17:16V-3 Collateral protection insurance, purchase by creditor.

3. a. If the terms of the credit agreement require the debtor to obtain and continue to maintain insurance which designates the creditor as loss payee or beneficiary protecting against loss or damage to the collateral and the debtor has not obtained or does not maintain that insurance, a creditor may purchase collateral protection insurance as of the date of the debtor's failure to provide evidence of insurance or failure to maintain insurance covering the collateral, or at a later date at the option of the creditor, with the cost to be paid or reimbursed by the debtor.

b. Collateral protection insurance purchased by the creditor shall be effective: as of the date of the initial credit transaction, if insurance designating the creditor as loss payee or beneficiary protecting against loss or damage to the collateral is not purchased by the debtor; as of the date the required coverage lapsed, if purchased initially but not maintained by the debtor; or at a later date as determined by the creditor.

c. Within 14 calendar days following the placement of the collateral protection insurance, the creditor shall mail or cause a notice to be mailed to the debtor at the address on file with the creditor, by United States mail, first class, postage prepaid, informing the debtor that:

(1) as of (insert date), evidence that you have purchased or maintained the insurance required by the terms of your credit agreement has not been provided to the creditor, (name of creditor);

(2) collateral protection insurance has been purchased by the creditor from the following insurer (insert name of insurer), with respect to the following credit transaction: (insert type of credit transaction);

(3) you are responsible for the cost of the collateral protection insurance purchased by the creditor, which cost is $ for 12 months;

(4) the amount stated under paragraph (3) of this notice has been added to the principal balance in your account as of (indicate date); you will be required to pay interest on this amount at the same rate that is applied pursuant to your credit agreement. We estimate that this coverage will cost you an estimated: (insert total cost of collateral protection insurance and interest paid on that cost, based on the debtor making minimum required payments) over the duration of the loan. This cost is intended as a good faith estimate, and may not be accurate if you repay more quickly or slowly than the estimated term;

(5) all or part of the cost of the collateral protection insurance stated under paragraph (3) of this notice may be paid by you at any time and amounts paid will be applied to your account;

(6) the effective date of coverage of the collateral protection insurance purchased by the creditor is the date of the initial credit transaction, if you failed to obtain insurance coverage initially, or the date of the lapse of coverage, if you failed to maintain or renew your coverage, or on (specify date if on a later date as determined by the creditor pursuant to subsection b. of this section);

(7) the cost of the collateral protection insurance purchased by the creditor may be considerably more expensive than insurance you can obtain on your own;

(8) the amount of coverage will not be greater than the outstanding principal balance in your account as of the effective date of the collateral protection insurance purchased by the creditor, which may be less than the value of your property, and as a result, you may be underinsured;

(9) the coverage purchased by the creditor will not include any liability coverage for claims made against you and will not satisfy any mandatory liability insurance law or financial responsibility law of this or any other state;

(10) if you provide us with evidence that you have the required insurance, we shall cause the collateral protection insurance to be canceled as of the effective date of the coverage which you provide (as shown on the policy or other evidence of coverage sent to us), and any unearned premium, costs and interest applicable to the collateral protection insurance after that date will be applied to the balance of your account, and the excess, if any, will be paid to you;

(11) if you have insurance coverage in place, or if you have replaced the coverage, and it has been in place without any lapse in the coverage but you have failed to provide the creditor with evidence of that coverage, you may, within 30 days after this notice was mailed, provide the creditor evidence of the insurance coverage showing the creditor as loss payee or beneficiary, and the collateral protection insurance coverage placed by the creditor will be canceled and the creditor will deduct from your principal balance all costs of the collateral protection insurance purchased by the creditor, including any interest charged to your account as a result of the costs of that insurance being added to your principal balance;

(12) to provide us with evidence that you have the required insurance, send a copy of the policy or other evidence to: (insert the physical and electronic address of creditor); and

(13) the collateral protection insurance purchased on your behalf may be cancelled at any time. In order to cancel the collateral protection insurance without incurring any additional costs, you must provide us with evidence that you have the required insurance within 30 days following the date that this notice was mailed. The creditor-placed collateral protection insurance may be cancelled at any time after the 30 days have elapsed, but you will be required to pay for any period of time in which the creditor-placed collateral protection insurance was in place.

d. Paragraph (9) of the notice required in subsection c. of this section shall be in a larger type size than the other paragraphs in that notice, and in bold type.

e. The creditor shall inform the debtor, in the notice, that if the debtor has insurance coverage naming the creditor as loss payee or beneficiary in place, or has replaced the insurance coverage, without a lapse in coverage the debtor may provide the creditor with evidence of the required insurance at any time and the creditor shall cause the collateral protection insurance to be canceled as of the effective date of the coverage provided by debtor, and any unearned premium, costs and interest applicable to the collateral protection insurance after that date shall be applied to the balance of the debtor's account, and the excess, if any, shall be paid to the debtor.

f. If, within 30 days after the notice required by subsection c. of this section was mailed to the debtor, the debtor provides evidence of insurance coverage to the creditor and evidence that the insurance coverage required by the credit agreement is in place or has been replaced, without any lapse in the coverage, and the only failure to comply with the credit agreement was the failure to provide evidence of that coverage to the creditor in a timely fashion, then the creditor shall cancel the coverage placed by the creditor and, if the costs of purchasing collateral protection insurance have been added to the obligation of the borrower, deduct those costs from the debtor's obligation, including interest, and no costs for the purchase of collateral protection insurance by the lender shall be assessed against the borrower.

g. The costs charged to the debtor shall not be excessive or discriminatory. Any cost or element of cost which is approved by the Department of Banking and Insurance or filed with the department and not disapproved, pursuant to P.L.1944, c.27 (C.17:29A-1 et seq.) or P.L.1982, c.114 (C.17:29AA-1 et seq.), shall not be deemed to be excessive or discriminatory for the purposes of this act.

h. Within 60 days of the receipt of evidence of coverage, a creditor shall send the debtor a notice of receipt, a confirmation of cancellation of any creditor-placed insurance, and a revised scheduled payment that reflects the requirements of this section.

i. No creditor shall enter into a credit agreement that includes charges on the debtor for collateral protection insurance coverage, unless the following or substantially similar warning is provided on a separate document accompanying the credit agreement and signed by the debtor:

WARNING

UNLESS YOU PROVIDE US WITH EVIDENCE OF THE INSURANCE COVERAGE AS REQUIRED BY OUR CREDIT AGREEMENT, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTEREST. THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT YOUR INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE WE PURCHASE MAY NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST YOU. YOU MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED PROPER COVERAGE ELSEWHERE.

YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED BY US. THE COST OF THIS INSURANCE MAY BE ADDED TO YOUR LOAN BALANCE. IF THE COST IS ADDED TO THE LOAN BALANCE, THE INTEREST RATE ON THE UNDERLYING LOAN WILL APPLY TO THIS ADDED AMOUNT. THE EFFECTIVE DATE OF COVERAGE MAY BE THE DATE YOUR PRIOR COVERAGE LAPSED OR THE DATE YOU FAILED TO PROVIDE PROOF OF COVERAGE.

THE COVERAGE WE PURCHASE MAY BE CONSIDERABLY MORE EXPENSIVE THAN INSURANCE YOU CAN OBTAIN ON YOUR OWN AND WILL NOT SATISFY NEW JERSEY'S MANDATORY LIABILITY INSURANCE LAWS.

L.1999, c.44, s.3; amended 2019, c.312, s.1.