Under a DCC or ASD, the client generally agrees to pay additional fees to the bank in exchange for the bank`s promise to temporarily cancel or suspend the obligation to repay the loan to the borrower. The fee may be flat-rate payable at the beginning of a loan (which can be financed over the life of the loan) or may take the form of a monthly or periodic fee. The commission compensates the bank for exempting dennots for borrowers in the circumstances defined by the DCC or DSA. These agreements also provide clients with a convenient method of repaying debts in the event of financial or personal difficulties and allow the bank to avoid the time and expense of collecting the loan balance from a borrower`s estate in the event of the borrower`s death or other special circumstances. [1] Debt cancellation and suspension products can be important instruments to avoid life-related risks. You protect both your institution and your borrowers, while maximizing your sources of income and interest-free income. A national bank must manage the risks associated with debt cancellation contracts and debt suspension agreements according to sound and robust banking principles. As a result, a national bank must establish and maintain effective risk management and control procedures for its cancellation contracts and debt suspension agreements. These include adequate financial collection and reporting of revenues, expenses, assets and liabilities, as well as appropriate treatment of all expected and unexpected revenue losses. A bank should also assess the relevance of its internal controls and risk reduction measures with respect to the nature and extent of its debt cancellation contract and debt suspension programs. Most public insurance services recognize parity with federal rules. Therefore, they classify debt cancellation as a banking product, not insurance, and do not regulate it…

unless they are expressly covered by state law. Eighth disclosure requires a bank describing the procedures a customer must follow to inform the bank that a triggering event has occurred. This information is important because a customer who wishes to activate the debt suspension or cancellation function of the contract debt must follow the procedures outlined in the contract. The requirement for banks to disclose this information will help eliminate customer confusion. (8) Description of the procedures a customer must follow to inform the bank that a triggering event has occurred as part of the debt cancellation contract or the debt suspension contract. Although debt cancellation contracts are similar to credit insurance, no insurance company is involved, so the lender can retain the entire royalty. The OCC and the National Credit Union Administration have found that national banks, federal savings deposits and federal credit unions can sell DCCs (and, in the case of national banks and federal credit unions, DSAs) without being subject to state insurance laws. In the absence of evidence of the emergence of abuses observed by commentators in the DCC or DSA market, we refused to overturn a blanket ban on flat fees. However, we remain concerned that abuses similar to those in the credit insurance market regarding DDS or DSAs granted under home mortgages are not developing. In order to protect against this result, the final rule of a national bank prohibits a customer from paying the fee for a DCC or DSA in a single payment payable at the beginning of the contract if the debt subject to the contract is a residential mortgage. The rule allows individual payment contracts for all other consumer credits, but requires banks that offer the ability to pay the royalty in a single payment, including the ability in good faith to pay this contract in regular payments.