N.Y. Comp. Codes R. & Regs. tit. 11 § 187.12

Current through Register Vol. 46, No. 50, December 11, 2024

Section 187.12 - Open-end loans and charge plans

(a) These rules and the provisions of all other sections of this Part not in conflict with the following will apply to credit insurance on open-end loans or charge plans:

(1) Definition of open-end loan or charge plan. An open-end loan or charge plan is a line of credit loan, a revolving charge plan or any other open-end self-replenishing credit arrangement between the creditor and one of its customers which may be drawn upon from time to time by the customer without renegotiating the lending agreement. The customer may repay the full outstanding balance at any time, or a specified minimum portion of the indebtedness (e.g., five percent, or a minimum of $10).

(2) Debtor's option for insurance. If a premium or charge for the insurance is to be made to the debtor by the creditor, insurance may be issued on a debtor only if he elects in writing to become insured and agrees to pay the premium or charge for the insurance. The debtor must be given the right to discontinue the insurance at any time by advance notice to the creditor. If the insurance benefits are reduced, or if the premium rate for the insurance is increased, the creditor shall give the insured debtors advance notice of the change and remind them of their right to discontinue the insurance.

(3) Disclosure to debtors--policies and certificates of insurance. The requirements in section 187.4(a) and (d) of this Part for policies, certificates, applications, or notices of proposed insurance shall apply only when the credit insurance on the open-end loan or charge plan is first issued. A new policy or certificate of insurance need not be issued each time the insured debtor incurs indebtedness on the account.

(4) Amount of insurance. If at any time the insured debtor has no outstanding indebtedness, the amount of his insurance will be zero. Subject to any maximums, the amount of a periodic credit unemployment insurance benefit may not exceed a specified percentage, not to exceed the greater of the amount of the minimum payment which the debtor is required to make on the debtor's loan or charge plan as of the monthly billing or statement date on or immediately preceding the date his unemployment or labor dispute work stoppage commenced, or a specified percentage, not to exceed six percent, of the debtor's unpaid indebtedness balance as of the date the debtor's unemployment or labor dispute work stoppage commenced. The payment of benefits may not be made for a period of unemployment extending beyond the date the insured portion of the outstanding indebtedness of the insured debtor's loan or charge plan becomes zero.

(5) Termination of insurance. A debtor's insurance may be terminated on the earliest of any of the following dates, but such termination of insurance shall not prejudice a claim existing on date of termination:

(i) on the date requested by the debtor or the date he fails to pay any required premium or charge on insurance;

(ii) on the premium billing date coinciding with or next following the date the debtor attains a stated age, which will not be less than age 66;

(iii) on the date the open-end loan or charge plan is terminated;

(iv) on the date the debtor is in default, as defined by the creditor's rules;

(v) subject to the notice requirement of section 187.5(h) of this Part, on the date the group policy is terminated; or

(vi) on the date the policyholder terminates coverage on all revolving accounts of the same class as that held by the debtor, subject to a minimum 31-day notice to all debtors.

(6) Additional rules.

(i) Credit unemployment insurance, may include an actively at work requirement. This provision may apply separately to each new indebtedness incurred by the debtor, and may not be reapplied to the total indebtedness balance each time a new indebtedness is incurred.

(ii) The unemployment insurance shall exclude from benefits, indebtedness incurred by the debtor while he was unemployed. A premium may not be charged on any new indebtedness incurred by the debtor while he is unemployed, unless included in the claim benefit. Any premium paid by the insured which is subsequently refunded will not be considered to have been charged to the debtor.

(iii) Total benefits for any period of unemployment may be limited to an amount stated or described in the policy.

(iv) The insurance may include a reinstatement provision for a debtor who has been paid the full benefits of the insurance.

(7) Payment of premiums and insurance charges. Insurance on a debtor for an open-end loan or charge plan, may only be provided on a periodic outstanding balance premium basis. The periodic charge may be applied to either:

(i) the average daily indebtedness balance in the debtor's account during the billing period; or

(ii) the indebtedness balance in the debtor's account on the billing date; or

(iii) by any other method as the Superintendent of Insurance may approve.

(8) The charge for insurance may be added to the debtor's indebtedness balance periodically and must be shown separately from any other charge. If the credit unemployment insurance is written as a package with other credit insurance, then monthly charge may be shown either separately or as a package, however the rates for each coverage should be disclosed separately. If the credit unemployment insurance is written along with credit disability insurance but not as a package then each charge must be displayed separately. Any credit life insurance premium must be displayed separately.

(9) Premium and insurance charge rates. Open-end loans or charge plans provide a minimum payment which the debtor is required to make on his indebtedness balance. While the amount of the minimum payment may change each time new indebtedness is incurred, each new minimum payment sets a maximum number of months over which the debtor must repay his indebtedness. The premium rate for credit unemployment insurance on open-end loans may be:

(i) the appropriate premium rate determined by section 187.7(c) of this Part, for the initial maximum number of months over which the debtor is required to repay the balance of his indebtedness after new indebtedness is incurred;

(ii) the appropriate premium rate for the maximum number of months remaining to be paid on the indebtedness balance on the billing date;

(iii) the actuarially determined weighted average term rate for the aggregate of the maximum repayment terms of all insured loans or charge plans of the creditor; or

(iv) any other plan approved by the Superintendent of Insurance.

N.Y. Comp. Codes R. & Regs. Tit. 11 § 187.12