DFS Proposes Important Changes To Pending Regulations

April 30, 2018 at 10:38 am Leave a comment

The DFS on Friday reissued proposed regulations, this time exempting credit life insurance from the department’s proposal. This is potentially good news for credit unions. Here’s why:

The Obama Administration had promulgated regulations imposing a fiduciary obligation on financial advisors. Under these regulations, financial advisors would have been obligated to demonstrate why a product they are selling to a consumer was in the consumer’s best interest. When the Trump Administration came to town, it decided not to go forward with this new requirement. (I’m shocked.) The 5th Circuit upheld the Trump Administration’s decision, but Governor Cuomo and the Department of Financial Services responded by proposing similar regulations at the State level.

Unlike the Obama Administration’s regulations, New York’s proposal would have imposed requirements on credit unions that offer credit life insurance. Frankly, this could have been devastating. Since the inception of the credit union industry, one of its core precepts has been that the debt shall die with the debtor. It accomplished this goal by making sure that members have access to insurance products that protect their loans against default in the event of a death.

Which brings us to Friday’s announcement. The state’s original proposal would have been so onerous and difficult to implement that many credit unions would have simply decided not to offer this important product. Although there is still a 30-day comment period, the fact that the state has tentatively decided not to include credit life in the revised regulations is a great sign for credit unions and their members. Given the troubling amount of debt that more and more people are dying with, it is more important than ever that consumers have options to protect their family members as they age.

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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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