Congress Daily reports today that the Consumer Financial Protection Agency (CFPA), faces another serious challenge and this time from Wisconsin. Milwaukee Rep. Gwen Moore, D-Wis., appears close to getting her amendment adopted to exclude providers of credit insurance from regulation by the CFPA.
The CFPA legislation is supposed to cover a wide range of consumer products and lending, not just banking services. Moore is reportedly sponsoring the amendment to exempt credit-insurance products at the behest of the credit union industry, specifically CUNA Mutual Group, the nation's largest credit-life insurance provider, located here in Madison.
Moore contends that "We cannot cherry-pick the types of insurance we want to regulate in this bill.” But consumer advocates contend that comprehensive coverage of abusive lending products across industries is exactly the brief of the CFPA.
"From a policy standpoint, credit insurance is the absolute worst kind of insurance and the most overpriced with the least benefit to consumers," said Ed Mierzwinski of the consumer group U.S. Public Interest Research Group (PIRG). "It's sold under a massive commission to the financial institution that is able to piggyback it onto its credit products like title insurance and private-mortgage insurance."
CUNA recently was ordered by a jury in South Dakota to pay a fine of $6 million in punitive damages for failing to pay a dying woman’s insurance claim. Attorneys representing the woman presented the case on June 2009, with evidence that CUNA Mutual refused to pay Teri Powell's claim for disability coverage, even after learning Powell was dying of cancer and was in hospice care. They presented evidence of 18 other policyholders whose claims fit the same pattern as Powell's claim.
The CFPA bill has already been undermined by other pro-business exemptions. Last week, 98% of small banks and credit unions were exempted from annual examination provisions in the CFPA, although their products (credit cards, etc.) will still be regulated. Final committee action on the bill is expected this week.