The Debt Shall Die With the Debtor, If You Are Lucky

February 26, 2018 at 7:32 am 1 comment

Even though I have arrived in my favorite alternative reality universe called Washington, D.C., the issue that I want to bring to your attention this morning has to do with a proposal by
New York’s Department of Financial Services (DFS). Governor Cuomo has proposed that the sellers of life insurance and annuity must offer products that are in the “best interest” of the consumer. The Association has written a comment letter critical of the proposal. Here is why.

Now is not the time to be making it more difficult for consumers to access financial products that help protect their families if they die with bills to pay. According to one survey, 73% of Americans are dying more than $60,000 in debt. This is not all credit card debt. More and more people are getting 6 year car loans and home equity loans later in life. In fact, if this trend continues, the golden years will be anything but for an increasingly large number of ostensibly middle-class Americans.

It’s not a coincidence that credit unions have offered credit life policies for almost as long as they had been in existence. Properly managed, these policies help consumers by keeping money in the family. They are not a panacea for the disturbing dying with debt trend we are seeing, but they are one part of an overall solution. If my wife and I feel that our children should be protected against certain collateralized losses, then we should have that option.

To be clear, the Governor’s proposal does not ban the sale of this or any other insurance product. But take a look at the nuanced disclosure and underwriting requirements. Credit unions certainly want to make sure that their products work for their members. However,many credit unions will simply decide that the cost and risks of providing this insurance isn’t worth it. In other words, this is another example of credit unions being penalized because of the misconduct of other larger institutions. Fortunately, DFS still has time to make changes exempting credit unions from this proposal.

Entry filed under: Advocacy, Compliance, General, New York State.

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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