September 05, 2022
Forced-placed auto insurance (CPI) has come under the scrutiny of various regulators as it relates to auto lending. The situation with Wells Fargo is a great example of recent regulatory issues with CPI Programs. Due to these recent changes, many lenders are considering a blanket approach to their risk management strategy; ultimately avoiding unwanted attention from regulators and shielding their borrowers from exorbitant force place premiums.
Ultimately many lenders feel that tracking and CPI programs create unnecessary regulatory risk and penalizes Borrowers that may already be struggling financially. Many times, force place premiums are only applied to the lesser credit tiers within auto portfolios which can potentially be viewed as borderline predatory to borrowers in that category (who are already paying a higher interest rate). When asked why should a lender charge all borrowers an LSI fee, our answer is “Why would a small percentage of borrowers pay the tracking cost for all other borrowers?”