Keep Insurers From U.S. Consumer Unit Purview, Say Trade Groups

The trade groups note that the language creating the agency already excludes activities involved in the "business of insurance" from the authority of the proposed agency.

But, they said, the current language in the proposal specifies that the activities of those who underwrite and sell "mortgage, title and credit insurance" would come under the authority–and that should be removed.

The trade groups also voiced concern in their letter that unless the language of the current bill is further tightened, there is the risk that other forms of insurance could be swept under the CFPA's jurisdiction.

Specifically, they said, the way the industry is interpreting the language of the current bill, to the extent one is deemed a "financial advisor" who "provides financial or other related advisory services" or "tax-planning" services, these products and their providers would come under the authority of the proposed agency.

One of the coalition's concerns, the letter said, is that to the extent the CFPA's authority covers products that do not involve a direct extension of credit, "the slippery-slope" debate over the intended scope of the proposed legislation will likely generate lengthy litigation where the courts will ultimately make that determination.

This is especially true where the definitions of terms like "financial advisor," "business of insurance" and "credit insurance" leave room for interpretation and confusion, the letter argues.

"This problem is compounded for terms like the 'business of insurance' where there are no statutory boundaries and the CFPA itself determines what activity falls within the scope of the 'business of insurance,'" the letter said.

"Vesting the CFPA with authority to define the parameters of this term may lead to an expansion of the CFPA's incursion into insurance, and any judicially-contested determination may be afforded administrative deference by the courts," the organizations wrote.

Their message was signed by the
American Insurance Association,
American Land Title Association and
Consumer Credit Industry Association.

Also signing were the Council of Insurance Agents & Brokers,
National Association of Insurance and Financial Advisors, National Association of Mutual Insurance Companies, National Association of Independent Life Brokerage Agencies, NAVA-Association for Insured Retirement Solutions, National Association of Professional Insurance Agents, Property Casualty Insurers Association of America, Association for Advanced Life Underwriting, American Council of Life Insurers, and Agents for Change.

According to the coalition, both lenders and insurers aim to allow a consumer to participate in financial transactions and other activities; however they deliver very different products.

The letter said, "Importantly, insurance is not an extension of credit," and insurance protects against risk of loss.

"The fact that some insurance protection covers risks surrounding a credit transaction does not alter the essence of the insurance product–a promise to provide protection in the event of a specified loss," the letter said.

"Given this distinction, no forms of insurance should be included within the CFPA mandate–including mortgage, title and credit insurance," the letter