F. Burfeind
Executive Vice President
(312) 939-2242

Chicago, March 4, 2008 - In comments provided to the U.S. Department of Defense with regard to proposed revision of the Military Annual Percentage Rate (MAPR), the Consumer Credit Industry Association has urged flexibility to make credit insurance and debt cancellation products available to military borrowers.

The comments from CCIA Executive Vice President William Burfeind were submitted to the Office of the Secretary of Defense on February 20. In his detailed analysis, Burfeind urged that the revised DOD MAPR rule conform to Regulation Z of the Federal Reserve to allow voluntary credit insurance and debt cancellation and suspension agreements for military borrowers. He also urged the DOD to incorporate credit insurance and debt cancellation into the financial training for military personnel called for in the draft rule revision.

Similarly, Burfeind suggested the DOD allow single premium payment of credit insurance premiums or of debt cancellation contract fees, noting that single premium payments guarantee that insurance or coverage remains in force, avoiding the risk of a lapse of coverage for failure to make a timely monthly payment.

He observed that whether paid by a single premium or on a monthly basis, credit insurance premiums or debt cancellation fees have the same cost and that there is no difference between financing a single premium or single debt cancellation contract payment “than paying a life, automobile or homeowners insurance premium with a credit card or cash loan.”

Noting that 46 percent of servicemen and women are under the age of 25, Burfeind said military personnel mirror the entire population in facing the same kinds of financial pressures and risk as non-military individuals and families.

“Service members like many other American consumers, finance their standard of living, have incurred and are servicing a lot of debt, don’t have savings to fall back on and are uninsured or underinsured,” the CCIA  executive commented, as he urged flexibility in the DOD rule including allowance for single premium financing of credit insurance or debt cancellation or suspension agreements.

He noted too that military personnel often rely on second jobs or the jobs of spouses for income to supplement military pay and face added financial pressure when the National Guard or the reserves call them to active duty.

Burfeind said the CCIA agrees with the DOD that loan packing is a predatory practice he called “reprehensible”, commenting, “But this practice should be condemned independent from assessing the value of the ancillary products” citing credit insurance and debt cancellation as financial service products that add value to loans. He wrote the interest of military consumers can be protected by adopting the protections of Regulation Z and protections found in state insurance and finance laws and regulations that provide for notice to borrowers that these products are voluntary and can’t be required with a loan.

“Within the context of individual service member circumstances, ancillary products like credit insurance and debt cancellation/suspension agreements can be a prudent purchase decision. The availability of these products should be encouraged,” Burfeind concluded in his letter to the DOD.

Based in Chicago, the 120-member CCIA is a trade association of insurance companies and other financial service providers selling or servicing consumer credit insurance, credit related lines of insurance, and other consumer credit protection products including debt cancellation and suspension contracts or agreements.