Florida CUs Collaborate With Banks on Bill to Sell Debt Cancellation

TALLAHASSEE, Fla. – Florida Gov. Charlie Christ last week signed into law a bill that will allow credit unions and banks to sell debt cancellation products. Florida is the only state in the country not allowing the sale of these loan insurance products.

While both state regulators and NCUA have issued legal opinions allowing the sale of debt cancellation insurance, the state insurance regulator had not allowed any insurer to provide the coverage for lenders, according to Andrew Price, director of legal affairs for the Florida CU League. “The problem was, we couldn’t get insurance on the back side because our insurance regulator wouldn’t allow insurers to offer it,” Price told The Credit Union Journal yesterday.

Debt cancellation is an agreement between a lender and a borrower in which the lender, for a fee, agrees to cancel or suspend the borrower's debt under certain circumstances, such as if the borrower dies or becomes unemployed.

The bill also allows creditors, such as credit unions, to buy insurance to protect themselves against the risk of financial loss from the use of debt cancellation products.

The bill was the product of lobbying by credit unions together with banks and insurers, Price said.