Sec. 1. 24-A MRSA §2910-B is enacted to read:

§2910-B.__Liability insurance in connection with debt

cancellation contracts

An insurer may not offer, issue or renew a liability insurance policy in connection with debt cancellation contracts issued by financial institutions unless the debt cancellation contracts meet the requirements of chapter 37 and rules adopted pursuant to that chapter.

SUMMARY

Recently, some financial institutions have offered debt cancellation contracts to their borrowers. These contracts operate similarly to credit insurance, but the risk is taken by the bank rather than by an insurer. The State's laws relating to credit insurance do not apply to these contracts. Some insurers market programs to financial institutions under which the bank issues debt cancellation contracts, but the insurer assumes the risk through a liability policy. This bill prohibits insurers from issuing such policies unless the underlying debt cancellation contracts meet the standards applicable to credit insurance.