Credit Insurance Is a Junk Fee Unless You Make an Informed Decision to Buy It

Junk fees are one of the many ways that businesses nickel and dime consumers into paying more than necessary for products and services. They can come in the form of hefty charges that you must pay at the beginning and end of a subscription contract, whether you stop paying for the service when the contract expires or terminate the subscription early. Another common form of junk fees are opaque service fees and processing fees; when asked, sellers often have no choice but to admit that these fees buy you nothing. Warranties and insurance are a gray area. They are supposed to pay for repairs or otherwise protect you from financial losses if something goes wrong with the product that you bought, but as anyone who has tried to get their vehicle repairs paid for after filing a car insurance claim, getting insurance companies to pay for what it sounds like they said they would pay for is easier said than done. What is even worse is when you don’t even know that you bought the insurance. The company that provides a popular financial product is facing lawsuits about deceptive practices related to the underwriting of credit insurance policies. If you are thinking of buying credit insurance, or if you bought it, but it has not protected you from debt liability, contact a Philadelphia debt relief lawyer.

How Credit Insurance Is Supposed to Work

When you borrow a loan, especially one with a large principal amount and a long repayment term, you can insure the loan with a credit insurance policy, where you pay monthly premiums over the term of the loan. If you become unable to keep making payments, the insurance will pay the outstanding balance of the loan. The policy indicates qualifying circumstances for which it will cover the outstanding balance. For example, the insurance might pay upon the death of the borrower or if the borrower becomes financially insolvent because of illness or involuntary job loss. The burden of proof is always on the claimant to show inability to pay; you can’t just stop making payments because you did the math and decided that it was cheaper to let the insurance pay the rest of your loan.

The Lawsuit Against OneMain Financial Over Hidden Credit Insurance Fees

OneMain Financial is a popular non-bank lender, which means that many borrowers who do not qualify for loans from banks borrow from it. Its customers are just the people who can benefit from credit insurance the most. Despite this, the company is facing a lawsuit from the attorneys general of 13 states. They allege that the company bundled credit insurance into customers’ loans without informing the borrowers, except in clauses buried deep in the fine print of the loan agreements, making the credit insurance effectively a junk fee.

Contact Louis S. Schwartz About Credit Insurance

A Philadelphia consumer law attorney can help you navigate credit insurance and other little-known aspects of borrowing and loan repayment.  Contact Louis S. Schwartz at CONSUMERLAWPA.com to set up a free, confidential consultation.

Sources

pbs.org/newshour/nation/onemain-financial-sued-by-13-attorneys-general-over-hidden-loan-add-ons

insurance.wa.gov/insurance-resources/credit-insurance/credit-insurance#:~:text=Credit%20insurance%2C%20or%20debt%20cancellation,making%20payments%20on%20your%20behalf.