Senate Bill No. 253
(By Senators Minard, Yoder, Sharpe and Wiedebusch)
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[Introduced February 3, 1994; referred to the Committee
on the Judiciary.]
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A BILL to amend and reenact section one hundred nine, article
three, chapter forty-six-a of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, relating to
the West Virginia consumer credit and protection act;
finance charges and related provisions; charges for credit
life and health insurance; and requiring notice to consumers
of the right to refund of unearned premiums in certain
situations when the insurance is not provided by the
creditor.
Be it enacted by the Legislature of West Virginia:
That section one hundred nine, article three, chapter forty-
six-a of the code of West Virginia, one thousand nine hundred
thirty-one, as amended, be amended and reenacted to read as
follows:
ARTICLE 3. FINANCE CHARGES AND RELATED PROVISIONS.
§46A-3-109. Additional charges; credit life or health insurance;
notice of cancellation; when refund required; obligations ofcreditor and insurer; civil penalty; rules relating to
insurance.
(a) In addition to the sales finance charge or loan finance
charge permitted by this chapter, a creditor may contract for and
receive the following additional charges in connection with a
consumer credit sale or a consumer loan:
(1) Official fees and taxes;
(2) Charges for insurance as described in subsection (b):
Provided,
That nothing contained in this section with respect to
insurance shall be construed as in any way limiting the power and
jurisdiction of the insurance commissioner of this state in the
premises;
(3) Annual charges, payable in advance, for the privilege of
using a lender credit card or similar arrangement which entitles
the user to purchase goods or services from at least one hundred
persons not related to the issuer of the lender credit card or
similar arrangement, under an arrangement pursuant to which the
debts resulting from the purchases are payable to the issuer;
(4) Charges for other benefits, including insurance,
conferred on the consumer, if the benefits are of value to him or
her and if the charges are reasonable in relation to the
benefits, are of a type which is not for credit, and are excluded
as permissible additional charges from the sales finance charge
or loan finance charge by rule adopted by the commissioner:
Provided,
That as to insurance, the policy as distinguished from
a certificate of coverage thereunder must be issued by anindividual licensed under the laws of this state to sell such
insurance and the determination of whether the charges therefor
are reasonable in relation to the benefits shall be determined by
the insurance commissioner of this state;
(5) Reasonable closing costs with respect to a debt secured
by an interest in land; and
(6) Documentary charge or any other similar charge for
documentary services in relation to securing a title, so long as
said charge is applied equally to cash customers and credit
customers alike and so long as such documentary charge does not
exceed fifty dollars.
(b) A creditor may take, obtain or provide reasonable
insurance on the life and earning capacity of any consumer
obligated on the consumer credit sale or consumer loan,
reasonable insurance on any real or personal property offered as
security subject to the provisions of this subsection, and
vendor's or creditor's single interest insurance with respect to
which the insurer has no right of subrogation. Only one policy
of life insurance and/or one policy of health and accident
insurance and/or one policy of accident insurance and/or one
policy of loss of income insurance on any one consumer may be in
force with respect to any one contract or agreement at any one
time, but one policy may cover both a consumer and his or her
spouse:
(1) The amount, terms and conditions of property insurance
shall have a reasonable relation to the existing hazards or riskof loss, damage or destruction and be reasonable in relation to
the character and value of the property insured or to be insured;
and the term of such insurance shall be reasonable in relation to
the terms of credit:
Provided,
That nothing shall be deemed to
prohibit the consumer from obtaining, at his or her option,
greater coverages for longer periods of time if he or she so
desires;
(2) Life insurance shall be in an initial amount not to
exceed the total amount repayable under the consumer credit
agreement, and where a consumer credit sale or consumer loan is
repayable in installments, such insurance shall at no time exceed
the scheduled or actual amount of unpaid indebtedness, whichever
is greater. Life insurance authorized by this subdivision shall
provide that the benefits shall be paid to the creditor to reduce
or extinguish the unpaid indebtedness:
Provided,
That if a
separate charge is made for such insurance and the amount of
insurance exceeds the unpaid indebtedness, where not prohibited,
then such excess shall be payable to the estate of the consumer.
The initial term of such life insurance in connection with a
consumer credit sale, other than a sale pursuant to a revolving
charge account, or in connection with a consumer loan, other than
a loan pursuant to a revolving loan account, shall not exceed the
scheduled term of the consumer credit agreement by more than
fifteen days. The aggregate amount of periodic benefits payable
by credit accident and health insurance in the event of
disability, as defined in the policy, and loss of incomeinsurance in the event of involuntary loss of employment, as
defined in the policy, shall not exceed the unpaid amount of such
indebtedness; periodic benefits payable in connection with a
consumer credit sale pursuant to a revolving charge account or of
a consumer loan pursuant to a revolving loan account may be based
upon the authorized credit limit;
(3) When the insurance is obtained or provided by or through
a creditor, the creditor may collect from the consumer or include
as part of the cash price of a consumer credit sale or as part of
the principal of a consumer loan, or deduct from the proceeds of
any consumer loan the premium, or in the case of group insurance,
the identifiable charge. The premium or identifiable charge for
such insurance required or obtained by a creditor may equal, but
shall not exceed the premium rate filed by the insurer with the
insurance commissioner. In any case, when the creditor collects
the entire premium for such insurance in advance, such premium
shall be remitted by such creditor to the insurer or the
insurance agent, as specified by the insurer, within ten days
from or after the end of the month in which such collection was
made;
(4) With respect to insurance against loss of or damage to
property, or against liability, the creditor shall furnish a
clear and specific statement in writing to the debtor, setting
forth the cost of the insurance if obtained from or through the
creditor, and stating that the debtor may choose the person
through whom the insurance is to be obtained;
(5) With respect to consumer credit insurance providing
life, accident, health or loss of income coverage, no creditor
shall require a consumer to purchase such insurance or to
purchase such insurance from such creditor or any particular
agent, broker or insurance company as a condition precedent to
extending credit to or on behalf of such consumer;
(6) When a consumer credit sale or consumer loan,
refinancing or consolidation is paid in full, the creditor
receiving such payment shall inform the debtor of the
cancellation of any consumer credit insurance providing life,
accident, health or loss of income coverage and advise the debtor
of the application of any unearned premiums to the loan balance.
if If such insurance was not provided by the creditor, the
creditor receiving the payment shall notify the debtor that he or
she may have the right to receive a refund of unearned premiums
from any other seller or provider of such insurance, and advise
the debtor of his or her obligation to notify any other insurer
of the payment of the loan balance and the cancellation of the
consumer credit insurance, and request a refund or credit of
unearned premiums, if applicable: Such notice for use when the
creditor is not the seller or provider of credit insurance, shall
be sent on a form as prescribed by the insurance commissioner as
provided in chapter twenty-nine-a of this code and shall contain
the name and address of the seller and the insurer. If the
creditor was the seller of the consumer credit insurance, the
creditor shall notify or shall cause the insurer to be notifiedof the cancellation of such insurance;
(7) Upon receipt by the insurer of notification of the
cancellation of consumer credit insurance, the insurer shall
cancel such insurance effective no later than thirty days from
the date of receipt of such notice. Within forty-five days
following the date of notification of cancellation of such
insurance, the insurer shall pay any refund of unearned premiums
to the debtor-insurer or such other person as directed by the
debtor-insurer; and
(8) An insurer, seller or creditor who fails to refund any
unused insurance premium or provide the proper notification of
payoff shall be liable for civil damages up to three times the
amount of the unused premium as well as other remedies as
provided for by section one hundred nine, article seven of this
chapter.
(c) The insurance commissioner of this state shall
promulgate legislative rules in accordance with the provisions of
chapter twenty-nine-a of this code to implement the provisions of
this article relating to insurance, and the authority of the
insurance commissioner to promulgate the same shall be exclusive
notwithstanding any other provisions of this code to the
contrary.
NOTE: The purpose of this bill is to require a creditor to
notify a consumer of the right to receive a refund or credit from
credit life, accident, health or loss of income coverage
insurance, under certain situations, when the creditor is not the
seller or provider of the insurance.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.