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Loan insurance a 'rip-off'?
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March 9, 1999: 4:18 p.m. ET
Consumers Union says loan companies overcharge $2 billion a year
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WASHINGTON (CNN) -- Insurance sold in conjunction with loans or other credit is a "massive rip-off," according to a report released Tuesday by Consumers Union and the Center for Economic Justice.
The report finds that American consumers are overcharged as much as $2 billion a year by department stores, auto dealers, banks, finance and credit-card companies that sell credit insurance to their customers. The consumer groups found that much of the insurance is unnecessary, over-priced and fraudulently sold.
Consumers in some states fare better than others. The report contains a "10 Worst" and "10 Best." Among the best: New York and Maine. Among the worst: Louisiana and Mississippi.
The report puts most of the blame on state regulators for failing to protect consumers by allowing gross overcharging, unfair and coercive sales practices and providing little consumer choice.
Bob Martin, communications manager for the National Association of Insurance Commissioners, told CNN that his agency has made legislative recommendations for more consumer protection, but that the NAIC is not a legislative body. It's up to state lawmakers to pass consumer protection laws, Martin said.
He added that the lenders who sell the insurance -- primarily banks, car dealerships and credit-card companies -- have a "great influence" on the nation's legislatures.
NAIC spokesman Steve Larsen said "state insurance departments have a really strong track record for protecting consumers" and will continue that practice. And, he acknowledged that many state commissioners are aware of the problems raised in the report and plan to study the findings.
The NAIC also plans a public hearing on the matter at its June meeting, Martin said.
Consumers Union warns most consumers to "stay away" from credit insurance unless they live in states with effective regulations, are senior citizens who may have no other access to insurance, or are in poor health.
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