Debt Protection (many times referred to as Debt Cancellation or Debt Suspension) programs offer lenders new opportunities to add value to their consumer lending businesses. Debt Protection is considered a banking product by the OCC and NCUA, based on several legal rulings. It is used in place of insurance products when covering a loan.
Essentially, Debt Protection is an agreement between a borrower and a lender to have the customer’s debt either cancelled (paid in full for a specified time period) or suspended (interest-only payments are made for a specified time period and a loan extension is granted) in the event some specified event(s) occurs.
Usually, these programs are fully backed by an insurer, but many lenders may offer these programs, charge a fee for it and pay benefits without an insurer. This allows the lender to customize benefits, prices and fee income to suit their unique market needs.
Almost any type of protection may be offered as long as it correlates to an event that may cause a borrower financial hardship and might result in their being unable to repay the loan.
Debt Protection is a growing product line that offers many advantages to traditional credit insurance. TEJ Agency has the technical expertise and providers to help you implement a lender risk management program that will satisfy you and your customers.
AKA: Debt Cancellation, Debt Suspension, Debt Waiver.
Banking product. May be backed by insurance company, however.
Makes payments to loan in the event borrower is unable to pay on their loan due to specified events.
Banks, Credit Unions, Auto Dealers, Finance Companies, Retailers.
Individual coverage.
Retail. Sold by lender at time of loan.
None required.