The Next Bank Lending Trap for Borrowers
 
Home Tell a Friend! Contact ICFE Link Exchange Search ICFE Subscribe ICFE About the ICFE
ICFE News Releases ICFE in the News Children and Money Financial Education Personal Financial Counseling with Paul S. Richard, RFC Credit Card Tips Credit File Correction Mending Spending Links and Resources Order Options

The Next Bank Lending Trap for Borrowers
Debt Protection To Become Part of Lending Agreements

San Diego, CA.  Why are bankers getting more excited about promoting consumer debt? Because a new lucrative debt protection program has replaced credit insurance as part of more and more lending agreements consumers sign when closing a loan other than a mortgage. This is not a separate insurance contract, so loan officers do not need a license to sell it and it is regulated by one state or federal banking agency rather than 50 state insurance agencies, according to USBanker magazine (06-04).

This is a new and growing profit center for lenders. Credit insurance, a waste of money for the majority of borrowers, used to be an option. Now, even the most creditworthy customers may be stuck paying for this protection, which amounts to the lender agreeing to suspending or canceling the loan payments under certain conditions for an unspecified period of time. So if a consumer wants the loan, they may have to pay the debt protection fees, like it or not.

The monthly cost is up to the lender, and to a large degree what the market will bear. It seems the $15-$25 a-month added to the payment is acceptable to borrowers, says USBanker, however it becomes a much tougher sell when it approaches $50 a month-add on. Some lenders refer to their product as monthly outstanding balance (MOB) debt cancellation contracts. Debt protection with an unemployment clause sells very well as one California based lender discovered when comparing sales of debt protection without an unemployment provision. This is just another fee trap for qualified borrowers and even for sub-prime borrowers. The chances of ever being eligible for and collecting any benefits are very remote for the large percentage of
borrowers.

A plus for home buyers is that many mortgage lenders are now including no-cost or low-cost policies that provides six to nine months of loan payments, following an involuntary loss of employment. This seems worth while on the surface if, in fact, it is no cost. Mortgage lenders have a logical selfish interest because the costs associated with default, in some cases leading to foreclosures, can be in the $10,000 to $40,000 range or more. Some policies also cover work related injuries, however employers must certify the injury and the insured must be under constant care.

The ICFE urges all borrowers to read loan offers very carefully and completely to determine what fees and other often unnesessary add-ons may be included in the monthly payments before signing on the dotted line.

For more info contac:

Paul S. Richard
Executive Director
Institute of Consumer Financial Education
PO Box 34070
San Diego, CA 92163

619-239-1401

Email Reply: info@icfe.org 
 

About the ICFE:

The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation).  The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely. 
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.

The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org).  CASDRAP disbanded in 2010, shortly after the web site project was completed.  In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.

The ICFE is also an on-line help for consumers who spend too much.  ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.

Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org.  Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G,  a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.

About the ICFE:

The Institute of Consumer Financial Education (ICFE), founded in 1982 by the late Loren Dunton (creator of the 'certified financial planner' (CFP) designation) and it is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely. The ICFE trains and certifies Personal Finance Instructors for its own curriculum. It also trains and certifies Credit Report Reviewers and Identity Theft Prevention Specialists.

The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, now in its 16th printing and has distributed over one million 'Credit/Debit Card Warning Labels' and 'Credit/Debit Card Sleeves' world wide.

The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.

The ICFE is also a partner in the national Jump$tart Coalition for Financial Literacy and the California Jump$tart chapter. The ICFE staff is also active with San Diego Saves, an offshoot of America Saves, and the California Student Debt Resource Awareness Project (CASDRAP) (studentdebthelp.org).

The ICFE's on-line help for consumers who spend too much was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from 'The Money Instruction Book,' a course in personal finance, positioned to become among the premier programs in the new bankruptcy and debtor education initiatives.

The ICFE Web site at: www.financial-education-icfe.org helps consumers with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and videos and how to teach children about money. Other ICFE services include a free eNews, and an online resource center of financial education learning tools, including videos, books, software and personal finance courses.

 
Home ] ICFE News Releases ] ICFE in the News ] Children and Money ] Financial Education ] Resource Center ] Credit Card Tips ][ Credit File Correction ] Mending Spending ] Links and Resources ]  [ Online Store ]

 

Copyright ©  1997 - by Paul S. Richard
and the Institute of Consumer Financial Education, All Rights Reserved.
View our
Privacy Policy Our Terms and Conditions

Institute of Consumer Financial Education
PO Box 34070
San Diego, Ca 92163
Paul S. Richard, Executive Director
Phone 619-239-1401

FAX 619-923-3284

Questions for www.financial-education-icfe.org Click to go to Website Contact Us or 
Website Design Donated by Desgn School Programs