Debt Cancellation / Debt Suspension
A new "debt protection" product is replacing credit insurance for many lenders. The technical name of the products is debt cancellation contract and debt suspension agreement. Federal banking regulators have declared debt cancellation and debt suspension products to be banking products and, as a result, these products are not subject to state insurance regulation -- even though they are effective substitutes for credit insurance. Federal banking regulators have developed regulations for debt cancellation and debt suspension products that do not even have the modest consumer protections that exist for credit insurance. There are no requirements for minimum benefit levels or reasonable rates and, consequently, debt cancellation and debt suspension products are a terrible deal for consumers. Debt suspension agreements have replaced almost all credit insurance for credit cards with product names like Credit Protector or Credit Protection and some credit insurance has been replaced on installment loans with debt cancellation and debt suspension products. CEJ has taken the lead in exposing the problems with debt cancellation and debt suspension products.
CEJ prepared a report on debt cancellation products for the FIRST Foundation that explains the basics about these products -- including what a poor value they are for consumers. The appendices provide useful information.
CEJ also prepared extensive comments to the Comptroller of the Currency on behalf of itself and the Consumer Federation of America (CFA) during the development of the regulation for debt cancellation and debt suspension products. CEJ and CFA also wrote to the OCC wrote to the OCC when the Comptroller of the Currency removed the most meaningful consumer protection in the regulations with warning just days before the regulation became effective
CEJ joined with the National Consumer Law Center, the Consumer Federation of America and Consumers Union in 2004 to submit comments on debt cancellation products to the Federal Reserve Board.
CEJ, CFA and the NCLC submitted comments Comments to the Consumer Financial Protection Bureau in 2012 to the Consumer Financial Protection Bureau regarding data collection for credit card terms recommending new collection and publication of data on debt cancellation and debt suspension products.