The unpaid balances of principal calculated according to the actuarial method.
History: 1971 c. 239
Refund or credit required. 424.205(1)
Upon prepayment in full of a consumer credit transaction by the proceeds of consumer credit insurance, the customer or the customer's estate is entitled to a refund of any portion of a separate charge for insurance which by reason of prepayment is retained by the original creditor or any assignee or returned to either of them by the insurer.
This chapter does not require the creditor to grant a refund or credit if all the refunds and credits due to the customer under chs. 421
amount to less than $1 and, except as provided in sub. (1)
, does not require the creditor to account to the debtor for any portion of a separate charge for insurance because:
The insurance is terminated by performance of the insurer's obligation;
The creditor pays or accounts for premiums to the insurer in amounts and at times determined by the agreement between them; or
The creditor receives directly or indirectly under any policy of insurance a gain or advantage not prohibited by law.
Except as provided in sub. (2)
, the creditor shall promptly make or cause to be made an appropriate refund or credit to the customer with respect to any separate charge made to the customer for insurance if:
The insurance is not provided or is provided for a shorter term than that for which the charge to the debtor for insurance was computed; or
The insurance terminates prior to the end of the term for which it was written because of prepayment in full or otherwise.
A refund or credit required by sub. (3)
is appropriate as to amount if it is computed according to either s. 422.209
or a method prescribed or approved by the commissioner of insurance.
Deferral, refinancing and consolidation agreements. 424.206(1)(1)
The creditor may not receive a separate charge for insurance in connection with a deferral (s. 422.204
), a refinancing (s. 422.205
) or a consolidation (s. 422.206
The customer agrees in writing at the time of deferral, refinancing or consolidation that a specific charge may be made;
The customer is to be provided with insurance for an amount or a term, or insurance of a kind, in addition to that to which the customer would have been entitled had there been no deferral, refinancing or consolidation;
The customer receives a refund or credit on account of any unexpired term of existing insurance in the amount that would be required if the insurance were terminated (s. 424.205
A creditor may not contract for or receive a separate charge for insurance which duplicates insurance with respect to which the creditor has previously contracted for or received a separate charge.
A violation of this section is subject to the provisions of s. 425.303
History: 1971 c. 239
; 1991 a. 316
Consumer credit insurance provided by a creditor may be subject to the furnishing of evidence of insurability satisfactory to the insurer. Whether or not such evidence is required, the term of the insurance shall commence no later than when the customer becomes obligated to the creditor or when the customer applies for the insurance, whichever is later except as follows:
If any required evidence of insurability is not furnished until more than 30 days after the term would otherwise commence, the term may commence on the date when the insurer determines the evidence to be satisfactory; or
If the creditor provides insurance not previously provided covering debts previously created, the term may commence on the effective date of the policy.
In the case where the commencement of the insurance is delayed, the customer to the extent the customer has paid a premium charge for any period of time before the insurance became effective, shall be entitled to a rebate or credit of such premium according to s. 424.205
The originally scheduled term of the insurance shall extend at least until the due date of the last scheduled payment of the obligation, except as follows:
If the insurance relates to an open-end credit plan, the term need extend only until the payment of the account and may be sooner terminated after at least 30 days' notice to the customer; or
If the customer is advised in writing in a clear and conspicuous manner that the insurance will be written for a specified shorter time, the term need extend only until the end of the specified time.
The term of the insurance shall not extend more than 15 days after the originally scheduled due date of the last scheduled payment of the debt unless it is extended without additional cost to the customer or as an incident to a deferral, refinancing or consolidation agreement.
History: 1971 c. 239
; 1991 a. 316
Amount of insurance. 424.208(1)(1)
The initial amount of credit life insurance shall not exceed the total amount repayable under the contract of indebtedness however the indebtedness may be repayable, but in cases where an indebtedness is repayable in substantially equal installments, the amount of insurance shall at no time exceed the scheduled or actual amount of unpaid indebtedness, whichever is greater.
The total amount of indemnity payable by credit accident and sickness insurance in the event of a disability, shall not exceed the aggregate of the periodic scheduled unpaid installments of the indebtedness, and the amount of each periodic indemnity payable shall not exceed the original indebtedness divided by the number of periodic installments.
History: 1971 c. 239
; 1973 c. 3
; 1997 a. 302
Legislative Council Note, 1973: [As to sub. (1) (intro.)] Clarifies the application of this subsection to open-end accounts. As the section reads prior to amendment, it could be construed to mean that maximum credit life insurance coverage would be determined by the account balance at the time the insurance was initially contracted for. However, the intent is that the amount of insurance fluctuate with, but never exceed, the account balance in open-end credit accounts. For verification, see s. 424.204 (2), which uses the current account balance to determine the premium charge. [Bill 432-A]
Filing and approval of rates and forms. 424.209(1)(1)
Notwithstanding s. 625.13 (1)
, no individual or group policy, certificate of insurance, notice of proposed insurance, application for insurance, endorsement or rider relating to credit life insurance or credit accident and sickness insurance delivered or issued for delivery in this state, or the schedule of premium rates or charges pertaining thereto, may be issued, delivered or used in this state until a copy of the form thereof has been filed with the commissioner of insurance, nor until the expiration of 30 days after it has been so filed unless the commissioner shall sooner give written approval thereto. Notwithstanding s. 625.22 (1)
, the commissioner, within 30 days after the filing of any such form, may disapprove such form or rate schedule if the benefits provided are unreasonable in relation to the premiums to be charged, or if the form contains a provision which is unjust, unfair, inequitable, misleading, deceptive or encourages misrepresentation of the policy, or is contrary to chs. 600
or any rule adopted thereunder. The benefits provided by any such policy shall be presumed reasonable in relation to the premium to be charged if the ratio of losses incurred to premiums earned is, or may reasonably be expected to be, 50% for credit life insurance and 60% for credit accident and sickness insurance, or such lower loss ratios as designated by the commissioner to afford reasonable allowance for expenses for a particular plan of coverage. If the ratio of losses incurred to premiums earned is less than or can reasonably be expected to be less than the prescribed standards, the benefits provided shall be presumed unreasonable in relation to the premiums charged. Determination of the reasonable relation of benefits to premiums shall be made by the commissioner for each policy form filed for such approval. Premium rate standards for other benefit plans shall be actuarially consistent with the prescribed rate standards. The commissioner may limit the use of any such form for those creditors or customers whose experience was the basis for approval and such other creditors or customers likely to experience similar mortality or morbidity.
Not later than 6 months after March 1, 1973, the commissioner of insurance, by rule, shall adopt premium rates for credit life and credit accident and sickness insurance based upon the loss ratio standards set forth in sub. (1)
, which rates shall be acceptable without further justification. No charge may be made for credit life or credit accident and sickness insurance which exceeds such premium rates except as provided in this subsection. The commissioner of insurance from time to time shall raise or lower the acceptable premium charges permitted for such insurance for any particular creditor, class of creditor or class of transaction whenever the commissioner determines that the actual loss experience for that particular creditor, class of creditor or class of transactions produces a ratio of losses to premiums which differs substantially, based on credible data for a relevant period of time, from the loss ratio standards established by sub. (1)
No individual policy of credit accident and sickness insurance or group policy of credit accident and sickness insurance may be delivered or issued for delivery in this state if the benefits are payable after a waiting period of less than 14 days, regardless of whether the payment of benefits is retroactive to the first day of disability.
If a group credit life insurance policy or group credit accident and sickness insurance policy is delivered to a policyholder which is not a Wisconsin corporation or other resident and does not have its principal office in Wisconsin, the forms to be filed by the insurer with the commissioner of insurance are the group certificates and notices of proposed insurance. The commissioner of insurance shall approve them if:
They provide the information that would be required if the group policy were delivered in this state;
The applicable premium rates or charges do not exceed those established by chs. 421
or by rules adopted thereunder; and
They do not contain provisions which are unjust, unfair, inequitable or deceptive, or encourage misrepresentation of the coverages, or are contrary to chs. 600
, or of any rule adopted thereunder.
Restrictions on property insurance. 424.301(1)
A creditor may not contract for a separate charge or receive a separate charge for insurance against loss of or damage to property in which the creditor holds a security interest or to property leased under a motor vehicle consumer lease unless all of the following conditions are met:
The insurance covers a substantial risk of loss or damage to property which is allowable collateral under s. 422.417
for the credit transaction.
The amount of the insurance does not exceed any of the following:
The actual cash value or stated value of any motor vehicle, manufactured home, or mobile home in which the creditor holds a security interest.
The cash value or replacement value of any property in which the creditor holds a purchase money security interest.
The stated amount of the customer's credit line if the purchase money security interest secures transactions pursuant to an open-end credit plan.
In any other transaction, the total payments or, if the transaction is for a term of 49 months or more, the amount financed.
The term of the insurance is reasonable in relation to the terms of credit.
The limitations of subs. (1)
and s. 422.202 (1) (b)
do not apply to property insurance on some or all of the property in which the creditor holds a security interest if the creditor does not require any insurance on the property and if the creditor is not designated a loss payee in the policy. Subsection (3)
does not apply to a credit transaction solely to finance the purchase of such property insurance.
The term of the insurance is reasonable if it is customary and does not extend substantially beyond a scheduled maturity.
A creditor may not contract for or receive a separate charge for insurance against loss of or damage to property unless the amount financed exclusive of charges for the insurance is $800 or more, and the value of the property is $800 or more.
A creditor may not contract for or receive a separate charge for insurance against loss of or damage to the customer's property in which the creditor does not hold a security interest if any of the following apply:
The creditor sells the customer insurance described in sub. (1)
covering some or all of the same property, except as provided in sub. (1m)
The amount of the insurance exceeds the amount by which the value of the property exceeds the amount of insurance against loss or damage to the property which the customer has in force at the time the consumer credit transaction is consummated.
If the customer purchases property insurance in addition to that already in force, the value of the customer's property shall be verified by the customer's written statement or an appraisal or a bill of sale.
Legislative Council Note, 1973: [As to sub. (1) (a)] Clarifies the scope of allowable property insurance. This paragraph sets forth one of the conditions necessary for property insurance. However, as it reads prior to amendment, no insurance could be taken on any household furnishings, regardless of whether the transaction involved a security interest in them. The effect of the amendment is to allow insurance on any permitted collateral, regardless of its nature. Therefore, if a creditor has a security interest in household furnishings, he will be able to protect his interest by the use of insurance against loss or damage. [Bill 432-A]
Insurance on creditor's interest only.
If a creditor contracts for or receives a separate charge for insurance against loss of or damage to property, the risk of loss or damage not willfully caused by the customer is on the debtor only to the extent of any deficiency in the effective coverage of the insurance, even though the insurance covers only the interest of the creditor.
History: 1971 c. 239
Cancellation by creditor. 424.303(1)
A creditor shall not request cancellation of a policy of property or liability insurance except after the customer's default (s. 425.103
), or in accordance with a written agreement by the customer at any time other than when the original transaction is entered into. In either case the cancellation does not take effect until written notice is delivered to the customer or mailed to the customer at an address as stated by the customer. The notice shall state that the policy may be canceled on a date not less than 30 days after the notice is delivered, or, if the notice is mailed, not less than 33 days after it is mailed.
Following cancellation, the customer shall be entitled to a rebate or credit for any prepaid charges which represent the premium for a period following cancellation.
This section shall not apply to a contract issued by an insurance premium finance company licensed under s. 138.12
Cancellation by customer. 424.304(1)
Following the sale of any insurance product under s. 422.202 (1) (b)
, the customer has the right to cancel the insurance until 30 days after the policy is mailed or otherwise delivered to the customer. The creditor shall provide the customer a notice in duplicate in the form set forth in subs. (2)
The notice required by sub. (1)
shall be in substantially the following form:
CUSTOMER'S RIGHT TO SUBSTITUTE PROPERTY
OR LIABILITY INSURANCE
You may cancel the property or liability insurance which you purchased through .... (name and address of lender) to insure the collateral securing your loan dated .... (date). To cancel, you must mail or deliver a written notice, together with the original policy for the property or liability insurance, to us before midnight of the 30th day after the date our policy was mailed or otherwise delivered to you. In addition, you must include a copy of a policy or endorsement for substitute insurance from another insurance company, such as the company insuring your home, that provides the same coverage and that names our company as loss payee. If you cancel and you do not provide evidence of substitute insurance to us with your notice or within 7 days after sending a cancellation notice to us, we may purchase other insurance to cover our risk and charge you for it.
If you wish, you may use this page as your written notice by writing "I hereby cancel this insurance" and adding your name, address and the date. This page, the original policy and a copy of the substitute policy or endorsement showing our company as loss payee must be sent or delivered to us before midnight on the 30th day after the date our policy was mailed or otherwise delivered to you. Keep the copy of this page for your records.
If you cancel this insurance, you may elect to receive either a check for the insurance premiums or a credit against your loan balance in the amount of the insurance premiums and the amount of applicable finance charge. Check which of the following you elect:
1. .... I want you to send me a check in the amount of $.... (amount of insurance premiums) for the insurance premiums.
2. .... I want you to credit my loan balance in the amount of $.... (amount of insurance premiums) which is the amount of the insurance premiums, plus the amount of applicable finance charge.
A creditor may elect to provide only a credit to a customer who cancels insurance under this section. If a creditor so elects, the creditor shall delete the last paragraph of the notice under sub. (2)
and shall substitute the following: "If you cancel this insurance, we will credit your loan balance in the amount of $.... (amount of insurance premiums), which is the amount of the insurance premiums, plus the amount of applicable finance charge."
Any customer who cancels and substitutes insurance within the 30-day period under sub. (1)
is entitled to a credit or payment under s. 424.402
. Any insurance policy covered by the notice shall be void as of the date of purchase, unless a loss has occurred, upon mailing or delivery of the notice of cancellation by the customer and all rights under the policy shall terminate. The creditor shall promptly provide the customer with a credit or payment, as applicable, even if the original policy does not accompany the notice of cancellation.
History: 1985 a. 256