The Consumer Financial Protection Bureau recently issued a final rule as part of the Dodd-Frank Act, and thanks to the lobbying efforts of the Independent Insurance Agents & Brokers of America (Big “I”) and others, premium financing transactions have been exempted from the scope of the rule.
Wes Bissett, Big “I” government affairs senior counsel, said the rule was a long-delayed response to a section of the nearly 13-year-old Dodd-Frank Act that deals with credit lending and requires financial institutions to annually collect extensive data from any small business ($5 million or less in gross yearly revenue) seeking a loan.
“The initial version of the rule released in September 2021 caused strong concern for many in the insurance sector because the CFPB indicated its intention for the regulation to apply to premium finance transactions,” explained Bissett. “Although the proposed rule would have imposed these mandates on financial institutions and not on Big “I” members directly, it is likely that agents would have borne the brunt of the extensive data collection obligation or been compelled to end their relationships with premium finance lenders.”
Bissett said Big “I” partnered with two other industry organizations to tell CFPB that premium financing is different from other forms of commercial lending, that premium finance companies do not engage in traditional underwriting or utilize the specified data elements, and that the mandates originally proposed by the CFPB could create conflicts with state insurance law and place insurance licensees in untenable positions.
Topics Agencies
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