Banks - Unfair Trade Practices

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randrew54
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Banks - Unfair Trade Practices

Post by randrew54 »

Banks have penetrated the insurance industry in a big way. Banks are growing mainly through acquisitions but they are also growing through unfair trade practices. I recently lost a large commercial account because my client was applying for a loan. The loan officer told him he may be able to get a point or two knocked off his loan if he had a "full account relationship" with the bank. My client asked what a "full account relationship" meant and the loan officer called in the insurance agent working in the office. Too my knowledge, this practice is illegal.

Has anyone else experienced this situation?
gregcw
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Re: Banks - Unfair Trade Practices

Post by gregcw »

You are correct.

FDIC Rule § 343.30 Prohibited practices
(a) Anticoercion and antitying rules. You may not engage in any practice that would lead a consumer to believe that an extension of credit, in violation of section 106(b) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1972), is conditional upon either:

(1) The purchase of an insurance product or annuity from the bank or any of its affiliates; or

(2) An agreement by the consumer not to obtain, or a prohibition on the consumer from obtaining, an insurance product or annuity from an unaffiliated entity.

(3) In the case of a bank or subsidiary of the bank at which insurance products or annuities are sold or offered for sale, the fact that:

(i) The approval of an extension of credit to a consumer by the bank or subsidiary may not be conditioned on the purchase of an insurance product or annuity by the consumer from the bank or a subsidiary of the bank; and

(ii) The consumer is free to purchase the insurance product or annuity from another source.
Gregcw
Smalltownagent
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Re: Banks - Unfair Trade Practices

Post by Smalltownagent »

Sounds like time to make a phone call to the Dept of Insurance. Scoundrels.
Companyman
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Re: Banks - Unfair Trade Practices

Post by Companyman »

gregcw - I would disagree that it is illegal based on what you posted.

" You may not engage in any practice that would lead a consumer to believe that an extension of credit, in violation of section 106(b) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1972), is conditional upon either..."

The bank representative said they may be able to lower the points not that the they would not offer to provide a loan is the fine line above. If they want to have a loan at 5% and not take the insurance or 4.5% and take the insurance offered is a decision for the consumer. If they required the loan then that makes the case.
yoyowordup
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Re: Banks - Unfair Trade Practices

Post by yoyowordup »

Companyman wrote:gregcw - I would disagree that it is illegal based on what you posted.

" You may not engage in any practice that would lead a consumer to believe that an extension of credit, in violation of section 106(b) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1972), is conditional upon either..."

The bank representative said they may be able to lower the points not that the they would not offer to provide a loan is the fine line above. If they want to have a loan at 5% and not take the insurance or 4.5% and take the insurance offered is a decision for the consumer. If they required the loan then that makes the case.

THIS
insuranceoldie
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Re: Banks - Unfair Trade Practices

Post by insuranceoldie »

I disagree that all is ok with a bank offering a half point loan reduction to do business with their in-house insurance agency. Have you heard of rebating? A 1/2 point interest rate discount is an enticement to do business with the bank by offering a rebate, a lower interest rate that may result in thousands of dollars of savings depending upon the loan size and duration.

If I heard of this happening in my market I'd walk into the department of insurance with the facts and evidence of this practice. Same applies to real estate companies offering better commissions if you do everything with their insurance and lending in-house entities when you list your home. Controlled business, unfair trade practices and rebating are NOT ok.

I hope some department of insurance compliance people are looking into these practices within their respective states? If they're occurring it's time to bring the hammer down.
OldIndyAgent
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Re: Banks - Unfair Trade Practices

Post by OldIndyAgent »

Its time to kick the GOP and DNC out of insurance, and re-implement Glass-Steagall.

The Glass-Steagall Act, also known as the Banking Act of 1933 (48 Stat. 162), was passed by Congress in 1933 and prohibits commercial banks from engaging in the investment business. It was enacted as an emergency response to the failure of nearly 5,000 banks during the Great Depression.

GET WALL STREET OUT OF INSURANCE!
...and your local banker!
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