Is Credit Insurance Just Another Junk Fee?

For the entire length of its existence, the Consumer Financial Protection Bureau (CFPB) has been railing against junk fees, which it defines as fees that do not provide a service to the consumer. Of course, it is difficult to pin down a definition for junk fees. Companies will always provide some justification for why they are charging you the fee, but only if you ask. In fact, the reason that junk fees and other hidden fees are so prevalent is that, most of the time, customers don’t ask about them. You have probably met people who scrutinize every bill and ask a lot of questions, the ones with the patience and the motivation to spend hours arguing on the phone with customer service representatives until they waive fees or back down from unfair prices. Perhaps you already decided that you don’t want to be one of those people, because they also tend to be the type who will brazenly ask for discounts even from retailers who charge the usual market price or less; when they do it, you might think that if they spent their time working instead of arguing about money, they would be rich. It is a moot point if you have already paid all the fees and are struggling with debt. All you can do is read the fine print in the future to avoid incurring avoidable fees. If all the little expenses have added up and you are in over your head with debt, contact a Boca Raton debt lawyer.

How Does Credit Insurance Work?

When you take out a loan, there is a lot more to it than simply the principal and interest. There is a loan origination fee, which protects the lender if the borrower defaults without making any payments. Some loans include credit insurance, or the option to add it. Some loans include the option to buy credit insurance. A credit insurance policy protects the borrower if he or she becomes unable to repay the loan. Depending on the specifics of the credit insurance policy, it might specify the conditions under which it would cover your unpaid portion of the loan. It might pay if the borrower dies with an outstanding loan balance or if the inability to pay results from the borrower’s illness or involuntary job loss. Insurance policies are never as generous as insurance salespeople make them sound, so if you buy credit insurance when you take out a loan, be sure to read the fine print and ask lots of questions before you sign the agreement.

Non-Bank Lender Faces Lawsuit Over Deceptive Practices Involving Credit Insurance

OneMain Financial, one of the country’s biggest non-bank lenders, is facing a lawsuit from the attorneys general of 13 states, requesting that it pay compensation to borrowers to whom it charged hidden fees, including credit insurance. The plaintiffs claim that the lender automatically included credit insurance in the loan, without the borrowers’ knowledge, so that they paid for it without using it, since they did not even know they had it.

Work With a Debt Lawyer About Junk Fees

A South Florida debt lawyer can help you if buying credit insurance made your finances worse.  Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.

Sources:

pbs.org/newshour/nation/onemain-financial-sued-by-13-attorneys-general-over-hidden-loan-add-ons

insurance.wa.gov/insurance-resources/credit-insurance/credit-insurance#:~:text=Credit%20insurance%2C%20or%20debt%20cancellation,making%20payments%20on%20your%20behalf.